<PAGE>
As filed with the Securities and Exchange Commission on November 26, 1997
Registration No. 333-37155
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
I.C. ISAACS & COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2253 52-1377061
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
3840 BANK STREET
BALTIMORE, MARYLAND 21224-2522
(410) 342-8200
</TABLE>
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
<TABLE>
<S> <C>
ROBERT J. ARNOT GERALD W. LEAR
CHAIRMAN OF THE BOARD AND CO-CHIEF EXECUTIVE OFFICER PRESIDENT AND CO-CHIEF EXECUTIVE OFFICER
I.C. ISAACS & COMPANY, INC. I.C. ISAACS & COMPANY, INC.
350 FIFTH AVENUE, SUITE 1029 3840 BANK STREET
NEW YORK, NEW YORK 10118 BALTIMORE, MARYLAND 21224-2522
(212) 563-2720 (410) 342-8200
</TABLE>
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------
Copies of all communications,
including all communications sent to the agent for service, should be sent to:
<TABLE>
<S> <C>
EARL S. WELLSCHLAGER, ESQUIRE JOEL J. HUGHEY, ESQUIRE
PIPER & MARBURY L.L.P. ALSTON & BIRD LLP
36 SOUTH CHARLES STREET 1201 W. PEACHTREE STREET
BALTIMORE, MARYLAND 21201 ATLANTA, GEORGIA 30309
(410) 539-2530 (404) 881-7000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON
A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX: / /
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING: / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING: / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(D)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING: / /
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) AMOUNT OF REGISTRATION FEE (2)
<S> <C> <C>
COMMON STOCK, $.0001 PAR VALUE.............................. $61,180,000.00 $18,540.00
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(1) INCLUDES 570,000 SHARES OF COMMON STOCK SUBJECT TO AN OPTION GRANTED TO THE
UNDERWRITERS BY THE COMPANY (AS HEREINAFTER DEFINED) TO COVER
OVER-ALLOTMENTS, IF ANY. SEE "UNDERWRITING."
(2) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE IN
ACCORDANCE WITH RULE 457 UNDER THE SECURITIES ACT. THE REGISTRATION FEE WAS
PAID ON OCTOBER 3, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 26, 1997
PROSPECTUS
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
3,800,000 SHARES
[LOGOS]
I.C. ISAACS & COMPANY, INC.
COMMON STOCK
All of the 3,800,000 shares of Common Stock offered hereby are being sold by
I.C. Isaacs & Company, Inc. (the "Company"). Prior to the Offering, there has
been no public market for the Common Stock of the Company. It is currently
anticipated that the initial public offering price will be between $12.00 and
$14.00 per share. See "Underwriting" for information relating to the
determination of the initial public offering price. Application has been made to
list the Common Stock on the Nasdaq National Market under the symbol "ISAC."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON
STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)(3)
<S> <C> <C> <C>
Per Share................................................ $ $ $
Total(4)................................................. $ $ $
</TABLE>
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company estimated to be
$ .
(3) It is estimated that between $19.0 million and $20.0 million of the net
proceeds will be used to pay the S Corporation Distribution. See "Company
Organization--Prior S Corporation Status."
(4) The Company has granted the Underwriters a 30-day option to purchase up to
570,000 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered severally by the Underwriters named
herein, subject to prior sale, when, as and if received and accepted by them,
subject to their right to reject orders, in whole or in part, and to certain
other conditions. It is expected that delivery of the certificates representing
such shares will be made against payment therefor in immediately available funds
at the office of The Robinson-Humphrey Company, LLC on or about , 1997.
The Robinson-Humphrey Company Legg Mason Wood Walker
Incorporated
The date of this Prospectus is , 1997
<PAGE>
"BOSS-REGISTERED TRADEMARK-," "LORD ISAACS-REGISTERED TRADEMARK-," "I. C.
ISAACS-REGISTERED TRADEMARK-," "PIZZAZZ-REGISTERED TRADEMARK-" AND "I.G.
DESIGN-REGISTERED TRADEMARK-" ARE TRADEMARKS OF THE COMPANY. ALL OTHER
TRADEMARKS OR SERVICE MARKS, INCLUDING "GIRBAUD-REGISTERED TRADEMARK-" AND
"MARITHE AND FRANCOIS GIRBAUD-REGISTERED TRADEMARK-" (COLLECTIVELY, "GIRBAUD")
AND "BEVERLY HILLS POLO CLUB-REGISTERED TRADEMARK-" APPEARING IN THIS PROSPECTUS
ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS AND ARE NOT THE PROPERTY OF THE
COMPANY.
------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER
OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL ___________, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................... 4
Risk Factors..................................... 9
Forward-Looking Statements....................... 16
Company Organization............................. 16
Use of Proceeds.................................. 18
Dividend Policy.................................. 18
Capitalization................................... 19
Dilution......................................... 20
Selected Financial Data.......................... 21
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 22
<CAPTION>
PAGE
-----
<S> <C>
Business......................................... 31
Management....................................... 49
Certain Transactions............................. 54
Principal Stockholders........................... 55
Shares Eligible for Future Sale.................. 56
Description of Capital Stock..................... 57
Underwriting..................................... 59
Legal Matters.................................... 60
Experts.......................................... 60
Additional Information........................... 61
Index to Financial Statements.................... F-1
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, THE "COMPANY" REFERS TO
I.C. ISAACS & COMPANY, INC. (FORMERLY I.G. DESIGN, INC.) AND ITS PREDECESSORS,
SUBSIDIARIES AND AFFILIATED COMPANIES, INCLUDING I.C. ISAACS & COMPANY L.P. SEE
"COMPANY ORGANIZATION." UNLESS OTHERWISE NOTED, ALL COMMON STOCK SHARE AMOUNTS,
PER SHARE DATA AND OTHER INFORMATION SET FORTH IN THIS PROSPECTUS (I) HAVE BEEN
ADJUSTED TO REFLECT A 246.9898-FOR-1 STOCK SPLIT, WHICH WILL BE EFFECTED PRIOR
TO CONSUMMATION OF THE OFFERING AND OTHERWISE GIVE EFFECT TO THE REORGANIZATION
(AS DEFINED IN "COMPANY ORGANIZATION") AND (II) ASSUME THAT THE UNDERWRITERS'
OVER-ALLOTMENT OPTION HAS NOT BEEN EXERCISED.
THE COMPANY
I.C. Isaacs & Company, Inc. is a rapidly growing designer, manufacturer and
marketer of branded sportswear. Founded in 1913, the Company has assembled a
portfolio of brands that addresses distinct fashion segments resulting in a
diverse customer base. The Company offers full lines of sportswear for young
men, women and boys under the BOSS brand in the United States and Puerto Rico
and sportswear for men and women under the Beverly Hills Polo Club brand in the
United States, Puerto Rico and Europe. Beginning in 1998, the Company will also
offer a collection of men's sportswear under the Girbaud brand in the United
States and Puerto Rico. Through a focused strategy of providing fashionable,
branded merchandise at value prices, the Company has emerged as a significant
fashion source for youthful and contemporary consumers who purchase sportswear
and outerwear through specialty and department stores. The Company also offers
women's sportswear under various other Company-owned brand names as well as
under third-party private labels. Net sales of the Company grew from $85.3
million in 1994 to $118.7 million in 1996, and operating income grew from $4.7
million in 1994 to $9.3 million in 1996. In the first nine months of 1997, net
sales and operating income totaled $127.2 million and $15.0 million,
respectively, as compared to $86.7 million and $8.0 million, respectively, in
the first nine months of 1996.
The Company manufactures and markets certain sportswear under the BOSS brand
for sale at specified price points in the United States and Puerto Rico subject
to a concurrent use agreement. The Company has positioned the BOSS line to
appeal to consumers who desire a fresh, urban, fashion-forward look. Through
creative and innovative marketing, the Company has created powerful brand appeal
for the BOSS line and has become an active influence in young men's fashion. The
BOSS collection has been expanded from an initial line of denim products to a
full array of sportswear consisting of jeans, tee shirts, sweatshirts, shorts,
knit and woven shirts and outerwear, many of which are characterized by
innovative design, creative graphics and bold uses of color. The Company also
markets a juniors' sportswear line under the BOSS brand for young women, which
includes a full selection of denim products and active sportswear. The Company's
net sales of BOSS sportswear increased at an annual growth rate of 37.1% in
1994, 10.8% in 1995 and 39.3% in 1996. In 1996, net sales of BOSS sportswear
accounted for 72.6% of the Company's net sales.
The Company manufactures and markets certain sportswear under the Beverly
Hills Polo Club brand in the United States, Puerto Rico and Europe under an
exclusive license. The Company targets men and women who desire updated
traditional sportswear at competitive prices. To reach a broader demographic
customer base, the Beverly Hills Polo Club collection combines contemporary
design details and innovative fabrics with classic American sportswear styling.
The Beverly Hills Polo Club collection consists primarily of cotton clothing,
including jeans, pants, shorts, knit and woven shirts and outerwear targeting
the active, image-conscious consumer. The Company's Beverly Hills Polo Club line
was introduced in the spring of 1994. The Company's net sales of Beverly Hills
Polo Club sportswear increased at an annual growth rate of 83.5% in 1995 and
102.3% in 1996. In 1996, net sales of Beverly Hills Polo Club sportswear
accounted for 12.0% of the Company's net sales.
4
<PAGE>
In November 1997, the Company acquired an exclusive license to manufacture
and market certain men's sportswear under the Girbaud brand in the United States
and Puerto Rico. The Girbaud brand is an internationally recognized designer
sportswear label with a distinct European influence. By targeting men who desire
contemporary, international fashion, the Girbaud brand will enable the Company
to address another consumer segment within its branded product portfolio. The
Company intends to reposition the Girbaud line with a broader assortment of
products, styles and fabrications reflecting a contemporary European look. The
Company plans to introduce the fall men's collection in early 1998.
In the late 1980's, management made a decision to change the Company's
marketing focus from a manufacturing-driven to a brand-driven strategy. As a
result, the Company believes it has developed distinct competitive strengths
that position it for continued success. See "Business--Competitive Strengths."
The Company's key competitive strengths include:
- EMPHASIS ON BRAND IDENTITY. The Company believes that brand identity, as
well as the image and lifestyle that a brand conveys, are important
factors that influence retail purchasing decisions. The BOSS, Beverly
Hills Polo Club and Girbaud lines have strong brand identities and enable
the Company to offer a broad continuum of designs and products well
recognized by fashion-conscious consumers.
- COMBINATION OF FASHION AND VALUE. Through its manufacturing, sourcing and
merchandising expertise, the Company achieves a distinct combination of
fashion and value. The Company provides its customers with fashionable,
brand name sportswear which typically sells at retail prices below those
of many well known designer brands.
- CREATIVE AND INNOVATIVE MARKETING. Through a coordinated merchandising,
advertising and marketing strategy, the Company has built strong name
recognition and brand image for its BOSS and Beverly Hills Polo Club
products. The Company targets youthful and contemporary consumers who are
influenced by fashion, music and sports by utilizing a variety of
advertising media, including television, print, outdoor signage and
professional sports sponsorships.
- FLEXIBLE MANUFACTURING AND SOURCING. The Company believes that its ability
to source products from its United States facilities and third party
foreign and domestic manufacturers enhances the Company's production
flexibility and capacity while enabling it to control more efficiently the
delivery, quality and pricing of its products. Currently, the Company
utilizes approximately 50 factories in more than 10 countries including
China, Hong Kong, Korea, Mexico, the Philippines, Taiwan, Thailand and the
United States. The Company does not have long-term contracts with any
manufacturers and most of the Company's manufacturers supply the Company
on a non-exclusive basis pursuant to purchase orders.
The Company's growth strategy includes continued capitalization on its
competitive strengths and the implementation of specific strategies for
continued expansion. See "Business--Growth Strategy." The Company's principal
growth strategies are as follows:
- BROADEN PRODUCT OFFERINGS. The Company believes it can effectively broaden
its product offerings through the expansion of products offered under
existing brands as well as the possible addition of new brands. Expansion
within the BOSS product line is expected to be driven by tops and
outerwear as well as the development of the boys', youth and juniors'
lines. In addition, the Company recently added polo shirts and swimwear
under the BOSS brand. Similarly, the Beverly Hills Polo Club brand
includes a number of product lines that are in the early stages of market
penetration, such as outerwear, and a number of potential product line
expansions, such as men's dress shirts. To further develop the Beverly
Hills Polo Club brand, product offerings within the women's line are being
expanded, and the Company is reorganizing and increasing its women's sales
force. The recent addition of the Girbaud brand adds a European-influenced
designer sportswear brand to the Company's sportswear lines.
5
<PAGE>
- ENHANCE MARKETING PROGRAMS. While the Company believes that its current
marketing strategy is one of its primary competitive strengths, the
Company intends to continue its efforts to increase net sales by enhancing
consumer recognition of its brand names and images through expanded
marketing efforts. These efforts will include increased television, print,
outdoor and point-of-sale advertising, as well as an expanded
"Shop-in-Shop" program at the retail level.
- EXPAND CHANNELS OF DISTRIBUTION. As demand for its sportswear increases,
the Company believes that it can continue to expand and penetrate various
channels of distribution. In recent years, the Company has expanded its
distribution channels beyond specialty stores and specialty store chains
with its BOSS label to begin significant distribution to department store
customers. The Beverly Hills Polo Club brand has not penetrated the
department store channel to the same extent as the BOSS brand, and the
expanded distribution of Beverly Hills Polo Club products is a primary
growth focus of the Company. The Company intends to market the Girbaud
brand to specialty stores, specialty store chains and department stores.
- INCREASE EUROPEAN PRESENCE FOR BEVERLY HILLS POLO CLUB. The Company
believes that it is well positioned to capitalize on the acceptance of the
Beverly Hills Polo Club brand name by continuing to expand its European
sportswear distribution. The classic American sportswear look conveyed by
the Beverly Hills Polo Club line is popular with European youth, and the
Company is expanding its wholesale and retail channels of distribution in
Europe to meet this increasing demand. The Company currently has
distributors in nine countries in Europe and has three franchise stores in
Spain.
S CORPORATION DISTRIBUTION AND RECENT DEVELOPMENTS
Since January 1, 1993, the Company has elected to be treated for federal and
state income tax purposes as an S corporation under Subchapter S of the Internal
Revenue Code of 1986, as amended, and under comparable state laws. One day prior
to the consummation of the transactions related to the Offering, the Company's S
corporation status will be terminated. On such date, the Company will declare a
dividend distribution to the stockholders of record of the Company, including
certain officers and directors of the Company, in an aggregate amount of
approximately $20.0 million, representing all earned but undistributed S
corporation earnings of the Company. On and after such date, the Company will no
longer be treated as an S corporation and, accordingly, will be fully subject to
federal and state income taxes. Purchasers of shares of Common Stock in the
Offering will not receive any portion of the S Corporation Distribution (as
hereinafter defined). See "Company Organization--Prior S Corporation Status."
The Company's right to use the BOSS brand name and image in the manufacture
and sale of apparel is dependent on third party concurrent use and license
agreements. Pursuant to a recent settlement of litigation (the "Settlement")
among the Company, Hugo Boss AG ("Hugo Boss"), Brookhurst, Inc. ("Brookhurst"),
Ambra Inc., a wholly-owned subsidiary of Hugo Boss ("Ambra"), and others, the
Company acquired certain domestic and foreign trademark common law and
registration rights to the BOSS brand name and image previously owned by
Brookhurst, the Company's former licensor. Neither Hugo Boss nor Ambra is
affiliated with Brookhurst or the Company. The Company conveyed the foreign
rights to the BOSS brand name and image to Ambra and received a license to
continue to manufacture apparel in certain foreign countries using the BOSS
brand name and image for sale in the United States and Puerto Rico. The Company
retained ownership of domestic rights to the BOSS brand name and image subject
to certain restrictions contained in a concurrent use agreement with Hugo Boss.
As a result of the Settlement, the Company's rights to manufacture and market
BOSS sportswear were expanded to allow broader product offerings and significant
Company control over styling, advertising and distribution. The Company does not
anticipate that the Settlement will have a material effect on the Company's
financial condition or results of operations. See "Business--Licenses and Other
Rights Agreements--BOSS Trademark Rights; and --Litigation."
The Company's principal executive offices are located at 3840 Bank Street,
Baltimore, Maryland 21224-2522 (telephone number (410) 342-8200) and 350 Fifth
Avenue, Suite 1029, New York, New York 10118 (telephone number (212) 563-2720).
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company hereby......... 3,800,000 shares
Common Stock to be outstanding after the Offering 7,800,000 shares
(1)..............................................
Use of Proceeds.................................... The estimated net proceeds of the
Offering of approximately $45.4 million
will be used (i) to repay approximately
$20.0 million of the Company's
outstanding debt under the Company's
credit facilities, (ii) to pay the
Initial S Corporation Distribution (as
hereinafter defined) of approximately
$18.5 million and the Subsequent S
Corporation Distribution (as
hereinafter defined) estimated to be
$0.9 million and (iii) for general
corporate and working capital purposes.
See "Use of Proceeds."
Nasdaq National Market Symbol...................... Application has been made for quotation
of the Common Stock on the Nasdaq
National Market under the symbol
"ISAC."
</TABLE>
- ------------------------
(1) Excludes 500,000 shares of Common Stock reserved for issuance under the
Company's 1997 Omnibus Stock Plan. See "Management--1997 Omnibus Stock
Plan."
RISK FACTORS
See "Risk Factors" beginning on page 9 for a discussion of certain
information that should be considered by prospective purchasers of the Common
Stock offered hereby.
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The summary historical and pro forma consolidated financial data set forth
below should be read in conjunction with the more detailed consolidated
financial statements, including the notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------- --------- ----------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales..................................... $ 62,232 $ 72,414 $ 85,298 $ 93,271 $ 118,655 $ 86,680 $ 127,247
Cost of sales................................. 48,051 54,880 62,216 68,530 84,421 60,188 85,677
--------- --------- --------- --------- ---------- --------- ----------
Gross profit.................................. 14,181 17,534 23,082 24,741 34,234 26,492 41,570
Selling, license, distribution, general and
administrative fees and expenses............ 12,282 15,214 18,333 20,267 25,627 18,468 26,674
Recovery of legal fees........................ -- -- -- -- (718) -- (117)
--------- --------- --------- --------- ---------- --------- ----------
Operating income.............................. 1,899 2,320 4,749 4,474 9,325 8,024 15,013
Interest expense.............................. 997 1,260 1,191 1,247 1,365 995 1,619
Other income (expense) (1).................... 55 1,215 1,235 (3) 85 (21) 28
Minority interest............................. -- -- (53) (33) (82) (71) (134)
--------- --------- --------- --------- ---------- --------- ----------
Income before extraordinary items (1)(2)...... 957 2,275 4,740 3,191 7,963 6,937 13,288
PRO FORMA STATEMENT OF INCOME DATA:
Income before income taxes.................... 3,184 2,275 5,129 3,191 7,963 6,937 13,288
Income tax provision (3)...................... 1,236 933 2,103 1,308 3,265 2,844 5,448
--------- --------- --------- --------- ---------- --------- ----------
Net income.................................... $ 1,948 $ 1,342 $ 3,026 $ 1,883 $ 4,698 $ 4,093 $ 7,840
--------- --------- --------- --------- ---------- --------- ----------
--------- --------- --------- --------- ---------- --------- ----------
Net income per share (4)...................... $ 0.87 $ 1.45
---------- ----------
---------- ----------
Weighted average common shares outstanding
(4)......................................... 5,423 5,423
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
--------------------------------------
<S> <C> <C> <C>
AS FURTHER
AS ADJUSTED ADJUSTED
ACTUAL (5) (5)
--------- -------------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................................................ $ 22,359 $ 3,524 $ 48,374
Total assets........................................................................... 63,521 64,486 68,347
Distribution payable................................................................... -- 18,500 --
Notes payable and long-term debt....................................................... 23,437 23,437 398
Stockholders' equity................................................................... 26,182 8,982 54,382
</TABLE>
- ------------------------
(1) Includes income from settlement of license disputes of $0.3 million, $1.5
million and $1.2 million in 1992, 1993 and 1994, respectively.
(2) Before extraordinary gains of $2.2 million in 1992 and $0.4 million in 1994
related to extinguishment of debt.
(3) Reflects historical provision for income taxes in 1992 and pro forma
provision for income taxes as if the Company had been taxed as a C
corporation for the years ended December 31, 1993, 1994, 1995 and 1996 and
the nine months ended September 30, 1996 and 1997, respectively.
(4) Pro forma income per share is based on the weighted average number of shares
of Common Stock outstanding plus the estimated number of shares being sold
by the Company which would be necessary to fund the distribution of earned
and undistributed S corporation earnings totaling approximately $18.5
million as of September 30, 1997. See "Use of Proceeds."
(5) Adjusted to reflect (i) the liability for the Initial S Corporation
Distribution consisting of all earned but undistributed S corporation
earnings as of September 30, 1997, (ii) the recording of an estimated $1.3
million of deferred tax assets determined as if the Company's S corporation
status had been terminated on September 30, 1997 and (iii) the purchase of
the minority interest at September 30, 1997 for approximately $335,000.
Further adjusted to reflect the sale of 3.8 million shares of Common Stock
by the Company assuming an initial public offering price of $13.00 per share
and the application of approximately $41.5 million of the net proceeds to
pay the Initial S Corporation Distribution and outstanding borrowings under
its credit facilities as of September 30, 1997. The Company anticipates that
the Subsequent S Corporation Distribution (as hereinafter defined)
consisting of all earned but undistributed S corporation earnings for the
period beginning on October 1, 1997 and ending on the S Termination Date (as
hereinafter defined) will be approximately $0.9 million. See "Use of
Proceeds" and "Company Organization."
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RISK FACTORS
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CONSIDER
CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET
FORTH IN THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE COMMON STOCK.
COMPETITION AND CHANGES IN CONSUMER DEMANDS
The apparel industry is highly competitive, fragmented and subject to
rapidly changing consumer demands and preferences. The Company believes that its
success depends in large part upon its ability to anticipate, gauge and respond
to changing consumer demands and fashion trends in a timely manner and upon the
continued appeal to consumers of the BOSS, Beverly Hills Polo Club and Girbaud
brand names. Failure by the Company to identify and respond appropriately to
changing consumer demands and fashion trends could adversely affect consumer
acceptance of its products and could have a material adverse effect on the
Company's financial condition and results of operations. The Company competes
with numerous apparel manufacturers and distributors, many of which have greater
financial resources than the Company. The Company's products also compete with a
substantial number of designer and non-designer lines. Although the level and
nature of competition differ among its product categories, the Company believes
that it competes primarily on the basis of brand image, quality of design and
value pricing. Increased competition by existing and future competitors could
result in reductions in sales or prices of the Company's products, which could
have a material adverse effect on the Company's financial condition and results
of operations. In addition, there is no assurance that the Company will be able
to introduce a competitive line of Girbaud products or that such products will
achieve market acceptance. The apparel industry historically has been subject to
substantial cyclical variations, and a recession in the general economy or
uncertainties regarding future economic prospects that affect consumer spending
habits could have a material adverse effect on the Company's financial condition
or results of operations. See "Business--Licenses and Other Rights Agreements;
and --Competition."
DEPENDENCE UPON LICENSES AND OTHER RIGHTS AGREEMENTS
The Company's business is heavily dependent upon its use of the BOSS,
Beverly Hills Polo Club and Girbaud brand names and images, which are in turn
dependent upon the existence and continuation of certain licenses and other
rights agreements. The Company's use of the BOSS brand name and image is limited
to certain specified products at specified price points in the United States and
Puerto Rico. The initial term of the BOSS agreements is four years; however, the
agreements may be extended at the Company's option through December 31, 2007.
The Company's right to use the BOSS brand name and image in the manufacture and
sale of apparel is substantially dependent on third party concurrent use and
license agreements. The Company's rights are subject to material restrictions on
the Company's right to manufacture and sell apparel using the BOSS brand name
and image, including, but not limited to, (i) prohibitions on using the BOSS
brand name or image on certain types of clothing and on non-apparel items, (ii)
parameters governing advertising, wholesale price points and the size, location,
appearance, style and coloring of the BOSS logotype on different product
categories and (iii) the requirement that the Company use the phrase "BOSS by
I.G. Design" in the BOSS logotype on its BOSS products. The Company is also
dependent upon the rights of the licensor of the Beverly Hills Polo Club brand
name and image in the use of such name and image on the Company's products. The
Company's licenses for use of the Beverly Hills Polo Club brand name and image
are limited to certain specified products in the United States, Puerto Rico and
Europe and may be extended at the Company's option through December 31, 2004.
The Company's license for use of the Girbaud brand name and image is limited to
certain specified products in the United States, Puerto Rico and the U.S. Virgin
Islands and may be extended at the Company's option through December 31, 2002.
There can be no assurance that the Company will be able to retain its right to
use the BOSS, Beverly Hills Polo Club and Girbaud brand names and images or
enter into comparable arrangements upon the expiration of the current
agreements. In addition, each of the agreements contains provisions that, under
certain circumstances (not all of which are under the Company's control), could
permit the licensor and third parties to terminate the agreements. Such
provisions
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include, among other things (i) a default in the payment of certain amounts
payable under the applicable agreement that continues beyond the specified grace
period and (ii) the failure to comply with the covenants contained in the
applicable agreement. Any termination of these agreements would result in the
Company losing its rights to use the BOSS, Beverly Hills Polo Club or Girbaud
brand names and images and could have a material adverse effect on the Company's
financial condition or results of operations. In addition, under the agreements,
the licensor and third parties retain the right to produce, distribute,
advertise and sell, and to authorize others to produce, distribute, advertise
and sell, certain garments that are similar to some of the Company's products.
Any such production, distribution, advertisement or sale of such garments by
such parties or other authorized parties could have a material adverse effect on
the Company's financial condition or results of operations.
No assurance can be given that others will not assert rights in, or
ownership of, these trademarks or other proprietary rights. If successful on the
merits, such claims could have a material adverse effect on the Company's
financial condition or results of operations. In the event of any litigation
arising from such claim, any claiming party could have significantly greater
resources than the Company to pursue litigation of such claims, and the Company
could be forced to incur substantial costs to defend legal actions taken against
it relating to the Company's use of trademarks or other proprietary rights. In
addition, if any such third party is successful in challenging the Company's use
of trademarks, the Company could be forced to pay significant damages or enter
into expensive royalty or licensing arrangements with such third party. See
"Business--Licenses and Other Rights Agreements."
RECENT SETTLEMENT OF BOSS LITIGATION
Pursuant to a recent Settlement of litigation relating to use of the BOSS
trademark among the Company, Hugo Boss, Brookhurst, Ambra and others, the
Company acquired certain domestic and foreign trademark common law and
registration rights to the BOSS brand name and image previously owned by
Brookhurst, the Company's former licensor. The Company conveyed the foreign
rights to the BOSS brand name and image to Ambra, a Delaware corporation and
wholly-owned subsidiary of Hugo Boss with its principal place of business in the
United States in New York, New York, and received a license to continue to
manufacture apparel in certain foreign countries using the BOSS brand name and
image for sale in the United States and Puerto Rico. The Company retained
ownership of domestic rights to the BOSS brand name and image, which is subject
to a concurrent use agreement with Hugo Boss. In addition, Ambra holds an option
dated November 5, 1997 to purchase the Company's domestic BOSS trademark rights
(the "Option") at any time between November 5, 2006 and December 31, 2007 or
earlier upon certain termination or default events. The Company's rights to use
the BOSS name will terminate upon exercise of the Option or upon earlier
termination of any of the other agreements. Any termination of the Company's
rights to use the BOSS name could have a material adverse effect on the
Company's financial condition or results of operations. Neither Hugo Boss nor
Ambra is affiliated with Brookhurst or the Company. There is no assurance that
the Settlement will preclude any future claims or litigation regarding the use
of the BOSS brand name or image. Such claims or litigation could have a material
adverse effect on the Company's financial condition or results of operations.
See "Business--Licenses and Other Rights Agreements--BOSS Trademark Rights; and
- --Litigation."
UNCERTAINTIES REGARDING MAINTAINING AND MANAGING GROWTH IN NET SALES
The Company's net sales have grown substantially over the last three years.
No assurance can be given that the level of net sales will not decline or that
the Company will be successful in increasing net sales in the future. For
example, the Company had unfilled orders of approximately $45 million as of
September 30, 1997, a decrease of $6 million as compared to approximately $51
million of such orders as of September 30, 1996. Although the Company believes
the decline was due primarily to variations in the timing of product orders by
specialty store customers, there can be no assurance that additional factors
such as seasonality, weather conditions, a change in demand and the scheduling
of manufacturing have not caused the decline in backlog since September 30,
1996, or that such factors may cause backlog, and the level of net sales, to
continue to fluctuate in the future. To manage growth effectively, the Company
must
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anticipate trends, changes in styles and customer demand, continue to implement
changes in certain aspects of its business, continue to expand its operations
(including the development of a new distribution facility), attract and retain
qualified personnel (including management), and develop, train and manage an
increasing number of management-level and other employees. Any unexpected
difficulties encountered during expansion, including, but not limited to,
possible delays in successfully manufacturing and marketing a Girbaud line of
products or delays in the construction and opening of the Company's new
distribution facility, could have a material adverse effect on the Company's
financial condition or results of operations. Additionally, each of the
Company's agreements to use the BOSS, Beverly Hills Polo Club and Girbaud brand
names and images provides that minimum annual royalties must be paid by the
Company regardless of the level of the Company's sales of those products. If the
Company does not achieve a sufficient level of sales, paying such minimum annual
royalties could have a material adverse effect on the Company's financial
condition or results of operations. See "--Seasonality and Quarterly
Fluctuations," "Business-- Licenses and Other Rights Agreements; and --Backlog
and Seasonality."
CREDIT RISKS
The Company extends credit to its customers based on an evaluation of each
customer's financial condition and credit history and, due to growth, continues
to experience increases in the amount of its outstanding accounts receivable. In
1994, 1995 and 1996, the Company's credit losses were $0.4 million, $0.4 million
and $0.9 million, respectively. In each of these years, the Company's credit
losses as a percentage of net sales has been less than three-quarters of one
percent. There can be no assurance that the Company's credit losses will
continue to be immaterial. The failure to accurately assess the credit risk from
its customers, changes in overall economic conditions and other factors could
cause the Company's credit losses to increase, which could have a material
adverse effect on the Company's financial condition or results of operations.
See "Business--Credit Control."
DEPENDENCE UPON UNAFFILIATED MANUFACTURERS
Approximately 72% of the Company's manufacturing needs are currently met
through contracting with third party manufacturers such that the Company is
largely dependent upon independent contractors for the manufacture of its
products. The Company believes that its dependence on independent contractors
will continue to increase. The Company currently contracts with approximately 50
manufacturers in more than 10 countries. The Company does not have long-term
contracts with any manufacturers and most of those manufacturers supply the
Company on a non-exclusive basis pursuant to purchase orders. During 1996,
approximately 9% of the Company's purchases of raw materials, labor and finished
goods for its apparel were made in Mexico; approximately 28% were made in Asia;
approximately 23% were made at third party facilities elsewhere in the United
States; and the balance was made in Company-operated facilities in the United
States. The Company anticipates that a significant portion of the manufacturing
of its Girbaud line of products will be performed by third party manufacturers
outside the United States. The inability of a manufacturer to ship the Company's
products in a timely manner or to meet the Company's quality standards could
adversely affect the Company's ability to deliver products to its customers in a
timely manner. The Company's reliance on third party manufacturers has not
resulted in the past in material delays or disruptions in service that have had
a material adverse effect on the Company's financial condition or results of
operations. However, delays in delivery caused by manufacturing delays,
disruption in services of delivery carriers or other factors could result in
cancellations of orders, refusals to accept deliveries or a reduction in
purchase prices, any of which could have a material adverse effect on the
Company's financial condition or results of operations.
The Company manufactures a substantial portion of its BOSS brand apparel
through unaffiliated foreign manufacturers, and the Company's activities through
these manufacturers are subject to a foreign manufacturing rights agreement with
Ambra. This agreement contains certain restrictions governing use of the BOSS
brand and the operations of third party manufacturers over which the Company may
have limited control. See "--Dependence Upon Licenses and Other Rights
Agreements" and "Business-- Manufacturing and Product Sourcing."
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RISKS RELATED TO FOREIGN OPERATIONS AND SOURCING
The Company's operations may be affected adversely by political instability
resulting in the disruption of trade with the countries in which the Company's
contractors are located, the imposition of additional regulations relating to
imports, the imposition of additional duties, tariff and other charges on
imports, significant fluctuations in the value of the dollar against foreign
currencies or restrictions on the transfer of funds. Such factors have not
previously had a material adverse effect on the Company's financial condition or
results of operations but there can be no assurance of such in the future. All
of the Company's products manufactured abroad are paid for in United States
dollars. Accordingly, the Company does not engage in any currency hedging
transactions.
The Company's import operations are subject to constraints imposed by
bilateral textile agreements between the United States and a number of foreign
countries. These agreements, which have been negotiated either under the
framework established by the Arrangement Regarding International Trade in
Textiles, known as the Multifiber Agreement, or other applicable statutes,
impose quotas on the amounts and types of merchandise that may be imported into
the United States from these countries. These agreements also allow the United
States to impose restraints at any time and on very short notice on the
importation of categories of merchandise that, under the terms of the
agreements, are not currently subject to specified limits. These agreements and
statutes have not previously had a material adverse effect on the Company's
financial condition or results of operations but there can be no assurance of
such in the future. Imported products are also subject to United States customs
duties, which comprise a material portion of the cost of the merchandise. A
substantial increase in customs duties could have a material adverse effect on
the Company's financial condition or results of operations. The United States or
the countries in which the Company's products are produced or sold may, from
time to time, impose new quotas, duties, tariffs or other restrictions, or
adversely adjust prevailing quota, duty or tariff levels, any of which could
have a material adverse effect on the Company's financial condition or results
of operations.
The Company's policy is to notify its independent manufacturers through its
agents of the expectation that such manufacturers operate in compliance with
applicable laws and regulations. While the Company's policies promote ethical
business practices and the Company's staff periodically visits and monitors the
operations of its independent manufacturers, the Company does not control such
manufacturers or their labor practices. The violation of labor or other laws by
an independent manufacturer of the Company or the divergence of an independent
manufacturer's labor practices from those generally accepted as ethical in the
United States could have a material adverse effect on the Company's financial
condition or results of operations. See "Business--Manufacturing and Product
Sourcing."
DEPENDENCE UPON KEY PERSONNEL
The success of the Company is largely dependent upon the personal efforts
and abilities of its senior management, particularly Messrs. Robert J. Arnot,
Chairman of the Board and Co-Chief Executive Officer, Gerald W. Lear, President
and Co-Chief Executive Officer, Gary B. Brashers, Vice President-- Manufacturing
and Chief Operating Officer, Eugene C. Wielepski, Vice President--Finance and
Chief Financial Officer, and Thomas P. Ormandy, Vice President--Sales. Effective
upon consummation of the Offering, these individuals, in the aggregate, will
beneficially own approximately 19.6% of the Company's outstanding Common Stock.
The Company has entered into employment agreements with each of these
individuals. See "Management--Employment Agreements." The loss of the services
of one or more of such individuals for an extended period of time could have a
material adverse effect on the Company's financial condition or results of
operations. The Company maintains and is the beneficiary of life insurance
policies in the amount of $1.0 million on the lives of each of Messrs. Arnot,
Lear and Brashers and in the amount of $0.5 million on the life of Mr.
Wielepski. See "Business--Employees" and "Management."
DEPENDENCE UPON CERTAIN CUSTOMERS
The Company's three largest customers accounted for an aggregate of
approximately 20% of net sales in 1996. The Company's largest single customer in
1996 was J.C. Penney Company, Inc., which accounted
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for approximately 13% of net sales. The Company does not have long-term
agreements with any of its customers. Instead, its customers purchase the
Company's products pursuant to purchase orders and are otherwise under no
obligation to continue to purchase the Company's products. The loss of one or
more of the Company's largest customers could have a material adverse effect on
the Company's financial condition or results of operations. The retail apparel
industry has periodically experienced consolidation and other ownership changes.
In the future, the Company's customers may consolidate, undergo restructurings,
reorganizations or bankruptcies, or realign these affiliations, any of which
could decrease the number of stores that carry the Company's products or
increase the ownership concentration within the retail apparel industry. Such
factors have not previously had a material adverse effect on the Company's
financial condition or results of operations but there can be no assurance of
such in the future. See "Business--Customers and Sales."
POTENTIAL SHORTAGES OF FABRICS
The Company is dependent upon the ability of its suppliers to furnish
fabrics in sufficient volumes at satisfactory prices and to meet performance,
quality and delivery criteria for its domestic and Mexican pant producers. The
Company does not have any contracts with its suppliers that obligate them to
continue selling fabrics to the Company. The Company has not previously
experienced material shortages of fabrics. However, if shortages of fabrics
occur, or if the prices of these fabrics rise and if the Company is unable to
increase its prices to recover such costs increases, a material adverse effect
on the Company's financial condition or results of operations could result. See
"Business--Manufacturing and Product Sourcing; and --Quality Control."
ENVIRONMENTAL CONTROLS AND OTHER REGULATORY REQUIREMENTS
The Company is subject to various federal, state and local environmental
laws and regulations governing, among other things, the discharge, storage,
handling and disposal of a variety of hazardous and nonhazardous substances and
wastes used in or resulting from its present and past operations. The Company's
operations also are governed by laws and regulations relating to employee safety
and health, principally the Occupational Safety and Health Act and the
regulations thereunder, that, among other things, establish exposure limitations
for cotton dust, formaldehyde, asbestos and noise and regulate chemical and
ergonomic hazards in the workplace. There can be no assurance that regulatory
requirements will not become more stringent in the future or that the Company
will not incur significant costs relating to these matters in the future. The
Company cannot predict the possible impact of additional or more stringent
regulatory requirements on its financial condition or results of operations. See
"Business-- Environmental Matters."
LACK OF SIGNIFICANT OPERATING HISTORY IN EUROPE
The Company acquired a license to distribute, manufacture and market Beverly
Hills Polo Club brand sportswear in Europe in the third quarter of 1996 and has
had no significant operating history against which to assess the reasonableness
of its strategy to expand sales internationally. The Company's European business
strategy relies heavily upon its ability to align itself with effective
distributors that are able to market the Beverly Hills Polo Club products to
retailers. The Company is also dependent upon the services of contract warehouse
facilities for the timely and accurate shipment of its products to its
distributors and retail stores. A general failure by the Company to maintain and
control its existing international distribution arrangements or to procure
additional international distribution relationships could have a material
adverse effect on the Company's financial condition or results of operations.
Thus, no assurance can be given that the Company's international strategy will
be successfully and properly implemented. In addition, due to the Company's
utilization of franchise store arrangements in Europe, the Company's European
expansion strategy is also dependent upon selecting franchisees that can
successfully execute a retail strategy. See "Business--Growth Strategy."
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SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company's business is subject to significant seasonal and quarterly
fluctuations that are characteristic of the apparel and retail industries. The
Company's backlog of orders and overall results of operations may fluctuate from
quarter to quarter as a result of, among other things, variations in the timing
of product orders by customers, weather conditions that may affect purchases at
the wholesale and retail levels, the amount and timing of shipments, advertising
and marketing expenditures and increases in the number of employees and overhead
to support growth. In the Company's segment of the apparel industry, sales are
generally higher in the first and third quarters. Historically, the Company has
taken greater markdowns in the second and fourth quarters. See "--Uncertainties
Regarding Maintaining and Managing Growth in Net Sales," "Management's
Discussion and Analysis of Financial Condition and Results of
Operation--Selected Quarterly Results" and "Business--Backlog and Seasonality."
CONTROL BY EXISTING STOCKHOLDERS
Following the consummation of the Offering, the Company's existing
stockholders, all of whom are parties to the Amended and Restated Shareholders'
Agreement (the "Restated Shareholders' Agreement"), will beneficially own an
aggregate of approximately 51.3% of the outstanding Common Stock. Accordingly,
such stockholders will have the ability to control the election of directors and
the results of other matters submitted to a vote of stockholders. Such
concentration of ownership, together with the Restated Shareholders' Agreement
and the anti-takeover effects of certain provisions in the Delaware General
Corporation Law and in the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") and Amended and Restated By-laws (the
"Restated By-laws"), may have the effect of delaying or preventing a change in
control of the Company. See "--Anti-Takeover Provisions," "Principal
Stockholders," "Description of Capital Stock" and "Certain
Transactions--Restated Shareholders' Agreement."
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate and Restated By-laws include provisions
that may have the effect of discouraging a non-negotiated takeover of the
Company and preventing certain changes of control. These provisions, among other
things (i) classify the Company's Board of Directors into three classes serving
staggered, three-year terms, (ii) permit the Company's Board of Directors,
without further stockholder approval, to issue up to 5.0 million shares of
preferred stock with rights and preferences determined by the Board of Directors
at the time of issuance, (iii) require a 66.7% vote of the Company's
stockholders to approve any amendment, addition or termination of the Restated
By-laws of the Company and (iv) restrict the ability of stockholders to call
special meetings of the stockholders, nominate individuals for election to the
Board of Directors or submit stockholder proposals. The Restated Shareholders'
Agreement designates Messrs. Robert J. Arnot, Gerald W. Lear, Ira J. Hechler and
Jon Hechler as principal shareholders (the "Principal Shareholders") and
provides that the other stockholders subject to the Restated Shareholders'
Agreement (the "Non-Principal Shareholders") shall vote, in elections of
directors to fill Class I or Class II of the Board of Directors, for nominees of
the Principal Shareholders. In addition, certain of the Company's agreements for
use of the BOSS brand name provide that certain specified changes in the control
of ownership of the Company may result in termination of such agreement. The
Restated Shareholders' Agreement also provides for certain rights of first
refusal and "drag along" rights. The provisions of the Restated Certificate, the
Restated By-laws and the Restated Shareholders' Agreement might, therefore, have
the effect of inhibiting stockholders' ability to realize the maximum value for
their shares of Common Stock that might otherwise be realized because of a
merger or other event affecting the control of the Company. See "Description of
Capital Stock" and "Certain Transactions--Restated Shareholders' Agreement."
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DILUTION
The initial public offering price is substantially higher than the book
value per share of Common Stock. Investors purchasing shares of Common Stock in
the Offering will therefore incur immediate and substantial dilution of $6.43
per share. See "Dilution."
DIVIDEND POLICY
The Company anticipates that, after payment of the S Corporation
Distribution to stockholders of record as of the S Termination Date (as
hereinafter defined), all earnings of the Company will be retained for the
foreseeable future for use in the operations of the Company's business.
Purchasers of shares of Common Stock in the Offering will not receive any
portion of the S Corporation Distribution. Any future determination as to the
payment of dividends will be at the discretion of the Company's Board of
Directors and will depend upon the Company's results of operations, financial
condition, restrictions in the Company's credit facility and other factors
deemed relevant by the Board of Directors. See "Dividend Policy."
ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or be
sustained. The initial public offering price of the Common Stock offered hereby
will be determined through negotiations among the Company and the Underwriters
and may bear no relationship to the market price for the Common Stock after the
Offering. Subsequent to the Offering, prices for the Common Stock will be
determined by the market and may be influenced by a number of factors, including
depth and liquidity of the market for the Common Stock, investor perceptions of
the Company, changes in conditions or trends in the Company's industry or in the
industry of the Company's significant customers, publicly traded comparable
companies and general economic and other conditions. See "Underwriting."
FUTURE SALES BY EXISTING STOCKHOLDERS; SHARES ELIGIBLE FOR FUTURE SALE
The Common Stock offered hereby will be freely tradable (other than by an
"affiliate" of the Company as such term is defined in the Securities Act of
1933, as amended ( the "Securities Act")) without restriction or registration
under the Securities Act. Immediately after the Offering, the Company's existing
stockholders will beneficially own an aggregate of approximately 51.3% of the
outstanding Common Stock. Subject to the restrictions set forth below, such
stockholders will be free to sell such shares from time to time to take
advantage of favorable market conditions or for any other reason. Future sales
of shares of Common Stock by the Company or its stockholders could adversely
affect the prevailing market price of the Common Stock. The Company and each of
its executive officers, directors and stockholders beneficially owning in the
aggregate 4.0 million shares of Common Stock have entered into lock-up
agreements with The Robinson-Humphrey Company, LLC and Legg Mason Wood Walker,
Incorporated, as representatives of the Underwriters, pursuant to which they
have agreed not to, directly or indirectly, sell, offer to sell, contract to
sell, solicit an offer to buy, grant any option for the purchase or sale of,
assign, pledge, distribute or otherwise transfer, dispose of or encumber any of
their shares of Common Stock (other than those being sold pursuant to this
Offering) or any securities convertible into or exercisable or exchangeable for
shares of Common Stock without the prior written consent of the representatives
of the Underwriters, for a period of 180 days after the date of this Prospectus
(the "Lockup Period"). In addition, certain restrictions on transfers of shares
of Common Stock by the existing stockholders of the Company are contained in the
Restated Shareholders' Agreement. After the Lockup Period, approximately 3.97
million shares of Common Stock will be eligible for sale pursuant to Rule 144
promulgated under the Securities Act. Sales of substantial amounts of Common
Stock in the public market, or the perception that such sales may occur, could
have a material adverse effect on the market price of the Common Stock. See
"Shares Eligible for Future Sale," "Underwriting" and "Certain
Transactions--Restated Shareholders' Agreement."
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements including, among
other things, the Company's anticipated growth strategies, the Company's
intention to continue to develop new products under the BOSS and Beverly Hills
Polo Club brand names, the Company's ability to successfully manufacture and
market a Girbaud line of products, the Company's expectation that it will fill
substantially all of its orders that were unfilled as of September 30, 1997 by
the end of 1997, the Company's future expenditures on capital projects and
advertising, construction and opening of the Company's new distribution
facility, continued operation under the licenses and other rights agreements
relating to the BOSS, Beverly Hills Polo Club and Girbaud brands, European
expansion, the Company's ability to limit credit risk exposure to its customers
and other aspects of the business of the Company. These forward-looking
statements are subject to risks and uncertainties, many of which are beyond the
Company's control, which could cause actual results to differ materially from
those contemplated in such forward-looking statements, including in particular
the risks and uncertainties described under "Risk Factors," including, among
other things (i) changes in the marketplace for the Company's products,
including consumer tastes, (ii) the introduction of new products or pricing
changes by the Company's competitors, (iii) changes in the economy and (iv)
termination of one or more of its agreements for use of the BOSS, Beverly Hills
Polo Club and Girbaud brand names and images in the manufacture and sale of the
Company's products. Prospective investors are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly update or revise any of
these forward-looking statements, whether as a result of new information, future
events or circumstances or otherwise. There can be no assurance that the events
described in these forward-looking statements will occur.
COMPANY ORGANIZATION
BACKGROUND
The Company was founded by Mr. Isaac C. Isaacs in Baltimore, Maryland in
1913. It remained a family-owned business until 1984, when it was reorganized as
I.C. Isaacs & Company L.P. (the "Partnership") by a group comprised of
management and outside investors. Since that time, the Company has operated as
the Partnership's general partner and holds a 99.0% ownership interest. Ira J.
Hechler, a director and stockholder of the Company, is currently the
Partnership's limited partner and holds a 1.0% ownership interest (the "Limited
Partnership Interest"). The business of the Company is conducted through the
Partnership. Upon consummation of the Offering, the Company's wholly-owned
subsidiary, Isaacs Design, Inc., will become the limited partner of the
Partnership. See "--The Reorganization."
PRIOR S CORPORATION STATUS
Since January 1, 1993, the Company has elected to be treated for federal and
state income tax purposes as an S corporation under Subchapter S of the Internal
Revenue Code of 1986, as amended (the "Code"), and under comparable state laws.
As a result, the Company's stockholders, rather than the Company, have been
taxed directly on the income of the Company for federal and certain state income
tax purposes, whether or not such income was distributed. One day prior to the
consummation of the transactions related to the Offering, the Company's S
corporation status will be terminated (the "S Termination Date").
On the S Termination Date the Company will declare the following dividend
distributions to the stockholders of record of the Company, including certain
officers and directors of the Company: (i) a dividend distribution in the
aggregate amount of approximately $18.5 million, which represents all earned but
undistributed S corporation earnings of the Company as of September 30, 1997
(the "Initial S Corporation Distribution"); and (ii) a dividend distribution in
the aggregate amount of the Company's earned but undistributed S corporation
earnings for the period beginning on October 1, 1997 and ending
16
<PAGE>
on the S Termination Date (the "Subsequent S Corporation Distribution" and,
together with the Initial S Corporation Distribution, the "S Corporation
Distribution"). The Company estimates that the amount of the Subsequent S
Corporation Distribution will be approximately $0.9 million. Although the amount
of the Initial S Corporation Distribution is not subject to any significant
change, the estimated amount of the Subsequent S Corporation Distribution could
be materially higher or lower depending upon the Company's earnings for the
period beginning on October 1, 1997 and ending on the S Termination Date. Only
stockholders of record as of the S Termination Date will participate in the S
Corporation Distribution. The Initial S Corporation Distribution is expected to
be paid on the date of consummation of the transactions relating to the Offering
(the "Closing Date"); the Subsequent S Corporation Distribution is expected to
be paid within 30 days after the Closing Date. The Company expects to pay the S
Corporation Distribution with a portion of the net proceeds from this Offering.
Purchasers of shares of Common Stock in the Offering will not receive any
portion of the S Corporation Distribution. See "Use of Proceeds." On and after
the S Termination Date, the Company will no longer be treated as an S
corporation and, accordingly, will be fully subject to federal and state income
taxes. See "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Pro Forma Adjustments for Income
Taxes."
THE REORGANIZATION
Prior to the Closing Date, the Company will (i) form a wholly-owned
subsidiary, Isaacs Design, Inc., which will acquire the Limited Partnership
Interest from Ira J. Hechler in exchange for approximately $335,000 in cash,
which is an amount equal to the book value of that interest, (ii) file with the
Secretary of State of Delaware an Amended and Restated Certificate of
Incorporation changing the authorized shares of capital of the Company from
20,000 shares of common stock, par value $1.00 per share, to 50.0 million shares
of Common Stock, par value $.0001 per share (the "Common Stock"), and 5.0
million shares of preferred stock, par value $.0001 per share (the "Preferred
Stock"), (iii) effect a 246.9898-for-1 stock split and (iv) declare a dividend
in the amount of the S Corporation Distribution. After the acquisition of the
Limited Partnership Interest, the Company will have sole control of the
Partnership. All of such transactions are referred to collectively herein as the
"Reorganization" and are conditioned upon the closing of the Offering.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the Offering are
estimated to be approximately $45.4 million, assuming an initial public offering
price of $13.00 per share (the mid-point of the range set forth on the cover
page of this Prospectus) and after deducting the estimated underwriting discount
and offering expenses payable by the Company. The Company intends to use such
net proceeds as follows: (i) to repay approximately $20.0 million of the
Company's outstanding borrowings under its credit facilities; (ii) to pay the S
Corporation Distribution (estimated to be between $19.0 million and $20.0
million); and (iii) for general corporate and working capital purposes. The
Company's credit facilities consist of a $1.0 million term loan, which will
mature on June 30, 2001 and has an annual interest rate equal to the prime rate
of interest plus 2.5%, and a revolving line of credit, which will mature on June
30, 1998 and has an annual interest rate equal to the prime rate of interest
plus 1.0%. Amounts outstanding under the Company's credit facilities were used
for working capital purposes. Pending application of the net proceeds as
described above, the Company will invest the net proceeds in short-term,
interest bearing instruments or other investment grade securities. See "Company
Organization" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
Since January 1, 1993, the Company has elected to be treated for federal and
state income tax purposes as an S corporation. As a result, the Company's
stockholders, rather than the Company, have been taxed directly on the earnings
of the Company for federal and certain state income tax purposes, whether or not
such earnings were distributed. In 1995, 1996 and thus far in 1997, the Company
made cash distributions to its stockholders in the amounts of $2.9 million, $3.2
million and $6.5 million, respectively, which were to be used to fund the
stockholders' tax obligations as a result of the Company's status as an S
corporation. One day prior to the Closing Date, the Company's S corporation
status will be terminated. See "Company Organization."
The Company anticipates that, after payment of the S Corporation
Distribution to stockholders of record as of the S Termination Date, all
earnings of the Company will be retained for the foreseeable future for use in
the operations of the Company's business. Purchasers of shares of Common Stock
in the Offering will not receive any portion of the S Corporation Distribution.
Any future determination as to the payment of dividends will be at the
discretion of the Company's Board of Directors and will depend upon the
Company's results of operations, financial condition, restrictions in the
Company's credit facility and other factors deemed relevant by the Board of
Directors.
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1997, (ii) as adjusted as of that date to give effect to the
Initial S Corporation Distribution, termination of the Company's S corporation
status and the recording of an estimated $1.3 million of net deferred tax assets
determined as if the Company's S corporation status had been terminated on
September 30, 1997 and (iii) as further adjusted to reflect the sale of 3.8
million shares of Common Stock by the Company in the Offering at an assumed
initial public offering price of $13.00 per share (the mid-point of the range
set forth on the cover page of this Prospectus), after deducting the estimated
underwriting discount and offering expenses payable by the Company, and the
application of the estimated net proceeds therefrom to pay the Initial S
Corporation Distribution, outstanding borrowings under the credit facilities and
the application of the remainder of the net proceeds as further described under
"Use of Proceeds." The information below should be read in conjunction with the
Company's consolidated financial statements and the related notes thereto, which
are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------------------
AS AS FURTHER
ACTUAL ADJUSTED(1) ADJUSTED(1)
--------- ------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Short-term debt:
Current maturities of term loan and revolving line of credit............ $ 22,489 $ 22,489 $ --
Current maturities of capital lease obligations......................... 142 142 142
--------- ------------- -----------
Total short-term debt................................................. $ 22,631 $ 22,631 $ 142
--------- ------------- -----------
--------- ------------- -----------
Distribution payable...................................................... $ -- $ 18,500 $ --
--------- ------------- -----------
--------- ------------- -----------
Long-term debt:
Term loan, net of current maturities.................................... $ 550 $ 550 $ --
Capital lease obligations............................................... 256 256 256
--------- ------------- -----------
Total long-term debt.................................................. 806 806 256
Stockholders' equity:
Preferred Stock, par value $.0001 per share, 5,000,000 shares -- -- --
authorized, none issued and outstanding...............................
Common Stock, par value $.0001 per share, 50,000,000 shares authorized, 1 1 1
4,024,699 shares issued; 4,000,000 shares outstanding, 7,824,699
shares issued and outstanding as further adjusted(2)..................
Additional paid-in capital.............................................. 266 266 45,666
Retained earnings....................................................... 25,930 8,730 8,730
Treasury stock, at cost (24,699 shares)................................. (15) (15) (15)
--------- ------------- -----------
Total stockholders' equity............................................ 26,182 8,982 54,382
--------- ------------- -----------
Total capitalization.................................................. $ 26,988 $ 9,788 $ 54,638
--------- ------------- -----------
--------- ------------- -----------
</TABLE>
- ------------------------------
(1) Adjusted to reflect (i) the liability for the Initial S Corporation
Distribution consisting of all earned but undistributed S corporation
earnings as of September 30, 1997 and (ii) the recording of an estimated
$1.3 million of net deferred tax assets determined as if the Company's S
corporation status had been terminated on September 30, 1997. Further
adjusted to reflect the sale of 3.8 million shares of Common Stock by the
Company assuming an initial public offering price of $13.00 per share and
the application of approximately $41.5 million of the net proceeds to pay
the Initial S Corporation Distribution and outstanding borrowings under its
credit facilities as of September 30, 1997.
(2) Excludes 500,000 shares of Common Stock reserved for issuance pursuant to
awards under the 1997 Omnibus Stock Plan (the "Plan"). See
"Management--Employment Agreements; and --1997 Omnibus Stock Plan."
19
<PAGE>
DILUTION
The net tangible book value of the Company at September 30, 1997 was
approximately $24 million, or $6.09 per share of Common Stock. After giving
effect to the Reorganization and the Initial S Corporation Distribution, as if
the distribution had been recorded as of September 30, 1997 and the Company's S
corporation status had terminated at such date, the as adjusted net tangible
book value of the Company at September 30, 1997 would have been approximately
$5.9 million or $1.47 per share of Common Stock. After giving effect to the sale
by the Company of shares of Common Stock in the Offering at an assumed initial
public offering price of $13.00 per share (the mid-point of the range set forth
on the cover page of this Prospectus) and after deducting the estimated
underwriting discount and offering expenses payable by the Company and the
application of the estimated net proceeds therefrom to pay the Initial S
Corporation Distribution, the as further adjusted net tangible book value of the
Company at September 30, 1997 would have been approximately $51.3 million, or
$6.57 per share. See "Company Organization" and "Use of Proceeds." This
represents an immediate increase in net tangible book value of $5.10 per share
to the Company's existing stockholders and an immediate net tangible book value
dilution of $6.43 per share to investors purchasing shares in the Offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share (1)................. $ 13.00
Net tangible book value per share at September 30, 1997... $ 6.09
Decrease attributable to pro forma adjustments............ (4.62)
---------
As adjusted net tangible book value per share at
September 30, 1997...................................... 1.47
Increase attributable to new investors in the Offering.... 5.10
---------
Net tangible book value, as further adjusted, per share
after the Offering (2).................................... 6.57
---------
Dilution per share to new investors......................... $ 6.43
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1997, the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average consideration paid per share by the existing
stockholders and by the new investors, assuming an initial public offering price
of $13.00 per share but before deducting the underwriting discount and estimated
offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 4,000,000 51.3% $ 252,113 0.5% $ 0.04
New investors....................................... 3,800,000 48.7 49,400,000 99.5 $ 13.00
---------- ----- ------------- -----
Total............................................. 7,800,000 100.0% $ 49,652,113 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
- ------------------------
(1) Before deducting estimated underwriting discounts and commissions and
estimated expenses of the Offering payable by the Company.
(2) Excludes 500,000 shares of Common Stock reserved for issuance pursuant to
awards under the Plan. See "Management--1997 Omnibus Stock Plan."
20
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below have been derived from the
consolidated financial statements of the Company and the related notes thereto.
The statement of income data for the years ended December 31, 1994, 1995 and
1996 and the nine months ended September 30, 1996 and 1997 and the balance sheet
data as of December 31, 1995 and 1996 and September 30, 1997 are derived from
the consolidated financial statements of the Company, which have been audited by
BDO Seidman, LLP, independent certified public accountants, and which are
contained elsewhere in this Prospectus. The statement of income data for the
years ended December 31, 1992 and 1993 and the balance sheet data as of December
31, 1992, 1993 and 1994 are derived from the consolidated financial statements
of the Company, which have been audited but are not contained herein. The
results of operations for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be expected for the entire year. The
following selected financial data should be read in conjunction with the
Company's consolidated financial statements and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales.............................................. $62,232 $72,414 $85,298 $93,271 $118,655
Cost of sales.......................................... 48,051 54,880 62,216 68,530 84,421
------- ------- ------- ------- --------
Gross profit......................................... 14,181 17,534 23,082 24,741 34,234
Selling expenses....................................... 5,874 6,853 7,462 8,927 11,898
License fees........................................... 805 2,182 3,012 3,174 4,817
Distribution and shipping expenses..................... 3,756 4,276 2,046 2,379 2,669
General and administrative expenses.................... 1,847 1,903 5,813 5,787 6,243
Recovery of legal fees................................. -- -- -- -- (718)
------- ------- ------- ------- --------
Operating income..................................... 1,899 2,320 4,749 4,474 9,325
Interest, net.......................................... 997 1,260 1,191 1,247 1,365
Other income (expense) (1)............................. 55 1,215 1,235 (3) 85
Minority interest...................................... -- -- (53) (33) (82)
------- ------- ------- ------- --------
Income before extraordinary item....................... 957 2,275 4,740 3,191 7,963
Extraordinary item (2)................................. 2,227 -- 389 -- --
------- ------- ------- ------- --------
Net income........................................... $ 3,184 $ 2,275 $ 5,129 $ 3,191 $ 7,963
------- ------- ------- ------- --------
------- ------- ------- ------- --------
PRO FORMA STATEMENT OF INCOME DATA:
Income before income taxes............................. 3,184 2,275 5,129 3,191 7,963
Income tax provision (3)............................... 1,236 933 2,103 1,308 3,265
------- ------- ------- ------- --------
Net income........................................... $ 1,948 $ 1,342 $ 3,026 $ 1,883 $ 4,698
------- ------- ------- ------- --------
------- ------- ------- ------- --------
Net income per share (4)............................... $ 0.87
--------
--------
Weighted average common shares outstanding (4)......... 5,423
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1997
------------- -------------
<S> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.............................................. $86,680 $127,247
Cost of sales.......................................... 60,188 85,677
------------- -------------
Gross profit......................................... 26,492 41,570
Selling expenses....................................... 8,932 12,154
License fees........................................... 3,478 5,927
Distribution and shipping expenses..................... 1,906 3,223
General and administrative expenses.................... 4,152 5,370
Recovery of legal fees................................. -- (117)
------------- -------------
Operating income..................................... 8,024 15,013
Interest, net.......................................... 995 1,619
Other income (expense) (1)............................. (21) 28
Minority interest...................................... (71) (134)
------------- -------------
Income before extraordinary item....................... 6,937 13,288
Extraordinary item (2)................................. -- --
------------- -------------
Net income........................................... $ 6,937 $ 13,288
------------- -------------
------------- -------------
PRO FORMA STATEMENT OF INCOME DATA:
Income before income taxes............................. 6,937 13,288
Income tax provision (3)............................... 2,844 5,448
------------- -------------
Net income........................................... $ 4,093 $ 7,840
------------- -------------
------------- -------------
Net income per share (4)............................... $ 1.45
-------------
-------------
Weighted average common shares outstanding (4)......... 5,423
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital............................ $ 5,343 $ 6,787 $10,035 $10,807 $16,274
Total assets............................... 24,443 27,201 30,103 31,764 37,257
Distribution payable....................... -- -- -- -- --
Total debt................................. 8,640 9,405 8,798 8,645 7,796
Stockholders' equity....................... 9,924 10,824 14,428 14,645 19,393
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------------
AS AS FURTHER
ACTUAL ADJUSTED (5) ADJUSTED (5)
------- --------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................ $22,359 $ 3,524 $48,374
Total assets............................... 63,521 64,486 68,347
Distribution payable....................... -- 18,500 --
Total debt................................. 23,437 23,437 398
Stockholders' equity....................... 26,182 8,982 54,382
</TABLE>
- ------------------------
(1) Includes income from settlement of license disputes of $0.3 million, $1.5
million and $1.2 million in 1992, 1993 and 1994, respectively.
(2) In connection with the early extinguishment of certain debt, the Company
recorded an extraordinary gain of $2.2 million and $0.4 million in 1992 and
1994, respectively.
(3) Reflects historical provision for income taxes in 1992 and pro forma
provision for income taxes as if the Company had been taxed as a C
corporation for the years ended December 31, 1993, 1994, 1995 and 1996 and
the nine months ended September 30, 1996 and 1997, respectively.
(4) Pro forma income per share is based on the weighted average number of shares
of Common Stock outstanding plus the estimated number of shares being sold
by the Company which would be necessary to fund the distribution of earned
and undistributed S corporation earnings totaling approximately $18.5
million as of September 30, 1997.
(5) Adjusted to reflect (i) the liability for the Initial S Corporation
Distribution consisting of all earned but undistributed S corporation
earnings as of September 30, 1997, (ii) the recording of an estimated $1.3
million of net deferred tax assets determined as if the Company's S
corporation status had been terminated on September 30, 1997 and (iii) the
purchase of the minority interest at September 30, 1997 for approximately
$335,000. Further adjusted to reflect the sale of 3.8 million shares of
Common Stock by the Company assuming an initial public offering price of
$13.00 per share and the application of approximately $41.5 million of the
net proceeds to pay the Initial S Corporation Distribution and outstanding
borrowings under its credit facilities as of September 30, 1997.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
"SELECTED FINANCIAL DATA" AND THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS
AND THE RELATED NOTES THERETO, WHICH ARE INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
During its first 77 years, the Company became one of the leading
manufacturers of pants, trousers and jeans in the United States. The Company was
able to utilize its fabric sourcing and manufacturing expertise to build a well
known franchise in the men's and women's bottoms segment of the apparel
industry. In this period, the Company's marketing efforts were typically driven
by its manufacturing capabilities, and branding was limited to Company-owned
brands and third-party private labels.
In the late 1980's, management made a decision to change the Company's
marketing focus from a manufacturing-driven to a brand-driven strategy. This
fundamental shift within the Company reflected senior management's belief that
the American sportswear market would be dominated by recognized brands with
clearly established images. Management also concluded that increasing market
share would go to those companies that were market-driven and able to service
their customers with diversified manufacturing and sourcing capabilities.
Recognizing its strength in bottoms manufacturing, in 1990 the Company entered
into a license agreement for the exclusive use of the BOSS brand name on men's
denim apparel and on all types of juniors' sportswear for the young women's
market. In 1994, the Company expanded its license agreement to include use of
the BOSS brand name on men's, women's, boys' and youth sportswear in the United
States and Puerto Rico. In 1997, the Company's rights to manufacture and market
BOSS sportswear were further expanded to allow broader product offerings and
significant Company control over styling, advertising and distribution. In the
fall of 1993, the Company entered into license agreements for the use of the
Beverly Hills Polo Club brand name on men's and women's sportswear in the United
States and Puerto Rico. License rights were expanded to include Europe in 1996
and to include men's dress shirts in 1997. See "Business--Licenses and Other
Rights Agreements."
In November 1997, the Company acquired an exclusive license to manufacture
and market certain men's sportswear under the Girbaud brand in the United States
and Puerto Rico. Over the last ten years, the Girbaud brand was manufactured and
marketed in the United States under license by VF Corp. The Girbaud brand is an
internationally recognized designer sportswear label with a distinct European
influence. By targeting men who desire contemporary international fashion, the
Girbaud brand will enable the Company to address another consumer segment within
its branded product portfolio. The Company intends to reposition the Girbaud
line with a broader assortment of products, styles and fabrications reflecting a
contemporary European look. The Company plans to introduce the fall men's
collection in early 1998. The Company anticipates that it will incur
approximately $600,000 in costs related to the implementation of the Girbaud
brand, including, but not limited to, minimum royalty payments, expenditures for
additional office and showroom space and costs related to adding merchandising
and sales personnel. See "Business--Licenses and Other Rights
Agreements--Girbaud License."
The Company also manufactures and markets women's sportswear under its own
"I.C. Isaacs," "Lord Isaacs" and "Pizzazz" brand names and under third-party
private labels. The Company intends to continue to manufacture and market this
sportswear for the foreseeable future. See "Business--Licenses and Other Rights
Agreements."
Over the past three years, the Company has completed its strategic
repositioning from a manufacturing-driven company to a marketing and
brand-driven company. Through a focused strategy of providing fashionable,
branded merchandise at value prices, the Company has emerged as a significant
fashion influence for youthful and contemporary consumers who purchase
sportswear through specialty and department stores. The Company's brand-driven
market strategy is evidenced by the increase of licensed,
22
<PAGE>
branded apparel as a percentage of the Company's net sales. In 1996, the BOSS
and Beverly Hills Polo Club brands comprised 72.6% and 12.0% of net sales,
respectively. Concurrent with this strategy, the Company has also shifted its
product mix from predominately bottoms to a full array of sportswear, including
tops and outerwear. As a result, net sales of the BOSS tops and outerwear lines
have more than doubled since 1994 to approximately $29 million in 1996. The
Company has also expanded its branded lines to include sportswear for boys,
youth and juniors. Historically, the Company has recognized markdowns for
specific unsold inventory in the second and fourth quarters. These specific
markdowns are reflected in cost of sales and the related gross margins at the
conclusion of the appropriate selling season. The following table sets forth,
for the periods indicated, the Company's net sales categorized by brand and
product category:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
MEN'S(1)
BOSS Bottoms................................................... $ 37,724 $ 37,234 $ 44,667 $ 32,360 $ 44,238
BOSS Tops...................................................... 6,709 15,882 29,284 21,014 35,543
BOSS Boys'..................................................... 1,834 3,264 6,736 4,201 10,833
Men's BHPC..................................................... 2,795 5,219 12,226 8,103 19,584
Men's Private Label............................................ 3,227 4,299 500 485 83
--------- --------- --------- --------- ---------
Men's net sales............................................ 52,289 65,898 93,413 66,163 110,281
--------- --------- --------- --------- ---------
WOMEN'S(1)
BOSS Juniors'(2)............................................... 9,528 5,424 5,413 5,263 3,204
Women's BHPC................................................... 1,048 1,833 2,043 1,775 1,128
Women's Other(3)............................................... 22,433 20,116 17,786 13,479 12,634
--------- --------- --------- --------- ---------
Women's net sales.......................................... 33,009 27,373 25,242 20,517 16,966
--------- --------- --------- --------- ---------
Total net sales............................................ $ 85,298 $ 93,271 $ 118,655 $ 86,680 $ 127,247
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) The net sales totals incorporate product returns allocated in proportion to
gross sales.
(2) Results for the year ended December 31, 1994 include approximately $2.5
million of net sales of tee shirts and sweatshirts with unisex styling that
were discontinued after the Company obtained a license to manufacture and
sell men's BOSS tops in the fourth quarter of 1994. As a result, these
products were recategorized in men's BOSS tops in 1995 and thereafter.
(3) Includes Company-owned brands and third-party private labels.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items in the Company's consolidated
statements of income for the periods shown below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996(1) 1996 1997(1)
--------- --------- ----------- --------- ---------
Net sales................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................ 72.9 73.5 71.1 69.4 67.3
--------- --------- ----- --------- ---------
Gross profit............................................. 27.1 26.5 28.9 30.6 32.7
Selling expenses......................................... 8.8 9.5 10.0 10.3 9.6
License fees............................................. 3.5 3.4 4.1 4.0 4.7
Distribution and shipping expenses....................... 2.4 2.6 2.2 2.2 2.5
General and administrative expenses...................... 6.8 6.2 4.7 4.8 4.1
--------- --------- ----- --------- ---------
Operating income......................................... 5.6% 4.8% 7.9% 9.3% 11.8%
--------- --------- ----- --------- ---------
--------- --------- ----- --------- ---------
</TABLE>
- ------------------------
(1) General and administrative expenses have been reduced to reflect the receipt
in 1996 and 1997 of approximately $0.7 million and $0.1 million,
respectively, related to an agreement with the Company's insurance carrier
to reimburse it for legal fees associated with litigation billed in prior
years.
23
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
NET SALES. Net sales increased 46.7% to $127.2 million in the nine months
ended September 30, 1997 from $86.7 million in the nine months ended September
30, 1996. Substantially all of this increase was due to higher volume shipments
of BOSS and Beverly Hills Polo Club sportswear. Net sales of BOSS sportswear
increased $31.0 million or 49.4% to $93.8 million primarily driven by strong
growth in the men's tops, boys' and youth segments and continued strength of the
jeans segment. Net sales of the BOSS tops segment were $35.5 million in the nine
months ended September 30, 1997 versus $21.0 million in the nine months ended
September 30, 1996. Net sales of Beverly Hills Polo Club sportswear increased
$10.8 million or 109.1% to $20.7 million over the same period, primarily driven
by strong growth in the men's business. International sales were insignificant
in the nine months ended September 30, 1997.
GROSS PROFIT. Gross profit increased 57.0% to $41.6 million in the nine
months ended September 30, 1997 from $26.5 million in the nine months ended
September 30, 1996. Gross profit as a percentage of net sales increased to 32.7%
from 30.6% over the same period. The increase in gross profit was due in part to
the expansion of the BOSS tops product line, which typically carries a higher
gross margin than the bottoms product line. In addition, the tops line had
improved gross margins due to reduced costs on imported tops resulting from
volume purchase discounts. Also, the continued shift of production of denim
bottoms from the United States to Mexico and the accompanying decrease in labor
and overhead costs contributed to the improved gross margin. The Company's
improved gross margin was also a result of increased sales of products at full
margin, particularly in the first quarter, offset somewhat by markdowns taken in
the second quarter related to unsold spring and summer goods.
SELLING, DISTRIBUTION, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
distribution, general and administrative ("SG&A") expenses increased 44.3% to
$26.7 million in the nine months ended September 30, 1997 from $18.5 million in
the nine months ended September 30, 1996. As a percentage of net sales, SG&A
expenses decreased to 20.9% from 21.3% over the same period. This improvement
reflects overall declines in SG&A expenses resulting from cost containment
efforts in certain expense areas and expense leverage associated with the
Company's growth. Selling expenses increased $3.3 million to $12.2 million over
the same period as a result of higher commissions to the Company's salespersons
and higher advertising expenditures which increased $0.5 million to $2.4 million
as the Company continued to focus on enhancing the identity and image of its
brands through increased media exposure. Distribution and shipping expenses
increased $1.3 million to $3.2 million due to higher unit shipments and
increased overtime costs. The Company opted to incur additional overtime wages
rather than adding personnel to process the increase in unit shipments. General
and administrative expenses increased $1.1 million to $5.3 million due to salary
increases for existing employees and salaries and costs associated with the
hiring of new management and administrative personnel.
LICENSE FEES. License fees increased $2.4 million to $5.9 million in the
nine months ended September 30, 1997 from $3.5 million in the nine months ended
September 30, 1996. As a percentage of net sales, license fees increased to 4.7%
from 4.0%. This increase was due to greater sales growth of non-denim branded
products, which have higher royalty rates than other branded products. The
Company believes that its license fees will increase as the percentage of net
sales of branded products increases.
OPERATING INCOME. Operating income increased 87.5% to $15.0 million or
11.8% of net sales in the nine months ended September 30, 1997, from $8.0
million or 9.3% of net sales in the nine months ended September 30, 1996. This
increase resulted primarily from the increase in net sales and gross profit
margins.
INTEREST EXPENSE. Interest expense increased $0.6 million to $1.6 million
in the nine months ended September 30, 1997 due to an increase in working
capital borrowing requirements. In the nine months ended September 30, 1997, the
average debt balance was $17.9 million, with an average effective interest rate
of 9.5%. In the nine months ended September 30, 1996, the average debt balance
was $9.1 million with an average effective interest rate of 9.25%.
24
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES. Net sales increased 27.2% to $118.7 million in 1996 from $93.3
million in 1995. Substantially all of the increase in net sales was due to
greater unit volume shipments of both the BOSS and Beverly Hills Polo Club
sportswear lines. Net sales of BOSS sportswear increased 39.3% to $86.1 million
in 1996 from $61.8 million in 1995. The volume increase in BOSS sportswear was
primarily driven by strong growth in the tops segment, continued strength of the
jeans segment and, to a lesser extent, growth in the boys' and youth segments.
Net sales of BOSS tops and outerwear nearly doubled from $15.9 million in 1995
to $29.3 million in 1996, as a result of the Company's continued product
expansion and increased consumer acceptance and demand. The BOSS bottoms segment
also showed strong growth, as net sales increased 20.2% in 1996 to $44.7
million. Net sales of Beverly Hills Polo Club sportswear increased 101.4% to
$14.3 million during the same period primarily driven by strong growth in the
men's segment. This success was due in part to increased acceptance of the
product after its first full year of sales and the ongoing reconfiguration of
the Company's Beverly Hills Polo Club sales force to more effectively market to
specialty store customers. These increases in net sales were partially offset by
a decline in sales of the Company's men's private label collection and women's
Company-owned and private label collections as the Company continued to place
more emphasis on branded labels. The Company discontinued the men's private
label collection in 1996 due to unsatisfactory gross margins relative to BOSS
and Beverly Hills Polo Club sportswear. The Company did not incur any material
costs in connection with the discontinuation. International sales were
insignificant in 1996.
GROSS PROFIT. Gross profit increased 38.5% to $34.2 million in 1996 from
$24.7 million in 1995. Gross profit as a percentage of net sales increased to
28.9% in 1996 from 26.5% in 1995. The increase in gross margin was primarily due
to the expansion of the BOSS tops product line as a percentage of total net
sales. The tops line had a higher gross margin due to reduced costs on imported
tops resulting from volume purchase discounts. Also, the continued shift of
production of denim bottoms from the United States to Mexico and accompanying
decrease in labor and overhead costs contributed to the improved gross margin.
SELLING, DISTRIBUTION, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses
increased 22.7% to $24.9 million in 1996 from $20.3 million in 1995. As a
percentage of net sales, SG&A expenses decreased to 21.1% in 1996 from 21.8% in
1995. This improvement reflects overall declines in SG&A expenses resulting from
cost containment efforts in certain expense areas and expense leverage
associated with the Company's growth. Selling expense increased $3.0 million to
$11.9 million over the same period, as a result of higher commissions to the
Company's salespersons and higher advertising expenditures which increased $1.0
million to $2.5 million as the Company initiated an advertising campaign to
promote the BOSS brand. Distribution and shipping expenses increased $0.3
million to $2.7 million due to higher unit shipments and overtime wages for
employees at the Company's distribution center. The Company opted to incur
additional overtime wages rather than adding personnel to process the increase
in unit shipments. General and administrative expenses increased $0.4 million to
$6.2 million during the same period primarily due to higher data processing
expenses.
LICENSE FEES. License fees increased $1.6 million to $4.8 million in 1996
from $3.2 million in 1995. As a percentage of net sales, license fees increased
to 4.1% from 3.4%. License fees increased at a rate in excess of the growth in
net sales due to the increase in sales of non-denim branded products.
OPERATING INCOME. Operating income increased 106.7% to $9.3 million or 7.9%
of net sales in 1996, from $4.5 million or 4.8% of net sales in 1995. This
increase primarily resulted from the increase in net sales and gross profit
margins as well as the receipt of approximately $0.7 million related to an
agreement with the Company's insurance carrier to reimburse it for legal fees
associated with litigation billed in prior years.
INTEREST EXPENSE. Interest expense increased to $1.4 million from $1.2
million in 1996 due to an increase in working capital borrowing requirements
which was partially offset by a reduction in borrowing costs. For 1996, the
average outstanding short-term debt balance was $9.8 million, with an average
effective interest rate of 9.25%. For 1995, the average balance was $8.5
million, with an average effective interest rate of 9.88%.
25
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased 9.4% to $93.3 million in 1995 from $85.3
million in 1994. Substantially all of this increase was due to greater unit
shipments of BOSS sportswear which was due to greater penetration of the
specialty store channel and initial shipments to a major department store chain.
Net sales of BOSS sportswear increased $6.0 million or 10.8% to $61.8 million in
1995 primarily due to the expansion of the tops product line. The overall
increase in net sales was partially offset by weaker sales of colored denim
shorts. Net sales of Beverly Hills Polo Club sportswear increased $3.3 million
or 86.8% to $7.1 million over the same period as it continued to grow from its
initial introduction by the Company in the first quarter of 1994. There were no
international sales in 1995 or 1994.
GROSS PROFIT. Gross profit increased 6.9% to $24.7 million in 1995 from
$23.1 million in 1994. However, gross profit as a percentage of net sales
decreased to 26.5% from 27.1% over the same period. The decrease in gross profit
as a percentage of net sales resulted from weaker sales of higher gross margin
colored denim shorts combined with stronger sales of the Company's lower gross
margin private label products.
SELLING, DISTRIBUTION, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses
increased 10.9% to $20.3 million in 1995 from $18.3 million in 1994. As a
percentage of net sales, SG&A expenses increased to 21.8% from 21.5% in 1994 as
the Company increased investment in organizational structure and personnel to
support growth and expanded advertising. Selling expenses increased $1.4 million
to $8.9 million during the same period primarily due to a $1.1 million increase
in advertising expenditures. Total advertising expenditures more than tripled to
$1.5 million as the Company significantly expanded its campaign to increase
awareness of the BOSS brand. Also, commission expenses to the Company's
salespersons rose as sales of BOSS and Beverly Hills Polo Club sportswear
continued to increase as a percentage of total net sales. Distribution and
shipping expenses increased $0.4 million to $2.4 million over the same period as
a result of increased unit shipments and overtime wages for employees at the
Company's distribution center. General and administrative expenses were
essentially unchanged from the $5.8 million experienced in 1994 as the Company
contained personnel costs.
LICENSE FEES. License fees increased $0.2 million to $3.2 million in 1995
from $3.0 million in 1994. This increase was attributable to increases in sales
of BOSS sportswear.
OPERATING INCOME. Operating income decreased 4.3% to $4.5 million or 4.8%
of net sales in 1995, from $4.7 million or 5.6% of net sales in 1994. This
decrease primarily resulted from lower gross margins coupled with higher SG&A
expenses.
INTEREST EXPENSE. Interest expense increased minimally to $1.3 million in
1995 primarily due to an increase in average outstanding borrowings. For 1995,
the average outstanding short-term debt balance was $8.5 million, with an
average effective interest rate of 9.88%. For 1994, the average balance was $6.6
million, with an average effective interest rate of 9.72%.
OTHER INCOME (EXPENSE). There was no significant other income in 1995 as
compared to other income of $1.2 million in 1994. In 1994, the Company received
approximately $1.2 million as the final payment related to the settlement of a
license dispute with a third party.
EXTRAORDINARY ITEM. The Company recognized an extraordinary gain of $0.4
million in 1994 related to early extinguishment of senior subordinated debt due
a former partner. There was no comparable item in 1995.
26
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied primarily on internally generated funds, trade credit
and asset-based borrowings to finance its operations and expansion. The
Company's capital requirements primarily result from working capital needed for
inventory and accounts receivable.
OPERATING CASH FLOW
Cash used by operations totaled $9.5 million for the nine months ended
September 30, 1997 due to a significant increase in accounts receivable and
inventory which resulted from higher sales of BOSS and Beverly Hills Polo Club
sportswear. This was partially offset by higher levels of accounts payable and
improved operating results. Cash used for investing activities totaled $0.8
million for the nine months ended September 30, 1997 and was used primarily for
the purchase of machinery for the Company's factories. Cash provided by
financing activities totaled $10.8 million for the nine months ended September
30, 1997. The Company borrowed $9.5 million under its credit facilities
primarily to finance the growth in accounts receivable and inventory and
borrowed $6.5 million to fund distributions to its stockholders for the payment
of federal and state income taxes.
Accounts receivable and inventories increased $16.3 million and $8.4
million, respectively, from December 31, 1996 to September 30, 1997 due to
higher sales of BOSS and Beverly Hills Polo Club sportswear and higher levels of
finished goods. The increase in accounts receivable was greater than the
increase in sales due to lower than expected cash collections beginning in May
and continuing through September 30, 1997. Also, the increase in the finished
goods inventories was greater than the increase in sales due to growth in
imported merchandise for which the Company pays via letters of credit prior to
delivery in the United States. The Company manages its inventory levels by
scheduling production and purchases of imported inventory to meet firm purchase
orders. There was a $2.1 million increase in the overdraft directly related to
the higher inventory levels necessary to support anticipated sales growth in
early 1997 and a $16.0 million increase in outstanding borrowings under the
Company's revolving line of credit from December 31, 1996 to September 30, 1997.
Capital expenditures were $0.8 million for the nine months ended September
30, 1997 and $0.7 million in both 1996 and 1995. The Company's capital
expenditures were comprised primarily of purchases of computer equipment and
sewing machinery for its domestic factories. The Company anticipates that
capital expenditures will be approximately $6.0 to $7.0 million in 1998,
primarily related to the construction of a new 150,000 square foot distribution
center in Milford, Delaware to be financed through a mortgage loan. The Company
does not currently have commitments for any other material capital expenditures
in 1998. A significant portion of the Company's fixed assets are located at its
manufacturing facilities in Mississippi. Although the Company has no current
plans to dispose of these manufacturing facilities, it does not plan to upgrade
the manufacturing facilities as they become obsolete, but rather intends to
transfer the production capacity to domestic and foreign independent
contractors. The Company has made no provision in its financial statements in
connection with these plans.
As of September 30, 1997, the Company had outstanding borrowings under its
revolving line of credit and term loan facility of $23.0 million compared to
$7.2 million as of December 31, 1996. The higher borrowing level was necessary
to support the growth in accounts receivable and inventory experienced in the
first nine months of 1997.
Because of the Company's treatment as an S corporation for federal and state
income tax purposes, the Company has provided funds to its stockholders for the
payment of income taxes on the earnings of the Company. Accordingly, the Company
made cash distributions to its stockholders in the amounts of $2.9 million, $3.2
million and $6.5 million in 1995, 1996 and thus far in 1997, respectively. Prior
to the Closing Date, the Company will declare the S Corporation Distribution.
The amount of the Initial S Corporation Distribution will be approximately $18.5
million, which represents all earned but undistributed S corporation earnings of
the Company as of September 30, 1997. The amount of the Subsequent S Corporation
27
<PAGE>
Distribution is estimated to be approximately $0.9 million, which will represent
all earned but undistributed S corporation earnings of the Company for the
period beginning on October 1, 1997 and ending on the S Termination Date. On and
after the S Termination Date, the Company will no longer be treated as an S
corporation. After completion of the Offering, the Company's immediate cash flow
needs will not reflect any dividend distributions to the Company's stockholders
for payment of income taxes on the earnings of the Company. However, the Company
will assume responsibility for payment of federal and state income taxes, which
will partially offset the Company's former cash commitment to provide its
stockholders with funds for the payment of income taxes.
CREDIT FACILITIES
The Company has an asset-based revolving line of credit with Congress
Financial Corporation that allows it to borrow up to $30.0 million based on a
percentage of eligible accounts receivable and inventory. Outstanding borrowings
at December 31, 1995, December 31, 1996 and September 30, 1997 were $7.2
million, $6.3 million and $22.3 million, respectively. Borrowings under the
revolving line of credit bear interest at the lender's prime rate plus 1.0%.
Also, the Company has a term loan facility with the lender, which allows it to
continually borrow up to $1.0 million. Outstanding borrowings under the term
loan were $0.3 million, $0.9 million and $0.7 million at December 31, 1995,
December 31, 1996 and September 30, 1997, respectively. The Company will use a
portion of the net proceeds of the Offering to repay the amounts outstanding
under these credit facilities. See "Use of Proceeds." The Company intends to
enter into a new credit facility after consummation of the Offering, which will
replace the existing revolving line of credit and term loan facilities. The
Company does not expect to incur material costs in connection with entering into
a new credit facility.
In November 1997, the Company borrowed $11.25 million from Ambra to finance
the acquisition of certain BOSS trademark rights. This obligation is evidenced
by a secured limited recourse promissory note which matures on December 31, 2007
(the "Note"). The Note bears interest at 10.0% per annum, payable quarterly;
principal is payable in full upon maturity of the Note, which is collateralized
by the Domestic BOSS Trademark Rights. See "Business--Licenses and Other Rights
Agreements."
The Company extends credit to its customers. Accordingly, the Company may
have significant risk in collecting accounts receivable from its customers. The
Company has credit policies and procedures which it uses to minimize its
exposure to credit losses. The Company's collection personnel regularly contact
customers with receivable balances outstanding beyond 30 days to expedite
collection. If these collection efforts are unsuccessful, the Company may
discontinue merchandise shipments until the outstanding balance is paid.
Ultimately, the Company may engage an outside collection organization to collect
past due accounts. The timely contact with customers by collection personnel has
been effective in reducing credit losses to an immaterial amount. In 1994, 1995
and 1996, the Company's credit losses were $0.4 million, $0.4 million and $0.9
million, respectively. In each of these years, the Company's actual credit
losses as a percentage of net sales has been less than three-quarters of one
percent. See "Business--Credit Control."
The Company believes that the net proceeds of the Offering, together with
cash from operations and its existing credit facilities, will be sufficient to
meet its capital requirements for the next 12 months.
PRO FORMA ADJUSTMENTS FOR INCOME TAXES
Prior to the Reorganization, the Company's earnings were not subject to
federal, state and local income taxes. In connection with the Reorganization,
the Company's earnings will become subject to such taxes. In addition, as a
result of the Reorganization, the Company will record a net deferred tax asset
and a corresponding tax benefit in its statement of income in accordance with
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." If the Offering occurred on September 30, 1997,
the deferred tax asset and corresponding tax benefit would have been
approximately $1.3 million. The Company's pro forma effective tax rate, which
excludes the non-recurring tax benefit
28
<PAGE>
discussed above, for the years ended December 31, 1994, 1995 and 1996 and for
the nine months ended September 30, 1996 and September 30, 1997 was 41.0%. The
effect of taxes is not discussed herein because the historic taxation of the
earnings of the Company is not meaningful with respect to periods after the
Reorganization.
SELECTED QUARTERLY RESULTS
The Company's business is impacted by the general seasonal trends that are
characteristic of the apparel and retail industries. In the Company's segment of
the apparel industry, sales are generally higher in the first and third
quarters. However, the Company's strong growth in 1996 minimized this seasonal
effect. Historically, the Company has taken greater markdowns in the second and
fourth quarters. As the timing of the shipment of products may vary from year to
year, the results for any particular quarter may not be indicative of results
for the full year. The Company has not had significant overhead and other costs
generally associated with large seasonal variations. See "Risk
Factors--Seasonality and Quarterly Fluctuations."
The following table sets forth certain unaudited quarterly financial
information for the periods shown:
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1996 1996 1996 1997 1997 1997
----------- ----------- ------------- ------------- ----------- ----------- -------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............. $ 25,902 $ 25,997 $ 34,781 $ 31,975 $ 39,312 $ 38,398 $ 49,537
Gross profit.......... 7,839 7,837 10,817 7,741 13,313 12,376 15,881
GROSS PROFIT MARGIN... 30.3% 30.1% 31.1% 24.2% 33.9% 32.2% 32.1%
Operating income...... $ 2,089 $ 1,567 $ 4,367 $ 1,302 $ 4,854 $ 3,968 $ 6,191
OPERATING MARGIN...... 8.1% 6.0% 12.6% 4.1% 12.3% 10.3% 12.5%
</TABLE>
INFLATION
The Company does not believe that the relatively moderate rates of inflation
experienced in the United States over the last three years have had a
significant effect on its net sales or profitability. Although higher rates of
inflation have been experienced in a number of foreign countries in which the
Company's products are manufactured, the Company does not believe that they have
had a material effect on the Company's net sales or profitability.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). SFAS 123 will begin to affect the Company in 1997
with the establishment of the 1997 Omnibus Stock Plan. See "Management-- 1997
Omnibus Stock Plan." The Company will adopt only the disclosure provisions of
SFAS 123 and account for stock-based compensation using the intrinsic value
method set forth in APB Opinion 25.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 provides a different method of calculating earnings per share than is
currently used in APB Opinion 15. SFAS 128 provides for the calculation of basic
and diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to existing fully diluted earnings
per share. As required by the policies of the Securities and Exchange Commission
(the "Commission"), the Company has treated the shares being sold to fund the S
Corporation Distribution as outstanding prior to the Offering. SFAS 128 does not
have a provision requiring such treatment. The Commission is currently
evaluating its policies concerning this issue. Assuming shares issued to fund
the S Corporation Distribution continue to be
29
<PAGE>
treated as outstanding prior to the Offering, the Company believes adopting SFAS
128 will not have a material effect on its calculation of earnings per share.
The Company will adopt the provisions for computing earnings per share set forth
in SFAS 128 in December 1997.
Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure ("SFAS 129"), effective for periods ending
after December 15, 1997, establishes standards for disclosing information about
an entity's capital structure. SFAS 129 requires disclosure of the pertinent
rights and privileges of various securities outstanding (stock, options,
warrants, preferred stock, debt and participation rights) including dividend and
liquidation preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. Adoption of SFAS 129 will have
no effect on the Company because it currently discloses the information
specified.
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. The Company's results of operations and financial position
will be unaffected by implementation of these new standards.
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
Statement of Financial Accounting Standards No. 131, Disclosure about
Segments of a Business Enterprise ("SFAS 131"), establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of an enterprise about which separate financial information is
available and that is evaluated regularly by the chief operating decision maker
in deciding how to allocate resources and in assessing performance.
Both SFAS 130 and SFAS 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Due to the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, they may have
on future financial statement disclosures.
30
<PAGE>
BUSINESS
INTRODUCTION
I.C. Isaacs & Company, Inc. is a rapidly growing designer, manufacturer and
marketer of branded sportswear. Founded in 1913, the Company has assembled a
portfolio of brands that addresses distinct fashion segments resulting in a
diverse customer base. The Company offers full lines of sportswear for young
men, women and boys under the BOSS brand in the United States and Puerto Rico
and sportswear for men and women under the Beverly Hills Polo Club brand in the
United States, Puerto Rico and Europe. Beginning in 1998, the Company will also
offer a collection of men's sportswear under the Girbaud brand in the United
States and Puerto Rico. Through a focused strategy of providing fashionable,
branded merchandise at value prices, the Company has emerged as a significant
fashion source for youthful and contemporary consumers who purchase sportswear
and outerwear through specialty and department stores. The Company also offers
women's sportswear under various other Company-owned brand names as well as
under third-party private labels. Net sales of the Company grew from $85.3
million in 1994 to $118.7 million in 1996, and operating income grew from $4.7
million in 1994 to $9.3 million in 1996. In the first nine months of 1997, net
sales and operating income totaled $127.2 million and $15.0 million,
respectively, as compared to $86.7 million and $8.0 million, respectively, in
the first nine months of 1996.
The Company manufactures and markets certain sportswear under the BOSS brand
for sale at specified price points in the United States and Puerto Rico subject
to a concurrent use agreement. The Company has positioned the BOSS line to
appeal to consumers who desire a fresh, urban, fashion-forward look. Through
creative and innovative marketing, the Company has created powerful brand appeal
for the BOSS line and has become an active influence in young men's fashion. The
BOSS collection has been expanded from an initial line of denim products to a
full array of sportswear consisting of jeans, tee shirts, sweatshirts, shorts,
knit and woven shirts and outerwear, many of which are characterized by
innovative design, creative graphics and bold uses of color. The Company also
markets a juniors' sportswear line under the BOSS brand for young women, which
includes a full selection of denim products and active sportswear. The Company's
net sales of BOSS sportswear increased at an annual growth rate of 37.1% in
1994, 10.8% in 1995 and 39.3% in 1996. In 1996, net sales of BOSS sportswear
accounted for 72.6% of the Company's net sales.
The Company manufactures and markets certain sportswear under the Beverly
Hills Polo Club brand in the United States, Puerto Rico and Europe under an
exclusive license. The Company targets men and women who desire updated
traditional sportswear at competitive prices. To reach a broader demographic
customer base, the Beverly Hills Polo Club collection combines contemporary
design details and innovative fabrics with classic American sportswear styling.
The Beverly Hills Polo Club collection consists primarily of cotton clothing,
including jeans, pants, shorts, knit and woven shirts and outerwear targeting
the active, image-conscious consumer. The Company's Beverly Hills Polo Club line
was introduced in the spring of 1994. The Company's net sales of Beverly Hills
Polo Club sportswear increased at an annual growth rate of 83.5% in 1995 and
102.3% in 1996. In 1996, net sales of Beverly Hills Polo Club sportswear
accounted for 12.0% of the Company's net sales.
In November 1997, the Company acquired an exclusive license to manufacture
and market certain men's sportswear under the Girbaud brand in the United States
and Puerto Rico. The Girbaud brand is an internationally recognized designer
sportswear label with a distinct European influence. By targeting men who desire
contemporary, international fashion, the Girbaud brand will enable the Company
to address another consumer segment within its branded product portfolio. The
Company intends to reposition the Girbaud line with a broader assortment of
products, styles and fabrications reflecting a contemporary European look. The
Company plans to introduce the fall men's collection in early 1998.
The Company also manufactures and markets women's sportswear under its own
"I.C. Isaacs," "Lord Isaacs" and "Pizzazz" brand names and under third-party
private labels. The Company intends to continue to manufacture and market this
sportswear for the foreseeable future.
31
<PAGE>
COMPETITIVE STRENGTHS
In the late 1980's, management made a decision to change the Company's
marketing focus from a manufacturing-driven to a brand-driven strategy. As a
result, the Company believes it has developed distinct competitive strengths
which position it for continued success. The Company's key competitive strengths
include:
EMPHASIS ON BRAND IDENTITY. The Company believes that brand identity, as
well as the image and lifestyle that a brand conveys, are important factors that
influence retail purchasing decisions. The Company believes that the BOSS and
Beverly Hills Polo Club brands have developed strong name recognition and
consumer appeal. The Company has consistently positioned the BOSS line to be a
fashion-forward brand with an urban attitude. The word "boss" conveys images of
power and authority and is commonly used by today's youth as an expression of
excellence. Similarly, the Company believes that the Beverly Hills Polo Club
brand name, together with the accompanying distinctive horse and rider logo,
connotes a "classic American" upscale image with which retail consumers easily
identify. In addition, Girbaud is an internationally recognized designer brand
and will be positioned to appeal to contemporary consumers who desire high
quality, European-influenced fashion. The combination of these brands enables
the Company to offer a broad continuum of designs and products that are
well-recognized by fashion-conscious consumers.
COMBINATION OF FASHION AND VALUE. The Company is able to provide consumers
with fashionable brand name sportswear at affordable prices. The BOSS and
Beverly Hills Polo Club product lines both consistently provide exciting,
fashion-forward products using fresh colors, striking graphic designs, unique
fabrics, unusual trimmings and elaborate embroidery. The Company offers a wide
array of traditional products such as jeans, tee shirts, polo shirts and
sweatshirts that are updated with creative design details and innovative
fabrics. The Company's manufacturing, sourcing and merchandising expertise
enables it to provide its customers with fashion, image-oriented products at
value prices. As a result, BOSS and Beverly Hills Polo Club products typically
sell at retail prices below those of many well known designer brands. The
Company anticipates that its Girbaud line of products will sell at retail prices
below those of many other internationally recognized designer brands.
CREATIVE AND INNOVATIVE MARKETING. The Company has built strong name
recognition and brand image for its BOSS and Beverly Hills Polo Club products
through a coordinated merchandising, advertising and promotion strategy. Since
the Company has not had the resources to commit to a major mass media campaign,
it has relied on innovation and creativity to reach its target customers who are
image conscious and influenced by fashion, music and sports. In advertising its
products, the Company uses magazines such as VIBE, SOURCE, SLAM, GQ and POV,
television shows and networks including Turner Network Television (TNT), Black
Entertainment Television (BET), MTV: Music Television, Univision, Telemundo and
various amateur and professional sporting events. The Company is also a sponsor
of the Chicago Bulls, New York Knicks, New Jersey Nets, Atlanta Hawks, Detroit
Pistons and Los Angeles Clippers professional basketball teams and promotes the
image of its BOSS and Beverly Hills Polo Club products by providing celebrities
with its branded clothing and featuring its products in television programs and
movies. The Company influences the presentation of those brands and products at
the retail level by providing in-store signage, video advertisements and the
"Shop-in-Shop" concept. The "Shop-in-Shop" concept involves the retailer
grouping of the Company's products by a retailer in one designated area and
complementing the presentation of the Company's products with signage and
fixturing to enhance the visibility of the brand. The Company intends to market
its Girbaud line of products following a similar strategy.
FLEXIBLE MANUFACTURING AND SOURCING. The Company believes that its ability
to source products from its United States facilities and third party foreign and
domestic manufacturers provides it with significant manufacturing flexibility.
The Company owns and operates three manufacturing facilities in the United
States for the production of bottoms. In addition, the Company contracts for the
manufacture of its products through third party foreign and domestic
manufacturers. Currently, the Company utilizes approximately 50 factories in
more than 10 countries including China, Hong Kong, Korea, Mexico, the
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Philippines, Taiwan, Thailand and the United States. See "--Manufacturing and
Product Sourcing." The Company achieves rapid delivery capability by producing
jeans in its own manufacturing facilities and tee shirts at domestic
contractors. In addition, the Company gains a significant cost advantage by
utilizing factories in Mexico and Asia for the manufacture of innovative and
labor intensive products that typically cannot be produced competitively in the
United States. The Company does not have long-term contracts with any
manufacturers, and most of the Company's manufacturers supply the Company on a
non-exclusive basis pursuant to purchase orders. This combination of
manufacturing and sourcing capabilities enhances the Company's production
flexibility and capacity while effectively enabling it to control the timing,
quality and pricing of its products.
GROWTH STRATEGY
The Company's growth strategy includes continued capitalization on its
competitive strengths and the implementation of specific strategies for
continued expansion. The Company's principal growth strategies are as follows:
BROADEN PRODUCT OFFERINGS. The Company believes it can effectively broaden
its product offerings through the expansion of products offered under existing
brands as well as the possible addition of new brands. As the BOSS brand has
developed, the Company has shifted its product mix from predominantly bottoms to
a broader collection of sportswear, driven by tops and outerwear. This evolution
is consistent with many sportswear companies, which generally sell several tops
for each pair of bottoms. Currently, the Company sells approximately the same
number of units of tops as bottoms, but the Company believes this ratio will
increase to three to four tops for each pair of bottoms sold. The continued
evolution of the product mix provides significant growth opportunities for the
Company's tops segment. The Company is growing its BOSS line by adding new
product categories, such as polo shirts and swimwear, broadening its outerwear
collection and expanding its boys', juniors' and youth lines. Similarly, the
Beverly Hills Polo Club brand includes a number of product lines that are in the
early stages of market penetration, such as outerwear, and a number of potential
product line expansions, such as men's dress shirts. To further develop the
Beverly Hills Polo Club brand, product offerings within the Beverly Hills Polo
Club women's line are also being expanded, and the Company is reorganizing and
increasing its women's sales force. The recent addition of the Girbaud brand
adds a European-influenced designer sportswear brand to the Company's sportswear
lines. The Company intends to offer a full array of men's bottoms, knit and
woven tops and outerwear under the Girbaud brand.
ENHANCE MARKETING PROGRAMS. While the Company believes that its current
marketing strategy is one of its primary competitive strengths, it intends to
continue its efforts to increase net sales by enhancing consumer recognition of
its brand names and images through expanded marketing efforts. The BOSS brand is
currently advertised through a variety of media, including television and print,
while the Beverly Hills Polo Club brand is primarily advertised through print
media. As the Company continues to grow, it plans to use its increased financial
resources to further support and expand the brand exposure for BOSS, Beverly
Hills Polo Club and Girbaud through increased television and print advertising,
and various forms of outdoor advertising such as billboards and signage on buses
and at bus stops. To further differentiate its products at the retail level, the
Company also plans to expand its point-of-sale advertising. Specifically, the
Company intends to build upon its existing programs to provide signage and
posters and to expand its presence in the stores by providing additional
permanently identified free-standing fixtures and presentation services. The
Company also plans to enhance the visibility of its products at the retail level
through the "Shop-in-Shop" concept. The Company believes an expanded
"Shop-in-Shop" program will further stimulate retailers to make longer term
commitments to the Company's products and will encourage each store to carry a
broader array of the Company's products each season.
EXPAND CHANNELS OF DISTRIBUTION. As demand for its sportswear increases,
the Company believes that it can continue to expand and penetrate various
channels of distribution, primarily the department store channel. In recent
years, the Company has expanded its distribution channels beyond the specialty
stores
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and specialty store chains with its BOSS label to begin significant distribution
to department store customers. As a result, J.C. Penney Company, Inc. was the
Company's largest customer in 1996. Under the BOSS brand, the Company is also
selling to other major department stores including The May Department Stores
Company, Federated Department Stores, Inc. and Dayton Hudson Corporation.
Further penetration of these accounts with the BOSS product line is a primary
focus of the Company, and the recently introduced "Shop-in-Shop" concept should
help facilitate this department store expansion. The Beverly Hills Polo Club
brand has not penetrated the department store channel to the same extent as the
BOSS brand, and the expanded distribution of Beverly Hills Polo Club products in
department stores is a primary growth focus of the Company. The Company intends
to market the Girbaud line to specialty stores, specialty store chains and
department stores. In addition, the Company will continue to increase the number
of products distributed to specialty stores and specialty store chains. The
Company already sells to over 4,000 specialty stores and specialty store chains
and believes that this broad cross-section of active accounts distinguishes it
from many of its competitors. Utilizing its 44 sales representatives and
in-house credit department, the Company plans to expand the product categories
that it sells to the specialty store channel of distribution.
INCREASE EUROPEAN PRESENCE FOR BEVERLY HILLS POLO CLUB. The Company
believes that it is well positioned to capitalize on the acceptance of the
Beverly Hills Polo Club brand name by continuing to expand its European
sportswear distribution. The classic American sportswear look conveyed by the
Beverly Hills Polo Club line is popular with European youth, due in part to the
proliferation of American entertainment, including music, movies, television
programs and professional sports. The Company is expanding its wholesale and
retail channels of distribution in Europe to meet this increasing demand. While
the Company has only recently entered the European market in the fourth quarter
of 1996, it currently has distributors in Belgium, France, Greece, Italy,
Luxembourg, the Netherlands, Norway, Portugal and the United Kingdom. To meet
the consumer demand for its Beverly Hills Polo Club sportswear, the Company has
been moving to expand its network of wholesale distributors in Europe and is
currently negotiating agreements to add distribution capabilities in Austria,
Germany and Switzerland. Each of the Company's distributors has an agreement
with the Company pursuant to which the distributor is the exclusive distributor
of specified products of the Company within a specified territory. In addition,
the Company has established three franchise stores in Spain, including a
showcase store in Madrid. Discussions are currently underway for several
additional franchise stores in Spain and elsewhere in Europe.
PRODUCTS
The Company's sportswear collections under the BOSS and Beverly Hills Polo
Club brands provide a broad range of product offerings for young men, women and
boys, including a variety of tops, bottoms and outerwear. Beginning in early
1998, the Company plans to provide a collection of men's sportswear under the
Girbaud brand including a broad array of bottoms, tops and outerwear. While
these brands reflect a distinct image and style, each is targeted to consumers
who are seeking high quality, fashionable products at competitive prices. The
Company also manufactures and markets women's sportswear under its own "I.C.
Isaacs," "Lord Isaacs" and "Pizzazz" brand names as well as under third-party
private labels. Consistent with its focus on branded products, the Company
discontinued its manufacture of men's private label apparel in the fourth
quarter of 1996. The following table sets forth, for the periods indicated, the
Company's net sales categorized by brand and product category:
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
MEN'S(1)
BOSS Bottoms................................................... $ 37,724 $ 37,234 $ 44,667 $ 32,360 $ 44,238
BOSS Tops...................................................... 6,709 15,882 29,284 21,014 35,543
BOSS Boys'..................................................... 1,834 3,264 6,736 4,201 10,833
Men's BHPC..................................................... 2,795 5,219 12,226 8,103 19,584
Men's Private Label............................................ 3,227 4,299 500 485 83
--------- --------- --------- --------- ---------
Men's net sales............................................ 52,289 65,898 93,413 66,163 110,281
--------- --------- --------- --------- ---------
WOMEN'S(1)
BOSS Juniors'(2)............................................... 9,528 5,424 5,413 5,263 3,204
Women's BHPC................................................... 1,048 1,833 2,043 1,775 1,128
Women's Other(3)............................................... 22,433 20,116 17,786 13,479 12,634
--------- --------- --------- --------- ---------
Women's net sales.......................................... 33,009 27,373 25,242 20,517 16,966
--------- --------- --------- --------- ---------
Total net sales............................................ $ 85,298 $ 93,271 $ 118,655 $ 86,680 $ 127,247
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) The net sales totals incorporate product returns allocated in proportion to
gross sales.
(2) Results for the year ended December 31, 1994 include approximately $2.5
million of net sales of tee shirts and sweatshirts with unisex styling that
were discontinued after the Company obtained a license to manufacture and
sell men's BOSS tops in the fourth quarter of 1994. As a result, these
products were recategorized in men's BOSS tops in 1995 and thereafter.
(3) Includes Company-owned brands and third-party private labels.
BOSS PRODUCTS
The BOSS brand is a full sportswear line characterized by innovative
fabrication, creative graphics and bold uses of color. BOSS products appeal to
young men, young women and boys, who want a fresh, fashion-forward look with an
urban attitude at a competitive price. As the line has expanded and matured, the
demographics of BOSS customers have expanded beyond their urban base to include
fashion-conscious young consumers across the United States. Over the past three
years, the Company has placed increased emphasis on expansion of the top's
segment, and it anticipates that this segment will continue to be the fastest
growing category of products in the BOSS collection.
Bottoms
The Company's BOSS products began as a line of high-quality jeans and other
denim casual wear. The bottoms line currently consists of a wide variety of
denim jeans in a broad array of colors, designs and styles together with
corduroy and twill pants. Many of the BOSS jeans feature elements such as unique
pocket treatments, innovative trim and embroidered logos. The Company maintains
its own washing facilities, which allow it to create a variety of washes for its
denim products. The Company identified an underserved niche in the young men's
market for fashion jeans at moderate price points as compared with many designer
jeans, which retail for $60 and up per pair. The estimated retail price for the
Company's jeans is between $35 and $50 per pair. In the spring of 1997, the
Company expanded its product offerings by introducing a swimwear collection.
Estimated retail prices for swimwear range from $30 to $40.
Tops and Outerwear
The BOSS young men's line includes a variety of tops, tee shirts and
outerwear. The BOSS tops collection consists of a range of products including
cotton tee shirts, polo shirts, cotton pique shirts, novelty knit tops and
fleece sweatshirts. These products utilize unique combinations of textured
polyester fabrications, as well as a broad array of appliqued logos and
innovative graphics. The styling of many of the BOSS tops is influenced by
sports clothing and uniforms and conveys an energetic, youthful attitude. The
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Company has expanded its outerwear line, which includes a variety of products
including nylon jackets and downfilled parkas. The estimated retail prices range
from $19 to $22 for tee shirts, $30 to $55 for tops and $50 to $100 for
outerwear products.
Boys', Youth and Juniors' (Young Women)
The Company complements its BOSS young men's line with BOSS boys' and youth
lines, which are targeted to appeal to boys ages 4 to 7 and youth ages 8 to 16.
The BOSS boys' and youth product lines are substantially similar to the young
men's line and include jeans, tee shirts, tops, sweatshirts and outerwear.
Because the boys' market is more price conscious, some of the styles use less
expensive fabrication and design detail. The boys' and youth lines typically
sell at retail prices approximately 10% to 20% below the young men's line.
The BOSS juniors' line is the female counterpart to the BOSS young men's
line and is targeted to appeal to fashion-conscious girls and women ages 16 to
25. The BOSS juniors' collection maintains its own identity as contemporary
sportswear with an urban attitude. The product line includes denim jeans, tee
shirts, skirts, tops and jackets. Many of these styles are characterized by
close-fitting designs utilizing textured fabrics and bold colors. The estimated
retail prices for the juniors' line range from $15 to $20 for tee shirts, $25 to
$50 for tops, $30 to $45 for jeans and $30 to $75 for outerwear.
BEVERLY HILLS POLO CLUB PRODUCTS
The Beverly Hills Polo Club sportswear products are positioned to be an
updated traditional sportswear brand. The products combine contemporary design
details and innovative fabric with classic American styling. With a broader
demographic appeal than the BOSS brand, Beverly Hills Polo Club products are
targeted to appeal to consumers 16 years and older. Today, the Beverly Hills
Polo Club name and accompanying horse and rider logo symbolize quality,
traditional sportswear at competitive prices.
Tops and Outerwear
The Company has merchandised the Beverly Hills Polo Club men's line to place
more emphasis on tops, including a full line of tee shirts, polo shirts, rugby
shirts, denim shirts and sweatshirts made primarily in cotton fabrics such as
pique, jersey and jersey fleece. While classic in styling, the tops line is
distinguished by innovative use of design, embroidery and fabric detail. The
collections also include more contemporary styles and a broader array of novelty
fabrics as well as product offerings such as woven shirts and outerwear,
including jackets and downfilled parkas. In 1998, the Company intends to
introduce a new line of men's dress shirts. Estimated retail prices range from
$19 to $22 for tee shirts, $30 to $60 for tops and $60 to $120 for outerwear.
Bottoms
While the primary focus of the Beverly Hills Polo Club men's line has been
on tops, the collection also includes a full line of bottoms consisting of denim
jeans, twill pants and corduroy casual pants. While somewhat more conservative
in styling compared to the BOSS line, the Beverly Hills Polo Club bottoms line
combines classic styling with unique trim, embroidery and pocket treatments.
Estimated retail prices for jeans and casual pants range from $40 to $55 per
pair.
Women's
The Company's Beverly Hills Polo Club women's sportswear line has a focus
similar to that of the men's sportswear line. It targets active, image-conscious
women 16 years and older and combines classic American styling with distinctive
design detail and fabrication. The product offerings include tee shirts, polo
shirts, denim shirts, jeans and casual pants. The collection also includes many
activewear items which utilize a variety of fabrics and graphic elements.
Estimated retail prices range from $18 to $20 for tee shirts, $30 to $60 for
tops and $40 to $55 for bottoms.
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<PAGE>
GIRBAUD PRODUCTS
The Girbaud brand is an internationally recognized designer sportswear
label. The Company's collection of Girbaud products will include a full line of
bottoms consisting of jeans and casual pants in a variety of fabrications
including denim, stretch denim, cotton twill and nylon. The Girbaud tops
collection will include cotton tee shirts, polo shirts, knit and woven tops,
sweaters and outerwear. Influenced by European design, each of these collections
will be characterized by innovative styling and fabrication and will be targeted
to men ages 16 to 40. The Company plans to introduce the fall men's collection
in early 1998.
COMPANY-OWNED AND THIRD-PARTY PRIVATE LABEL PRODUCTS
The Company also produces sportswear for women under its own brands,
including "I.C. Isaacs," "Lord Isaacs" and "Pizzazz," as well as under
customers' private labels. These brands focus on pull-on elastic waist pants and
belted trousers in cotton, bleached and stonewashed denim, blended polyester and
rayon. These pants are designed to appeal to more mature women looking for basic
styling at value prices. The Company offers pants in a variety of fits including
missy, petite and large sizes. Color-coordinated tops and sweaters in cotton,
acrylic, blended polyester rayon and ramie cottons complete the mix. Estimated
retail prices range from $13 to $50 for bottoms and $20 to $60 for tops.
CUSTOMERS AND SALES
The Company's products are sold in over 4,000 specialty stores, specialty
store chains and department stores. The Company uses both sales representatives
and distributors for the sale of its products. Sales representatives include
employees of the Company as well as independent contractors. Each of the
Company's distributors and non-employee sales representatives has an agreement
with the Company pursuant to which they serve as the exclusive distributor or
sales representative of specified products of the Company within a specified
territory. The Company does not have long-term contracts with any of its
customers. Instead, its customers purchase the Company's products pursuant to
purchase orders and are under no obligation to continue to purchase the
Company's products. The Company's BOSS products are sold throughout the United
States and Puerto Rico in over 1,500 specialty stores and specialty store
chains, such as Fine's and Miller's Outpost. The Company's newest level of
distribution is to department stores, and its single largest customer in 1996
was J.C. Penney Company, Inc., which accounted for approximately 13% of net
sales. Other department store customers include Federated Department Stores,
Inc., The May Department Stores Company and Dayton Hudson Corporation. The
Company's BOSS products are sold and marketed under the direction of its
national sales office headquartered in New York. In addition to executive
selling based in New York and Dallas, the Company has 18 commissioned sales
representatives who work out of regional showrooms throughout the United States
and Puerto Rico. The Company considers its professional sales force to be one of
its major assets and one of the principal reasons why it has been successful in
establishing relationships with department stores and thousands of specialty
stores and specialty retail chains. See "Risk Factors--Dependence Upon Certain
Customers."
The Company's Beverly Hills Polo Club sportswear is sold in the United
States, Puerto Rico and Europe. Although the Company is only in its third year
of distributing Beverly Hills Polo Club sportswear, the products are sold to
over 1,000 specialty stores, specialty store chains and department stores, such
as J.C. Penney, Inc. and Maurice's. The Company has begun to sell Beverly Hills
Polo Club products to department stores and believes that there is significant
potential for expanded department store sales. The Company's Beverly Hills Polo
Club products are sold and marketed under the direction of its men's and women's
national sales offices in New York. In addition to executive selling based in
New York and Dallas, the Company has a sales force consisting of 14 sales
representatives for its line of men's sportswear and 11 sales representatives
for its line of women's sportswear. To more effectively market the Beverly Hills
Polo Club women's collection, the Company is currently in the process of
reconfiguring and increasing its women's sales force. See "Risk
Factors--Dependence Upon Certain Customers."
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The Company's Beverly Hills Polo Club sportswear has recently begun to be
sold throughout Europe through wholesale distributors, all of whom buy products
directly from the Company. Since January 1, 1997, the Company has entered into
wholesale distribution arrangements with distributors in Belgium, France,
Greece, Italy, Luxembourg, the Netherlands, Norway, Portugal and the United
Kingdom and is negotiating agreements with distributors in Austria, Germany and
Switzerland. Under these arrangements, the distributors purchase goods from the
Company's Spanish subsidiary in United States dollars under irrevocable letters
of credit or by prepayment, thereby minimizing the Company's credit risk. In
addition, the Company has established three franchise stores in Spain, including
a showcase store in Madrid. Discussions are currently underway for several
additional franchise stores in Spain and elsewhere in Europe. See "Risk
Factors--Lack of Significant Operating History in Europe."
The Company intends to begin sales of its Girbaud products in the United
States and Puerto Rico in early 1998 when it introduces the fall men's
collection. The Company anticipates that these products will be sold and
marketed under the direction of a newly created sales force to be headquartered
in New York.
The Company-owned branded products and third-party private label products
are sold under the direction of the women's sales headquarters in New York and
by 15 commissioned sales representatives throughout the United States. The
products are distributed to department stores such as Dayton Hudson Corporation,
Mercantile Stores Company, Inc. and Sears Roebuck and Co.; mass merchandisers
and discounters such as Hills Department Store Company and Ames Department
Stores, Inc.; catalogs such as National Wholesale Co., Inc. and Arizona
Mail-Order Company, Inc. and approximately 1,500 specialty stores nationwide.
DESIGN AND MERCHANDISING
The Company's designers and merchandisers travel around the world in order
to monitor emerging fashion trends and search for styling inspiration and
fabrics. These sources, together with new styling and graphics developed by the
Company's designers, serve as the primary creative influences for the Company's
product lines. In addition, designers and merchandisers regularly meet with
sales management to gain additional market insight and further refine the
products to be consistent with the needs of each of the Company's markets. The
Company's in-house design and product development is carried out by
merchandising departments in New York. Many of the Company's products are
developed using computer-aided design equipment, which allows designers to view
and easily modify images of a new design. From 1994 to 1997 the Company's design
staff grew from 6 to 13 people. The Company expects an increase to 22 people in
1998. Design expenditures incurred were approximately $0.6 million, $0.9
million, $1.3 million and $1.3 million for 1994, 1995, 1996 and the nine months
ended September 30, 1997, respectively. The Company estimates that design
expenditures will be approximately $2.2 million in 1998.
ADVERTISING AND MARKETING
The Company prides itself on its ability to efficiently utilize its
advertising budget. Although the Company has increased its expenditures on
advertising to approximately $2.5 million or 2.1% of net sales in 1996, this is
still a relatively modest amount as compared with some of its competitors. In
1994, 1995 and 1996, the Company's expenditures for advertising and marketing
activities totaled $0.4 million, $1.5 million and $2.5 million, respectively. As
the Company continues to grow, it plans to use its increased financial resources
to further support and expand the brand exposure for each of its brands.
The Company aggressively communicates and reinforces the brand and image of
its BOSS and Beverly Hills Polo Club products through creative and innovative
advertising and marketing efforts. The Company's advertising and marketing
strategies are directed by its national sales offices and developed in
collaboration with its advertising agency. The Company's advertising strategy is
geared towards its youthful consumers whose lifestyles are influenced by music,
sports and fashion. The Company has been advertising the BOSS brand since 1992
and the Beverly Hills Polo Club brand since 1994, and its advertising campaigns
have evolved from trade magazines to a wide variety of media, including
billboards, television, fashion magazines and professional sports endorsements.
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Print advertisements for the BOSS brand appear regularly in VIBE, SOURCE and
SLAM magazines, while television advertisements appear on various networks
including Turner Network Television (TNT), Black Entertainment Television (BET),
MTV: Music Television, Univision and Telemundo. Advertisements for the BOSS
brand also appear on a variety of outdoor advertising media, including
billboards and bus stops. Print advertisements for the Beverly Hills Polo Club
brand are targeted to appeal to a broader demographic base and appear in
magazines such as GQ and POV. Television advertisements for the Beverly Hills
Polo Club brand are currently being developed. The Company's products can also
be seen on some of today's most visible sports and music celebrities, whose
attitude and image are captured by the BOSS and Beverly Hills Polo Club brands.
In addition, the Company is a sponsor of selected professional basketball teams,
including the Chicago Bulls, New York Knicks, New Jersey Nets, Atlanta Hawks,
Detroit Pistons and Los Angeles Clippers.
Recognizing that point of sale advertising is highly effective, the Company
provides an array of in-store signage, fixtures and product videos for both BOSS
and Beverly Hills Polo Club products. In addition, through the "Shop-in-Shop"
concept, the Company seeks to enhance brand recognition and to differentiate its
products from other branded apparel by creating an environment that is
consistent with the image of its products. For example, J.C. Penney Company,
Inc. currently has approximately 250 stores using the "Shop-in-Shop" concept to
showcase BOSS young men's products and approximately 75 stores using the
"Shop-in-Shop" concept to showcase Beverly Hills Polo Club men's merchandise.
The Company plans to expand the "Shop-in-Shop" program to build longer term
commitments with retailers and enable retailers to carry a broader array of the
product lines each season.
The Company intends to advertise and market its Girbaud line of products
following a similar strategy including the use of a variety of print and
television advertisements as well as the use of the "Shop-in Shop" concept.
MANUFACTURING AND PRODUCT SOURCING
GENERAL
The Company believes that its flexible manufacturing and sourcing
capabilities enable it effectively to control the timing, quality and pricing of
products while providing customers with increased value. The Company uses its
own facilities as well as both domestic and foreign contractors for the
production of its products. During 1996, approximately 9% of the Company's
purchases of raw materials, labor and finished goods for its apparel were made
in Mexico; approximately 28% were made in Asia; approximately 23% were made at
third-party facilities in the United States; and the balance was made at the
Company's facilities in the United States. For the first nine months of 1997,
approximately 72% of the Company's manufacturing and sourcing was done by third
parties, all through arrangements with independent contractors. Each of the
Company's independent contractors and independent buying agents has an agreement
with the Company pursuant to which they perform manufacturing or purchasing
services for the Company on a non-exclusive basis. The Company evaluates its
contractors frequently and believes that there are a number of manufacturers
capable of producing products that meet the Company's quality standards. The
Company represents all or a significant portion of many of its contractors'
production and has the ability to terminate its arrangements with any of its
contractors at any time. The Company intends to apply a similar manufacturing
and product sourcing strategy with respect to its Girbaud line of products. See
"Risk Factors--Dependence Upon Unaffiliated Manufacturers; --Risks Relating to
Foreign Operations and Sourcing; and --Potential Shortages of Fabrics."
UNITED STATES AND MEXICO
The Company operates three manufacturing facilities in the United States and
currently utilizes seven contractors in the United States and three in Mexico.
The majority of the production in these facilities is of bottoms and tee shirts.
The Company produces approximately 50% of its bottoms (slacks, jeans, shorts and
skirts) in three Company-operated manufacturing facilities in Mississippi, which
combine to employ approximately 720 people. All three facilities utilize a level
of automation that enables the Company to
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competitively price its products and maintain the flexibility necessary to meet
its customers' changing demands.
The Company safeguards its manufacturing capacity by utilizing contractors
in both the United States and Mexico to produce the same product lines. The
Company has established ongoing relationships with all of these contractors but
is not bound by written agreements to continue to do business with any of them.
The Company also uses a variety of contractors in both the United States and
Mexico as needed for value added functions such as embroidery, screen printing
and laundering. Seasonal fluctuations in production requirements are
accommodated by adjusting contracted quantities, while maintaining more
consistent levels of production in Company-operated facilities. All contractors
in the United States and Mexico are selected and managed by the Company's
manufacturing staff in Mississippi and Mexico.
The Company uses a variety of raw materials, principally consisting of woven
fabrics including denim, cotton, polyrayons and various trim items. While the
Company must make commitments for a significant portion of its fabric purchases
in advance of sales, the Company's risk is reduced because a substantial portion
of the Company's products are sewn in basic denim.
ASIA
In addition to the Company's domestic and Mexican pant and tee shirt
production facilities, the balance of the Company's sportswear products is
produced by approximately 50 different manufacturers in more than 10 countries.
Virtually all of the Company's products other than pants and tee shirts are
produced in Asia, but none of the Asian contractors engaged by the Company
accounted for more than 10.0% of the Company's total production in 1996. The
Company has well established relationships with many of its contractors although
it does not have written agreements with them. The Company retains independent
buying agents in various countries in Asia to assist in selecting and overseeing
independent manufacturers, sourcing fabric, trim and other materials and
monitoring quotas. The independent buying agents also perform quality control
functions on behalf of the Company including inspecting materials and
manufactured products prior to accepting delivery. The sourcing and
merchandising staffs in the Company's New York offices oversee all aspects of
Asian fabric and product development, apparel manufacturing, price negotiation
and quality control, as well as the research and development of new Asian
sources of supply.
The Company seeks to achieve the most efficient means for the timely
delivery of its high quality products. With rare exceptions, the Company does
not purchase fabrics but instead negotiates a finished garment price from its
contractors. The contractor must then purchase the approved fabric as part of
the package. Orders are generally placed after the Company has received customer
orders, and delivery of finished goods to customers generally occurs 90 to 150
days after placement of the order. All of the Company's products manufactured
abroad are paid for in United States dollars. Accordingly, the Company does not
engage in any currency hedging transactions. During the last several years, the
volume of the Company's products produced in Asia has increased dramatically,
and this trend is likely to continue in the future.
WAREHOUSING AND DISTRIBUTION
The Company has serviced its United States customers for the last 38 years
utilizing a Company-owned and operated distribution center in Milford, Delaware.
This primary facility has been expanded during that time, resulting in its
present size of approximately 70,000 square feet. Over the last few years, the
Company has leased additional space in the Milford area to accommodate increased
capacity requirements fueled by growth in sales. The Company is in the process
of establishing a computerized "Warehouse Management System" with real-time
internal tracking information and the ability to provide its customers with
electronically transmitted "Advance Shipping Notices." The accuracy of shipments
is increased by the ability to scan coded garments at the packing operation.
This process also provides for computerized routing and customer invoicing. The
vast majority of shipments are handled by UPS, common carriers or parcel post.
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The Company believes that its increased distribution requirements as a
result of rapid growth can be better met by consolidating its warehousing and
distribution functions into a new 150,000 square foot facility to be located in
Milford, Delaware. Consolidating all the receiving, stocking, packing and
shipping functions into one facility should result in improved management
control and less redundancy in supervision and operational functions. The
Company believes that its engineering plan for the new facility will provide the
capacity to accommodate substantial growth in the Company's domestic volume and
will reduce labor costs and improve response times. The Company believes the
construction of this facility should be completed in 1998 at an estimated cost
of between $6.0 million and $7.0 million to be financed through a mortgage loan.
In order to ensure against the possibility of interrupted flow of goods to its
customers, the Company plans to occupy the new facility in phases.
The Company currently services its European customers through a contractual
arrangement with a distribution center in Barcelona, Spain, where the Company
maintains its European headquarters.
QUALITY CONTROL
The Company's quality control program is designed to ensure that all of the
Company's products meet its high quality standards. The quality of piece goods
is monitored prior to garments being produced, and prototypes of each product
are inspected and approved before production runs are commenced.
The goods produced by Company-operated facilities, as well as by United
States and Mexican contractors, undergo continual audits by quality personnel
during production. The quality control efforts of Company-operated facilities
are directed and coordinated by the Company's Quality Control Manager located in
Mississippi. Frequent visits are made by the Quality Control Manager and other
support staff to all outside contractors to ensure compliance with the Company's
rigorous quality standards. Audits are also performed by quality personnel at
the Milford, Delaware distribution center on all categories of incoming
merchandise. The Company employs a full-time staff of 43 persons dedicated to
the quality control efforts of its United States and Mexican production. See
"Risk Factors--Potential Shortages of Fabrics; and --Dependence Upon
Unaffiliated Manufacturers."
All garments produced for the Company in Asia must be produced in accordance
with the Company's specifications. The Company's import quality control program
is designed to ensure that all of the Company's products meet its high quality
standards. The Company monitors the quality of fabrics prior to the production
of garments and inspects prototypes of products before production runs are
commenced. In many cases, the Company requires its agents or manufacturers to
submit fabric to an independent outside laboratory for testing prior to
production. The Company requires each agent to perform both in-line and final
quality control checks during and after production before the garments leave the
contractor. Personnel from the Company's New York office also visit Asia to
conduct inspections. See "Risk Factors-- Potential Shortages of Fabrics; and
- --Dependence upon Unaffiliated Manufacturers."
BACKLOG AND SEASONALITY
The Company's business is impacted by the general seasonal trends that are
characteristic of the apparel and retail industries. In the Company's segment of
the apparel industry, sales are generally higher in the first and third
quarters. The Company generally receives orders for its products three to five
months prior to the time the products are delivered to stores. As of September
30, 1997, the Company had unfilled orders of approximately $45 million, compared
to approximately $51 million of such orders as of September 30, 1996. The
Company expects to fill substantially all of these orders in 1997. The backlog
of orders at any given time is affected by a number of factors, including
seasonality, weather conditions, scheduling of manufacturing and shipment of
products. These factors, combined with variations in the timing of product
orders by specialty store customers, contributed to the decrease in backlog from
September 30, 1996 to September 30, 1997. All such orders are subject to
cancellation for causes such as late delivery. Accordingly, a comparison of
backlogs of orders from period to period is not necessarily meaningful and may
not be indicative of eventual actual shipments. See "Risk Factors--Uncertainties
Regarding Maintaining and Managing Growth in Net Sales; and --Seasonality and
Quarterly Fluctuations."
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LICENSES AND OTHER RIGHTS AGREEMENTS
The Company's business is heavily dependent upon its use of the BOSS,
Beverly Hills Polo Club and Girbaud brand names and images, which are in turn
dependent upon the existence and continuation of certain licenses and other
rights agreements as described below. See "Risk Factors--Dependence Upon
Licenses and Other Rights Agreements."
BOSS TRADEMARK RIGHTS
In 1990, the Company obtained a license from Brookhurst to use the
registered trademark BOSS in the United States and Puerto Rico in connection
with certain items of sportswear for men and women. Brookhurst and its
predecessors had utilized the BOSS trademark since the late nineteenth century.
As part of the Settlement, Brookhurst (i) sold its BOSS trademark rights
worldwide (excluding Mexico), goodwill and registrations to the Company, (ii)
assigned its rights with respect to the BOSS trademark under certain agreements
with third parties (the rights under (i) and (ii) above referred to collectively
as the "BOSS Trademark Rights") to the Company and (iii) agreed to cease using
the BOSS brand name and image (except for a limited sell-off of certain uniforms
and samples bearing the BOSS mark). As part of the Settlement, the Company sold
its foreign BOSS trademark rights and its rights under related agreements
acquired from Brookhurst (the "BOSS Foreign Trademark Rights") to Ambra. Neither
Hugo Boss nor Ambra is affiliated with Brookhurst or the Company. The Company
also entered into a foreign manufacturing rights agreement with Ambra (the
"Foreign Rights Agreement") under which the Company obtained a license to
manufacture apparel in certain foreign countries for sale in the United States
using the BOSS brand name and image. The Company retained its ownership of
domestic BOSS Trademark Rights ("Domestic BOSS Trademark Rights") subject to a
concurrent use agreement with Hugo Boss (the "Concurrent Use Agreement").
Subject to the terms of the Concurrent Use Agreement, Hugo Boss retained the
right to manufacture and market sportswear and other products using the BOSS
name. In the event Hugo Boss manufactures and markets sportswear products which
the Company is permitted to manufacture and market under the Concurrent Use
Agreement, Hugo Boss must sell such products at or above specified wholesale
price points in the United States and Puerto Rico, which are generally higher
than the price points of the Company. Although there is some degree of overlap
in the wholesale price points of the Company and Hugo Boss under the Concurrent
Use Agreement, the Company does not currently sell or intend to sell BOSS brand
sportswear within those overlapping price points and does not anticipate any
material adverse effect on the Company's financial condition or results of
operations if Hugo Boss were to manufacture and market sportswear within those
overlapping price points. See "Risk Factors--Recent Settlement of BOSS
Litigation."
Under the agreements entered into in connection with the Settlement, the
Company's BOSS rights were expanded to allow broader product offerings and
additional Company control over styling, advertising and distribution. In
addition to the categories of apparel which the Company was permitted to
manufacture, distribute, market and sell under its previous license agreement
with Brookhurst, under the Settlement, the Company acquired the right to
manufacture, distribute, market and sell, within specified wholesale price
points, the following categories of apparel under the BOSS brand in a specified
microgramma style (the "BOSS Logotype"): swimwear, jogging suits, polo shirts
and belts (as parts of garments). The Company may use the BOSS trademark in
forms other than the BOSS Logotype with the prior approval of the other parties
to the agreements. The Company is prohibited from using the BOSS brand name or
image on footwear, formal and tailored clothing, leather clothing, body wear,
underwear, intimate apparel, loungewear, sleepwear and robes, clothing designed
for the primary purpose of engaging in skiing, tennis, motor sports, windsurfing
and any non-apparel items. The Concurrent Use Agreement sets forth specific
parameters governing the use by the Company of the BOSS Logotype with respect to
advertising, wholesale pricing points and the size, location, appearance, style
and coloring of the trademark on different product categories and advertising,
and requires that the Company use the phrase "BOSS by
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I.G. Design" in the BOSS Logotype on its BOSS products. No material adverse
effect on the Company's financial condition or results of operations is expected
as a result of the Concurrent Use Agreement.
Under the Foreign Rights Agreement, the Company continues to have the right
to manufacture BOSS apparel in foreign countries, including those in which the
Company is currently manufacturing BOSS apparel and several additional
countries. No significant changes are anticipated with respect to the Company's
foreign manufacturing activities and therefore no material adverse effect on the
Company's financial condition or results of operations is expected. The Foreign
Rights Agreement will terminate on December 31, 2001, but may be extended, at
the Company's option, through December 31, 2007.
Under the Foreign Rights Agreement, the Company will pay annual royalties of
12.5%: (i) on the first $32.0 million of net sales attributable to apparel
manufactured in those foreign countries in which the Company currently
manufactures or will manufacture BOSS products and several additional countries
("Territory Net Sales") for each of the first four years of the agreement; (ii)
on the first $20.0 million in Territory Net Sales for year five of the
agreement; and (iii) on the first $16.0 million of Territory Net Sales in years
six through ten of the agreement. Such base royalties will increase upon any
prepayment of the Note. For the first four years of the agreement, an aggregate
additional royalty of 5.0% is payable annually on Territory Net Sales from $84.0
million to approximately $105.3 million and an aggregate additional royalty of
4.0% is payable annually on Territory Net Sales of $158.0 million and up.
Additional royalties in years five through ten of the agreement increase for
certain corresponding sales levels. The Company is required, subject to certain
royalty payment caps set forth in the agreement, to generate minimum annual
Territory Net Sales of at least $32.0 million for each of the first four years
of the agreement; $20.0 million for the fifth year of the agreement and $16.0
million for each of years six through ten of the agreement. The Company's
Territory Net Sales for any given year under the agreement must equal at least
95.0% of total net sales attributable to BOSS apparel manufactured worldwide. To
the extent that the Company does not achieve the required Territory Net Sales,
the Company will have the right, in order to avoid termination of the agreement,
to pay royalties as if such Territory Net Sales had been achieved.
The Foreign Rights Agreement may be terminated by the licensor upon the
occurrence of certain events, including, but not limited to (i) a material
breach by the Company after expiration of the applicable grace period, (ii)
certain events of bankruptcy, insolvency or assignment for the benefit of all
creditors relating to the Company or the appointment of a receiver or trustee
for the Company (a "Bankruptcy Event"), (iii) certain specified changes in the
control of the ownership of the Company and (iv) certain uncured breaches by the
Company's foreign manufacturers of the terms of the agreements. In addition to
terminating the agreement, the licensor may require the Company to pay on an
accelerated basis all royalties due under certain sales assumptions through the
then current term of the agreement upon the occurrence of certain events
including, but not limited to (i) the failure of the Company to pay royalties
when due or to meet certain minimum sales requirements, (ii) the failure of the
Company to manufacture products in certain foreign countries, (iii) the sale of
the licensed products outside the United States, (iv) certain attempts by the
Company to create or establish trademark rights in the word BOSS in its own name
anywhere outside of the United States, (v) the willful and material breach of
the agreement and (vi) the occurrence of a Bankruptcy Event. The Company's
rights to use the BOSS name will terminate upon exercise of the Option (as
hereinafter defined) or upon earlier termination of any of the other agreements.
Any termination of the Company's rights to use the BOSS name could have a
material adverse effect on the Company's financial condition or results of
operations.
Ambra holds an option dated November 5, 1997 to purchase the Domestic BOSS
Trademark Rights from the Company (the "Option") for an amount equal to the
original principal amount of the Note at any time between November 5, 2006 and
December 31, 2007 or earlier upon (i) certain breaches of the Concurrent Use
Agreement, (ii) an event of default under the Note or (iii) termination for any
reason of the Foreign Rights Agreement. See "Risk Factors--Dependence Upon
Licenses and Other Rights Agreements" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
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BEVERLY HILLS POLO CLUB LICENSES
Beverly Hills Polo Club Domestic Licenses
Since 1993, the Company has had exclusive wholesale licensing agreements
(collectively, the "BHPC Agreements") with BHPC Marketing, Inc. for the
manufacture and promotion of certain men's and women's sportswear bearing the
registered trademark Beverly Hills Polo Club with an accompanying horse and
rider design (the "BHPC Trademark") for sale to moderate or better department
stores and specialty stores in the United States and its possessions, including
Puerto Rico. Under the BHPC Agreements, the Company may sell up to 25.0% of its
total volume for each of the men's and women's categories to warehouse clubs.
The licenses generally allow the Company to use the BHPC Trademark on sportswear
designed by or for the Company, subject to a quality approval process for
marketing and advertising materials, manufacturing premises and products bearing
the trademark. Under each of these licenses, as amended through April 1997, the
Company is required to make payments to the licensor in an amount equal to 5.0%
of the Company's net invoiced sales of licensed merchandise and to spend an
amount equal to 1.0% of net invoiced sales of such merchandise in advertising
for the licensed products. Under each license, the Company pays a monthly
royalty equal to the greater of 8.3% of the guaranteed minimum annual royalty or
the actual royalty earned by the licensor in the preceding month.
Under the Beverly Hills Polo Club men's agreement (the "Men's Agreement")
the Company has been granted an exclusive license to use the BHPC Trademark in
connection with menswear fashions made of materials other than silk in the
following categories: denim sportswear, outerwear, knit, woven and dress shirts,
knit and woven casual pants and shorts, sweaters, basic and fashion fleece tops
and bottoms, overalls and shortalls, knit tops (including tee shirts and polo
shirts), swimwear and warm-ups. The Men's Agreement has an initial term expiring
December 31, 1998 and is renewable at the option of the Company, provided the
Company is not in breach thereof at the time renewal notice is given, for two
consecutive three-year periods commencing January 1, 1999, through December 31,
2004.
The Company's payment of royalties under the Men's Agreement is subject to a
guaranteed minimum annual royalty of $350,000 for the contract year ending
December 31, 1997 and $400,000 for the contract year ending December 31, 1998. A
guaranteed minimum annual royalty payment of $300,000, which was required for
the contract year ending December 31, 1996, was exceeded by the Company.
Notwithstanding its term, the Men's Agreement may be terminated by the licensor
in the event the Company fails to make net shipments of products for the
contract year ending December 31, 1997 in the amount of $7.0 million and for the
contract year ending December 31, 1998 in the amount of $8.0 million. Guaranteed
minimum annual royalties and guaranteed annual net shipments for each of the
renewal terms will be the greater of (i) 80.0% of the immediately preceding
contract year's actual royalties and net shipments or (ii) the previous year's
guaranteed minimum royalty and guaranteed net shipments.
The Beverly Hills Polo Club women's agreement (the "Women's Agreement")
grants the Company the right to use the BHPC Trademark in connection with
women's, missy, junior, petite and large size coordinated sportswear, sweaters,
sweater dresses, sweater suits, basic fleece tops and bottoms, basic tee shirts,
basic polo shirts, warm ups in knit and woven fabrics and women's tennis and
golf related shorts sets, skort sets and pant sets in knit and woven fabrics.
The Women's Agreement has an initial term expiring December 31, 1998 and is
renewable at the option of the Company, provided the Company is not in breach
thereof at the time renewal notice is given, for two consecutive three-year
periods commencing January 1, 1999, through December 31, 2004.
The Company's payment of royalties under the Women's Agreement is subject to
a guaranteed minimum annual royalty of $100,000 for the contract year ending
December 31, 1997 and $150,000 for the contract year ending December 31, 1998.
No guaranteed minimum annual royalty payment was required for the contract year
ending December 31, 1996. Notwithstanding the term of the Women's Agreement, the
women's license may be terminated by the licensor in the event the Company fails
to make net shipments of products for the contract year ending December 31, 1997
in the amount of $2.0 million and for the contract year ending December 31, 1998
in the amount of $3.0 million. Such termination provision has been waived for
the contract year ending December 31, 1997. Guaranteed minimum annual royalties
and guaranteed annual net shipments for each of the renewal terms will be the
greater of (i) 80.0% of the
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<PAGE>
immediately preceding contract year's actual royalties and net shipments or (ii)
the previous year's guaranteed minimum royalty and guaranteed net shipments.
Each of the Men's and the Women's Agreements may be terminated by the
licensor upon the occurrence of certain events, including but not limited to the
following: (i) a breach by the Company of any obligation under the Agreement
that remains uncured within 30 days following the receipt of written notice of
such breach, (ii) the Company becomes insolvent, is the subject of a petition in
bankruptcy or otherwise enters into any composition with its creditors,
including reorganization, or (iii) the Company has committed three breaches of
the Agreement, in which case no right to cure the breach is afforded to the
Company.
During the term of the Beverly Hills Polo Club domestic Men's and Women's
Agreements, the Company is prohibited from manufacturing or otherwise
distributing any merchandise under a brand name which closely resembles the BHPC
Trademark and from using on non-Beverly Hills Polo Club products any graphic,
style or design which closely resembles any items supplied to the Company by the
licensor. In addition, the rights of the Company under the Men's and Women's
Agreements are subject to the terms of a Settlement Agreement and Consent
Judgment between the licensor and Polo Fashions Inc., which imposes certain
restrictions on the licensor's manner of use and advertising of the BHPC
Trademark, including a prohibition on the use of the words "Polo" and "Polo
Club" alone on any item of apparel. The Company believes that the BHPC
Trademark, as licensed to the Company, complies with those restrictions.
Beverly Hills Polo Club International Licenses
On August 15, 1996, I.C. Isaacs Europe, S.L., a Spanish limited corporation
and wholly-owned subsidiary of the Company, entered into retail and wholesale
license agreements (collectively, the "International Agreements") for use of the
BHPC Trademark in Europe. The International Agreements, as amended through April
28, 1997, provide certain exclusive rights to use the BHPC Trademark in all
countries of Europe for an initial term of three years ending December 31, 1999,
renewable at the Company's option through two consecutive three-year extensions
ending December 31, 2004. The International Agreements are subject to
substantially the same terms and conditions as the BHPC Agreements described
above. The Company commenced its operations under the International Agreements
by January 1, 1997, as required by the terms thereof.
The international retail agreement (the "Retail Agreement") grants the
Company the right to use the BHPC Trademark in connection with the manufacture
and sale through authorized Beverly Hills Polo Club retail stores and franchised
stores in Europe of the following categories of products: (i) men's pants, woven
shirts, knit shirts, jeans, shorts, sweaters and outerwear (excluding dress
shirts and suits); (ii) women's slacks, skirts, dresses, sweaters, outerwear,
blouses and jeans; and (iii) all other products licensed by the Beverly Hills
Polo Club licensor to other third parties (which must be purchased by the
Company from the authorized third-party licensees). The Retail Agreement
excludes dress shirts and suits. Under the Retail Agreement, the Company is
required to pay the licensor royalties equal to (i) 4.0% of the wholesale
purchases by the Company of Beverly Hills Polo Club products sold to Beverly
Hills Polo Club retail stores and (ii) 2.0% of retail sales of licensed products
by Beverly Hills Polo Club retail stores. The Company is subject to guaranteed
minimum annual royalty payments of $60,000 in 1998 and $100,000 in 1999 and
guaranteed net shipment volumes of $1.0 million in 1998 and $2.0 million in
1999. There are no guaranteed minimum annual royalty payments or guaranteed net
shipment volumes for the contract year ended December 31, 1997. The Retail
Agreement is subject to applicable franchising laws in Europe and, as a result,
the licensor may terminate the agreement if the Company is unable to obtain any
necessary governmental approval or to make any necessary governmental filings
within four months from the date of the first franchise agreement.
The international wholesale agreement (the "Wholesale Agreement") grants the
Company the right to use the BHPC Trademark in connection with the manufacture
and sale at wholesale, for distribution to department stores and specialty
stores in Europe, of the following categories of products: (i) men's apparel
(excluding suits, ties, underwear, shoes and full length rainwear); and (ii)
women's apparel (excluding hosiery, intimate apparel, business suits, underwear,
accessories, shoes and full length rainwear). Under
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<PAGE>
the Wholesale Agreement, the Company is required to pay the licensor a royalty
equal to 6.0% of net shipments by the Company of licensed products directly to
authorized Beverly Hills Polo Club distributors or to retail stores. The
Wholesale Agreement imposes guaranteed minimum annual royalty payments of
$120,000 in 1998 and $240,000 in 1999 and guaranteed net shipment volumes of
$2.0 million in 1998 and $4.0 million in 1999. There are no guaranteed minimum
annual royalty payments or guaranteed net shipment volumes for the contract year
ended December 31, 1997.
GIRBAUD LICENSE
In November 1997, the Company entered into an exclusive license agreement
(the "Girbaud Agreement") with Girbaud Design, Inc. and its affiliate Wurzburg
Holding S.A. to manufacture and market men's jeanswear, casualwear and outerwear
under the Girbaud brand and certain related trademarks (the "Girbaud Marks") in
all channels of distribution in the United States, including Puerto Rico and the
U.S. Virgin Islands. The Girbaud Agreement includes the right to manufacture the
licensed products in a number of foreign countries. This Girbaud Agreement has
an initial term of two years through December 31, 1999, and may be extended at
the option of the Company for an additional three-year term. The Company holds
certain rights of first refusal to extend the Girbaud product lines to include
men's activewear, and women's, boys' and girls' jeanswear, activewear and
casualwear. The Girbaud Agreement generally allows the Company to use the
Girbaud Marks on apparel designed by or for the Company or based on designs and
styles previously associated with the Girbaud brand, subject to quality control
by the licensor over the final designs of the products, marketing and
advertising materials and manufacturing premises.
Under the Girbaud Agreement the Company is required to make payments to the
licensor in an amount equal to 6.25% of the Company's net sales of regular
licensed merchandise, and 3.0% in the case of certain irregular and closeout
licensed merchandise. The Company is subject to guaranteed minimum annual
royalty payments of $1.2 million in 1998, $1.5 million in 1999, $2.0 million in
2000, $2.5 million in 2001 and $3.0 million in 2002. On a quarterly basis during
the term, commencing with the first quarter of 1998, the Company is obligated to
pay the greater of (i) actual royalties earned by the licensor under the license
or (ii) 8.3% of the minimum guaranteed royalties for that year. The Company is
required to spend at least $350,000 in advertising for the Girbaud brand in 1998
and $500,000 each year thereafter while the Girbaud Agreement is in effect. The
Girbaud Agreement may be terminated by the licensor upon the occurrence of
certain events, including, but not limited to, a breach by the Company of any
obligation under the Girbaud Agreement that remains uncured following certain
specified grace periods.
CREDIT CONTROL
The Company manages its own credit and collection functions and has never
used a factoring service or outside credit insurance. The Company sells to
approximately 4,100 accounts throughout the United States and Puerto Rico. All
of the functions necessary to service this large volume of accounts are handled
by the Company's in-house credit department in Baltimore, Maryland. The Company
currently employs eight people in its credit department and believes that
managing its own credit gives it unique flexibility as to which customers the
Company can sell and how much business it can do with each. The Company obtains
and periodically updates information regarding the financial condition and
credit histories of customers. Credit personnel evaluate this information and,
if appropriate, establish a line of credit. Credit personnel track payment
activity for each customer using customized computer software and directly
contact customers with receivable balances outstanding beyond 30 days. Under
certain circumstances, the Company may discontinue merchandise shipments until
the outstanding balance is paid. Ultimately, the Company may determine to engage
an outside collection organization to collect past due accounts. The Company
believes this provides a selling advantage over those competitors who factor
their receivables. In 1994, 1995 and 1996, the Company's credit losses were $0.4
million, $0.4 million and $0.9 million, respectively. In each of these years,
the Company's actual credit losses as a percentage of net sales has been less
than three-quarters of one percent. See "Risk Factors--Credit Risks."
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COMPETITION
The apparel industry is highly competitive and fragmented and is subject to
rapidly changing consumer demands and preferences. The Company believes that its
success depends in large part upon its ability to anticipate, gauge and respond
to changing consumer demands and fashion trends in a timely manner and upon the
continued appeal to consumers of the BOSS, Beverly Hills Polo Club and Girbaud
brands. The Company competes with numerous apparel brands and distributors
(including Calvin Klein, DKNY, Fila, FUBU, Guess?, Tommy Hilfiger, JNCO and
Nautica). Many of the Company's competitors have greater financial resources
than the Company. Although the level and nature of competition differ among its
product categories, the Company believes that it competes on the basis of its
brand image, quality of design and value pricing. In addition, under the
Concurrent Use Agreement, the BHPC Agreements and the Girbaud Agreement, certain
third parties have retained the right to produce, distribute, advertise and
sell, and to authorize others to produce, distribute, advertise and sell certain
garments that are similar to some of the Company's products, including, in the
case of the BOSS brand, similar garments using the BOSS name at generally higher
wholesale price points. Any such production, distribution, advertisement or sale
of such garments by such licensor or another authorized party could have a
material adverse effect on the Company's financial condition or results of
operations. See "Risk Factors--Competition and Changes in Consumer Demands."
MANAGEMENT INFORMATION SYSTEMS
The Company believes that advanced information processing is essential to
maintaining its competitive position. The Company is currently upgrading systems
that allow areas of the business to be more pro-active to customer requirements,
to improve internal communication flow, to increase process efficiency and to
support management decisions. The Company's systems provide, among other things,
comprehensive order processing, production, accounting and management
information for the marketing, selling, manufacturing, retailing and
distribution functions of the Company's business. The Company's software program
allows it to track, among other things, orders, manufacturing schedules,
inventory and sales of its products. The program includes centralized management
information systems, which provide the various operating departments with
financial, sales, inventory and distribution related information. Via electronic
data interchange, the Company is able to ship orders to certain customers within
24 to 72 hours from the time of order receipt.
EMPLOYEES
The Company believes that its employees are one of its most valuable
resources. As of September 30, 1997, the Company had 930 full-time employees.
The Company is not a party to any labor agreements, and none of its employees is
represented by a labor union. The Company considers its relationship with its
employees to be good and has not experienced any material interruption of its
operations due to labor disputes. See "Risk Factors--Dependence Upon Key
Personnel."
PROPERTIES
Certain information concerning the Company's principal facilities is set
forth below:
<TABLE>
<CAPTION>
LEASED OR APPROXIMATE AREA
LOCATION OWNED USE IN SQUARE FEET
- ----------------------------------------- ----------- ----------------------------------------- ----------------
<S> <C> <C> <C>
Baltimore, MD............................ Owned Administrative Headquarters and Office 40,000
Facilities
New York, NY............................. Leased Sales, Merchandising, Marketing and 7,449
Sourcing Headquarters
New York, NY............................. Leased Sales, Marketing and Sourcing 4,300
Headquarters
Barcelona, Spain......................... Leased European Headquarters 2,000
Milford, DE.............................. Owned Distribution Center 70,000
Newton, MS............................... Leased Manufacturing Plant 101,000
Carthage, MS............................. Leased Manufacturing Plant 110,000
Raleigh, MS.............................. Leased Manufacturing Plant 90,000
</TABLE>
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The Company also has regional sales offices, all of which are leased, in the
following cities: Atlanta, Georgia; Dallas, Texas; Miami, Florida; Seattle,
Washington; Los Angeles, California; Philadelphia, Pennsylvania; Boston,
Massachusetts; Minneapolis, Minnesota; Charlotte, North Carolina; and Santurce,
Puerto Rico. The Company believes that its existing facilities are well
maintained and in good operating condition. The Company also believes that its
increased distribution requirements can be better met by consolidating its
warehousing and distribution functions into a new 150,000 square foot facility
to be located in Milford, Delaware. See Note 5 of Notes to Consolidated
Financial Statements for further information regarding current lease
obligations.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects (such as emissions to air, discharges to water, and the
generation, handling, storage and disposal of solid and hazardous wastes) or
(ii) impose liability for the costs of clean up or other remediation of
contaminated property, including damages from spills, disposals or other
releases of hazardous substances or wastes, in certain circumstances without
regard to fault. Certain of the Company's operations routinely involve the
handling of chemicals and wastes, some of which are or may become regulated as
hazardous substances. The Company has not incurred any significant expenditures
or liabilities for environmental matters. Although the Company believes that its
environmental obligations will not have a material adverse effect on its
financial condition or results of operations, environmental compliance matters
are subject to inherent risks and uncertainties. See "Risk
Factors--Environmental Controls and Other Regulatory Requirements."
LITIGATION
The Company recently entered into a Settlement of litigation involving use
of the BOSS trademark. The original complaint was filed in the United States
District Court for the Southern District of New York on February 11, 1993 by
Hugo Boss Fashions, Inc., International Fashions Apparel Corporation and Hugo
Boss and sought injunctive relief and compensatory damages for misappropriation,
infringement of trademark rights, unfair competition, dilution, use of name with
intent to deceive, violations under the Lanham Act, breach of contract and
tortious interference with contractual relations. The original complaint named
Brookhurst, Boss Sportswear (USA), Inc. and the Company as defendants and was
subsequently amended to add Boss Golf Company, Inc. The defendants filed a
counterclaim against the plaintiffs alleging trademark infringement and related
matters arising out of the plaintiffs' use of the BOSS trademark. In November
1997, the parties entered into the Settlement pursuant to which the Company will
continue to be able to use the BOSS brand name and image in connection with the
manufacture of BOSS brand apparel in the United States and certain foreign
countries, subject to the terms of the Concurrent Use Agreement, for
distribution in the United States and Puerto Rico. Although its insurance
carrier paid approximately $650,000 pursuant to the Settlement, the Company did
not admit any liability and such payment was made based on the cost of
ligitation rather than any assessment of the Company's potential liability in
the suit. See "--Licenses and Other Rights Agreements--BOSS Trademark Rights."
From time to time the Company is a party to various claims, complaints and
other legal actions that have arisen in the ordinary course of business. The
Company is not presently aware of any such legal proceedings which, in the
aggregate, it believes would have a material adverse effect on the Company's
financial condition or results of operations.
48
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Robert J. Arnot...................................... 49 Chairman of the Board, Co-Chief Executive Officer and
Director
Gerald W. Lear....................................... 55 President, Co-Chief Executive Officer and Director
Gary B. Brashers..................................... 50 Vice President--Manufacturing, Chief Operating
Officer and Director
Eugene C. Wielepski.................................. 51 Vice President--Finance, Chief Financial Officer and
Director
Ira J. Hechler....................................... 79 Director
Jon Hechler.......................................... 44 Director
Ronald S. Schmidt.................................... 53 Director
Thomas P. Ormandy.................................... 47 Vice President--Sales
</TABLE>
The Company has two Chief Executive Officers, Robert J. Arnot and Gerald W.
Lear. Messrs. Arnot and Lear share decision-making responsibility with respect
to business strategy, product pricing, budgeting, financial management,
institutional relationships, licensing decisions, European operations and legal
issues.
ROBERT J. ARNOT has been a Director of the Company since 1984, Vice
President of Planning and Corporate Development from 1989 to 1991, Chairman of
the Board of Directors since 1991 and Co-Chief Executive Officer since 1996. He
has been employed by the Company since 1989. In addition to sharing overall
decision-making responsibility as described above, Mr. Arnot has lead
responsibility for the following operating areas, which report directly to him
in New York: BOSS, Beverly Hills Polo Club and Girbaud design and merchandising,
Asian sourcing and manufacturing, BOSS, Beverly Hills Polo Club and Girbaud
sales management and advertising.
GERALD W. LEAR has been a Director of the Company since 1980 and President
and Chief Executive Officer since 1987. He was Vice President from 1975 to 1984
and Executive Vice President from 1984 to 1986. He has been employed by the
Company since 1962. In addition to sharing overall decision-making
responsibility as described above, Mr. Lear has lead responsibility for the
following operating areas, which report directly to him in Baltimore: United
States and Mexican production of bottoms, United States tee shirt production,
I.C. Isaacs bottoms merchandising, bottoms design department, cost accounting,
shipping and warehousing and corporate administration (which includes management
information systems, credit, accounting, customer service and personnel).
GARY B. BRASHERS has been a Director and Chief Operating Officer since 1988
and Vice President-- Manufacturing since 1985. Prior to that he held positions
with the Company in quality control and manufacturing. He has been employed by
the Company since 1978. Prior to joining the Company, he held various
manufacturing management positions in the apparel industry since 1969.
49
<PAGE>
EUGENE C. WIELEPSKI has been a Director, Vice President--Finance and Chief
Financial Officer of the Company since 1991. He has held the positions of
Secretary and Treasurer since 1976. From 1976 to 1990 he was Controller. He is a
Certified Public Accountant and has been employed by the Company since 1973.
IRA J. HECHLER has been a Director of the Company since 1984. He is a
private investor who is also a member of the Board of Directors of American
Banknote Corporation and Concord Camera Corporation. He is Vice Chairman of the
Board of Directors of A.R.T./New York and a member of the Board of Trustees and
Treasurer of the Nassau County Museum of Art.
JON HECHLER has been a Director of the Company since 1984. He has been
employed by Ira J. Hechler and Associates, an investment company, since 1980. He
also serves as President of T. Eliot, Inc., a manufacturer of bathroom
equipment. He is the son of Ira J. Hechler.
RONALD S. SCHMIDT has been a Director of the Company since 1990. He is
President and Chief Executive Officer of I.B. Diffusion, a manufacturer of
ladies' apparel.
THOMAS P. ORMANDY has been Vice President--Sales of the Company since 1986.
Previously, he was a salesman with Thompson and Company, an apparel
manufacturer, since 1975. He is responsible for the sales and marketing of the
BOSS men's, boys' and juniors' lines as well as the Beverly Hills Polo Club
men's line.
BOARD OF DIRECTORS
The Company's Board of Directors is currently comprised of seven members.
There are currently two vacancies, and following the consummation of the
Offering, the Company intends to appoint two additional directors who will be
neither officers nor employees of the Company or its affiliates.
The Company's Board of Directors is divided into three classes of three
members each. Directors of each class will be elected at the annual meeting of
stockholders held in the year in which the term for such class expires and will
serve for three years thereafter. The first class, whose term will expire at the
first annual meeting after the Offering, currently consists of Messrs. Arnot,
Lear and Wielepski; the second class, whose term will expire at the second
annual meeting after the Offering, currently consists of Messrs. Ira J. Hechler,
Jon Hechler and Gary B. Brashers; the third class, whose term will expire at the
third annual meeting after the Offering, currently consists of Mr. Ronald S.
Schmidt. The vacancies in Class III will be filled when the Company appoints two
additional directors after the Offering. For further information on the effect
of the classified Board of Directors, see "Description of Capital Stock--Certain
Certificate of Incorporation, By-law and Statutory Provisions Affecting
Stockholders."
Pursuant to the Restated Shareholders' Agreement, all of the existing
stockholders of the Company have agreed to vote their shares of Common Stock in
elections to fill Class I and Class II of the Board of Directors in favor of the
nominees of the Principal Stockholders (as hereinafter defined). See "Certain
Transactions--Restated Shareholders' Agreement."
The Company has established a Compensation Committee consisting of Messrs.
Ira J. Hechler, Jon Hechler and Ronald S. Schmidt. The Compensation Committee is
responsible for reviewing and approving all compensation arrangements with
officers of the Company and will also be responsible for administering the 1997
Omnibus Stock Plan. See "--1997 Omnibus Stock Plan."
Within 90 days following the consummation of the Offering, the Board of
Directors will establish an Audit Committee. The Audit Committee will be
responsible for recommending to the Board of Directors the engagement of the
independent auditors of the Company and reviewing with the independent auditors
the scope and results of the audits, the internal accounting controls of the
Company, audit practices and the professional services furnished by the
independent auditors.
The General Corporation Law of the State of Delaware (the "Delaware
Corporation Law") provides that a company may indemnify its directors and
officers as to certain liabilities. The Company's Restated
50
<PAGE>
Certificate and Restated By-laws provide for the indemnification of the
Company's directors and officers to the fullest extent permitted by law, and the
Company intends to enter into separate indemnification agreements with each of
its directors and officers to effectuate these provisions and to purchase
directors' and officers' liability insurance. The effect of such provisions is
to indemnify, to the fullest extent permitted by law, the directors and officers
of the Company against all costs, expenses and liabilities incurred by them in
connection with any action, suit or proceeding which they are involved by reason
of their affiliation with the Company. See "Description of Capital
Stock--Certain Certificate of Incorporation, By-law and Statutory Provisions
Affecting Stockholders; and --Director and Officer Indemnification."
COMPENSATION OF DIRECTORS
Directors who are employees of the Company receive no compensation for
serving on the Board of Directors. Directors who are not employees of the
Company will receive an annual retainer fee of $10,000 for their services and
attendance fees of $750 per Board or committee meeting attended. All directors
are reimbursed for expenses incurred in connection with attendance at Board or
committee meetings. In addition, members of the Board of Directors will be
eligible to participate in the Company's 1997 Omnibus Stock Plan. See "--1997
Omnibus Stock Plan."
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or awarded to, or
earned by, the Co-Chief Executive Officers and the four most highly compensated
officers other than the Co-Chief Executive Officers (the "Named Executive
Officers") for the year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)(2)
-------------------------------
<S> <C> <C> <C>
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- --------------------------------------------------------------------------------------- --------- --------- ---------
Robert J. Arnot........................................................................ 1996 $ 275,676 $ 50,000
Chairman of the Board and
Co-Chief Executive Officer
Gerald W. Lear......................................................................... 1996 300,220 50,000
President and
Co-Chief Executive Officer
Gary B. Brashers....................................................................... 1996 200,220 25,000
Vice President--Manufacturing and
Chief Operating Officer
Eugene C. Wielepski.................................................................... 1996 160,220 20,000
Vice President--Finance and
Chief Financial Officer
Thomas P. Ormandy...................................................................... 1996 240,000 110,000
Vice President--Sales
Marc Baff.............................................................................. 1996 107,620 --
Vice President--Sales
</TABLE>
- ------------------------------
(1) In their capacity as stockholders of the Company, the officers listed above
were reimbursed during 1996 for payment of taxes on income of the Company
that was passed through to the stockholders. See "Dividend Policy."
(2) Perquisites did not exceed the lesser of $50,000 or 10.0% of the total
salary and bonus for any of the Named Executive Officers.
51
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into individual employment agreements (the
"Executive Employment Agreements") with each of Messrs. Arnot, Lear, Brashers,
Wielepski and Ormandy (collectively, the "Executives"). The initial term of the
Executive Employment Agreements began on May 15, 1997 (the "Effective Date") and
will terminate on the third anniversary of the Effective Date in the case of
Messrs. Arnot and Lear and on the second anniversary of the Effective Date in
the case of Messrs. Brashers, Wielepski and Ormandy. The Executive Employment
Agreements will automatically extend after the initial term for successive
one-year terms, unless notice not to extend is given by either party at least 60
days prior to the end of the then current term. The Executive Employment
Agreements provide for an annual base salary of $400,000, $400,000, $240,000,
$200,000 and $300,000 plus up to 20.0% thereof as bonus, respectively, which may
be increased based on periodic reviews by the Compensation Committee. In
addition, the Executive Employment Agreements provide that the Executives are
entitled to participate in any bonus and stock option plans, programs,
arrangements and practices sponsored by the Company as may be established from
time to time by the Board of Directors of the Company for the benefit of such
executive employees, in accordance with the terms of such plans. Each Executive
is also entitled to certain fringe benefits, including Company-paid health and
life insurance. If any of the Executives is terminated without cause (as such
term is defined in the Executive Employment Agreements), then such Executive
will receive as severance his then current base salary for the remainder of his
term of employment. The Executive will also continue to participate in
Company-sponsored health, life insurance and other fringe benefit plans and
programs during the severance period. The Executive Employment Agreements also
include certain noncompetition, nonsolicitation and confidentiality provisions.
1997 OMNIBUS STOCK PLAN
On May 15, 1997, the Board of Directors of the Company and the Company's
stockholders adopted the 1997 Omnibus Stock Plan (the "Plan"). The purpose of
the Plan is to promote the long-term growth and profitability of the Company by
providing key people with incentives to improve stockholder value and contribute
to the growth and financial success of the Company, and by enabling the Company
to attract, retain and reward the best-available persons for positions of
substantial responsibility. The maximum number of shares of Common Stock that
may be issued with respect to awards granted under the Plan is 500,000. The Plan
is administered by the Compensation Committee of the Board of Directors.
Participation in the Plan will be open to all employees, officers, directors and
consultants of the Company or any of its affiliates, as may be selected by the
Compensation Committee from time to time. The Plan allows for stock options,
stock appreciation rights, stock awards, phantom stock awards and performance
awards to be granted. The Compensation Committee will determine the prices,
vesting schedules, expiration dates and other material conditions upon which
such awards may be exercised.
DEFINED BENEFIT PENSION PLAN
The Company maintains a defined benefit pension plan (the "Pension Plan")
for its employees. The normal retirement benefit, payable at age 65, is 20.0% of
base compensation up to $10,000 plus 39.5% of base compensation over $10,000,
prorated for service less than 30 years. A reduced benefit is also payable on
early retirement, after age 55 and after 15 years of service. The Pension Plan
also provides disability retirement and death benefits. The Company pays the
full cost of the benefits under the Pension Plan through its contributions to a
trust. The Company's cash contributions to the Pension Plan during the year
ended December 31, 1996 aggregated $0.6 million.
52
<PAGE>
The Pension Plan Table below provides the estimated annual benefits payable
under the I.C. Isaacs Pension Plan upon retirement in specified compensation and
years of service classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
RENUMERATION
- -------------
<C> <S> <C> <C> <C> <C> <C>
15 20 25 30 35
--------- --------- --------- --------- ---------
$ 100,000 ............................................. $ 13,838 $ 18,451 $ 23,063 $ 27,676 $ 27,676
125,000 ............................................. 13,838 18,451 23,063 27,676 27,676
150,000 ............................................. 13,838 18,451 23,063 27,676 27,676
175,000 ............................................. 13,838 18,451 23,063 27,676 27,676
200,000 ............................................. 13,838 18,451 23,063 27,676 27,676
225,000 ............................................. 13,838 18,451 23,063 27,676 27,676
250,000 ............................................. 13,838 18,451 23,063 27,676 27,676
300,000 ............................................. 13,838 18,451 23,063 27,676 27,676
400,000 ............................................. 13,838 18,451 23,063 27,676 27,676
450,000 ............................................. 13,838 18,451 23,063 27,676 27,676
500,000 ............................................. 13,838 18,451 23,063 27,676 27,676
</TABLE>
The compensation considered in determining benefits under the plan (as
provided in the column titled "Remuneration") is the annual average compensation
for the five consecutive calendar years producing the highest average. The
compensation considered is limited to $75,000. All amounts of salary, bonus and
other compensation as reported in the Summary Compensation Table, up to $75,000,
are included in compensation considered under the plan. The amounts of benefit
provided in the Pension Plan Table are the amounts of benefit payable per year
in equal monthly installments for the life expectancy of the participants (i.e.,
straight life annuity amounts). The plan is integrated with Social Security, and
its benefit formula is as follows: (i) 0.6667% of compensation, multiplied by
years of service up to 30 years; plus (ii) 0.65% of compensation in excess of
$10,000 multiplied by years of service up to 30 years.
The estimated credited years of service for each of the Named Executive
Officers were as follows, estimated as of January 1, 1997:
<TABLE>
<CAPTION>
ESTIMATED CREDITED
NAME YEARS OF SERVICE
- -------------------------------------------------------------------------- -----------------------
<S> <C>
Robert J. Arnot........................................................... 5
Gerald W. Lear............................................................ 34
Gary B. Brashers.......................................................... 18
Eugene C. Wielepski....................................................... 23
Thomas P. Ormandy......................................................... 10
Marc Baff................................................................. 19
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee during 1996, but each of
Messrs. Arnot and Lear (each of whom also served as an executive officer of the
Company during 1996) participated in deliberations concerning executive
compensation. The Executive Employment Agreements were approved by the Company's
current Compensation Committee.
KEY MAN INSURANCE
The following individuals are key employees of the Company, and their
contribution to the Company has been and will be a significant factor in the
Company's future success: Robert J. Arnot, Gerald W. Lear, Gary B. Brashers and
Eugene C. Wielepski. The loss of the services of one or more of these executive
53
<PAGE>
officers for an extended period of time could have a material adverse effect on
the Company's financial condition or results of operations. The Company
maintains and is the beneficiary of life insurance policies in the amount of
$1.0 million on the lives of each of Messrs. Arnot, Lear and Brashers and in the
amount of $0.5 million on the life of Mr. Wielepski.
CERTAIN TRANSACTIONS
RESTATED SHAREHOLDERS' AGREEMENT
The Company's Shareholders' Agreement dated December 20, 1984, as amended,
has been amended and restated, effective as of the time of consummation of the
Offering. No consideration was paid in connection with the execution of the
Restated Shareholders' Agreement. Pursuant to the Restated Shareholders'
Agreement, Messrs. Robert J. Arnot, Gerald W. Lear, Ira J. Hechler and Jon
Hechler are designated as principal shareholders (the "Principal Shareholders")
and the other stockholders of the Company immediately prior to consummation of
the Offering are designated as non-principal shareholders (the "Non-Principal
Shareholders"). The Principal Shareholders and the Non-Principal Shareholders
have agreed to vote their shares of Common Stock, in elections to fill Class I
and Class II of the Board of Directors, to elect nominees of the Principal
Shareholders. The Restated Shareholders' Agreement provides that each of the
Principal Shareholders has granted to each of the other Principal Shareholders
and to the Company rights of first refusal (the "Refusal Right") with respect to
the sale of any shares of the Company's outstanding Common Stock. The Restated
Shareholders' Agreement provides that each of the Non-Principal Shareholders
holding, at the time of the contemplated transfer, in excess of 0.5% of the
outstanding Common Stock of the Corporation has granted to (i) each of the
Principal Shareholders, (ii) each Non-Principal Shareholder and (iii) the
Company, rights of first refusal with respect to the sale of any shares of the
Company's outstanding Common Stock. The Restated Shareholders' Agreement also
provides that in the event that any two of (i) Robert J. Arnot, (ii) Gerald W.
Lear and (iii) Ira J. Hechler and Jon Hechler (a "Majority") agree to enter into
a transaction with a third party for the tender of shares (including, without
limitation, in a change of control transaction), the rights of first refusal set
forth above shall not apply and the Majority or the Company may require the
other Principal Shareholders and Non-Principal Shareholders to participate in
such transaction on the same terms and conditions applicable to the Majority.
The Refusal Right terminates upon the earlier of May 15, 2001 or upon the
Principal Shareholders beneficially owning 20% or less of the shares of Common
Stock outstanding. The remainder of the Restated Shareholders' Agreement
terminates upon the earlier of May 15, 2003 or upon the Principal Shareholders
beneficially owning 20% or less of the shares of Common Stock outstanding.
ACQUISITION OF LIMITED PARTNERSHIP INTEREST
Prior to the Closing Date, the Company's wholly-owned subsidiary, Isaacs
Design, Inc., will acquire the Limited Partnership Interest from Ira J. Hechler,
a director and stockholder of the Company, in exchange for approximately
$335,000 in cash, which the Company believes represents terms no less favorable
than as could have been received from a disinterested third party. After the
acquisition, the Company will have sole control of the Partnership. See "Company
Organization."
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of October 31, 1997, and
as adjusted to reflect the sale of the Common Stock being offered hereby
(assuming no exercise of the Underwriters' over-allotment option) by (i) each
person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5.0% of the outstanding Common Stock, (ii) each of the
Company's directors, (iii) each of the Named Executive Officers and (iv) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF BENEFICIAL OWNERSHIP
COMMON STOCK PRIOR TO OF COMMON STOCK
THE OFFERING AFTER THE OFFERING
----------------------- -----------------------
NAME OF BENEFICIAL OWNERS (1) NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------------------------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Robert J. Arnot...................................................... 447,792 11.19% 447,792 5.74%
Gerald W. Lear....................................................... 447,792 11.19 447,792 5.74
Gary B. Brashers..................................................... 288,237 7.21 288,237 3.70
Eugene C. Wielepski.................................................. 185,242 4.63 185,242 2.37
Thomas P. Ormandy.................................................... 158,320 3.96 158,320 2.03
Ira J. Hechler....................................................... 811,361 20.28 811,361 10.40
Jon Hechler.......................................................... 365,791 9.14 365,791 4.69
The Stanley Keller Irrevocable Trust (2)............................. 263,538 6.59 263,538 3.38
Ronald S. Schmidt.................................................... 0 * 0 *
Marc Baff............................................................ 0 * 0 *
All directors and executive officers as a group (10 persons)......... 2,968,073 74.20% 2,968,073 38.05%
</TABLE>
- ------------------------------
* Less than one percent.
(1) The business address of each person listed above beneficially owning more
than 5.0% of the outstanding Common Stock is c/o I.C. Isaacs & Company,
Inc., 3840 Bank Street, Baltimore, Maryland 21224-2522. Except as described
below and subject to the Restated Shareholders' Agreement and applicable
community property laws and similar laws, each person listed above has sole
voting and investment power with respect to such shares. See "Certain
Transactions--Restated Shareholders' Agreement."
(2) The trustees of The Stanley Keller Irrevocable Trust are Barbara Keller and
Howard Schultz.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock.
No predictions can be made as to the effect, if any, that future sales of Common
Stock, and options to acquire shares of Common Stock, or the availability of
shares for future sale, will have on the market price prevailing from time to
time. Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales may occur, could have a material adverse effect on
the market price of the Common Stock. See "Risk Factors--Future Sales by
Existing Stockholders; Shares Eligible for Future Sale" and "Management--1997
Omnibus Stock Plan."
Upon the consummation of the Offering, the Company will have 7.8 million
shares of Common Stock outstanding. Of these shares, the 3.8 million shares of
Common Stock sold by the Company in the Offering will be freely tradable without
restriction or further registration under the Securities Act, unless held by an
"affiliate" of the Company (as that term is defined under the Securities Act).
Any such affiliate will be subject to the resale limitations of Rule 144 adopted
under the Securities Act. The remaining 4.0 million shares of Common Stock
outstanding are "restricted securities" for purposes of Rule 144 and are held by
"affiliates" of the Company within the meaning of Rule 144 under the Securities
Act. Restricted securities may not be resold in a public distribution except in
compliance with the registration requirements of the Securities Act or pursuant
to an exemption therefrom, including the exemption provided by Rule 144.
In general, under Rule 144, a person (or persons whose shares are
aggregated), including a person who may be deemed to be an "affiliate" of the
Company, is entitled to sell within any three-month period a number of shares
beneficially owned for at least one year that does not exceed the greater of (i)
1.0% of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume of the outstanding shares of Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain requirements as to the manner of sale, notice and the availability of
current public information about the Company. However, a person (or persons
whose shares are aggregated) who is not an "affiliate" of the Company during the
90 days preceding a proposed sale by such person and who has beneficially owned
"restricted securities" for at least two years is entitled to sell such shares
under Rule 144 without regard to the volume, manner of sale or notice
requirements.
The Company, together with each of its executive officers, directors and
stockholders beneficially owning in the aggregate 51.3% of the shares of Common
Stock outstanding after the Offering have entered into lock-up agreements with
The Robinson-Humphrey Company, LLC and Legg Mason Wood Walker, Incorporated, as
representatives of the Underwriters, pursuant to which they have agreed not to,
directly or indirectly, sell, offer to sell, contract to sell, solicit an offer
to buy, grant any option for the purchase or sale of, assign, pledge, distribute
or otherwise transfer, dispose of or encumber (or make any announcement with
respect to any of the foregoing), any of their shares of Common Stock (other
than those being sold pursuant to this Offering) or any options, rights,
warrants or other securities convertible into or exercisable or exchangeable for
Common Stock or evidencing any right to purchase or subscribe for shares of
Common Stock for a period of 180 days following the date of this Prospectus
without the prior written consent of the representatives of the Underwriters. In
addition, certain restrictions on transfers of shares of Common Stock by the
existing stockholders of the Company are contained in the Restated Stockholders'
Agreement. Sales of substantial amounts of Common Stock in the public market, or
the perception that such sales may occur, could have a material adverse effect
on the market price of the Common Stock. See "Certain Transactions--Restated
Shareholders' Agreement."
The Company has adopted the 1997 Omnibus Stock Plan, pursuant to which an
aggregate of 500,000 shares are available for option grants and other equity
awards. See "Management--1997 Omnibus Stock Plan." The Company intends to file a
registration statement on Form S-8 under the Securities Act to register all of
the shares of Common Stock reserved for issuance under the 1997 Omnibus Stock
Plan. Such registration statement is expected to be filed as soon as practicable
after the date of the Offering and will automatically become effective upon
filing. Shares issued under the 1997 Omnibus Stock Plan after the registration
statement is filed may thereafter be sold in the public market, subject, in the
case of the various holders, to the Rule 144 volume limitations applicable to
affiliates, the lock-up agreement described above and any transfer or vesting
restrictions imposed on the date of the grant.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company is
qualified in its entirety by reference to the form of Restated Certificate and
the form of Restated By-laws, each to become effective upon consummation of the
Offering and each filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
The authorized capital stock of the Company consists of 50.0 million shares
of Common Stock, par value $.0001 per share, and 5.0 million shares of Preferred
Stock, par value $.0001 per share.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of the stockholders, including the election of
directors. The Restated Certificate does not provide for cumulative voting in
the election of directors. Accordingly, holders of a majority of the shares of
Common Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any Preferred Stock outstanding at the time, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock have no preemptive rights and no rights to
convert their Common Stock into any other securities and there are no redemption
provisions with respect to such shares. All of the outstanding shares of Common
Stock are fully paid and non-assessable. The rights, preferences and privileges
of holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of Preferred Stock that the Board
of Directors may designate and that the Company may issue in the future.
At present there is no established trading market for the Common Stock.
Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol "ISAC."
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
PREFERRED STOCK
The Restated Certificate provides that the Board of Directors, without
further action by the stockholders, may issue shares of the Preferred Stock in
one or more series and may fix or alter the relative, participating, optional or
other rights, preferences, privileges and restrictions, including the voting
rights, redemption provisions (including sinking fund provisions), dividend
rights, dividend rates, liquidation preferences and conversion rights, and the
description of and number of shares constituting any wholly unissued series of
Preferred Stock. The Board of Directors, without further stockholder approval,
can issue Preferred Stock with voting and conversion rights, which could
adversely affect the voting power of the holders of Common Stock. No shares of
Preferred Stock presently are outstanding, and the Company currently has no
plans to issue shares of Preferred Stock. The issuance of Preferred Stock in
certain circumstances may have the effect of delaying or preventing a change of
control of the Company without further action by the stockholders, may
discourage bids for the Company's Common Stock at a premium over the market
price of the Common Stock and may adversely affect the market price and the
voting and other rights of the holders of Common Stock.
CERTAIN CERTIFICATE OF INCORPORATION, BY-LAW AND STATUTORY PROVISIONS AFFECTING
STOCKHOLDERS
CLASSIFIED BOARD OF DIRECTORS. The Company's Board of Directors is divided
into three classes of directors, designated Class I, Class II and Class III.
Each class shall consist, as nearly as possible, of one-third of the total
number of directors. The term of the initial Class I directors will terminate on
the date of the annual meeting of stockholders (an "Annual Meeting") in 1998,
the term of the initial Class II directors
57
<PAGE>
will expire on the date of the 1999 Annual Meeting, and the term of the initial
Class III directors will expire on the date of the 2000 Annual Meeting. At each
Annual Meeting, beginning in 1998, successors to the class of directors whose
term expires at that Annual Meeting will be elected for a three-year term. See
"Management--Board of Directors." At least two annual meetings of stockholders,
instead of one, generally will be required to change the majority of the
Company's Board of Directors.
SPECIAL MEETINGS OF STOCKHOLDERS; STOCKHOLDER ACTION BY WRITTEN
CONSENT. The Restated Certificate provides that any action required or
permitted to be taken by the Company's stockholders may be effected without a
meeting, without prior notice and without a vote if a consent in writing is
signed by the holders of a number of shares that would be sufficient to take
such action at a meeting of the stockholders. Additionally, the Restated By-laws
provide that special meetings of the stockholders of the Company may be called
only by the Chairman of the Board of Directors, the Chief Executive Officer or
the President of the Company.
ADVANCE NOTICE REQUIREMENTS OF STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Restated By-laws provide that stockholders seeking to bring
business before or to nominate directors at any meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive offices
of the Company not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that (i) in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date or (ii) in
the case of the annual meeting of stockholders held during the 1998 fiscal year
of the Company, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day following the day
on which notice of the date of the annual meeting was mailed or public
disclosure of the date of the annual meeting was made, whichever first occurs.
The Restated By-laws also specify certain requirements for a stockholder's
notice to be in proper written form. These provisions may preclude some
stockholders from bringing matters before the stockholders or from making
nominations for directors.
DIRECTOR AND OFFICER INDEMNIFICATION. The Delaware Corporation Law provides
that a Delaware corporation may include provisions in its certificate of
incorporation relieving each of its directors of monetary liability arising out
of his or her conduct as a director for breach of his or her fiduciary duty
except liability for (i) any breach of such director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions that are not in good
faith or involve intentional misconduct or a knowing violation of law, (iii)
conduct violating Section 174 of the Delaware Corporation Law (which section
relates to unlawful distributions) or (iv) any transaction from which a director
derived an improper personal benefit. The Company's Restated Certificate
includes such provisions.
To the fullest extent permitted by the Delaware Corporation Law, as amended
from time to time, the Company's Restated Certificate and Restated By-laws
provide that the Company shall indemnify and advance expenses to each of its
currently acting and former directors and officers, and may so indemnify and
advance expenses to each of its current and former employees and agents. The
Company believes the foregoing provisions are necessary to attract and to retain
qualified persons as directors and officers. Following consummation of the
Offering, the Company intends to enter into separate indemnification agreements
with each of its directors and executive officers in order to effectuate such
provisions.
58
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for whom The Robinson-Humphrey Company, LLC and Legg
Mason Wood Walker, Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company and the
Company has agreed to sell to the Underwriters, the number of shares of Common
Stock set forth opposite their respective names.
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
The Robinson-Humphrey Company, LLC...............................................
Legg Mason Wood Walker, Incorporated.............................................
----------
Total........................................................................ 3,800,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase all shares of Common
Stock offered hereby if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share in sales to certain other dealers.
After the Offering, the public offering price and other selling terms may be
changed.
The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 570,000 shares of Common Stock at the Offering price less the
underwriting discount set forth on the cover page of this Prospectus to cover
over-allotments, if any.
Prior to the offering made hereby, there has been no public market for the
Common Stock. The initial public offering price for the Common Stock will be
determined through negotiations among the Company and the Representatives and
will not be based upon any independent appraisal or valuation of the Company.
Among the factors to be considered in making such determination are prevailing
market and general economic conditions, the market capitalization of
publicly-traded companies that the Company and the Representatives believe to be
comparable to the Company, the revenues and earnings of the Company in recent
periods, the experience of the Company's management, the economic characteristic
of the business in which the Company competes, estimates of the business
potential of the Company, the present state of the Company's development and
other factors deemed relevant.
The Underwriters do not intend to confirm sales of shares of Common Stock to
any account over which they exercise discretionary authority. The
Representatives intend to make a market in the Common Stock after completion of
this Offering.
The Company, together with each of its executive officers and directors and
stockholders beneficially owning in the aggregate approximately 4.0 million
shares of Common Stock, have entered into lock-up agreements with the
Representatives pursuant to which they have agreed not to, directly or
indirectly, sell, offer to sell, contract to sell, solicit an offer to buy,
grant any option for the purchase or sale of, assign, pledge, distribute or
otherwise transfer, dispose of or encumber (or make any announcement with
respect to any of the foregoing) any shares of Common Stock (other than those
being sold pursuant to this
59
<PAGE>
Offering) or any options, rights, warrants or other securities convertible into
or exercisable or exchangeable for Common Stock or evidencing any right to
purchase or subscribe for shares of Common Stock for a period of 180 days from
the date of this Prospectus without the prior written consent of the
Representatives.
In connection with the Offering, the Underwriters may purchase and sell
shares of Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock, and syndicate
short positions involve the sale by the Underwriters of a greater number of
shares of Common Stock than they are required to purchase from the Company in
the Offering. The Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the shares sold in the Offering may be reclaimed by the syndicate if such shares
of Common Stock are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may be
discontinued at any time. These transactions may be effected in the Nasdaq
National Market, in the over-the-counter market or otherwise.
The Company has agreed to indemnify the Underwriters against, and to
contribute to losses arising out of, certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Piper & Marbury L.L.P. Certain legal matters relating to the Offering
will be passed upon for the Underwriters by Alston & Bird LLP.
EXPERTS
The consolidated financial statements and schedule included in this
Prospectus and in the Registration Statement have been audited by BDO Seidman,
LLP, independent certified public accountants, to the extent and for the periods
set forth in their reports appearing elsewhere herein and in the Registration
Statement and have been included herein in reliance upon such reports given upon
the authority of said firm as experts in accounting and auditing.
60
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus,
which is part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain items of which are omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company or the Common Stock, reference is made to the Registration Statement and
the exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus regarding the contents of any contract or any other document are not
necessarily complete and, in each instance, reference is hereby made to the copy
of such contract or other document filed as an exhibit to such Registration
Statement. The Registration Statement, including exhibits thereto, may be
inspected, without charge, and copies of all or any part thereof may be obtained
upon payment of prescribed fees at the public reference facilities of the
Commission, maintained by the Commission at its principal office located at 450
Fifth Street, N.W., Washington, D.C. 20549, the New York Regional Office located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and the
Chicago Regional Office located at Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http:\\www.sec.gov.
Statements contained in this Prospectus concerning the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent accountants and with
quarterly reports containing unaudited financial information for each of the
first three quarters of each fiscal year.
61
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets at December 31, 1995, 1996 and September 30, 1997......... F-3
Consolidated Statements of Income for the years ended December 31, 1994, 1995, 1996
and the nine months ended September 30, 1996 and September 30, 1997................. F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994,
1995, 1996 and the nine months ended September 30, 1996 and September 30, 1997...... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995,
1996 and the nine months ended September 30, 1996 and September 30, 1997............ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
I.C. Isaacs & Company, Inc.
Baltimore, Maryland
We have audited the accompanying consolidated balance sheets of I.C. Isaacs
& Company, Inc. and subsidiaries as of December 31, 1995 and 1996 and September
30, 1997 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31, 1996
and the nine month periods ended September 30, 1996 and 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of I.C. Isaacs
& Company, Inc. and subsidiaries at December 31, 1995 and 1996 and September 30,
1997 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 and the nine month periods
ended September 30, 1996 and 1997 in conformity with generally accepted
accounting principles.
BDO Seidman, LLP
Washington, D.C.
October 31, 1997, except for
Note 5, the date of which is
November 13, 1997
F-2
<PAGE>
I.C. ISAACS & COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
---------------------------- SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1997 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
Current
Cash, including temporary investments of $779,436, $368,175
and $127,514................................................ $ 1,411,954 $ 938,799 $ 1,492,535 $ 1,158,036
Accounts receivable, less allowance for doubtful accounts of
$350,000, $660,000 and $1,120,000 (Note 3).................. 10,365,050 16,582,990 32,937,439 32,937,439
Inventories (Notes 1 and 3)................................... 14,323,730 14,090,974 22,526,000 22,526,000
Prepaid expenses and other (Note 6)........................... 703,267 1,266,655 1,601,737 1,601,737
------------- ------------- ------------- -------------
Total current assets............................................ 26,804,001 32,879,418 58,557,711 58,223,212
Property, Plant and Equipment, at cost, less accumulated
depreciation and amortization (Notes 2 and 3)................. 2,818,637 2,399,822 2,514,518 2,514,518
Goodwill, less accumulated amortization of $731,025, $797,265
and $846,945.................................................. 1,921,075 1,854,835 1,805,155 1,805,155
Other Assets (Note 5)........................................... 219,941 122,565 643,190 1,943,190
------------- ------------- ------------- -------------
$ 31,763,654 $ 37,256,640 $ 63,520,574 $ 64,486,075
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Checks issued against future deposits......................... $ 1,217,832 $ 1,150,679 $ 3,333,423 $ 3,333,423
Current maturities of term loan and revolving line of credit
(Note 3).................................................... 7,417,500 6,520,418 22,489,284 22,489,284
Current maturities of capital lease obligations (Note 3)...... 223,999 216,764 142,040 142,040
Accounts payable.............................................. 5,110,126 6,378,310 6,295,096 6,295,096
Accrued expenses and other current liabilities (Note 4)....... 1,816,957 2,144,277 3,611,297 3,611,297
Accrued compensation.......................................... 210,810 194,710 327,509 327,509
Distribution payable.......................................... -- -- -- 18,500,000
------------- ------------- ------------- -------------
Total current liabilities....................................... 15,997,224 16,605,158 36,198,649 54,698,649
------------- ------------- ------------- -------------
Long-term Debt (Note 3)
Term loan..................................................... 116,649 699,994 549,991 549,991
Capital lease obligations..................................... 575,403 358,638 255,335 255,335
Junior subordinated notes..................................... 311,130 -- -- --
------------- ------------- ------------- -------------
Total long-term debt............................................ 1,003,182 1,058,632 805,326 805,326
------------- ------------- ------------- -------------
Minority interest............................................... 118,431 200,273 334,499 --
------------- ------------- ------------- -------------
Commitments and Contingencies (Notes 3,
5 and 6)
STOCKHOLDERS' EQUITY (Note 9):
Preferred stock; $.0001 par value; 5,000,000 shares
authorized, none outstanding................................ -- -- -- --
Common stock; $.0001 par value; 50,000,000 shares authorized;
4,024,699 shares issued; 4,000,000 shares outstanding....... 402 402 402 402
Additional paid-in capital.................................... 266,579 266,579 266,579 266,579
Retained earnings............................................. 14,392,704 19,140,464 25,929,987 8,729,987
Treasury stock, at cost (24,699 shares)....................... (14,868) (14,868) (14,868) (14,868)
------------- ------------- ------------- -------------
Total stockholders' equity...................................... 14,644,817 19,392,577 26,182,100 8,982,100
------------- ------------- ------------- -------------
$ 31,763,654 $ 37,256,640 $ 63,520,574 $ 64,486,075
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE>
I.C. ISAACS & COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------------------- -----------------------------
1994 1995 1996 1996 1997
------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 85,298,186 $ 93,271,157 $ 118,655,253 $ 86,679,910 $ 127,246,549
Cost of sales............................. 62,216,041 68,529,969 84,421,651 60,188,034 85,676,570
------------- ------------- -------------- ------------- --------------
Gross profit.............................. 23,082,145 24,741,188 34,233,602 26,491,876 41,569,979
------------- ------------- -------------- ------------- --------------
Operating Expenses
Selling (Note 5)........................ 7,461,438 8,926,800 11,897,834 8,932,030 12,153,727
License fees (Note 5)................... 3,012,193 3,174,656 4,817,037 3,478,514 5,926,964
Distribution and shipping............... 2,045,911 2,378,728 2,669,093 1,905,655 3,223,690
General and administrative.............. 5,813,853 5,786,524 6,243,327 4,151,834 5,369,729
Recovery of legal fees (Note 5)......... -- -- (718,558) -- (117,435)
------------- ------------- -------------- ------------- --------------
Total operating expenses.................. 18,333,395 20,266,708 24,908,733 18,468,033 26,556,675
------------- ------------- -------------- ------------- --------------
Operating income.......................... 4,748,750 4,474,480 9,324,869 8,023,843 15,013,304
------------- ------------- -------------- ------------- --------------
Other Income (Expense)
Interest................................ (1,191,047) (1,247,353) (1,365,163) (994,545) (1,619,198)
Other, net (Note 8)..................... 1,235,030 (3,178) 84,795 (21,492) 28,272
------------- ------------- -------------- ------------- --------------
Total other income (expense).............. 43,983 (1,250,531) (1,280,368) (1,016,037) (1,590,926)
------------- ------------- -------------- ------------- --------------
Income before minority interest and
extraordinary item...................... 4,792,733 3,223,949 8,044,501 7,007,806 13,422,378
Minority interest......................... (52,520) (32,593) (81,842) (70,768) (134,226)
------------- ------------- -------------- ------------- --------------
Income before extraordinary item.......... 4,740,213 3,191,356 7,962,659 6,937,038 13,288,152
Extraordinary Item--Gain on extinguishment
of debt (Note 3)........................ 388,770 -- -- -- --
------------- ------------- -------------- ------------- --------------
Net income................................ $ 5,128,983 $ 3,191,356 $ 7,962,659 $ 6,937,038 $ 13,288,152
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Pro forma financial information:
Income before income taxes, as
presented............................... $ 5,128,983 $ 3,191,356 $ 7,962,659 $ 6,937, 038 $ 13,288,152
Pro forma provision for income taxes
(unaudited)............................. 2,103,000 1,308,000 3,265,000 2,844,000 5,448,000
------------- ------------- -------------- ------------- --------------
Pro forma net income (unaudited).......... $ 3,025,983 $ 1,883,356 $ 4,697,659 $ 4,093,038 $ 7,840,152
------------- ------------- -------------- ------------- --------------
------------- ------------- -------------- ------------- --------------
Pro forma earnings per share
(unaudited)............................. $ 0.87 $ 1.45
Weighted average shares outstanding....... 5,423,077 5,423,077
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
I.C. ISAACS AND COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------ ---------------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS STOCK TOTAL
----------- ----------- --------- ----------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993... -- -- 4,024,699 $ 402 $ 247,791 $10,611,742 $ (63,143) $10,796,792
Net income..................... -- -- -- -- -- 5,128,983 -- 5,128,983
Stockholder distributions...... -- -- -- -- -- (1,603,511) -- (1,603,511)
Purchase of treasury stock
(24,699 shares).............. -- -- -- -- -- -- (13,579) (13,579)
----------- ----------- --------- ----------- ----------- ---------- --------- ----------
Balance at December 31, 1994... -- -- 4,024,699 402 247,791 14,137,214 (76,722) 14,308,685
Net income..................... -- -- -- -- 3,191,356 -- 3,191,356
Stockholder distributions...... -- -- -- -- -- (2,935,866) (2,935,866)
Sale of treasury stock (24,699
shares)...................... -- -- -- -- 18,788 -- 61,854 80,642
----------- ----------- --------- ----------- ----------- ---------- --------- ----------
Balance at December 31, 1995... -- -- 4,024,699 402 266,579 14,392,704 (14,868) 14,644,817
Net income..................... -- -- -- -- -- 7,962,659 7,962,659
Stockholder distributions...... -- -- -- -- -- (3,214,899) -- (3,214,899)
----------- ----------- --------- ----------- ----------- ---------- --------- ----------
Balance at December 31, 1996... -- -- 4,024,699 402 266,579 19,140,464 (14,868) 19,392,577
Net income..................... -- -- -- -- -- 13,288,152 -- 13,288,152
Stockholder distributions...... -- -- -- -- -- (6,498,629) -- (6,498,629)
----------- ----------- --------- ----------- ----------- ---------- --------- ----------
Balance at September 30,
1997......................... -- -- 4,024,699 $ 402 $ 266,579 $25,929,987 $ (14,868) $26,182,100
----------- ----------- --------- ----------- ----------- ---------- --------- ----------
----------- ----------- --------- ----------- ----------- ---------- --------- ----------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
I.C. ISAACS & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Operating Activities
Net income..................................... $5,128,983 $3,191,356 $7,962,659 $6,937,038 $13,288,152
Adjustments to reconcile net income to net cash
provided by operating activities
Write-off of other assets.................... 61,981 -- -- -- --
Extraordinary gain........................... (388,770) -- -- -- --
Provision for doubtful accounts.............. 278,338 398,451 1,193,693 543,775 1,251,425
Write-off of accounts receivable............. (428,338) (398,451) (883,693) (443,775) (791,425)
Provision for sales returns and discounts.... 5,545,414 5,104,266 5,955,658 3,596,697 8,122,576
Sales returns and discounts.................. (5,483,107) (5,062,285) (5,633,525) (3,445,857) (8,529,067)
Provision of overcharges..................... -- -- -- -- 174,150
Depreciation and amortization................ 1,512,934 1,477,450 1,359,252 1,076,778 759,513
(Gain) loss on sale of assets................ -- 99,116 (71,800) -- --
Minority interest............................ 52,520 32,593 81,842 70,768 134,226
(Increase) decrease in assets
Accounts receivable........................ (2,915,062) 886,051 (6,850,073) (9,848,535) (16,582,108)
Inventories................................ 470,913 (2,936,042) 232,756 (727,936) (8,435,026)
Prepaid expenses and other................. 459,543 (161,621) (563,388) (137,593) (335,082)
Other assets............................... (325,000) -- -- -- (43,624)
Increase (decrease) in liabilities
Accounts payable........................... (1,099,403) 971,255 1,268,184 230,923 (83,214)
Accrued expenses and other current
liabilities.............................. 665,696 43,334 327,320 874,931 1,467,020
Accrued compensation....................... 52,470 (44,030) (16,100) 61,494 132,799
---------- ---------- ---------- ---------- -----------
Cash provided by (used in) operating
activities....................................... 3,589,112 3,601,443 4,362,785 (1,211,292) (9,469,685)
---------- ---------- ---------- ---------- -----------
Investing Activities
Proceeds from sale of assets................... -- 13,750 71,800 -- --
Capital expenditures........................... (676,648) (669,464) (701,821) (382,238) (780,495)
---------- ---------- ---------- ---------- -----------
Cash used in investing activities................ (676,648) (655,714) (630,021) (382,238) (780,495)
---------- ---------- ---------- ---------- -----------
Financing Activities
Checks issued against future deposits.......... 440,374 345,929 (67,153) (139,071) 2,182,744
(Purchase) sale of treasury stock.............. (13,579) 80,642 -- -- --
Stockholder distributions...................... (1,603,511) (2,935,866) (3,214,899) (2,060,997) (6,498,629)
Principal payments on debt..................... (1,783,263) (760,618) (1,632,216) (325,734) (328,030)
Principal proceeds from debt................... 833,230 291,552 783,349 4,036,211 15,968,866
Deferred financing costs....................... -- -- (75,000) (75,000) (521,035)
---------- ---------- ---------- ---------- -----------
Cash provided by (used in) financing
activities....................................... (2,126,749) (2,978,361) (4,205,919) 1,435,409 10,803,916
---------- ---------- ---------- ---------- -----------
Increase (decrease) in cash and cash
equivalents...................................... 785,715 (32,632) (473,155) (158,121) 553,736
Cash and Cash Equivalents, at beginning of
period........................................... 658,871 1,444,586 1,411,954 1,411,954 938,799
---------- ---------- ---------- ---------- -----------
Cash and Cash Equivalents, at end of period...... $1,444,586 $1,411,954 $ 938,799 $1,253,833 $ 1,492,535
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
I.C. ISAACS & COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of I.C. Isaacs &
Company, Inc. ("ICI"), I.C. Isaacs Europe, S.L. ("Isaacs Europe") and I.C.
Isaacs & Company L.P. (the "Partnership"). Collectively, ICI, Isaacs Europe and
the Partnership are referred to herein as the "Company." ICI, operates as the
general partner of the Partnership and has a 99.0% ownership interest. The
limited partner, with a 1.0% ownership interest, is an individual. The Company
has accounted for the limited partner's ownership interest as a minority
interest in the accompanying consolidated financial statements. The Company
established Isaacs Europe in July 1996 as the exclusive licensee of Beverly
Hills Polo Club sportswear in Europe. Isaacs Europe did not have any significant
revenue or expenses in 1996 or through September 30, 1997. All intercompany
balances and transactions have been eliminated.
BUSINESS DESCRIPTION
The Company, which operates in one business segment, designs, manufactures
and markets branded sportswear for men, women and boys under the BOSS brand in
the United States and Puerto Rico and under the Beverly Hills Polo Club brand in
the United States, Puerto Rico and Europe. The Company also manufactures women's
sportswear under various Company-owned brand names as well as under third-party
private labels.
INTERIM FINANCIAL INFORMATION
In the opinion of management, the interim financial information as of
September 30, 1997 and for the nine months ended September 30, 1996 and 1997
contains all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for such periods. Results for
interim periods are not necessarily indicative of results to be expected for an
entire year.
REORGANIZATION AND PRO FORMA INFORMATION (UNAUDITED)
ICI has or will initiate certain events (the "Reorganization") in connection
with its initial public offering of common stock. ICI has established a
wholly-owned subsidiary ("Isaacs Design, Inc.") to purchase, at book value, the
1.0% limited partnership interest in the Partnership held by the limited
partner. Consequently, upon completion of the initial public offering, the
consolidated group will include ICI, Isaacs Design, Inc., Isaacs Europe and the
Partnership. In connection with the Reorganization, ICI will declare a dividend
to the stockholders representing earned but undistributed earnings through the
closing date of the Reorganization.
Concurrently with the Reorganization, ICI will terminate its Subchapter S
corporation status and will become subject to federal and state income taxes.
The accompanying consolidated statements of income reflect a pro forma provision
for income taxes for the years ended December 31, 1994, 1995 and 1996 and for
the nine month periods ended September 30, 1996 and 1997, based upon pretax
income as if the consolidated group discussed above had been subject to federal
and state income taxes, based on an estimated effective tax rate of 41.0%. The
difference between the statutory and estimated effective tax rates is due to
state income taxes (4.5%), nondeductible entertainment expense (2.0%) and
nondeductible goodwill amortization (0.5%). In connection with termination of
its Subchapter S corporation status, ICI will record a net deferred tax asset
and accompanying tax benefit to reflect the differences in the financial
statement and income tax bases of the assets and liabilities which principally
relate to uniform inventory capitalization ($0.1 million), allowance for
doubtful accounts ($0.4 million), depreciation ($0.7 million) and other accruals
($0.1 million). If the Subchapter S corporation status had terminated on
September 30,
F-7
<PAGE>
I.C. ISAACS & COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
1997, the net deferred tax asset that would have been recognized would have been
approximately $1.3 million.
Pro forma earnings per share are based on pro forma net income and the
weighted average number of shares of common stock outstanding adjusted to
include the estimated number of shares (1,423,077) being sold by ICI which would
be necessary to fund the distribution of all previously earned but undistributed
Subchapter S corporation earnings. This amount, estimated at $18.5 million as of
September 30, 1997, will be paid as the initial Subchapter S corporation
distribution upon the closing of the initial public offering.
Supplementary pro forma net income per share for the year ended December 31,
1996 and the nine months ended September 30, 1997 of $0.79 and $1.09,
respectively, is based upon the weighted number of shares of common stock used
in the calculation of pro forma net income per share increased by the sale of
555,416 and 1,772,252 shares, respectively, assuming an initial offering price
of $13.00 per share, the proceeds of which would be necessary to repay
approximately $7,220,408 and $23,039,275, respectively, of the Company's term
loan and revolving line of credit.
The pro forma balance sheet as of September 30, 1997 reflects the
termination of the Subchapter S corporation status, establishment of the net
deferred tax asset, declaration of the dividend of the earned but undistributed
Subchapter S corporation earnings and the purchase of the minority interest as
if they had occurred on September 30, 1997.
RISKS AND UNCERTAINTIES
The apparel industry is highly competitive. The Company competes primarily
with larger, well capitalized companies, which may seek to increase market share
through price reductions. The risk to the Company is that such a strategy may
ultimately lead to reduced profit margins. In the past several years, many of
the Company's competitors have switched much of their apparel manufacturing from
the United States to foreign locations such as Mexico, the Dominican Republic
and throughout Asia. As competitors lower production costs it gives them greater
flexibility to alter prices. Over the last several years, the Company has
switched a significant portion of its production to contractors outside the
United States to reduce costs. Management believes that it will continue this
strategy for the foreseeable future.
The Company faces the uncertainty of the continued availability of increases
in its borrowing capacity. Adequate working capital is essential to an apparel
manufacturer due to the significant cash investment in inventory and accounts
receivable and the long lead time between payment for such inventory and
collection of customer receivables. The Company believes that it has an
excellent relationship with its asset-based lender and that it will be able to
obtain sufficient working capital to finance its requirements.
The Company faces other risks inherent in the apparel industry. These risks
include changes in fashion trends and related consumer acceptance and the
continuing consolidation in the retail segment of the apparel industry. The
Company's ability, or inability, to manage these risk factors could influence
future financial and operating results.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make certain estimates and
assumptions, particularly regarding valuation of accounts receivable and
inventory, recognition of liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results could differ
from those estimates.
F-8
<PAGE>
I.C. ISAACS & COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of trade accounts receivable. The Company's
customer base is not concentrated in any specific geographic region but is
concentrated in the retail industry. For the years ended December 31, 1994, 1995
and 1996 sales to one customer were 20.0%, 19.0% and 13.0% of total sales,
respectively. The significant customer was the same in 1994 and 1995, but was
different in 1996. For the nine months ended September 30, 1996 and 1997 sales
to one customer were 12.3% and 14.6% of total sales, respectively. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
The Company's actual credit losses as a percentage of net sales has been less
than three-quarters of one percent.
The Company is also subject to concentrations of credit risk with respect to
its cash and cash equivalents, which it minimizes by placing these funds with
high-quality institutions.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to the letter of credit agreements, but it does not expect
any financial institutions to fail to meet their obligation given their high
credit rating.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the assets by both straight-line and accelerated
methods. Leasehold improvements are amortized using the straight-line method
over the life of the lease.
GOODWILL
The Company has recorded goodwill based on the excess of purchase price over
net assets acquired, and it is being amortized on a straight-line basis over 40
years. The Company analyzes the operating income of the women's Company-owned
and private label line in relation to the goodwill amortization for evidence of
impairment. The Company analyzes only the profitability of this product line
because it is the remaining activity of the business acquired in 1984 which gave
rise to the goodwill.
LICENSES
Included in other assets is the cost of certain licenses which allow the
Company to manufacture and market certain branded apparel. The Company
capitalized the cost of obtaining the licenses, and the cost of the licenses is
being amortized on a straight-line basis over the initial term of three years.
The Company accrues royalty expense related to the licenses at the greater of
the specified percentage of sales or the minimum guaranteed royalty set forth in
the license agreements.
REVENUE RECOGNITION
Sales are recognized upon shipment of products. Allowances for estimated
returns are provided when sales are recorded.
F-9
<PAGE>
I.C. ISAACS & COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs, included in selling expenses, are expensed as incurred
and were $368,765, $1,498,001, $2,529,109, $1,945,039 and $2,441,603 for the
years ended December 31, 1994, 1995, 1996 and nine months ended September 30,
1996 and 1997, respectively.
CASH EQUIVALENTS
For purposes of the statements of cash flows, all temporary investments
purchased with a maturity of three months or less are considered to be cash
equivalents.
INCOME TAXES
The entities in the consolidated group include principally a Subchapter S
corporation and a partnership which are not subject to federal or certain state
income taxes. Therefore, the Company has made no provision for income taxes in
the accompanying financial statements as taxes are the liability of the
respective stockholders and partners.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
109"). Under SFAS 109, deferred taxes are determined using the liability method
which requires the recognition of deferred tax assets and liabilities based on
differences between financial statement and income tax bases using presently
enacted tax rates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments of the Company include long-term debt. Based upon
current borrowing rates available to the Company, estimated fair values of these
financial instruments approximate their recorded amounts.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"). SFAS 123 will begin to affect the Company in fiscal
1997 with the establishment of the 1997 Omnibus Stock Plan. See
"Management--1997 Omnibus Stock Plan." The Company will adopt only the
disclosure provisions of SFAS 123 and account for stock-based compensation using
the intrinsic value method set forth in APB Opinion 25.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 provides a different method of calculating earnings per share than is
currently used in APB Opinion 15. SFAS 128 provides for the calculation of basic
and diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to existing fully diluted earnings
per share. As required by the policies of the Securities and Exchange Commission
(the "Commission"), the Company has treated the shares being sold to fund the S
Corporation Distribution as outstanding prior to the Offering. SFAS 128 does not
have a provision requiring such treatment. The Commission is currently
evaluating its policies concerning this issue. Assuming shares issued to fund
the S Corporation Distribution continue to be treated as outstanding prior to
the Offering, the Company believes adopting SFAS 128 will not have a material
effect on its calculation of earnings per share. The Company will adopt the
provisions for computing earnings per share set forth in SFAS 128 in December
1997.
F-10
<PAGE>
I.C. ISAACS & COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure ("SFAS 129") effective for periods ending
after December 15, 1997, establishes standards for disclosing information about
an entity's capital structure. SFAS 129 requires disclosure of the pertinent
rights and privileges of various securities outstanding (stock, options,
warrants, preferred stock, debt and participation rights) including dividend and
liquidation preferences, participant rights, call prices and dates, conversion
or exercise prices and redemption requirements. Adoption of SFAS 129 will have
no effect on the Company as it currently discloses the information specified.
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. The Company's results of operations and financial position
will be unaffected by implementation of these new standards.
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS 130"), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.
Statement of Financial Accounting Standards No. 131, Disclosure about
Segments of a Business Enterprise ("SFAS 131"), establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
Both SFAS 130 and SFAS 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Due to the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, they may have
on future financial statement disclosures.
F-11
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- SEPTEMBER 30,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Raw materials................................... $ 3,330,394 $ 3,146,405 $ 3,653,870
Work-in-process................................. 1,738,602 3,345,545 2,653,752
Finished goods.................................. 9,254,734 7,599,024 16,218,378
------------- ------------- -------------
$ 14,323,730 $ 14,090,974 $ 22,526,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, ESTIMATED
-------------------------- SEPTEMBER 30, USEFUL
1995 1996 1997 LIVES
------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Land................................ $ 185,660 $ 185,660 $ 185,660
Buildings and improvements.......... 5,301,761 5,301,761 5,339,371 18 years
Machinery, equipment and fixtures... 7,878,836 8,570,577 9,225,110 5-7 years
Other............................... 1,025,362 1,035,442 1,123,795 various
------------ ------------ -------------
14,391,619 15,093,440 15,873,936
Less accumulated depreciation and
amortization...................... 11,572,982 12,693,618 13,359,418
------------ ------------ -------------
$2,818,637 $ 2,399,822 $ 2,514,518
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Term loan (a)..................................... $ 316,653 $ 899,998 $ 749,995
Revolving line of credit (a)...................... 7,207,496 6,320,414 22,289,280
Installment purchase obligations (b).............. 10,000 -- --
------------ ------------ -------------
7,534,149 7,220,412 23,039,275
Capital lease obligations (c)..................... 799,402 575,402 397,375
Junior subordinated notes (d)..................... 311,130 -- --
------------ ------------ -------------
Total............................................. $ 8,644,681 $ 7,795,814 $ 23,436,650
Less current maturities of long-term debt and
revolving line of credit........................ 7,417,500 6,520,418 22,489,284
Less current maturities of capital lease
obligations..................................... 223,999 216,764 142,040
------------ ------------ -------------
$ 1,003,182 $ 1,058,632 $ 805,326
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
F-12
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LONG-TERM DEBT (CONTINUED)
(a) The Company has a renewable term loan agreement with a borrowing limit
of $1,000,000. The term loan facility is payable in 60 monthly installments of
$16,667 and is collateralized by property and equipment. The term loan facility
may be renewed for periods of 60 months at the option of the lender. The term
loan facility bears interest at the prime rate of interest plus 2.5%
(effectively 11.0% at September 30, 1997) and is payable monthly.
The revolving line of credit agreement and letter of credit arrangement
provide that the Company may borrow up to 80% of the net amount of eligible
accounts receivable and a portion of imported inventory, as defined in the
financing agreement. The revolving line of credit expires on June 30, 1998.
Borrowings under the revolving line of credit and outstanding letters of credit
(limited to $10.0 million) may not exceed $30.0 million and bear interest at the
prime rate of interest plus 1.0% (effectively 9.5% at September 30, 1997).
Additional borrowings available under the revolving line of credit and letter of
credit agreements are approximately $2.5 million at September 30, 1997.
Borrowings under these agreements are collateralized by the Company's accounts
receivable, imported inventories and other assets. Outstanding letters of credit
approximated $5.2 million at September 30, 1997. Among the provisions of the
financing agreement are requirements to maintain specified levels of working
capital and net worth. Retained earnings of approximately $8.0 million are
restricted as to the payment of dividends.
Average short-term borrowings and the related interest rates are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Borrowings under revolving line of credit....... $ 7,207,496 $ 6,320,414 $ 22,289,280
Weighted average interest rate.................. 9.88% 9.25% 9.50%
Maximum month-end balance during the period..... $ 10,649,725 $ 11,024,807 $ 22,950,740
Average balance during the period............... $ 8,518,496 $ 9,814,896 $ 17,893,654
</TABLE>
(b) The Company's plants were financed by the issuance of industrial revenue
and general obligation bonds by municipalities in Mississippi. These obligations
bore interest at rates varying between 5% and 14%. The Company repaid the
remaining obligation in 1996.
(c) The Company leases equipment under various capital leases which are
included in property, plant and equipment in the amount of $1,048,037 at
December 31, 1995 and 1996 and September 30, 1997. Amortization expense related
to assets under capital leases amounted to $156,813, $211,512, $191,490,
$143,617 and $126,830 for the years ended December 31, 1994, 1995, 1996 and the
nine months ended September 30, 1996 and 1997, respectively.
F-13
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LONG-TERM DEBT (CONTINUED)
As of December 31, 1996, future net minimum lease payments under capital
leases that have initial or remaining noncancelable lease terms in excess of one
year are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 267,208
1998.............................................................. 202,827
1999.............................................................. 189,551
2000.............................................................. 6,296
---------
Total minimum lease payments...................................... 665,882
Less: amount representing interest................................ (90,480)
---------
Present value of net minimum lease payments....................... 575,402
Less: current portion............................................. (216,764)
---------
Long-term capital lease obligations............................... $ 358,638
---------
---------
</TABLE>
(d) Junior subordinated notes totaling $311,130 were due to stockholders of
ICI and had a maturity date of June 1998. Interest was calculated at the prime
rate of interest plus 1.5% but could not exceed 16.0%. The Company repaid these
subordinated notes in October 1996.
As of December 31, 1993, the Company had two junior subordinated notes
outstanding to a former partner in the Partnership which totalled $1,500,000
plus approximately $150,000 in contingent fees. The notes were due in full by
February 1995. On September 30, 1994, the Company repaid the two notes, at a
discount of 15.0%, as well as accrued interest through September 30, 1994. The
Company recognized an extraordinary gain of $388,770 for the difference between
the carrying value of the subordinated debt, including accrued interest and
contingent payments of $1,810,104 and the repayment amount of $1,421,334.
Scheduled maturities of the Company's term loan and revolving line of credit
as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997............................................................... $6,520,418
1998............................................................... 200,004
1999............................................................... 200,004
2000............................................................... 200,004
2001............................................................... 99,982
---------
$7,220,412
---------
---------
</TABLE>
F-14
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
<S> <C> <C> <C>
Royalties.......................................... $ 878,918 $ 1,194,637 $ 2,080,544
Accrued professional fees.......................... 100,000 150,000 100,000
Payable to salesmen................................ 233,818 152,701 517,209
Severance agreements............................... 145,913 103,745 --
Payroll tax withholdings........................... 231,142 145,736 98,817
Customer credit balances........................... 177,402 254,244 132,409
Accrued bonuses.................................... -- -- 250,000
Other.............................................. 49,764 143,214 432,318
------------ ------------ -------------
$ 1,816,957 $ 2,144,277 $ 3,611,297
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
The Company rents real and personal property under leases expiring at
various dates through 1999. Certain of the leases stipulate payment of real
estate taxes and other occupancy expenses. Minimum annual rental commitments
under noncancellable operating leases in effect at December 31, 1996 are
summarized as follows:
<TABLE>
<CAPTION>
COMPUTER
TRUCKS SHOWROOMS HARDWARE MACHINERY TOTAL
---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
1997.................................................... $ 137,942 $ 365,677 $ 138,585 $ 189,969 $ 832,173
1998.................................................... 98,898 171,020 144,731 77,269 491,918
1999.................................................... 56,784 133,350 52,851 3,653 246,638
2000.................................................... 56,784 135,572 22,224 -- 214,580
2001.................................................... 56,784 138,684 5,556 -- 201,024
Thereafter.............................................. 42,588 219,583 -- -- 262,171
---------- ------------ ---------- ---------- ------------
$ 449,780 $ 1,163,886 $ 363,947 $ 270,891 $ 2,248,504
---------- ------------ ---------- ---------- ------------
---------- ------------ ---------- ---------- ------------
</TABLE>
Total rent expense is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------ --------------------------
1994 1995 1996 1996 1997
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Minimum rentals................................ $ 536,862 $ 344,047 $ 773,987 $ 552,773 $ 667,622
Other lease costs.............................. 397,705 566,533 459,823 430,705 389,388
---------- ---------- ------------ ------------ ------------
$ 934,567 $ 910,580 $ 1,233,810 $ 983,478 $ 1,057,010
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
</TABLE>
During 1990, the Company executed a license agreement for the manufacture
and sale of "sports-wear" under the BOSS trademark. This agreement had an
expiration date in December 1999 with additional options to extend it through
2004. The agreement provided for certain minimum license fees and additional
license fees of 5.0% of denim sales and 6.0% of non-denim sales, as defined.
Total license fees amounted to $2,908,532, $2,753,422, $4,209,750, $3,008,634
and $5,021,331 for the years ended December 31, 1994, 1995, 1996 and the nine
months ended September 30, 1996 and 1997, respectively. The
F-15
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Company executed certain agreements on September 30, 1997 pursuant to which it
acquired the BOSS trademark, subject to certain restrictions, and conveyed the
foreign rights to the BOSS brand to Ambra Inc., a wholly-owned subsidiary of
Hugo Boss AG ("Ambra").
The percentage of BOSS sportswear sales to total sales was 65.1%, 66.3%,
72.2%, 73.4% and 77.3% for the years ended December 31, 1994, 1995 and 1996 and
the nine months ended September 30, 1996 and 1997, respectively.
In September 1993, the Company purchased a license to manufacture and sell
certain apparel under the Beverly Hills Polo Club trademark. The agreement was
amended in 1996 and expires in December 1998, with options to extend through
2004. The licensor may terminate the agreement if the Company does not meet
minimum sales requirements as set forth in the agreement. The agreement provides
for minimum annual license fees or license fees of 5.0% of sales whichever is
greater. Also, the Company is required to spend 1.0% of annual sales on product
advertising. The license fees were $103,661, $421,234, $607,287, $469,880 and
$905,633 for the years ended December 31, 1994, 1995, 1996 and the nine months
ended September 30, 1996 and 1997, respectively.
In 1996, Isaacs Europe executed an exclusive license for the manufacture and
sale, in Europe, of sportswear under the Beverly Hills Polo Club trademark. The
license agreement has an initial term of three years with three one-year renewal
options. The agreement provides for minimum annual license fees, beginning in
the second year, or 6.0% of sales whichever is greater.
The minimum license fees under the Beverly Hills Polo Club agreement are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 112,500
1998.............................................................................. 330,000
1999.............................................................................. 360,000
----------
$ 802,500
----------
----------
</TABLE>
In February 1993, the owner of the BOSS trademark filed suit against the
licensor of the BOSS trademark in the United States and several licensees,
including the Company. The complaint alleged trademark infringement related to
use of the BOSS trademark. However, the complaint did not challenge the
exclusive right of the Company to use the BOSS trademark in connection with the
manufacture and sale of certain clothing as set forth in its exclusive license
agreement.
The Company executed certain agreements in November 1997 which resulted in
the settlement of the BOSS trademark litigation described above. In November
1997, as part of the BOSS litigation settlement, the Company borrowed $11.25
million to finance the acquisition of certain BOSS trademark rights. This
obligation is evidenced by a secured limited recourse promissory note which
matures on December 31, 2007. The note bears interest at 10.0% per annum,
payable quarterly; principal is payable in full upon maturity of the Note, which
is collateralized by the domestic BOSS trademark rights. The settlement allowed
the Company to acquire the domestic rights to the BOSS trademark for use in the
manufacture and sale of apparel, subject to certain restrictions as set forth in
the agreements, and the Company's transfer of the foreign rights to the BOSS
trademark to Ambra. The Company also entered into a foreign
F-16
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
rights manufacturing agreement with Ambra under which the Company obtained the
license to manufacture apparel in foreign countries in which the Company is
currently manufacturing BOSS products for sale in the United States and Puerto
Rico. Under the foreign rights agreement, the Company will pay annual royalties
of 12.5% on the first $32.0 million of net sales attributable to apparel
manufactured in specified foreign countries for each of the first four years of
the agreement; on the first $20.0 million of such net sales in year five of the
agreement and on the first $16.0 million of such net sales in years six through
ten of the agreement. For the first four years of the agreement, an additional
royalty of 5.0% is payable annually on net sales from $84.0 million to
approximately $105.3 million and an additional royalty of 4.0% is payable
annually on net sales in excess of $158.0 million. Additional royalties in years
five through ten of the agreement increase for certain corresponding sales
levels. To the extent that the Company does not achieve the net sales
requirements, it will have the right, in order to avoid termination of the
foreign rights agreement, to pay royalties as if it had achieved such net sales
requirement. The foreign rights agreement has an initial term of four years but
may be extended at the Company's option through December 31, 2007. The domestic
BOSS trademark is subject to an option to purchase from the Company under
conditions set forth in the agreements.
Subsequent to September 30, 1997, the Company and one of its insurance
carriers reached an agreement whereby the insurance company will provide
reimbursement for the legal costs associated with the litigation described
above. The Company records the reimbursement when received from the insurance
carrier. As part of this agreement, the Company received $718,558 in 1996 and
$117,435 thus far in 1997.
In November 1997, the Company entered into an exclusive license agreement
with Girbaud Design, Inc. and its affiliate to manufacture and sell men's jeans
and casual apparel under the Girbaud brand and certain related trademarks in the
United States, Puerto Rico and the U.S. Virgin Islands. The agreement has an
initial term of two years and may be extended at the option of the Company for
an additional three-year term. Under the agreement the Company is required to
make payments to the licensor in an amount equal to 6.25% of net sales of
regular licensed merchandise and 3.0% of certain irregular and closeout licensed
merchandise. Payments are subject to guaranteed minimum annual royalties as
follows:
<TABLE>
<S> <C>
1998............................................................ $1,200,000
1999............................................................ $1,500,000
2000............................................................ $2,000,000
2001............................................................ $2,500,000
2002............................................................ $3,000,000
</TABLE>
Beginning with the first quarter of 1998, the Company is obligated to pay the
greater of actual royalties earned or 8.3% of the minimum guaranteed royalties
for that year. The Company is required to spend at least $350,000 in advertising
for the Girbaud brand in 1998 and $500,000 each year thereafter while the
agreement is in effect.
The Company is party to employment agreements with five executive officers
which provide for specified levels of compensation and certain other benefits.
The agreements also provide for severance payments from the termination date
through the expiration date under certain circumstances.
F-17
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RETIREMENT PLAN
The Company sponsors a defined benefit pension plan that covers
substantially all employees with more than one year of service. The Company's
policy is to fund pension costs accrued. Contributions to the plan reflect
benefits attributed to employees' service to date, as well as service expected
to be earned in the future. The benefits are based on the number of years of
service and the employee's compensation during the three consecutive complete
years of service prior to or including the year of termination of employment.
Plan assets consist primarily of common stocks, fixed income securities and
cash. The latest available actuarial valuation is as of December 31, 1996.
Pension expense for the years ended December 31, 1994, 1995 and 1996 and the
nine months ended September 30, 1996 and September 30, 1997 was $305,000,
$310,000, $284,000, $282,000 and $270,000, respectively. The components of
pension expense for the last three years are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1994 1995 1996
---------- ---------- ----------
Service cost of current period........................... $ 244,000 $ 223,000 $ 208,000
Interest on the projected benefit obligation............. 470,000 485,000 555,000
Return on plan assets.................................... (456,000) (445,000) (526,000)
Net other costs.......................................... 47,000 47,000 47,000
---------- ---------- ----------
Pension cost............................................. $ 305,000 $ 310,000 $ 284,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The following table sets forth the Plan's funded status and amounts
recognized at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Vested benefits................................................... $ 5,987,000 $ 6,730,000
Nonvested benefits................................................ 37,000 56,000
------------ ------------
Accumulated benefit obligation.................................... 6,024,000 6,786,000
Effect of anticipated future compensation levels and other
events.......................................................... 457,000 862,000
------------ ------------
Projected benefit obligation...................................... 6,481,000 7,648,000
Fair value of assets held in the plan............................. 6,139,000 7,357,000
------------ ------------
Excess of projected benefit obligation over plan assets........... (342,000) (291,000)
Unrecognized net loss from past experience different from that
assumed......................................................... 344,000 661,000
Unrecognized prior service cost................................... 159,000 143,000
Unamortized liability at transition............................... 155,000 124,000
------------ ------------
Net prepaid periodic pension cost................................. $ 316,000 $ 637,000
------------ ------------
------------ ------------
</TABLE>
With respect to the above table, the weighted average discount rate used to
measure the projected benefit obligation was 8.0%; the rate of increase in
future compensation levels was 3.0%; and the expected long-term rate of return
on assets was 8.0%. The net prepaid periodic pension cost is included in prepaid
expenses and other current assets in the accompanying consolidated balance
sheets.
F-18
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest amounted to $1,192,040, $1,272,794, $1,389,023,
$991,844 and $1,616,692 for the years ended December 31, 1994, 1995, 1996 and
the nine months ended September 30, 1996 and 1997, respectively.
During 1994 and 1995 the Company purchased property and equipment totalling
$731,792 and $316,245, respectively, by issuing notes payable.
8. NON-RECURRING INCOME
During 1991, the Company received $6.0 million under the provisions of a
settlement agreement related to termination of a license. Additionally, the
agreement provided that, if certain conditions are met, the Company could
receive up to $3.0 million through 1998. The Company had received the maximum
amount allowable under this agreement as of December 31, 1994. Included in other
income for 1994 are payments of approximately $1.18 million.
9. COMMON AND PREFERRED STOCK
In May 1997, the Board of Directors of ICI authorized the filing of a
registration statement for an initial public offering of the Company's common
stock.
In May 1997, the stockholders approved an amended and restated Certificate
of Incorporation which increased the authorized common shares from 20,000 to
50.0 million and established a class of preferred shares with 5.0 million shares
authorized. On November 13, 1997, the Board of Directors of ICI approved a
246.9898-for-1 stock split of the common stock, which will be paid in the form
of a stock dividend to the stockholders effective November 13, 1997. The change
in the Company's common stock for the stock dividend has been given retroactive
effect for all periods presented.
In May 1997, the Company adopted the 1997 Omnibus Stock Plan. Under the 1997
Omnibus Stock Plan, the Company may grant qualified and nonqualified stock
options, stock appreciation rights, restricted stock or performance awards,
payable in cash or shares of common stock, to selected employees. The 1997
Omnibus Stock Plan will be administered by the Board of Directors. The Company
has reserved 500,000 shares of common stock for issuance under the 1997 Omnibus
Stock Plan.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with this
Registration Statement. The Company will pay all expenses of the Offering. All
of such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission, NASD and Nasdaq.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee...................................... $ 18,591
NASD Filing Fee.................................................................... 6,618
Nasdaq Listing Fee................................................................. 37,000
Printing and Engraving Fees and Expenses........................................... *
Legal Fees and Expenses............................................................ *
Accounting Fees and Expenses....................................................... *
Blue Sky Fees and Expenses......................................................... *
Transfer Agent Fees................................................................ *
Miscellaneous...................................................................... *
---------
TOTAL...................................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be completed in an amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 145 of the General Corporation Law of Delaware (the
"Delaware Corporation Law"), Article IX of the Restated By-laws of the
Registrant, a copy of which is filed as Exhibit 3.02 to this Registration
Statement, provides that the Registrant shall indemnify any person in connection
with any threatened, pending or completed legal proceeding (other than a legal
proceeding by or in the right of the Registrant) by reason of the fact that he
is or was a director, officer, employee or agent of the Registrant or is or was
serving at the request of the Registrant as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such legal proceeding if he acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
Registrant, and with respect to any criminal action or proceeding, if he has no
reasonable cause to believe that his conduct was unlawful. If the legal
proceeding is by or in the right of the Registrant, the director or officer may
be indemnified by the Registrant against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement of
actually and reasonably incurred in connection with the defense or settlement of
such legal proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Registrant and
believed to be in or not opposed to the best interest of the Registrant and
except that he may not be indemnified in respect of any claim, issue or matter
as to which he shall have been adjudged to be liable to the Registrant unless a
court determines otherwise.
Article IX of the Registrant's Restated By-laws also allows the Registrant
to maintain liability insurance on behalf of any person who is or was a
director, officer, employee or agent of the Registrant or such person who serves
or served as director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise at the request of the
Registrant.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article VII
of the Restated Certificate of the Registrant, a copy of which is filed with
Exhibit 3.01 to this Registration Statement, provides that no director of the
Registrant shall be personally liable to the Registrant or its stockholders for
monetary damages for any breach of his fiduciary duty as a director; provided,
however, that such clause shall not apply to any liability of a director (1) for
any breach of his loyalty to the Registrant or its stockholders, (2) for acts or
omissions that are not in good faith or involve intentional misconduct or a
II-1
<PAGE>
knowing violation of the law, (3) under Section 174 of the Delaware Corporation
Law, or (4) for any transaction from which the director derived an improper
personal benefit.
The form of Underwriting Agreement, filed as Exhibit 1.01 hereto, contains
provisions by which the Underwriters will agree to indemnify the Registrant and
each officer, director and controlling person of the Registrant against certain
liabilities.
The Form of Indemnification Agreement, filed as Exhibit 10.09 hereto,
contains provisions by which the Registrant will agree to indemnify each of its
officers and directors against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On January 17, 1997, the Company issued 24,699 shares of Common Stock to
Thomas P. Ormandy, an executive officer of the Company, for $39,485 cash.
On September 2, 1997, the Company issued 5,746 shares of Common Stock to
existing stockholders of the Company in consideration of the cancellation of
stock certificates that had been issued at a time when the Company did not have
a sufficient number of authorized shares of Common Stock.
Immediately prior to the consummation of the Offering the Company will
effect a 246.9898-for-1 stock split pursuant to which it will issue an aggregate
of approximately 4.0 million shares of Common Stock to the Company's existing
stockholders. See "Company Organization."
Each of the foregoing transactions was exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
in reliance on Section 3(a)(9) and/or Section 4(2) of the Securities Act on the
basis that such transaction was solely with existing security holders and/or did
not involve a public offering. No underwriters were involved in connection with
any of the foregoing transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<C> <S>
*1.01 Form of Underwriting Agreement
*3.01 Amended and Restated Certificate of Incorporation
*3.02 Amended and Restated By-laws
*4.01 Specimen Common Stock Certificate
*5.01 Opinion of Piper & Marbury L.L.P.
*10.01(a) Form of Amended and Restated Shareholders' Agreement
*10.01(b) Form of Amendment No. 1 to Amended and Restated Shareholders' Agreement
*10.02 Employment Agreement dated as of May 15, 1997, between the Registrant and Robert J. Arnot
*10.03 Employment Agreement dated as of May 15, 1997, between the Registrant and Gerald W. Lear
*10.04 Employment Agreement dated as of May 15, 1997, between the Registrant and Gary B. Brashers
*10.05 Employment Agreement dated as of May 15, 1997, between the Registrant and Eugene C. Wielepski
*10.06 Employment Agreement dated as of May 15, 1997, between the Registrant and Thomas Ormandy
*10.07 1997 Omnibus Stock Plan
*10.08(a) Accounts Financing Agreement dated June 16, 1992
*10.08(b) Covenant Supplement to Accounts Financing Agreement dated June 16, 1992
*10.08(c) Inventory and Equipment Security Agreement Supplement to Accounts Financing Agreement dated June
16, 1992
*10.08(d) Trade Financing Agreement Supplement to Accounts Financing Agreement (Security Agreement) dated
June 16, 1992
*10.08(e) Amendment to Financing Agreements dated October 30, 1992
*10.08(f) Second Amendment to Financing Agreements dated January 4, 1993
*10.08(g) Third Amendment to Financing Agreements dated March 10, 1993
*10.08(h) Fourth Amendment to Financing Agreements dated May 1, 1993
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
*10.08(i) Fifth Amendment to Financing Agreements dated January 1, 1994
<C> <S>
*10.08(j) Sixth Amendment to Financing Agreements dated September 1, 1993
*10.08(k) Seventh Amendment to Financing Agreements dated August, 1994
*10.08(l) Eighth Amendment to Financing Agreements dated December 31, 1994
*10.08(m) Ninth Amendment to Financing Agreements dated April, 1995
*10.08(n) Tenth Amendment to Financing Agreements dated June 23, 1995
*10.08(o) Eleventh Amendment to Financing Agreements dated January 1, 1996
*10.08(p) Twelfth Amendment to Financing Agreements dated June 25, 1996
*10.08(q) Thirteenth Amendment to Financing Agreements dated August, 1996
*10.08(r) Term Promissory Note dated June, 1996
*10.08(s) Trademark Collateral Assignment and Security Agreement dated June 16, 1992
*10.09 Form of Indemnification Agreement
10.10(a) BOSS Worldwide Rights Acquisition Agreement dated September 30, 1997
10.10(b) Promissory Note dated November 5, 1997
10.10(c) Guaranty of Promissory Note dated November 5, 1997
10.10(d) Trademark Assignment dated November 5, 1997
10.10(e) Trademark Assignment dated November 5, 1997
10.10(f) Trademark Assignment dated November 5, 1997
10.10(g) Trademark Assignment dated November 5, 1997
10.10(h) Assignment and Assumption Agreement dated November 5, 1997
10.10(i) Escrow Agreement dated November 5, 1997
10.10(j) Collateral Assignment of Trademarks dated November 5, 1997
+10.10(k) Termination of License Agreement dated November 5, 1997
10.10(l) Logo Typeface
10.10(m) Certain Provisions in Settlement Agreement
10.11(a) Foreign BOSS Rights Acquisition Agreement dated September 30, 1997
10.11(b) Trademark Assignment dated November 5, 1997
10.11(c) Assignment and Assumption Agreement dated November 5, 1997
+10.11(d) Concurrent Use Agreement dated November 5, 1997
+10.11(e) Foreign Manufacturing Rights Agreement dated November 5, 1997
10.11(f) Option Agreement dated November 5, 1997
10.11(g) Secured Limited Recourse Promissory Note dated November 5, 1997
10.11(h) Note Assumption Agreement dated November 5, 1997
10.11(i) Guaranty of Promissory Note dated November 5, 1997
10.11(j) Agreement Regarding Consent to Release and Waiver of Brookhurst Note Claims dated November 5,
1997
10.11(k) Certain Provisions in Settlement Agreement
10.11(l) Indemnification Agreement dated November 5, 1997
10.12 Uniforms License Agreement dated November 5, 1997
10.13 Trademark License Agreement Relating to BOSS Golf and Other Marks dated November 5, 1997
10.14 Beverly Hills Polo Club Exclusive Domestic License Agreement dated December 14, 1995
10.15 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Men's) dated June 3, 1997
10.16 Beverly Hills Polo Club Exclusive Domestic License Agreement dated June 1, 1993
10.17 Beverly Hills Polo Club Assignment of Licenses (Women's) dated August 31, 1993
10.18 Beverly Hills Polo Club Amendment (Women's) dated September 1, 1993
10.19 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Women's) dated June 3, 1997
10.20 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Men's) dated July 29, 1997
10.21 Beverly Hills Polo Club International Exclusive License Agreement (Wholesale) dated August 15,
1996
10.22 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Wholesale) dated June 3, 1997
10.23 Beverly Hills Polo Club International Exclusive License Agreement (Retail) dated August 15, 1996
10.24 Beverly Hills Polo Club Amendment to International Exclusive License Agreement (Retail) dated
June 3, 1997
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
10.25 Beverly Hills Polo Club Amendment to Exclusive License Agreement dated July 29, 1997
<C> <S>
10.26 Girbaud Trademark License and Technical Assistance Agreement dated November 1, 1997
10.27(a) Defined Benefit Pension Plan
10.27(b) First Amendment to Defined Benefit Pension Plan
*21.01 List of Subsidiaries
23.01 Consent of BDO Seidman, LLP
*23.02 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.01)
*24.01 Power of Attorney (included on signature pages to the Registration Statement)
</TABLE>
- ------------------------
* Previously filed.
+ Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities
and Exchange Commission.
(B) FINANCIAL STATEMENT SCHEDULES:
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION PAGE NO.
- --------- ----------------------------------------------------------------------------- -------------
<S> <C> <C>
II Valuation and Qualifying Accounts S-2
</TABLE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
described in this Registration Statement or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling persons of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement (filed herewith as
Exhibit 1.01) certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement or Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, in Baltimore, Maryland on
this 26th day of November 1997.
I.C. ISAACS & COMPANY, INC.
By: /s/ ROBERT J. ARNOT
-----------------------------------------
Robert J. Arnot
Chairman of the Board
and Co-Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ ROBERT J. ARNOT Chairman of the Board and November 26, 1997
- ------------------------------ Co-Chief Executive Officer
Robert J. Arnot and Director (Principal
Executive Officer)
/s/ GERALD W. LEAR President and Co-Chief November 26, 1997
- ------------------------------ Executive Officer and
Gerald W. Lear Director (Principal
Executive Officer)
/s/ EUGENE C. WIELEPSKI Vice President and Chief November 26, 1997
- ------------------------------ Financial Officer and
Eugene C. Wielepski Director (Principal
Financial and Accounting
Officer)
/s/ GARY B. BRASHERS* Director November 26, 1997
- ------------------------------
Gary B. Brashers
/s/ IRA J. HECHLER* Director November 26, 1997
- ------------------------------
Ira J. Hechler
II-5
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JON HECHLER* Director November 26, 1997
- ------------------------------
Jon Hechler
/s/ RONALD S. SCHMIDT* Director November 26, 1997
- ------------------------------
Ronald S. Schmidt
<TABLE>
<S> <C>
*By: /s/ EUGENE C. WIELEPSKI
--------------------------------------
Eugene C. Wielepski
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
I.C. Isaacs & Company, Inc.
The audits referred to in our report to I.C. Isaacs & Company, Inc., dated
October 31, 1997, except for Note 5, the date of which is November 13, 1997,
which is contained in the Prospectus constituting part of this Registration
Statement, included the audit of the financial statement schedule listed in the
accompanying index for each of the three years in the period ended December 31,
1996 and the nine months ended September 30, 1996 and 1997. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based upon our audits.
In our opinion, such schedule presents fairly, in all material respects, the
information set forth therein.
/s/ BDO Seidman, LLP
Washington, D.C.
October 31, 1997
S-1
<PAGE>
SCHEDULE II
I.C. ISAACS & COMPANY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COSTS BALANCE AT
BEGINNING AND END
DESCRIPTION OF YEAR EXPENSES DEDUCTION OF YEAR
- -------------------------------------------------------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful accounts................................... $ 500 $ 278 $ (428) $ 350
Reserve for sales returns and discounts........................... $ 382 $ 5,546 $ (5,483) $ 445
Year ended December 31, 1995
Allowance for doubtful accounts................................... $ 350 $ 398 $ (398) $ 350
Reserve for sales returns and discounts........................... $ 445 $ 5,104 $ (5,062) $ 487
Year ended December 31, 1996
Allowance for doubtful accounts................................... $ 350 $ 1,194 $ (884) $ 660
Reserve for sales returns and discounts........................... $ 487 $ 5,956 $ (5,634) $ 809
Nine months ended September 30, 1996
Allowance for doubtful accounts................................... $ 350 $ 544 $ (444) $ 450
Reserve for sales returns and discounts........................... $ 487 $ 3,597 $ (3,446) $ 638
Nine months ended September 30, 1997
Allowance for doubtful accounts................................... $ 660 $ 1,251 $ (791) $ 1,120
Reserve for sales returns and discounts........................... $ 809 $ 8,123 $ (8,529) $ 403
</TABLE>
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------------------------- -----
<C> <S> <C>
*1.01 Form of Underwriting Agreement
*3.01 Amended and Restated Certificate of Incorporation
*3.02 Amended and Restated By-laws
*4.01 Specimen Common Stock Certificate
*5.01 Opinion of Piper & Marbury L.L.P.
*10.01(a) Form of Amended and Restated Shareholders' Agreement
*10.01(b) Form of Amendment No. 1 to Amended and Restated Shareholders' Agreement
*10.02 Employment Agreement dated as of May 15, 1997, between the Registrant and Robert J. Arnot
*10.03 Employment Agreement dated as of May 15, 1997, between the Registrant and Gerald W. Lear
*10.04 Employment Agreement dated as of May 15, 1997, between the Registrant and Gary B.
Brashers
*10.05 Employment Agreement dated as of May 15, 1997, between the Registrant and Eugene C.
Wielepski
*10.06 Employment Agreement dated as of May 15, 1997, between the Registrant and Thomas Ormandy
*10.07 1997 Omnibus Stock Plan
*10.08(a) Accounts Financing Agreement dated June 16, 1992
*10.08(b) Covenant Supplement to Accounts Financing Agreement dated June 16, 1992
*10.08(c) Inventory and Equipment Security Agreement Supplement to Accounts Financing Agreement
dated June 16, 1992
*10.08(d) Trade Financing Agreement Supplement to Accounts Financing Agreement (Security Agreement)
dated June 16, 1992
*10.08(e) Amendment to Financing Agreements dated October 30, 1992
*10.08(f) Second Amendment to Financing Agreements dated January 4, 1993
*10.08(g) Third Amendment to Financing Agreements dated March 10, 1993
*10.08(h) Fourth Amendment to Financing Agreements dated May 1, 1993
*10.08(i) Fifth Amendment to Financing Agreements dated January 1, 1994
*10.08(j) Sixth Amendment to Financing Agreements dated September 1, 1993
*10.08(k) Seventh Amendment to Financing Agreements dated August, 1994
*10.08(l) Eighth Amendment to Financing Agreements dated December 31, 1994
*10.08(m) Ninth Amendment to Financing Agreements dated April, 1995
*10.08(n) Tenth Amendment to Financing Agreements dated June 23, 1995
*10.08(o) Eleventh Amendment to Financing Agreements dated January 1, 1996
*10.08(p) Twelfth Amendment to Financing Agreements dated June 25, 1996
*10.08(q) Thirteenth Amendment to Financing Agreements dated August, 1996
*10.08(r) Term Promissory Note dated June, 1996
*10.08(s) Trademark Collateral Assignment and Security Agreement dated June 16, 1992
*10.09 Form of Indemnification Agreement
10.10(a) BOSS Worldwide Rights Acquisition Agreement dated September 30, 1997
10.10(b) Promissory Note dated November 5, 1997
10.10(c) Guaranty of Promissory Note dated November 5, 1997
10.10(d) Trademark Assignment dated November 5, 1997
10.10(e) Trademark Assignment dated November 5, 1997
10.10(f) Trademark Assignment dated November 5, 1997
10.10(g) Trademark Assignment dated November 5, 1997
10.10(h) Assignment and Assumption Agreement dated November 5, 1997
10.10(i) Escrow Agreement dated November 5, 1997
10.10(j) Collateral Assignment of Trademarks dated November 5, 1997
+10.10(k) Termination of License Agreement dated November 5, 1997
10.10(l) Logo Typeface
10.10(m) Certain Provisions in Settlement Agreement
10.11(a) Foreign BOSS Rights Acquisition Agreement dated September 30, 1997
10.11(b) Trademark Assignment dated November 5, 1997
10.11(c) Assignment and Assumption Agreement dated November 5, 1997
+10.11(d) Concurrent Use Agreement dated November 5, 1997
+10.11(e) Foreign Manufacturing Rights Agreement dated November 5, 1997
10.11(f) Option Agreement dated November 5, 1997
10.11(g) Secured Limited Recourse Promissory Note dated November 5, 1997
10.11(h) Note Assumption Agreement dated November 5, 1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO DESCRIPTION PAGE
- ----------- ----------------------------------------------------------------------------------------- -----
10.11(i) Guaranty of Promissory Note dated November 5, 1997
<C> <S> <C>
10.11(j) Agreement Regarding Consent to Release and Waiver of Brookhurst Note Claims dated
November 5, 1997
10.11(k) Certain Provisions in Settlement Agreement
10.11(l) Indemnification Agreement dated November 5, 1997
10.12 Uniforms License Agreement dated November 5, 1997
10.13 Trademark License Agreement Relating to BOSS Golf and Other Marks dated November 5, 1997
10.14 Beverly Hills Polo Club Exclusive Domestic License Agreement dated December 14, 1995
10.15 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Men's) dated June 3,
1997
10.16 Beverly Hills Polo Club Exclusive Domestic License Agreement dated June 1, 1993
10.17 Beverly Hills Polo Club Assignment of Licenses (Women's) dated August 31, 1993
10.18 Beverly Hills Polo Club Amendment (Women's) dated September 1, 1993
10.19 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Women's) dated June 3,
1997
10.20 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Men's) dated July 29,
1997
10.21 Beverly Hills Polo Club International Exclusive License Agreement (Wholesale) dated
August 15, 1996
10.22 Beverly Hills Polo Club Amendment to Exclusive License Agreement (Wholesale) dated June
3, 1997
10.23 Beverly Hills Polo Club International Exclusive License Agreement (Retail) dated August
15, 1996
10.24 Beverly Hills Polo Club Amendment to International Exclusive License Agreement (Retail)
dated June 3, 1997
10.25 Beverly Hills Polo Club Amendment to Exclusive License Agreement dated July 29, 1997
10.26 Girbaud Trademark License and Technical Assistance Agreement dated November 1, 1997
10.27(a) Defined Benefit Pension Plan
10.27(b) First Amendment to Defined Benefit Pension Plan
*21.01 List of Subsidiaries
23.01 Consent of BDO Seidman, LLP
*23.02 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.01)
*24.01 Power of Attorney (included on signature pages to the Registration Statement)
</TABLE>
- ------------------------
* Previously filed.
+ Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities
and Exchange Commission.
<PAGE>
Exhibit 10.10(a)
WORLDWIDE RIGHTS ACQUISITION AGREEMENT
AGREEMENT dated as of September 30, 1997, by and among I. C. Isaacs &
Company L.P., a limited partnership organized and existing under the laws of
Delaware ("Buyer"); Brookhurst, Inc., a corporation organized and existing under
the laws of California ("Seller"); and William Ott (individually, "Ott", and
collectively, with Brookhurst, the "Selling Parties").
W I T N E S S E T H :
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, all of Seller's right, title and interest in and to all "BOSS"
trademarks and other proprietary interests, if any, related thereto owned by
Seller and used in connection with its business throughout the world together
with the goodwill symbolized by such trademarks, on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein
the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of BOSS Assets. Upon the terms and conditions
herein set forth, Seller shall sell, convey, transfer, assign and deliver to
Buyer on the Closing Date (as hereinafter defined), and Buyer shall purchase
from Seller on the Closing Date, the following assets, properties and rights of
Seller throughout the world (excluding Mexico) (the "Trademark Assets"), all of
which, taken together, represent the business of Seller operating under the BOSS
marks:
<PAGE>
(a) any and all right, title and interest of the Selling Parties in and to
the trademarks, service marks, trade names, logos, insignias, designs,
copyrights (if any), and other proprietary interests therein, containing the
term "BOSS" or constituting a stylized B, throughout the world (excluding
Mexico), including, without limitation, all registrations and applications for
registration (including, to the fullest extent permitted by law, all "intent to
use" applications) therefor throughout the world (excluding Mexico) (the
"Trademarks"), and the goodwill symbolized by the Trademarks, together with all
causes of action and the proceeds thereof (except as set forth in paragraph
1.1(d)) in favor of the Selling Parties heretofore accrued or hereafter accruing
with respect to the Trademarks;
(b) all rights of the Selling Parties under license agreements, concurrent
use agreements and other agreements listed on Schedule 1.1(b) and all files
relating thereto (the "Assumed Agreements"), including, without limitation, an
assignment of all copyrights, if any, that the Selling Parties jointly or
severally may own as a result of designs and other works created by any licensee
of any portion of the Seller's BOSS business (including any works created by
Buyer and owned by Seller under Buyer's license from Seller); and
(c) all right, title and interest in and to all records and other
information the Selling Parties or either of them have within their possession
or control applicable to the products they or either of them have previously
licensed under the Trademarks and all trademark files relating to the Trademark
Assets, provided, however, that Seller shall not be responsible for (i)
destruction of records caused by an Act of God or other "Force Majeure" event,
or (ii) any immaterial non-intentional destruction of records.
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<PAGE>
(d) Notwithstanding the foregoing, the parties acknowledge and agree that
Buyer is not acquiring any rights of Seller under its license agreements
(including, without limitation, rights to institute legal proceedings pursuant
to such license agreements) with Buyer, Boss Sportswear (U.S.A.) Inc. and
Checkmate Group LLC, all of which license agreements have been (or will at
Closing be) terminated. Nothing set forth in this Section 1.1 (d) shall limit
Seller's rights, if any, to seek indemnification and contribution from licensees
of Seller with regard to Excluded Liabilities, as hereinafter defined, which
rights are specifically reserved to Seller.
1.2 Liabilities. Buyer shall assume no liabilities or obligations,
whether now existing or arising in the future, fixed or contingent, known, or
unknown, relating to the use by the Selling Parties (including, without
limitation, use by any of Seller's affiliates, subsidiaries, predecessors or
licensees other than Buyer) of the Trademarks and any other matter relating to
the conduct of any business relating thereto prior to the Closing or with
respect to any permitted activities of Seller, or any of its affiliates,
subsidiaries, predecessors or licensees after the Closing Date ("Excluded
Liabilities").
1.3 Encumbrances. The sale and transfer of the Trademark Assets
shall be free and clear of all pledges, security interests, mortgages and liens
("Encumbrances").
ARTICLE
CONSIDERATION
2.1 Consideration. In consideration of the sale and transfer of the
Trademark Assets to Buyer,
(a) on the Closing Date, Buyer shall pay cash in the amount of U.S.
$5,625,000 by wire transfer to a bank account designated in writing by Seller;
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<PAGE>
(b) on the Closing Date, Buyer shall pay cash in the amount of
U.S.$5,625,000 to the escrow agent identified in the Escrow Agreement;
(c) on the Closing Date, Buyer shall deliver an executed Promissory
Note in the form annexed hereto as Exhibit A (the "Note"); and
(d) on the Closing Date, Buyer shall deliver a guaranty by Hugo Boss
AG ("Hugo Boss") of Buyer's obligations under the Note in the form annexed
hereto as Exhibit B (the"Guaranty").
ARTICLE
THE CLOSING
3.1 Time and Place of Closing. The closing of the purchase and sale
of the Trademark Assets hereunder (the "Closing") shall take place at the
offices of Coudert Brothers located at 1114 Avenue of the Americas, New York,
New York 10036 at 10:00 a.m. local time on a date agreed to by the parties (the
"Closing Date"), which date shall not be later than eight (8) business days
following the date on which the applicable waiting period, including any
extension thereof, under the HSR Act (as hereinafter defined) shall have
expired.
3.2 Deliveries To Be Made by the Seller. On the Closing Date, Seller
shall have executed and delivered to Buyer the following:
(a) executed trademark assignments substantially in the forms
attached hereto as Exhibit C;
(b) possession of (i) an original of each of Seller's Trademark
registrations currently in effect (except that a copy of Seller's California
state registration may be delivered); (ii) an original of any other
registrations for the Trademarks to the extent in Seller's possession,
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<PAGE>
custody or control; and (iii) Seller's original trademark application and
registration files including, for example, letters or other materials from
each of Seller's domestic and foreign trademark counsel showing deadlines for
trademark office actions to the extent in Seller's possession, custody or
control;
(c) an agreement of assignment and assumption of Assumed Agreements
in the form annexed hereto as Exhibit D (the "Assumption Agreement");
(d) an Escrow Agreement substantially in the form attached hereto as
Exhibit E (the "Escrow Agreement");
(e) an executed copy of the Note;
(f) an agreement terminating the License Agreement dated August 11,
l994 between Buyer and Seller substantially in the form annexed hereto as
Exhibit F (the "Termination Agreement"); and
(g) such other instruments and documents as may be elsewhere herein
required.
3.3 Deliveries To Be Made by Buyer. On the Closing Date, Buyer shall
have executed and delivered to Seller the following:
(a) the cash payment provided for in Section 2.1(a);
(b) the executed Note;
(c) the Assumption Agreement;
(d) the Escrow Agreement;
(e) delivery of the payment described in Section 2.1(b) to the
Escrow Agent;
(f) the Guaranty duly executed by Hugo Boss; and
(g) the Termination Agreement.
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES
Each of the Selling Parties hereby jointly and severally makes the
following representations and warranties, each of which is complete and correct
on and as of the date hereof (it being acknowledged and agreed that Ott's
liability under this Agreement is limited by the terms of Section 9.13 hereof).
4.1 Organization and Good Standing of the Seller. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. Boss Golf Company, Inc. has changed or will change within
thirty days after the Closing Date its name to a name not including the word
"BOSS". All qualifications of such company to do business as well as similar
registrations to do business or business name registrations have been or will
within 90 days after the Closing Date hereof be altered, changed or withdrawn to
reflect such name change.
4.2 Authority; Execution. Seller has all the requisite power and
authority, corporate and otherwise, to execute, deliver and perform its
obligations under this Agreement. The execution and delivery of this Agreement,
and each of the other instruments of transfer, conveyance and assignment
delivered hereunder, have been duly and validly authorized by all necessary
corporate and other action on the part of each of the Selling Parties, as
applicable, and this Agreement and each of such other instruments has been duly
executed by each of the Selling Parties, as applicable. This Agreement
constitutes the valid and binding agreement of each of the Selling Parties, as
applicable, enforceable against the Selling Parties in accordance with its
respective terms.
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<PAGE>
4.3 Breach of Statute or Contract.
(a) The execution, delivery and performance of this Agreement by the
Selling Parties and the consummation of the transactions contemplated hereby
will not: (i) violate or conflict with any provision of the charter documents
or by-laws of Seller; (ii) violate or conflict with, result in the breach or
termination of or otherwise give any other contracting party the right to
terminate, or constitute a default (or an event which, with the lapse of time,
or the giving of notice, or both, will constitute a default) under, any contract
or other instrument to which either Selling Party is a party and which relate to
the Trademark Assets or by which either Selling Party is bound, or result in the
creation of any Encumbrance upon any of the Trademark Assets pursuant to the
terms of any such contract or instrument, or (iii) violate or conflict with any
judgment, order, writ, injunction or decree of any court or governmental body of
any jurisdiction applicable to either Selling Party (excluding any judgments,
orders, writs, injunctions or decrees in any actions or proceedings involving
Hugo Boss or its affiliates) or, to the knowledge of Seller, any law or
regulation materially adversely affecting Buyer's ability to exploit the
Trademark Assets.
(b) Except as set forth on Schedule 4.3(b), there are no notices,
licenses, consents, permissions or approvals of any nature whatsoever which are
required to be obtained by Seller from any Federal, state or local governmental
or regulatory body or other third party or, to Seller's knowledge, from any
foreign governmental or regulatory body for the consummation of the transactions
contemplated by this Agreement, or as a condition to the sale, assignment and
transfer of the Trademark Assets to be effected hereunder.
-7-
<PAGE>
4.4 No Claims or Litigation. Except as set forth on Schedule 4.4(a), no
litigation, judicial or arbitral action, claim asserted in writing and received
by Seller or the Selling Parties within the preceding two years or, to the
knowledge of Seller, administrative or regulatory proceeding or adversarial
proceeding in any trademark office, or governmental investigation involving the
Trademark Assets or the transactions contemplated by this Agreement, including,
without limitation, any claim of conflict with or violation of any proprietary
or other right (collectively, "Litigation") is pending or, to the knowledge of
Seller, threatened against Seller. For purposes of the foregoing, "Litigation"
shall not be deemed to include any actions, proceedings or claims involving
Hugo Boss or its affiliates. Except as set forth on Schedule 4.4(b), there
is no judgment, order, injunction, decree or award outstanding (whether
rendered by a court, tribunal, administrative agency or arbitral tribunal and
excluding any judgments, orders, injunctions, decrees or awards in any
actions or proceedings involving Hugo Boss AG or its affiliates), against
Seller or referencing Seller by name or, to Seller's knowledge, by which
Seller is bound which affects the Trademark Assets or the use of the
Trademark Assets in any way.
4.5 Trademarks. Schedule 4.5.A hereto sets forth a correct and complete
list of all registrations currently in effect and pending applications for
registration of the Trademarks, together with dates of registration, including,
without limitation, pending copyright applications or registrations currently in
effect and current trade name or d/b/a applications or registrations, if any.
Schedule 4.5B sets forth, to the knowledge of Seller, all registrations and
applications for registration of Trademarks which are no longer in effect. All
registrations described in Schedule 4.5A are currently in effect and have not
been found to be invalid, and, except as set
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<PAGE>
forth in Schedule 4.5.C hereto, to Seller's knowledge, as of the date hereof
no filings or other action is required for at least 120 days from the date
hereof to maintain the registrations or applications described in Schedule
4.5.A in full force and effect. Except as set forth in Schedule 4.5.D,
Seller is not currently licensing any person to use or operate under any of
the Trademarks. True and complete copies and, if not available, descriptions
of all such licenses, including all amendments or modifications, have
heretofore been delivered to Buyer. Except as set forth in Schedule 4.5.E,
and except for customary sell-off rights granted to alleged infringers,
Seller has not affirmatively agreed or consented to the non-use by Seller, or
use by any third party, of any mark containing the word BOSS. To Seller's
knowledge, and excluding the use of the stylized "B" and the conduct of
Seller's Mexican licensee, none of Seller's, Seller's affiliates, or its
licensees' use of the Trademarks infringes, unfairly competes or otherwise
conflicts with any proprietary or other rights of any other person, excluding
the rights of Hugo Boss, provided, however, that no representation is made in
the preceding clause as to the rights of any persons in countries outside of
the U.S. in which both (a) Seller or its licensees manufacture products
bearing the Trademarks and (b) Seller does not hold a trademark registration
for BOSS. To Seller's knowledge (such knowledge being based solely on
Seller's actual knowledge and inquiry of its licensees other than its
licensee in Mexico), there are no countries in which Seller or its licensees
(other than Buyer) currently manufacture products bearing the Trademarks.
Other than with respect to counterfeiters whose identities are unknown to
Seller, Seller has, or will within 30 days after the Closing Date have,
delivered to Buyer all written materials in its possession relating to any
possible infringement, unfair competition or other interference with Seller's
rights in the Trademarks involving apparel by any third party.
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Seller has paid, or will pay within a reasonable period of time, in full (or
otherwise to the satisfaction of the invoicing party) all outstanding
invoices of domestic and foreign trademark counsel (except counsel in Mexico)
for work done and disbursements incurred on behalf of the Selling Parties
(whether or not billed on or by the date hereof).
4.6 No Alienation of Rights. Except as set forth in the Assumed
Agreements or any other documents identified on Schedule 4.5.D or E or Schedule
4.6, no Selling Party has transferred, assigned, licensed (which license is
currently outstanding) or otherwise encumbered with Encumbrances any of its
rights in any Trademark Asset.
4.7 Checkmate. Seller has terminated the July 14, 1995 License for Men's
and Boy's underwear ("Checkmate Bodywear License") between Seller and Checkmate
Group LLC ("Checkmate"). Seller has also terminated the June 25, 1996 license
for golf apparel and other items relating to golf ("Checkmate Golf License")
between Seller and Checkmate. The termination of the Checkmate Bodywear License
and the Checkmate Golf License complied, in all material respects, with the
requirements for termination of such licenses under the contracts' provisions.
There is no litigation, judicial, or, arbitral action, or, to the knowledge of
Seller, administrative proceeding pending against any Selling Party by or on
behalf of Checkmate; Seller has no knowledge of any claim by or litigation,
judicial, administrative or arbitral action or proceeding threatened against
Seller by or on behalf of Checkmate. Buyer has been provided with all documents
relating or referring to the termination of the Checkmate Bodywear License and
Checkmate Golf License. Seller has heretofore disclosed to Buyer all material
facts that Seller is aware of which relate to any potential claim by Checkmate
arising out of Seller's termination of the Checkmate Bodywear License and the
Checkmate Golf License.
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<PAGE>
4.8 Ownership of Trademark Assets. As between the Selling Parties and
all affiliates and other persons or entities related in any manner to any
Selling Party, Seller owns all rights in and to the Trademark Assets.
4.9 Knowledge. Whenever a statement regarding the existence or absence of
facts in this Agreement is qualified by a phrase such as to Seller's knowledge
or words to similar effect, it is intended by the parties that the information
attributed to Seller be actually known, or information which should have been
known based on reasonable inquiry by Ott, Leslie Blanchard, Nicholas Yacobucci
or any officer or executive of Seller.
4.10 Materiality. The phrase "materially adversely affecting Buyer's
ability to exploit the Trademark Assets" or words of similar effect, shall be
deemed to mean (i) the existence or occurrence at any time from and after the
date hereof of any actual harm, or the existence of any reasonably anticipated
actual harm, to Buyer's ability to exploit the Trademark Assets or (ii) either
(x) the failure of Seller to remedy the breach in question assuming the breach
is remediable or (y) the inability of Seller to remedy the breach in question
without prejudice to Buyer's ability to exploit the Trademark Assets. For
purposes of this Section 4.10, no "actual
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<PAGE>
harm" shall be deemed to exist as to the first six claims of harm unless such
claim of harm reasonably involves at least the following amounts in damage or
loss:
First Claim $50,000
Second Claim $25,000
Third Claim $25,000
Fourth Claim $25,000
Fifth Claim $25,000
Sixth Claim $25,000
it being agreed that, without prejudice to, or limitation of, Seller's ability
to claim that such a subsequent claim involves no "actual harm", no such
monetary threshold applies to any subsequent claims.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties each of
which is complete and correct on and as of the date hereof:
5.1 Organization and Good Standing of Buyer. Buyer is a limited
partnership duly organized and validly existing under the laws of Delaware
5.2 Authority; Execution. Buyer has all requisite power and authority,
corporate and otherwise, to execute, deliver and perform its obligations under
this Agreement. The execution and delivery of this Agreement, and each of the
other instruments of transfer, conveyance and assignment delivered hereunder, by
Buyer have been duly and validly authorized by all necessary corporate and other
action on the part of Buyer, and this Agreement and each of such other
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<PAGE>
instruments has been duly executed by Buyer, as applicable. This Agreement
constitutes the valid and binding agreement of Buyer, enforceable against
Buyer in accordance with its terms.
5.3 Breach of Statute or Contract.
(a) The execution, delivery and performance of this Agreement by
Buyer and the consummation of the transactions contemplated hereby will not:
(i) violate or conflict with any provision of the certificate of limited
partnership and other organizational documents of Buyer; (ii) violate or
conflict with, result in the breach or termination of or otherwise give any
other contracting party the right to terminate, or constitute a default (or an
event which, with the lapse of time, or the giving of notice, or both, will
constitute a default) under, any contract or other instrument to which Buyer is
a party; or (iii) violate or conflict with any judgment, order, writ, injunction
or decree of any court or governmental body of any jurisdiction applicable to
Buyer (excluding any judgments, orders, injunctions, decrees or awards in any
actions or proceedings involving Seller or its affiliates) or, to the knowledge
of Buyer, any law or regulation materially adversely affecting Buyer's ability
to consummate the transaction contemplated by this Agreement.
(b) Except as provided in Schedule 5.3(B), there are no notices,
licenses, consents, permissions or approvals of any nature whatsoever which are
required to be obtained by Buyer from any Federal, state or local governmental
or regulatory body or other third party or, to Buyer's knowledge, from any
foreign governmental or regulatory body for the consummation of the transactions
contemplated by this Agreement, or as a condition to the sale, assignment and
transfer of the Trademark Assets to be effected hereunder.
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ARTICLE VI
COVENANTS
6.1 Further Assurances.
(a) From time to time until the expiration of six (6) years from the
Closing Date, upon the request and at the expense of Buyer but without further
consideration, Seller shall:
(i) do, execute, acknowledge, deliver and file, or shall cause
to be done, executed, acknowledged, delivered and filed, all such further acts,
deeds, transfers, conveyances, assignments or assurances (including, without
limitation, for purposes of transferring record ownership of the Trademark
Assets to Buyer) as may be reasonably requested by Buyer for transferring,
conveying, assigning and reducing to Buyer's possession, ownership and use of
the Trademark Assets including, without limitation, executing on the Closing
Date any assignments of foreign Trademarks in recordable form reasonably
requested by Buyer; and
(ii) deliver to Buyer such other records, documentation and
information in Seller's possession or control as may be reasonably requested by
Buyer to assist Buyer in the use and protection of the Trademark Assets.
(b) Seller shall keep and preserve any and all records,
documentation and information which relate to the Trademark Assets except as
otherwise provided herein. Seller may dispose or destroy any such records,
documentation and information at any time, provided that Seller first shall
notify Buyer so that Buyer may, at its expense and within a reasonable time
after receipt of such notice, obtain from Seller any or all of said records,
documentation and information. Seller shall not be responsible for (i)
destruction of records caused by an Act of
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God or other "Force Majeure" event, or (ii) any immaterial
non-intentional destruction of records.
6.2 No Further Use of "BOSS". From and after the Closing Date hereof,
Selling Parties, (including, without limitation, all affiliates thereof) shall
cease all use of the name and mark "BOSS", all variations thereon and all other
names and marks which incorporate the term "BOSS" and will never use the name or
mark "BOSS", any variation thereon or any other names and marks which
incorporate the term "BOSS" in the future, except to the limited extent
permitted in Section 6.6. Notwithstanding the foregoing, Seller may make such
limited use of the name and mark "BOSS" as is permitted under the Settlement
Agreement (as hereinafter defined).
6.3 No Effect on Use of Other Marks of Seller. Nothing in this Agreement
shall prohibit the use by Seller, for any purpose, of the name or mark
"Brookhurst," or the name or mark "Commercial Uniform," as to which trademarks
Brookhurst retains all right, title and interest.
6.4 No Challenge to Ownership or Use of Buyer's and Seller's Marks.
(a) From and after the Closing Date, Selling Parties (including, without
limitation, any affiliates thereof) will not challenge or object to the use,
ownership, registration or validity of any "BOSS" marks or names, any variations
thereon or any other names and marks which incorporate the term "BOSS", by Buyer
(including, without limitation, any affiliates thereof) in any manner including,
without limitation, in any subsequent legal proceeding to enforce this
Agreement.
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<PAGE>
(b) From and after the Closing Date, Buyer (including, without limitation,
any affiliates thereof) will not challenge or object to the use, ownership,
registration or validity of any "BROOKHURST" marks or names, any variations
thereon or any other names and marks which incorporate the term "BROOKHURST"
(other than names or marks including BOSS, I.G. DESIGN or ISAACS), by Seller
(including, without limitation, any affiliates thereof) in any manner.
6.5 Mail and Communications. From and after the Closing Date, Seller shall
promptly remit or refer to Buyer any mail or other communications, including,
without limitation, any written inquiries, relating to the Trademarks Assets
which are received by Seller from and after the Closing for a period of six (6)
years from the date hereof.
6.6 Sell-off of Inventories. (a) Seller currently has: approximately
64,000 finished career apparel garments with a label that bears a BOSS logo in
its possession, the substantial majority of which constitutes uniforms for
United Airlines (such garments being hereinafter collectively referred to as the
"Career Apparel Garments"). Notwithstanding anything to the contrary contained
herein, Seller may for a period of six months after the Closing Date: (i)
continue to sell and distribute the Career Apparel Garments in its possession on
the date hereof with a label that bears a "BOSS by Brookhurst" logo in the
typeface which is set forth on Exhibit G; provided, that Seller may extend the
aforesaid limited use of "BOSS by Brookhurst" labels up to an aggregate
additional period of three years, provided it pays in advance an annual license
fee of $3,500 per year and executes a license agreement with Buyer in a form
mutually agreed to by the parties. Seller agrees that after the Closing Date it
will not order any new labels with a BOSS logo, manufacture or cause to be
manufactured any garments which will bear
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a BOSS logo or label and will destroy its current inventory of labels with a
BOSS logo beyond those already used in the existing inventory of Career
Apparel Garments and will make no further use of any labels with a BOSS logo.
The use of any labels with a BOSS logo, or the sale or distribution of any
Career Apparel Garments with a label containing a BOSS logo in accordance
with the terms of this paragraph shall not constitute a breach of this
Agreement. None of the Career Apparel Garments bears a BOSS mark on the
exterior of such garments.
6.7 HSR Matters. As promptly as possible after the date hereof, but in
any case, not later than fifteen (15) business days following the date hereof,
unless the parties shall otherwise agree filing is unnecessary, Buyer and Seller
shall file their respective Notification and Report Forms under the Hart-Scott
Rodino Antitrust Improvements Act of 1976 as amended (the "HSR Act") with
respect to the transactions contemplated hereby. The parties further agree to
request early termination of the waiting period applicable to such filings under
the HSR Act and to respond as promptly as practicable to any request for
additional information made pursuant to the HSR Act.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER
7.1 Conditions Precedent to Obligations of Buyer. The obligation of
Buyer to consummate the transactions contemplated under this Agreement is
subject to the fulfillment, as of the Closing Date, of each of the following
conditions (any or all of which may be waived by Buyer):
(a) the representations and warranties of the Selling Parties set
forth in Article IV hereof shall be true and correct in all material respects;
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(b) the Selling Parties shall have performed and complied in all
material respects with all covenants, obligations and undertakings required by
this Agreement to be performed or complied with on or prior to the Closing Date:
(c) Buyer shall have been furnished with a certificate, dated the
Closing Date and executed by Ott individually and as an officer of Seller,
certifying to the fulfillment of the conditions specified in Sections 7.1(a) and
(b)( it being acknowledged that Ott shall have no liability for money damages
thereunder consistent with Section 9.13 hereof);
(d) the applicable waiting period, including any extension thereof,
under the HSR Act shall have expired without action taken to prevent
consummation of the transactions contemplated by this Agreement;
(e) no judgment, order or decree shall have been rendered which has
the effect of enjoining the consummation of the transactions contemplated by
this Agreement;
(f) a settlement agreement by and among Hugo Boss AG, Hugo Boss
USA, Inc., Hugo Boss Fashions, Inc., Buyer, Seller and Boss Golf Company,
Inc. (i) settling the action commenced by the filing of a complaint dated
February 11, 1993, which complaint was subsequently amended and superseded by
Amended Complaint dated November 5, 1993, (ii) providing for the payment by
defendants therein to Hugo Boss of $2,000,000, (iii) settling any and all
proceedings between Hugo Boss and any of the parties hereto throughout the
world (except Canada, Hong Kong and Mexico) and (iv) including the provisions
set forth in Exhibit H hereto, and otherwise being in form and content
mutually satisfactory to all parties, shall have been entered into by all
parties thereto (the "Settlement Agreement");
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(g) settlement agreements by and between Hugo Boss and Seller shall
have been entered into settling any and all proceedings in Canada, Hong Kong and
Mexico on terms mutually satisfactory to all parties thereto (the "Foreign
Settlement Agreements");
(h) stipulated resolutions of all proceedings in Hong Kong by and
between Hugo Boss, on the one hand, and third party agents or manufacturers of
Buyer, on the other, shall have been entered into on terms satisfactory to Buyer
and Hugo Boss (the "Hong Kong Resolutions");
(i) with respect to any intent-to-use applications for the
Trademarks presently outstanding for which use has been made prior to the date
hereof, a list of first use dates for each product listed in each of said
applications, if any, and documentary support for same to support "amendments
to allege use" shall have been delivered to Buyer; and
(j) the Escrow Agreement shall have been entered into by all parties
thereto.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated under this Agreement are
subject to the fulfillment, as of the Closing Date, of each of the following
conditions (any or all of which may be waived by Seller):
(a) the representations and warranties of Buyer set forth in Article
V shall be true and correct in all material respects as of the Closing Date;
(b) Buyer shall have performed and complied in all material respects
with all obligations and undertakings required by this Agreement to be performed
or complied with by Buyer on or prior to the Closing Date;
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(c) Seller shall have been furnished with a certificate, dated the
Closing Date and executed by an officer of Buyer certifying to the fulfillment
of the conditions specified in Sections 7.2(a) and (b);
(d) the applicable waiting period, including any extension thereof,
under the HSR Act shall have expired without action taken to prevent
consummation of the transactions contemplated by this Agreement;
(e) no judgment, order or decree shall have been rendered which has
the effect of enjoining the consummation of the transactions contemplated by
this Agreement; and
(f) the Settlement Agreement shall have been entered into by all
parties thereto; and
(g) the Foreign Settlement Agreements shall have been entered into by
all parties thereto;
(h) The Hong Kong Resolutions shall have been entered into by all
parties thereto; and
(i) the Escrow Agreement shall have been entered into by all parties
thereto.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
INDEMNIFICATION
8.1 All representations and warranties contained in or made pursuant to
this Agreement shall be continuing and shall survive and remain in full force
and effect after the date hereof for a period of five (5) years notwithstanding
any investigation conducted by any party hereto. All claims for indemnification
under this Agreement shall be brought by the parties exclusively pursuant to,
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and shall be disposed of exclusively in accordance with the terms of, this
Article VIII.
8.2 Indemnity Obligations of the Selling Parties. Subject to Section
9.13, the Selling Parties hereby jointly and severally agree to indemnify and
hold Buyer and its subsidiaries, partners, shareholders, affiliates, directors,
officers, employees, agents, successors and permitted assigns (collectively,
"Buyer Affiliates") harmless from, and to reimburse Buyer and each Buyer
Affiliate for, any Buyer Indemnity Claims (as that term is hereinafter defined)
arising under this Agreement. For purposes of this Agreement, the term "Buyer
Indemnity Claim" shall mean any loss, damage, deficiency, claim, liability,
obligation, suit, action, fee, cost or expense of any nature whatsoever arising
out of, based upon or resulting from (i) the breach of any representations and
warranties of the Selling Parties which are contained in or made pursuant to
this Agreement; (ii) any breach or nonfulfillment of, or any failure to perform,
any of the covenants, agreements, obligations or undertakings made by Seller in
or pursuant to this Agreement, including, without limitation, the obligations
set forth in Exhibit H, the content of which will appear in the Settlement
Agreement; (iii) any liabilities or obligations of Seller, or any affiliate or
licensee of Seller other than Buyer, not assumed by Buyer pursuant to the terms
hereof (excluding any matters relating to Mexico or the Letter Agreement by and
between Brookhurst, Inc. and Reebok International Limited dated May 28, 1993);
(iv) any liabilities or obligations arising out of any and all actions, claims,
suits, proceedings, demands, assessments, judgments, recoveries, damages, costs
and expenses or deficiencies incident to the disposal of any matter which is the
subject of indemnification under this Section 8.2; and (v) all interest,
penalties, costs and expenses (including, without limitation, all out-of-pocket
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expenses, reasonable investigation expenses and reasonable fees and
disbursements of accountants and counsel) arising out of any matter which is the
subject of indemnification under this Section 8.2 and in which and to the
proportionate extent Buyer Affiliates prevail. Notwithstanding the foregoing,
Ott's liability under this Section 8.2 shall be limited solely to enforcement
through equitable relief of all obligations of Ott and/or Seller under this
Agreement, and Ott shall not be liable under any circumstances for monetary
damages pursuant to this Section 8.2.
8.3 Indemnity Obligations of Buyer. Buyer hereby agrees to indemnify and
hold Seller and its respective subsidiaries, shareholders, affiliates,
directors, officers, employees, agents, successors and permitted assigns
(collectively, "Seller Affiliates"), harmless from, and to reimburse Seller and
each Seller Affiliate for, any Seller Indemnity Claims (as that term, is
hereinafter defined) arising under this Agreement. For purposes of this
Agreement, the term "Seller Indemnity Claims" shall mean any loss, damage,
deficiency, claim, liability, suit, action, fee, cost or expense of any nature
whatsoever arising out of, based upon or resulting from (i) the breach of any
representations and warranties of Buyer which are contained in or made pursuant
to this Agreement; (ii) any breach of nonfulfillment of, or failure to perform,
any of the covenants, agreements, obligations or undertakings made by Buyer in
or pursuant to this Agreement; (iii) any liabilities or obligations assumed by
Buyer pursuant to the terms hereof; (iv) any liabilities or obligations arising
out of any and all actions, claims, suits, proceedings, demands, assessments,
judgments, recoveries, damages, costs and expenses or deficiencies incident to
the disposal of any matter which is the subject of indemnification under this
Section 8.3; and (v) all interest, penalties, costs and expenses (including,
without limitation, all out-of-pocket expenses, reasonable investigation
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expenses and reasonable fees and disbursements of counsel and accounts) arising
out of any matter which is the subject of indemnification under this Section 8.3
and in which and to the proportionate extent Seller Affiliates prevail.
8.4 Notification of Claims. In the event of the occurrence of any event
which any party asserts constitutes a Buyer Indemnity Claim or Seller Indemnity
Claim, as applicable, the indemnified party shall provide the indemnifying party
with prompt notice of such event, including, without limitation, any facts and
circumstances which give rise to such claim, and shall otherwise make available
to the indemnifying party all relevant information which is material to the
claim and which is in the possession of the indemnified party. If such event
involves the claim of any third party (a "Third-Party Claim"), the indemnifying
party shall have the right to elect to join in the defense, settlement,
adjustment or compromise of any such Third-Party Claim, and to employ counsel to
assist such indemnifying party in connection with the handling of such claim, at
the sole expense of the indemnifying party, and no such claim shall be settled,
adjusted or compromised, or the defense thereof terminated, without the prior
consent of the indemnifying party unless and until the indemnifying party shall
have failed, after the lapse of a reasonable period of time, but in no event
more than 30 days after written notice to it of the Third-Party Claim, to join
in the defense, settlement, adjustment or compromise of the same. An
indemnified party's failure within a reasonable time to give notice or to
furnish the indemnifying party with any relevant data and documents in its
possession in connection with any Third-Party Claim shall not constitute a
defense (in part or in whole) to any claim for indemnification by such party,
except and only to the extent that such failure shall result in any material
prejudice to the indemnifying party. If so desired by any indemnifying party,
such party may elect, at such party's sole expense, to assume control of the
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defense, settlement, adjustment or compromise of any Third-Party Claim, insofar
as the claim relates to the liability of the indemnifying party, provided that
such indemnifying party shall obtain the consent of all indemnified parties
before entering into any settlement, adjustment and compromise of such claim, or
ceasing to defend against such claim, if as a result thereof, or pursuant
thereto, there would be imposed on an indemnified party any liability or
obligation not covered by the indemnification obligations of the indemnifying
party under this Agreement (including, without limitation, any injunctive relief
or other remedy).
If Buyer has not received a written notice from Seller disputing Buyer's
Buyer Indemnity Claim within ninety (90) days after Buyer's submission of a
notice of such claim to Seller, then Buyer may provide a further notice sent to
Seller by registered or certified mail to the effect that Seller has not
disputed such claim and that Buyer intends to submit a Settlement Notice (as
defined in the Escrow Agreement) based on Seller having been deemed to have
consented to such claim and the computation thereof, as applicable. If Seller
does not within thirty (30) days after receipt of such latter notice dispute in
writing the Buyer Indemnity Claim by notice to Buyer and Escrow Agent, then
Seller shall be deemed to have consented to such claim and, to the extent set
forth in Buyer's notices, the computation thereof.
8.5 Escrow Agreement. (a) At the Closing, Buyer will deposit $5,625,000
with the Escrow Agent, which amount shall be deemed to be part of the "Escrow
Fund" as defined in the Escrow Agreement. In addition, under the terms of the
Note and the Escrow Agreement, Buyer is obligated to deposit portions of certain
installments of principal and interest due under the Note with the Escrow Agent
on and as of the date payment of each such installment is due. Effective upon
each such deposit, such funds shall be deemed to become part of the "Escrow
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Fund" for all purposes thereunder and shall be disbursed pursuant to the terms
of the Escrow Agreement.
8.6 Reservation of Rights. Subject to Section 9.13, notwithstanding
anything to the contrary set forth in this Agreement, neither party shall be
precluded from asserting any claim or cause of action under this Agreement if
the other shall breach this Agreement.
8.7 Termination. This Agreement may be terminated, and the transactions
contemplated herein may be abandoned, (a) by mutual written agreement of the
parties hereto at any time or (b) by either party by written notice to the other
party if the Closing Date shall not have occurred on or before December 31,
1997, provided that the right to terminate this Agreement hereunder shall not be
available to any party whose breach of any representation or warranty or failure
to perform or comply with any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing to occur on or before such date.
ARTICLE IX
GENERAL
9.1 Waiver. Any failure of Buyer, on the one hand, or the Selling
Parties, on the other, to comply with any of the obligations or agreements set
forth in this Agreement or to fulfill any condition set forth in this Agreement
may be waived only by written instrument signed by the other party. No failure
by any party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver of such right, nor shall any single or partial exercise of
any right hereunder by any party preclude any other or future exercise of that
right or any other right hereunder by that party.
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9.2 Notices. All notices, requests or other communications required or
permitted hereunder (excluding, however, mail and/or communications covered
under paragraph 6.5 hereof) shall be given or made in writing and shall be (i)
delivered personally (including commercial carrier), (ii) sent by registered or
certified airmail, return receipt requested, postage prepaid or (iii) sent by
telecopier, addressed to the party to whom they are directed at the following
addresses, or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 9.2:
If to Seller, to:
Brookhurst, Inc.
107 West Carob Street
Compton, California 90220
Attention: William Ott
Telecopier: 310/763-3846
William Ott
107 West Carob Street
Compton, California 90220
Telecopier: 310/763-3846
With a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Robert J. Jossen, Esq.
Telecopier: 212/758-9526
If to Buyer, to:
I. C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: President and Co-Chief Executive Officer
Telecopier: 410/558-2096
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I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and Co-Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1604
Any notice, request or other communications shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any party
may change its address for notices hereunder, effective upon giving of notice of
such change hereunder to the other parties.
9.3 No Third Party Beneficiaries. Neither this Agreement nor any
provision hereof, nor any document or instrument executed or delivered pursuant
hereto, shall be deemed to create any right in favor of or impose any obligation
upon any person or entity other than Buyer and Selling Parties and their
respective successors and assigns.
9.4 Equitable Remedies. Selling Parties, on the one hand, and Buyer, on
the other hand, each acknowledge that it will be impossible to measure in money
the damages that would be suffered by Buyer and Selling Parties, respectively,
if the other party fails to comply with the obligations imposed on it pursuant
to paragraphs 1.1, 3.2, 3.3, 6.1, 6.2, 6.3, 6.4 and 6.5 of this Agreement and
that, in the event of any such failure, the claiming party will be irreparably
damaged and will not have an adequate remedy at law. Each party shall,
therefore, be entitled to equitable relief, including, without limitation,
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injunctive relief and/or specific performance to enforce such obligations of the
other party and, if any action should be brought in equity to enforce any
provisions of this Agreement, neither party shall raise the defense that there
is an adequate remedy at law. The parties further agree that notwithstanding
the provisions of Section 9.12, either party may, in accordance with the
provisions of this Section 9.4 hereof, seek immediate injunctive relief in court
prior to the initiation of or pending resolution of any dispute in arbitration.
Except as expressly provided in this Agreement, all specific remedies provided
for in this Agreement are cumulative and are not exclusive of one another or of
any other remedies available at law or in equity. Notwithstanding anything to
the contrary set forth herein, nothing contained elsewhere in this Agreement,
including, without limitation, the monetary thresholds set forth in Section 4.10
with respect to the definition of "actual harm", shall be deemed to limit in any
way the availability of equitable relief for any breach of this Agreement.
9.5 Captions and Paragraph Headings. Captions and paragraph headings used
in this Agreement are for convenience only and are not a part of this Agreement
and shall not be used in interpreting or construing it.
9.6 Entire Agreement. The making, execution and delivery of this
Agreement by the parties has been induced by no representations, statements,
warranties or agreements other than those herein expressed. This Agreement
embodies the entire understanding of the parties with respect to the subject
matter hereof. Notwithstanding the foregoing, the parties acknowledge that a
number of different agreements and instruments of which the parties are
signatory are all being executed simultaneously with this Agreement and at
Closing. The parties acknowledge that this Agreement or instrument is to be
interpreted and enforced separately and independently of any other such
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agreement or instrument, and the breach of any such agreement by a party shall
not affect the rights of such party under this Agreement. This Agreement may be
amended or modified only by an instrument of equal formality signed by the
parties or their duly authorized representatives. The parties have made no
representations or warranties not expressly set forth in this Agreement. This
Agreement supersedes and terminates all prior discussions, negotiations,
understandings, arrangements and agreements among the parties relating to the
subject matter hereof, except as expressly set forth herein.
9.7 Counterparts. This Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
9.8 Assignability. No party hereto may assign any of its interests,
rights or obligations under the Agreement without the prior written consent of
the other parties. Notwithstanding the foregoing, Buyer may assign its rights,
but not its obligations, under this Agreement to any entity under common control
with Buyer or to any assignee or other successor in interest to any of the
Trademark Assets without the consent of Seller, and Seller may assign its rights
under the Note and the Escrow Agreement in accordance with the terms of such
instruments, provided, that neither party may assign any rights referred to in
this Section 9.8 unless it has complied with all of its obligations under the
instrument the rights under which it wishes to assign. Any impermissible
attempted assignment of this Agreement without such prior written consent shall
be void as to the other parties to this Agreement. Nothing in this Section 9.8
shall be construed as requiring Seller's consent to any assignment of Buyer's
rights under this Agreement to Ambra Inc. or any affiliate thereof and the
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assumption by such assignee of any obligations of Buyer (if any) relating
thereto.
9.9 Expenses. The parties shall each bear their own expenses in
connection with the negotiation, execution and delivery of this Agreement and
the performance of their respective obligations hereunder.
9.10 Successors and Assigns. This Agreement and the provisions thereof
shall be binding upon and inure to the benefit of the respective successors and
permitted assigns of the parties hereto.
9.11 Governing Law. The validity, construction, operation and effect of
any and all of the terms and provisions of this Agreement shall be determined
and enforced in accordance with the laws of the State of New York without giving
effect to principles of conflicts of law thereunder except as to matters solely
involving foreign trademark rights, in which case the applicable foreign
trademark laws shall be applied to determine such foreign trademark rights. In
the event any legal action becomes necessary to enforce or interpret the terms
of this Agreement, the parties agree that such action will be brought in the
U.S. District Court for the Southern District of New York, and the parties
hereby submit to the jurisdiction of such court; provided, however, that any
party may enforce an arbitration award in any court of competent jurisdiction
located in New York City and the parties hereby submit to the jurisdiction of
any such court.
9.12 Arbitration. (a) Notwithstanding anything contained in Section 9.11
above, except as provided in paragraph (b) below and as provided for in
paragraph 9.4 above, all disputes arising from or in any way in connection with
this Agreement shall be finally settled through binding arbitration conducted
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pursuant to the Rules of Conciliation and Arbitration of the International
Chamber of Commerce in effect as of the date of the initiation of any dispute
submitted to arbitration under this section ( ICC Rules ) by three arbitrators
appointed in accordance with the ICC Rules. Except as provided in this Section,
no modification or amendment of the ICC Rules applicable to any such arbitration
shall be binding upon the parties unless agreed to in writing by the parties.
In each such arbitration, each party to the dispute shall appoint one arbitrator
within 30 days of receipt by the defendant of the request for arbitration, and
the arbitrators so appointed by the parties shall appoint the third arbitrator
(who shall be the Chairman), within 30 days of the confirmation of the later of
the two arbitrators appointed by the parties. If any such arbitration involves
multiple claimants or multiple defendants, nomination of arbitrators shall be
governed by the applicable ICC rules. Notwithstanding anything to the contrary
contained in the ICC rules: (i) the arbitration proceedings shall be conducted
in the City of New York, State of New York; (ii) the arbitration proceedings
shall be conducted in the English language; and (iii) the arbitrators shall
apply New York law without regard to such state's choice of law rules, except as
to matters involving solely issues of foreign trademark rights, in which case
the applicable foreign trademark laws shall be applied to determine such foreign
trademark rights. If the arbitrator(s) determine that the set-off was improper,
Buyer shall pay to Seller the amount set-off plus interest thereon at the
reference rate announced by Union Bank of California from time to time as the
"prime rate", plus one percent, computed from the date of the set-off through
and including the date of payment of the set-off amount. If the non-prevailing
party does not comply with an arbitration decision, the prevailing parties may
immediately enforce the arbitration decision in an equitable proceeding in court
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with both parties' court costs and related attorneys' fees paid by the
non-prevailing party in the arbitration, unless the arbitration decision is
modified, or not upheld or enforced, in which case, each side shall bear its own
costs and attorneys' fees.
(b) (i) Notwithstanding anything contained in Section 9.11 above, in
the event Buyer, pursuant to the second paragraph of paragraph 6 of the Note,
sets off funds that were to be paid to Seller pursuant to the payment schedule
contained in the Note, the parties agree to resolve in a fast-track procedure
whether such set-off is appropriate (the Set-Off Dispute ). Such a procedure
shall be initiated by transmission of a request for arbitration to the
defendant. Within thirty (30) days of receipt by defendant of such request, the
parties shall appoint one arbitrator who shall conduct an expedited arbitration
pursuant to the ICC Rules to determine if Buyer can demonstrate a likelihood of
success on the merits of its claim underlying the Set-Off Dispute. If the
parties cannot agree upon an arbitrator within such 30-day period, or such
longer period as may be agreed upon in writing by the parties, then an
arbitrator shall be appointed by the ICC pursuant to its rules. The Set-Off
Dispute arbitration shall be conducted within thirty (30) days of the
confirmation of an arbitrator, unless the parties to the dispute agree in
writing to an extension of the said 30-day period.
(ii) The expedited arbitration shall be conducted in the City of New
York, State of New York in the English language and the arbitrator shall apply
New York law without reference to such state's choice of law rules, except as to
matters involving solely issues of foreign trademark rights, in which case, the
applicable foreign trademark laws shall be applied to determine such foreign
trademark rights. The arbitrator shall render a decision as to Buyer's
likelihood of success on the merits of the claim underlying the Set-Off Dispute
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within thirty (30) days of the final submission to the arbitrator. If the
arbitrator decides that Buyer has shown a likelihood of success on the merits
of its claim, Buyer shall be entitled to retain the set-off funds pending a
full arbitration conducted pursuant to subsection (a) above. If the
arbitrator determines that Buyer has not shown a likelihood of success on the
merits of the claim underlying the Set-Off Dispute, Buyer shall pay such
set-off amount to Seller within ten (10) business days, with interest thereon
from the date of the set-off at an interest rate of 7% per annum.
Notwithstanding the foregoing, either party may commence an arbitration
pursuant to Subsection (a) above with respect to the underlying dispute which
led to the set-off prior to, simultaneously with, during or after
commencement of an expedited arbitration. Unless agreed to by the parties,
the sole arbitrator rendering the decision as to whether Buyer has
demonstrated a likelihood of success on the claim underlying the Set-Off
Dispute shall not serve as an arbitrator for any arbitration of the
underlying dispute conducted pursuant to subsection (a) above, nor shall any
decision or award, in whole or in part, be referred to in any such subsequent
arbitration, or be made known to the arbitrators appointed pursuant to
subsection (a) above for such arbitration. Unless agreed to by the parties,
the pendency of a fast track arbitration under this section shall not be
cause for delay or postponement of any other arbitration between the parties.
9.13 Liability of Ott. Ott, as the sole shareholder of Seller, shall be
jointly and severally liable with Seller as a primary obligor and not as a
surety, provided, however, that his liability hereunder shall be limited solely
to the enforcement through equitable relief of all obligations of Ott and/or
Seller under this Agreement, and Ott shall not be liable under any circumstances
for monetary damages.
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9.14 Confidentiality. This Agreement, its terms, conditions and
provisions, and the trade secrets and confidential information of the parties
are strictly confidential and shall not be disclosed by either party to any
other person or entity without the prior written consent of the other party, or
as required by law, (i) except financial institutions (including but not limited
to investment bankers and underwriters), attorneys and accountants with which
the parties transact business, provided, however, that such third parties agree
in writing to abide by the terms of this provision; or (ii) except as
appropriate for the parties to protect and/or enforce their respective trademark
rights. Buyer and Seller further agree that disclosure of this Agreement within
their organizations shall be limited to their respective directors, officers and
employees with a "need to know," to carry out the purposes of this Agreement, or
to protect the rights of either party. Nothing in this provision is intended to
prevent or substantially interfere with Buyer's or its partners', affiliates or
stockholders' ability to make all disclosures required by law pursuant to
offering and selling stock to the public, or with respect to the parties' rights
to reflect the terms of this transaction as an asset on any financial
statements.
9.15 Release of Liability Upon Assumption. Notwithstanding anything in
this Agreement to the contrary, the obligations of I.C. Isaacs & Company L.P.
("ICI") under this Agreement are expressly conditioned on the Selling Parties'
agreements as follows, and the Selling Parties do hereby irrevocably covenant
and agree as follows:
(a) ICI shall be permitted to assign any or all of its rights under
this Agreement, the Note and the Escrow Agreement to Hugo Boss affiliate
Ambra Inc. ("Ambra") and/or to have Ambra assume (and Ambra shall be
permitted to assume) any or all of ICI's obligations under this Agreement,
the Escrow Agreement and the Note. Upon such assignment and assumption,
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Ambra shall have the right to assert the rights assigned to it directly against
Seller or the Selling Parties, as the case may be, to the full extent that
ICI would have been entitled to assert such rights but for the assignment;
(b) Upon and after Ambra's assumption of any of ICI's obligations
under this Agreement, ICI shall be fully released from such of ICI's obligations
under this Agreement as are assumed by Ambra and:
(i) Neither ICI nor any of ICI's partners, nor (A) any
individual, partnership, joint venture, organization, association, company or
trust which may have any legal or beneficial interest in ICI or its partners, as
the case may be, and (B) any officers, directors, managers, employees, agents,
advisors, successors or assigns of any thereof (ICI, its partners, and such
entities and natural persons are referred to herein as "Exempted Persons"),
shall be personally liable for payment or performance of any obligations arising
under this Agreement or the Escrow Agreement to the extent such obligations are
assumed by Ambra (such obligations under this Agreement and the Escrow Agreement
are referred to herein as the "Obligations"); provided, however, that nothing in
this paragraph 9.15(b)(i) shall release or otherwise limit Seller's rights
against any successor or assignee of ICI's obligations, including, without
limitation, Ambra.
(ii) The Selling Parties shall not seek, pursue, obtain or
enforce any claim or judgment against any of the Exempted Persons for the
Obligations; and
(iii) In the event of any nonpayment or nonperformance of
this Agreement or any of the Obligations, the Selling Parties' sole and
exclusive remedy for such nonpayment or nonperformance shall be to exercise such
rights as the Selling Parties may have against any successor, assignee or
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guarantor of ICI's obligations, including, but not limited to, Ambra or (with
respect to the Guaranty) Hugo Boss.
(c) Promptly upon Ambra assumption of such obligations of ICI under
this Agreement, the Selling Parties shall mark and sign all of their originals
of this Agreement with the following legend and deliver a copy of this Agreement
so marked and signed to ICI; provided, however, the failure of the Selling
Parties to so mark and sign the originals of this Agreement, or to deliver such
copy to ICI, shall not prejudice ICI's rights under this Section or cause ICI to
remain obligated under this Agreement:
"CERTAIN OBLIGATIONS (AS DEFINED ABOVE) OF I.C. ISAACS & COMPANY L.P.
("ISAACS") HAVE BEEN ASSUMED BY AMBRA, INC. AND THE SELLING PARTIES HAVE
RELEASED ISAACS FROM SAID OBLIGATIONS.
BROOKHURST, INC.
By: /s/ William Ott
__________________________________(Seal)
WILLIAM OTT, PRESIDENT
/s/ William Ott
_____________________________________
WILLIAM OTT, INDIVIDUALLY"
(d) The foregoing clauses of this Section shall be self operative and
shall not require the execution or delivery of any further documentation.
Notwithstanding the foregoing, upon ICI's request upon and after Ambra's
assumption of certain obligations of ICI under this Agreement, the Selling
Parties shall execute and deliver to ICI such further documents as may be
-36-
<PAGE>
reasonably requested by ICI from time to time for the purpose of further
confirming to ICI and/or other persons designated by ICI that ICI no longer has
such obligations or liability under this Agreement.
-37-
<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day and
year first written above.
BROOKHURST, INC.
By:
---------------------------------
Name: William Ott
Title: President
I. C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: /s/ Robert J. Arnot
--------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
--------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
WILLIAM OTT
---------------------------------
<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day and
year first written above.
BROOKHURST, INC.
By: /s/ William Ott
----------------------------------
Name: William Ott
Title: President
I. C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By:
--------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By:
--------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
WILLIAM OTT
/s/ William Ott
---------------------------------
<PAGE>
"CERTAIN OBLIGATIONS (AS DEFINED ABOVE) OF I.C. ISAACS & COMPANY L.P.
("ISAACS") HAVE BEEN ASSUMED BY AMBRA INC. AND THE SELLING PARTIES HAVE
RELEASED ISAACS FROM SAID OBLIGATIONS.
BROOKHURST, INC.
By: /s/ WILLIAM OTT (Seal)
___________________________
WILLIAM OTT, PRESIDENT
/s/ WILLIAM OTT
___________________________
WILLIAM OTT, INDIVIDUALLY"
<PAGE>
WORLDWIDE RIGHTS ACQUISITION AGREEMENT
EXHIBITS
Exhibit A The Promissory Note
Exhibit B The Hugo Boss Guaranty
Exhibit C Trademark Assignments
Exhibit D Assumption Agreement
Exhibit E Escrow Agreement
Exhibit F Termination Agreement
Exhibit G "BOSS by Brookhurst" logo typeface
Exhibit H Certain Provisions in Settlement Agreement
<PAGE>
SCHEDULE 1.1(b)
ASSUMED AGREEMENTS
1. Trademark License Agreement by and between Brookhurst, Inc. and ProGroup,
Inc. dated February 1, 1993.
2. Agreement by and between Brookhurst, Inc. and Boss Manufacturing Company
dated January 17, 1994.
3. Settlement Agreement by and between Brookhurst, Inc. and Bravo Corporation
dated January 21, 1997.
4. Agreement by and between Brookhurst, Inc. and Hi-Tech Golf, Inc. dated
July 20, 1994.
5. Settlement Agreement by and between Brookhurst, Inc. and Le Boss Sports
Wear, Inc. dated August 9, 1994.
6. Settlement Agreement by and between Brookhurst, Inc. and Hassan Nijem
d.b.a. W-Two Tees dated March 31, 1995.
7. Agreement by and between Brookhurst, Inc. and Cooper Industries, Inc.
dated July 19, 1993.
8. Agreement by and between Brookhurst, Inc. and Dayang International, Inc.
dated February 28, 1994.
9. Agreement by and between Brookhurst, Inc. and Dong Jin Trading Co., Inc.
dated February 28, 1994.
10. Agreement by and between The Boss Group Companies and Millie and Sol
Friedman dated June 9, 1983.
11. Stipulation Terminating Opposition by and between Boss Group Companies,
Inc. and Levi Strauss & Co. dated June, 1976.
12. Agreement by and between Brookhurst, Inc., Yogi Enterprises, Inc. and New
York Wholesale dated February 21, 1994.
<PAGE>
SCHEDULE 4.3(b)
THIRD PARTY CONSENTS AND WAIVERS
Hart-Scott-Rodino approval.
<PAGE>
SCHEDULE 4.4(a)
LITIGATION
United States
Hugo Boss Fashions, Inc. et al. v. Brookhurst. Inc. et al., 93 Civ.0875
(LMM)(THK)
Brookhurst, Inc. v. Bailiwick Golf, Inc., CV 96-6516 LGB (RNBx) (BOSS OF THE
MOSS)
Brookhurst, Inc. v. Thomas B. Bluemel, Opposition No. 104,087 (B.O.S.2)
Brookhurst, Inc. v. George Lesnick, Opposition No. 100,291 (BOSS OF THE MOSS)
Brookhurst, Inc. v. U.S. Boss Club, Inc., Opposition No. 99,923 (US BOSS CLUB)
Brookhurst, Inc. v. Hugo Boss A.G., Opposition No. 93,355 (BOSS HUGO BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
89,912 (BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
91,860 (BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
90,751 (BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
95,577 (BABY BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
95,224 (BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
97,364 (BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
95,117 (BOSS AMERICA)
<PAGE>
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
95,473 (BOSS BUSINESS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
95,196 (LITTLE BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
95,269 (LADY BOSS)
Hugo Boss AG and Hugo Boss Fashions, Inc. v. Brookhurst, Inc., Opposition No.
95,205 (BOSS GOLF)
Brookhurst, Inc. V. Hugo Boss A.G., Cancellation No. 21,614 (BOSS)
Brookhurst, Inc. V. Hugo Boss A.G., Cancellation No. 21,616 (BOSS)
Brookhurst, Inc. V. Hugo Boss A.G., Cancellation No. 22,751 (BOSS)
Brookhurst, Inc. V. Hugo Boss A.G., Cancellation No. 22,014 (BOSS)
Letters received from Boss Manufacturing Company dated June 13, June 28 and
August 8, 1994.
Canada
Brookhurst, Inc. v. Hugo Boss AG, Hugo Boss Canada Inc., Carrera Optic AG, Falke
Fashion, Siga Corp., La Seta Mantero, S.p.A., Franz Falke-Rohen Strumpffabriken,
New Pel, S.p.A., Federal Court of Canada, Court No. T-l333-93
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BOSS ELEMENTS, Application Number 766,156, owned
by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BOSS HUGO BOSS ELEMENTS DESIGN, Application
Number 766,155, owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark HUGO HUGO BOSS & DESIGN, Application Number
740,329, owned by Hugo Boss AG
<PAGE>
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark HUGO HUGO BOSS DESIGN, Application Number
732,109, owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BOSS HUGO BOSS DESIGN, Application Number
701,377, owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BALDESSARINI HUGO BOSS DESIGN, Application Number
732,110, owned by Hugo Boss AG
Hong Kong, China and Macau
See attached.
Japan
See attached.
Mexico
Letters received from Merchant & Gould dated August 22 and September 4, 1997.
<PAGE>
LIST OF HONG KONG PROCEEDINGS
Date of cease and Date of Writ 1996
desist letter Action No.
Brookhurst, Inc. vs. Hugo Boss 16 August 1996 20 September 1996 10808
AG
Brookhurst, Inc. vs. Hugo Boss 16 August 1996 20 December 1996 14585
AG and Hugo Boss Hong Kong
Limited
Hugo Boss AG vs. CAC 26 July 1996 24 September 1996 10896
Garment Ltd.
Hugo Boss AG vs. Chungkuo 26 July 1996 24 September 1996 10897
Chung Fah Co Ltd
Hugo Boss AG vs. P'NT 13 July 1996 24 September 1996 10898
Merchandising Co Ltd
Hugo Boss AG and Hugo Boss 31 July 1996 8707
Hong Kong Limited vs.
Ace Merchandising Corp. (a
firm) (3rd party)
Pro-Knit Mfg. Ltd. (Defendant)
Hugo Boss AG vs. Gofar 13 July 1996 5 August 1996 8857
Textiles Limited
Hugo Boss AG and Hugo Boss Amended 174
Hong Kong Limited vs. Statement of Claim
Dodge International Trading pursuant to
Ltd, Dodge Knitting Company Summons dated 9
Ltd, Dodge Trading Ltd (5th to August 1995
7th Defendants);
(Sun Cheung Tak
Manufacturing Ltd, Cheung Fat
Trading Co. (a firm)(1st and 4th
Defendants); Garment Express
Fashions Co. (a firm)(2nd
Defendant); Harf Sharan (HK)
Co. (3rd Defendant); Wah Kel
Garment Co. (a firm)(8th and
9th Defendants))
Times Trademark Industrial 28 October 1996
Ltd.
<PAGE>
LIST OF MACAU PROCEEDINGS
Date of cease and Date of Writ 1996
desist letter Action No.
Fabrica de Vestuano Best 25 July 1996
Found Limitada (received by
Eldex Limited in HK)
[LIST OF PRC PROCEEDINGS]
Date of cease and Date of Writ 1996
desist letter Action No.
[Hugo Boss AG vs. Boss unknown unknown
Sportwear (USA), Inc.]
<PAGE>
JAPAN
List of All Legal Matters Involving Boss Trademark
TRIALS
- ---------------------------------------------------
Trial No. Our Case
- ---------------------------------------------------
554/1993 S7069 Non-Use Cancellation
Trial against Trademark
Reg. No. 695865 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
555/1993 S7070 Non-Use Cancellation
Trial against Trademark
Reg. No. 695865 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
564/1993 S7071 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
565/1993 S7072 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
566/1993 S7073 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
567/1993 S7074 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
568/1993 S7075 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
569/1993 S7076 Non-Use Cancellation
Trial against Trademark
Reg. No. 2197845 "BOSS"
owned by Hugo Boss A.G.
- ---------------------------------------------------
<PAGE>
SCHEDULE 4.4(b)
JUDGMENTS AND ORDERS
See Schedule 4.5.E for references to Levi Strauss & Co.
<PAGE>
SCHEDULE 4.5.A
CURRENT TRADEMARK REGISTRATIONS AND APPLICATIONS
UNITED STATES
Federal Registrations
Registration Number Mark/Class(es)* Registration Date
- ------------------- --------------- -----------------
1,023,305 BOSS/25 10/21/75 renewed 10/21/95
1,214,960 LADY BOSS/25 11/02/82
1,756,992 B(stylized)/25 03/09/93
1,933,326 BOSS/28 11/07/95
State Registrations
Registration Number Mark/Class(es) Registration Date
- ------------------- -------------- -----------------
101509 (California) BOSS/25 7/23/96
Federal Applications
Application Number Mark/Class(es)
- ------------------ --------------
74/074,962 BOSS/21, 24, 25, 28
74/075,953 BOSS/25
74/263,623 BOSS/28
74/269,769 BOSS/28
74/326,997 BOSS/25
74/323,654 BOSS/12, 14, 16, 18, 25, 28
74/801,552 BOSS/24, 26
74/346,231 BABY BOSS/8, 14, 16, 18, 25, 28
74/801,565 BABY BOSS/24, 26
74/346,234 LITTLE BOSS/8, 14, 16, 18, 25, 28
74/801,545 LITTLE BOSS/24, 26
74/346,230 LADY BOSS/12, 14, 16, 18, 25, 28
- ----------
* Prior to Closing, the Acquisition Agreement shall not be deemed to be
breached by inclusion of incorrect information relating to the Marks and
Classes in this Schedule. Said information shall be reviewed, corrected if
necessary, updated and confirmed by Seller prior to Closing.
<PAGE>
2
SCHEDULE 4.5.A
74/801,550 LADY BOSS/24, 26
74/346,232 BOSS AMERICA/12, 14, 16, 18, 25, 28
74/801,551 BOSS AMERICA/24, 26
74/346,233 BOSS GOLF/12, 14, 16, 18, 25, 28
74/801,554 BOSS GOLF/24, 26
74/355,226 BOSS BUSINESS/12, 14, 16, 18, 25, 28
74/801,657 BOSS BUSINESS/24, 26
75/013,293 BOSS/7, 8, 11, 12, 14, 21
Current DBA Applications and Registrations
See attached.
CANADA
Federal Applications
Application Number Mark/Class(es)
- ------------------ --------------
721,562 BOSS/?
ITALY
Registrations
Application Number Mark/Class(es) Registration Date
- ------------------ -------------- -----------------
643416 BOSS AMERICA/25,28 2/21/95
HONG KONG
Application Number Mark/Class(es)
- ------------------ --------------
96/06527 BOSS and
BOSS (Stylized)/25
ROC (TAIWAN)
Application Number Mark/Class(es)
- ------------------ --------------
85032505 BOSS BUSINESS/25
<PAGE>
3
SCHEDULE 4.5.A
CHINA
Application for business name for Boss Golf Company
MACAU
Application Number Mark/Class(es)
- ------------------ --------------
N/001305 BOSS/25
MALAYSIA
Application Number Mark/Class(es)
- ------------------ --------------
96/06531 BOSS/25
JAPAN
Application Number Mark/Class(es)
- ------------------ --------------
330801/1992 BOSS AMERICA/9
330803/1992 BOSS AMERICA/20
330804/1992 BOSS AMERICA/25
330805/1992 BOSS AMERICA/26
MEXICO
Application Number Mark/Class(es)
- ------------------ --------------
152400 BOSS/25
152401 BOSS BOSS AMERICA/25
152402 BOSS AMERICA/25
<PAGE>
SCHEDULE 4.5B
PREVIOUS TRADEMARK REGISTRATIONS AND APPLICATIONS
United States
Registration No. 213,560 dated June 1, 1926, renewed June 1, 1946 for BOSS
Registration No. 127,268 dated November 14, 1919 for BILLIE BOSS
Registration No. 1,080,019 dated December 20, 1977 for BOSS
Application Serial No. 36,141 for BOSS AND DESIGN
Application Serial No. 36,142 for BOSS TEXTOOL SERVICES
California trademark registration dated February 12, 1897
California trademark registration no. 1434 dated September 19, 1959 for THE BOSS
France
Application No. 93/453,859 for BOSS AMERICA
Japan
Application No. 330802/1992 for BOSS AMERICA
Application No. 330806/1992 for BOSS AMERICA
Peru
Trademark registration dated July 7, 1921 for THE BOSS
<PAGE>
Mexico
Trademark registration number 16,666 dated June 5, 1919
Trademark registration number 26,603 dated February 23, 1927
Trademark registration number 323615 dated May 29, 1985
China
Application No. 93007161 for BOSS BUSINESS
Macau
Application No. 12784/DSE for BOSS
2
<PAGE>
SCHEDULE 4.5.C
FILINGS AND ACTIONS REQUIRED WITHIN 120 DAYS
Office Action response due December 8, 1997 for Canadian BOSS trademark
application number 721,562.
Office Action response due October 4, 1997 for Japanese trademark application
number 330805/1992.
Japanese trademark applications which have been denied may be subject to appeal.
<PAGE>
AMENDMENT TO SCHEDULE 4.5.C.
TO THE WORLDWIDE RIGHTS ACQUISITION AGREEMENT
DATED SEPTEMBER 30, 1997
----------------------------------------------------------
It is hereby agreed, by and between the undersigned counsel, that
Schedule 4.5.C to the World Wide Rights Acquisition Agreement dated September
30, 1997, should be amended to delete any reference to any "office action
response due October 4, 1997 for Japanese trademark application number
330805/1992."
/s/ Louis M. Solomon /s/ Pamela T. Church /s/ Robert J. Mathias
- -------------------- -------------------- ---------------------
Louis M. Solomon Pamela T. Church Robert J. Mathias
Shereff, Friedman, Coudert Brothers Piper & Marbury LLP
Hoffman & Goodman, LLP 1114 Avenue of the Americas 36 South Charles Street
919 Third Avenue New York, New York 10036 Baltimore, Maryland 21201
New York, New York 10022
Attorneys for Attorneys for Hugo Boss AG Attorneys for I.C. Isaacs
Brookhurst, Inc. & Company L.P.
<PAGE>
SCHEDULE 4.5.D
CURRENT BOSS LICENSES
LICENSE AGREEMENT dated August 11, 1994 by and between BROOKHURST, INC. and I.C.
ISAACS & CO., L.P.
TRADEMARK LICENSE AGREEMENT dated February 1, 1993 by and between BROOKHURST,
INC. and PROGROUP, INC.
TRADEMARK LICENSE AGREEMENT dated August 25, 1992 by and between BROOKHURST,
INC. and BOSS AMERICA, S.A. DE C.V.: terminated but there are sell-off rights in
Paragraph Thirteenth of said Agreement.
<PAGE>
SCHEDULE 4.5.E
AGREEMENTS RE USE OF TRADEMARK
1. Agreement by and between Brookhurst, Inc. and Boss Manufacturing Company
dated January 17, 1994.
2. Settlement Agreement by and between Brookhurst, Inc. and Bravo Corporation
dated January 21, 1997.
3. Letter to Jeffrey A. Pine, attorney for Enjoylife, Inc. dated April 30,
1993.
4. Agreement by and between Brookhurst, Inc. and Hi-Tech Golf, Inc. dated
July 20, 1994.
5. Settlement Agreement by and between Brookhurst, Inc. and Le Boss Sports
Wear, Inc. dated August 9, 1994.
6. Settlement Agreement by and between Brookhurst, Inc. and Hassan Nijem
d.b.a. W-Two Tees dated March 31, 1995.
7 Trademark License Agreement by and between Brookhurst, Inc. and ProGroup,
Inc. dated February 1, 1993.
8. Letter to John F. McKenna, Jr., Esq., attorney for Boss Uniform Service,
from Roger A. Browning, attorney for The Boss Group Companies, dated March
20, 1974.
9. Agreement by and between Brookhurst, Inc. and Cooper Industries, Inc.
dated July 19, 1993.
10. Agreement by and between Brookhurst, Inc. and Dayang International, Inc.
dated February 28, 1994.
11. Agreement by and between Brookhurst, Inc. and Dong Jin Trading Co., Inc.
dated February 28, 1994.
12. Agreement by and between The Boss Group Companies and Millie and Sol
Friedman dated June 9, 1983.
13. Letter from William H. Pavitt, Jr., attorney for Boss Group Companies,
Inc., to Claude W. Lowe, Esq., attorney for H.D. Lee Company, dated
January 13, 1976.
14. Stipulation Terminating Opposition by and between Boss Group Companies,
Inc. and Levi Strauss & Co. dated June, 1976.
<PAGE>
2
SCHEDULE 4.5.E
15. Agreement (undated and unsigned) by and between Boss Group Companies, Inc.
and Levi Strauss & Co.
16. Agreement by and among Brookhurst, Inc., Yogi Enterprises, Inc. and New
York Wholesale dated February 21, 1994.
17. Letter Agreement by and between Brookhurst, Inc. and Reebok International
Limited dated May 28, 1993.
18. Settlement Agreement by and among Brookhurst, Inc., Hugo Boss AG and
Stefano Herren Mode dated January 6, 1988.
<PAGE>
SCHEDULE 4.6
ALIENATION OF RIGHTS
[NONE]
<PAGE>
SCHEDULE 5.3(B)
THIRD PARTY CONSENTS
Hart-Scott-Rodino approval.
Approval from secured lender, Congress Financial Corporation.
<PAGE>
Exhibit 10.10(b)
PROMISSORY NOTE
November 5, 1997
FOR VALUE RECEIVED, I.C. ISAACS & COMPANY L.P., a limited
partnership organized and existing under the laws of Delaware with its
principal place of business at 3840 Bank Street, Baltimore, MD 21224 ( Maker
), hereby promises to pay to BROOKHURST, INC., a corporation organized and
existing under the laws of the State of California with its principal place
of business located at 107 West Carob Street, Compton, California 90220-5206
("Brookhurst"), the principal sum of U. S. $11,000,000 (Eleven Million
Dollars), on the dates and in the amounts hereinafter set forth. This
Promissory Note is the promissory note issued by Maker pursuant to a
Worldwide Rights Acquisition Agreement by and between Maker and Brookhurst
(the Rights Agreement"). Capitalized terms used but not defined herein
shall have the respective meanings ascribed to them in the Rights Agreement.
This Promissory Note is hereinafter referred to as the "Note".
1. Interest. The outstanding principal amount of this Note shall
bear simple interest at the per annum rate of ten percent (10.00%) (computed
on the basis of a 365 day year and the number of actual days elapsed), and
shall be payable quarterly, commencing with the quarterly payment due January
1, 1998 as set forth in paragraph 2. Interest shall accrue as of the date of
this Note and thereafter on the outstanding and unpaid principal amount of
this Note, and shall be payable quarterly, as set forth in paragraph 2.
2. Principal, Interest and Maturity Date.
(a) Subject to paragraph 2(b) below, the following
principal and interest payments are to be made by Maker to
Brookhurst on the dates indicated:
Payment Due Date Principal Due Quarterly Interest
- ----------------- -------------- ------------------
Jan. 1, 1998 $275,000
Apr. 1, 1998 $275,000
July 1, 1998 $275,000
Oct. 1, 1998 $275,000
<PAGE>
Jan. 1, 1999 $275,000
Apr. 1, 1999 $275,000
July 1, 1999 $275,000
Oct. 1, 1999 $3,300,000 $275,000
Jan. 1, 2000 $192,500
Apr. 1, 2000 $192,500
July 1, 2000 $192,500
Oct. 1, 2000 $4,200,000 $192,500
Jan. 1, 2001 $87,500
Apr. 1, 2001 $87,500
July 1, 2001 $87,500
Oct. 1, 2001 $2,500,000 $87,500
Jan. 1, 2002 $25,000
Apr. 1, 2002 $25,000
July 1, 2002 $25,000
Oct. 1, 2002 $1,000,000 $25,000
(b) The parties agree that subject to the provision of
paragraph 3.2(e) of the Escrow Agreement by and between Maker and
Brookhurst of even date herewith ("Escrow Agreement") one-half
(1/2) of each principal and interest payment due under paragraph
2(a) of this Note shall be transmitted by Maker to the Escrow
Agent for deposit in the Escrow Fund (as defined in the Escrow
Agreement) under the terms and conditions of the Escrow
Agreement.
3. Prepayment. This Note may be prepaid at any time
by Maker upon payment of the total amount of principal and
interest due as provided in paragraph 2 ($14,420,000), less
payments previously made hereunder, or upon such other terms as
the parties may agree.
4. General Payment Provisions. All payments of
principal and interest and other sums due pursuant to this Note
to Brookhurst shall be made by wire transfer of immediately
available funds to Union Bank, Beverly Hills, California, Bank
ABA No. 16-49, Bank Routing No. 122000496, Account No. 2000131000
or to such other account as Brookhurst shall have previously
designated to Maker in writing not later than fifteen Business
Days (as defined below) prior to the date on which such payment
becomes due.
(ii) All payments of principal and interest and other
sums due pursuant to this Note to the Escrow Fund shall be made
pursuant to the requirements of the Escrow Agreement.
2
<PAGE>
(iii)If the due date of any payment under this Note
would otherwise fall on a day which is not a Business Day, such
date will be extended to the immediately succeeding Business Day.
The term "Business Day" shall mean any day other than Saturday,
Sunday, or a banking holiday of the United States, State of New
York, or the Federal Republic of Germany.
(iv) A late payment fee of one percent (1%) of any
principal or interest payment made more than fifteen (15) days
after the due date hereunder shall be due with such late payment,
notwithstanding any right of cure by Maker. All such late
payments shall continue to accrue interest of the rate of 10% per
annum from the due date until the date actually paid.
5. Events of Default. An Event of Default shall
occur upon one or more of the following events:
(a) Maker shall default in the payment when due of any
principal or interest under this Note and such default shall
continue unremedied for a period of fifteen (15) days, provided,
however, that upon written notice from Brookhurst Maker shall
have fifteen (15) days to cure any such non-payment, and such
cure shall preclude Brookhurst from declaring an Event of Default
based upon non-payment; or
(b) Maker shall admit in writing its inability to, or
be generally unable to, pay its debts as such debts generally
become due; or
(c) Maker shall (i) apply for or consent in writing to
the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidation of itself or of all or a
substantial part of its property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case
under Title II of the United States Code (as now or hereafter in
effect) (the "Bankruptcy Code"), or such other such similar law
in any jurisdiction, (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of
debts, (v) acquiesce in writing to any petition filed against it
in an involuntary case under the Bankruptcy Code, or (vi) take
any corporate action for the purpose of effecting any of the
foregoing; or
(d) a proceeding or case shall be commenced, without
the application or consent of Maker in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of such entity or
3
<PAGE>
of all or any substantial part of its assets, or (iii) similar
relief in respect of such entity, under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of ninety (90)
days; or an order for relief against any such entity shall be
entered in an involuntary case under the Bankruptcy Code or such
other similar law in any jurisdiction;
Upon and during the continuance of an Event of Default,
and subject to the provisions of Section 15 of this Note, (i)
Brookhurst may, by written notice to Maker, declare the principal
amount then outstanding of, and the total interest on, this Note
(ie., $14,420,000 minus all payments made to date), to be
forthwith due and payable, whereupon such amount shall be
immediately due and payable without presentment, demand, protest
or other formalities of any kind, all of which are hereby
expressly waived by Maker; (ii) Maker shall pay all of the
expenses of Brookhurst incurred for the collection of this Note,
including reasonable attorneys' fees and legal expenses, and
(iii) Brookhurst may exercise from time to time any other rights
and remedies available to it by law, including without limitation
those available under any agreement or other instrument relating
to the amounts owed under this Note. No delay on the part of
Brookhurst in the exercise of any right or remedy shall operate
as a waiver thereof, and no single or partial exercise by
Brookhurst of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy.
6. Setoff. Maker shall have the right to offset and
deduct sums due and owing to Maker under the Rights Agreement
against and from sums due and owing by Maker under this Note,
pursuant to and consistent with paragraph 9.12 of the Rights
Agreement.
7. No Assignment. The rights and obligations under
this Note may be assigned by Maker only with the written consent
of Brookhurst; provided that nothing in this Section 7 shall be
construed as requiring Brookhurst's consent to an assumption of
the obligations and assignment of the rights of Maker under this
Note by Hugo Boss AG or its subsidiary Ambra Inc. as permitted
under Section 15 of this Note and nothing in this Section 7 shall
be construed as affecting Maker's rights under Section 15. Upon
assignment, Brookhurst agrees that the assignee shall stand in
the shoes of Maker, and shall have all of the obligations and
rights as Maker, including, without limitation, the rights and
obligations assumed by Maker under the Rights Agreement, the
Escrow Agreement, and the right of setoff as provided in
paragraph 6 of this Note. Brookhurst may assign this Note to any
third party, provided that such assignment does not in any way
limit Maker's right of setoff as provided in paragraph 6 of this
Note.
4
<PAGE>
8. Entire Agreement. Except as set forth in this
Section 8 and the definition of capitalized terms used in this
Note, the terms of this Note evidence the entire agreement
between Maker and Brookhurst regarding the indebtedness evidenced
by this Note and the terms and provisions of the Rights Agreement
shall in no way control, interpret, amend, add to or affect the
rights, duties and obligations of Maker and Brookhurst under this
Note.
9. Governing Law. This Note shall be governed by,
and construed in accordance with, the laws of the State of New
York applicable to contracts made and to be performed entirely in
the State of New York without regard to such state's choice of
law rules.
10. Notices. All notices, demands or requests or
other communications relating to any matter set forth herein
shall be given or made in writing and shall be (i) delivered
personally (including commercial courier), or (ii) sent by
registered or certified airmail, return receipt requested,
postage prepaid, addressed to the party to whom they are directed
at the following address, or at such other address as may be
designated by notice from such party.
If to Brookhurst: Brookhurst, Inc.
107 West Carob Street
Compton, California 90220-5206
Attn.: William E. Ott
with a copy to: Shereff, Friedman, Hoffman &
Goodman, LLP
919 Third Avenue
New York, New York 10022-9998
Attn.: Robert J. Jossen, Esq.
If to Maker: I.C. Isaacs & Company, L.P.
3840 Bank Street
Baltimore, MD 21224
Attn: Gerald W. Lear
President and Co-Chief
Executive Officer
5
<PAGE>
and
I.C. Isaacs & Company, L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attn: Robert J. Arnot
Chairman and Co-Chief
Executive Officer
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, MD 21201-3010
Attn: Robert J. Mathias, Esq.
Any notice, request, demand or other communication
given or made in the manner prescribed in this paragraph shall be
deemed to have been given and to be effective upon receipt or
refusal by the addressee. Any party may change its address for
notices hereunder, effective upon giving notice of such change
hereunder to the other party.
11. Adjustment of Interest Rate or Fees. No provision
of this Note shall require the payment of interest to the extent
that receipt of any such payment by Brookhurst would be contrary
to the provisions of United States law, if any, limiting the
maximum amount of interest or fees that may be charged to or
collected from Maker, and if any sum in excess of such maximum
rate of interest of fees is paid or charged, the excess will be
returned to Maker, without premium or penalty, and all payments
made thereafter will be appropriately applied to interest and
principal to give effect to such maximum rate, and after such
application any amount paid in excess of principal due Brookhurst
shall be immediately refunded to Maker.
If the maximum rate of interest, if any, now permitted
by law to be charged for this transaction is increased, then for
so long as the increase is in effect, the applicable maximum rate
permitted to be charged as referred to in the paragraph
immediately preceding will be deemed to be such increased rate.
If the maximum rate of interest, if any, now permitted by law to
be charged for this transaction should be eliminated so that
there would be no maximum rate, then interest on this Note shall
thereafter be paid at the rate provided in this Note.
6
<PAGE>
12. Waiver. Maker hereby waives diligence,
presentment, protest, demand for payment and notice of default,
dishonor or nonpayment to or upon Maker with respect to this Note
except as otherwise provided herein. No delay on the part of
Brookhurst in exercising any right hereunder shall operate as a
waiver of such right under this Note.
13. Modifications in Writing. This Note may not be
changed orally, but only by an agreement in writing, signed by
the party against whom enforcement of any waiver, change,
modification or discharge is sought.
14. Arbitration. All disputes relating to this Note
shall be resolved pursuant to the arbitration procedures set
forth in the Rights Agreement.
15. Release of Liability Upon Assumption.
Notwithstanding anything in this Note to the contrary, the
obligations of I.C. Isaacs & Company L.P. ( ICI ) under this Note
are expressly conditioned on Brookhurst's agreements as follows,
and Brookhurst does hereby irrevocably covenant and agree as
follows:
(a) ICI shall be permitted to assign its rights and
obligations under this Note to Ambra Inc. ( Ambra ) and to have
Ambra assume (and Ambra shall be permitted to assume) all of
ICI's obligations under this Note;
(b) Upon and after Ambra's assumption of ICI's
obligations under this Note in accordance with its terms, ICI
shall be fully released from ICI's obligations under this Note
and:
(i) Neither ICI nor any of ICI's partners, nor (A) any
individual, partnership, joint venture, organization,
association, company or trust which may have any legal or
beneficial interest in ICI or its partners, as the case may be,
and (B) any officers, directors, managers, employees, agents,
advisors, successors or assigns except successors or assigns to
the rights and obligations of ICI under this Note (ICI, its
partners, and such entities and natural persons are referred to
herein as Exempted Persons ), shall be personally liable for the
repayment of the principal sum of this Note, or any interest
thereon, or the payment or performance of any other obligations
evidenced by this Note, or for any deficiency thereof or arising
therefrom, or any other direct or indirect obligations arising
under this Note (for purposes of this paragraph 15, the principal
sum, interest thereon and other obligations arising under this
Note, are referred to as the Obligations ); provided, however,
that nothing in this Paragraph 15 shall release or
7
<PAGE>
otherwise limit Brookhurst's rights against any successor or
assignee of ICI's obligations under this Note, including, without
limitation, Ambra; and
(ii) Brookhurst shall not seek, pursue, obtain or
enforce any claim or judgment against any of the Exempted Persons
for the Obligations; and
(iii) In the event of any nonpayment of this Note
or any of the Obligations Brookhurst's sole and exclusive remedy
for such nonpayment shall be to exercise such rights as
Brookhurst may have against any successor, assignee or guarantor
of ICI's obligations under this Note, including , but not limited
to Ambra and/or Hugo Boss AG.
(c) Promptly upon Ambra's assumption of the
obligations of ICI under this Note, Brookhurst shall mark and
sign this Note with the following legend and deliver a copy of
this Note so marked and signed to ICI; provided, however, the
failure of Brookhurst to so mark and sign this Note, or to
deliver such copy to ICI, shall not prejudice ICI's rights under
this Section or cause ICI to remain obligated under this Note:
THE OBLIGATIONS (AS DEFINED ABOVE) OF I.C. ISAACS & COMPANY
L.P. ( ISAACS ) HAVE BEEN ASSUMED BY AMBRA INC. AND
BROOKHURST HAS RELEASED ISAACS FROM THE OBLIGATIONS. ISAACS
HAS NO OBLIGATIONS UNDER THIS NOTE OR THE ESCROW AGREEMENT.
BROOKHURST, INC.
By:_______________________ (Seal)
William Ott, President
(d) The foregoing clauses of this Section shall be
self operative and shall not require the execution or delivery of
any further documentation. Notwithstanding the foregoing, upon
ICI's request upon and after Ambra's assumption of the
obligations of ICI under this Note, Brookhurst shall execute and
deliver to ICI such further documents as may be reasonably
requested by ICI from time to time for the purpose of further
confirming to ICI and/or other persons designated by ICI that ICI
has no obligation or liability under this Note.
8
<PAGE>
16. Execution by Brookhurst. Notwithstanding anything
in this Note to the contrary, this Note shall not be effective
and enforceable against Maker unless and until it has been signed
below by Brookhurst. Brookhurst signs below to further evidence
Brookhurst's agreement to be bound by the terms of this Note.
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: I.G. DESIGN, INC., a Delaware
corporation, its general partner
By: /s/ Gerald W. Lear
___________________________________
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
By: /s/ Robert J. Arnot
___________________________________
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
Brookhurst, Inc.
By: /s/ William E. Ott
___________________________________
Name: William E. Ott
Title: President
THE OBLIGATIONS (AS DEFINED ABOVE) OF I.C. ISAACS & COMPANY L.P.
( ISAACS ) HAVE BEEN ASSUMED BY AMBRA INC. AND BROOKHURST HAS
RELEASED ISAACS FROM THE OBLIGATIONS. ISAACS HAS NO OBLIGATIONS
UNDER THIS NOTE OR THE ESCROW AGREEMENT.
BROOKHURST, INC.
By: /s/ William Ott
_____________________ (Seal)
William Ott, President
9
<PAGE>
EXHIBIT 10.10(c)
GUARANTY OF PROMISSORY NOTE
For valuable consideration, the undersigned, HUGO BOSS, A.G., a
German corporation ("Guarantor"), hereby unconditionally guarantees the due,
prompt and complete performance (including payment) at stated maturity, by
acceleration or otherwise by I.C. Isaacs & Company L.P., a Delaware limited
partnership ("Buyer"), of each and every obligation and liability now or
hereafter existing of Buyer under that certain Promissory Note, dated
November 5, 1997 ("Note") to Brookhurst, Inc. ("Seller") whether for principal,
interest, fees, expenses, attorneys' fees, court costs and collection charges
incurred by Seller in enforcing this Guaranty ("the "Obligations") or otherwise.
The obligations of Guarantor under this Guaranty are independent of
the obligations of Buyer, and a separate action or actions may be brought
against Guarantor, whether action is brought against Buyer or whether Buyer is
joined in any such action or actions; provided, however, Seller shall be
required to first comply with any procedures specified in the Note or any
agreement ancillary thereto with respect to demands to be made against Buyer or
actions to be taken in order to quantify an amount due or identify an issue in
dispute.
If any provision of this Guaranty is held invalid or unenforceable,
the remainder of this Guaranty shall not be affected thereby, the provisions of
this Guaranty being severable in any such instance.
Guarantor guarantees that the Obligations will be paid strictly in
accordance with the terms of the Note, regardless of any law, regulation or
order, except an order with respect to the liability of Buyer or Guarantor under
this Note now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of Seller with respect thereto. The liability of Guarantor
under this Guaranty shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of Buyer's obligations
under the Note or any other agreement or instrument relating
or ancillary thereto;
(ii) any change in the time, manner, place and/or terms of payment
of, or in any other term of, all or any of the Obligations, or
any other amendment or waiver of, or any consent to or
departure from the Note;
(iii) any action or inaction, taken under or in respect of the Note
and/or any other agreement executed concurrently herewith in
the exercise of any remedy, power or privilege therein
contained (including, without limitation, the acceleration of
the maturity of the Note) or otherwise with respect thereto
except the exercise of the right of set-off set forth in
<PAGE>
Section 6 of the Note and Section 9.12 of the Worldwide Rights
Acquisition Agreement ("Acquisition Agreement");
(iv) the extension of time for Buyer's performance of or compliance
with any terms, covenants or agreements on its part to be
performed or observed under the Note, or the waiver of such
performance or compliance with or consent to the failure in or
departure from such performance or compliance;
(v) the settlement or compromise of the liability of Buyer to pay
any and all of the Obligations, or the subordination of the
payment of any and all of the Obligations to the prior payment
of any other debts or claims of Buyer; or
(vi) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of,
Buyer in respect of the obligations or a surety or guarantor
in respect of this Guaranty (it being agreed that the
obligations of the Guarantor hereunder shall not be discharged
except by payment as herein provided) subject to the right of
set-off set forth in Section 6 of the Note and Section 9.12 of
the Acquisition Agreement.
Any action, inaction, change, extension, waiver, or consent referred to above
may be in such manner and upon such terms Seller and Buyer may deem proper, and
without notice to or further assent from the Guarantor, and all without
affecting this Guaranty or the obligations of the Guarantor hereunder, which
shall continue in full force and effect until all of the Obligations and all
obligations of the Guarantor hereunder shall be fully paid and performed.
Guarantor hereby waives promptness, diligence, presentment, demand,
protest, notice of acceptance or of the occurrence of an Event of Default and
any other notice with respect to any of the Obligations and this Guaranty and
any requirement that Seller exhaust any right or take any action against Buyer
or other person or entity.
Guarantor hereby represents and warrants as follows:
(i) The execution, delivery and performance by Guarantor of this
Guaranty do not contravene any law or contractual restriction
binding on or affecting Guarantor.
(ii) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and
performance by Guarantor of this Guaranty.
2
<PAGE>
(iii) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable in accordance with its terms.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by Guarantor therefrom shall in any event be effective unless
the same shall be in writing and signed by Seller.
No failure on the part of Seller to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until payment in full of the Obligations and all other amounts
payable under this Guaranty, (ii) be binding upon Guarantor, its successors and
assigns, and (iii) inure to the benefit of and be enforceable by Seller and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), Seller may assign or otherwise transfer the Note held by
it to any other person or entity, and such other person or entity shall
thereupon become vested with all the rights in respect thereof granted to Seller
herein or otherwise.
Seller, in its sole discretion, may proceed to exercise any right or
remedy which it may have under this Guaranty without pursuing or exhausting any
right or remedy which it may have against Buyer or any other person or entity,
for any or all of the Obligations; and Seller may proceed to exercise any right
or remedy which it may have under this Guaranty without regard to any actions or
omissions of Buyer or any other person or entity subject to the right of set-off
set forth in Section 6 of the Note and Section 9.12 of the Acquisition
Agreement.
This Guaranty shall be governed by, and construed in accordance
with, the laws of the State of New York without reference to its choice of law
rules. All disputes hereunder shall be resolved pursuant to the procedures set
forth in Section 9.12(a) of the Acquisition Agreement.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written. This Guaranty shall terminate immediately upon satisfaction
of the Note.
Dated November 5, 1997 HUGO BOSS A.G.
By: /s/ Jorg-Viggo Muller
---------------------------
Name: Jorg-Viggo Muller
-------------------------
Title: Chief Financial Officer
------------------------
By: /s/ Gert-Jurgen Frisch
---------------------------
Name: Gert-Jurgen Frisch
-------------------------
Title: Attorney-in-Fact
------------------------
Witness:
/s/ Illegible
------------------------
/s/ Illegible
------------------------
3
<PAGE>
EXHIBIT 10.10(d)
TRADEMARK ASSIGNMENT
This Assignment is effective as of the 5th day of November,
1997, by and between Brookhurst, Inc., a California corporation with its
principal place of business at 107 West Carob Street, Compton, California 90220
("Assignor") and I.C. Isaacs, L.P., a Delaware Limited Partnership with its
principal place of business at 3840 Bank Street, Baltimore, Maryland 21224
("Assignee").
WITNESSETH:
WHEREAS, Assignor is the owner of certain trademarks in the United States
of America constituting or containing the word BOSS and the Stylized B,
including common law rights and rights in certain trademark registrations and
applications for registration listed on the "Schedule of Trademarks" attached
hereto, together with the good will of the business associated therewith (the
"Trademarks");
WHEREAS, Assignee desires to acquire all right, title and interest of
Assignor in and to the Trademarks;
NOW, THEREFORE, to All Whom It May Concern, be it known that for good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Assignor does hereby sell, assign, transfer and set over, to
Assignee, its successors and assigns forever, its entire right, title and
interest in and to the Trademarks, the same to be held and enjoyed by Assignee
for its own use and enjoyment, and for the use and enjoyment of its successors,
assigns or other legal representatives forever, as fully and entirely as the
same would have been held and enjoyed by Assignor had the assignment and sale
set forth herein not been made.
<PAGE>
IN TESTIMONY WHEREOF, Assignor has caused these presents to be signed by
its officer thereunto duly authorized, and its corporate seal to be hereto
affixed.
BROOKHURST, INC.
By: /s/ William Ott
-------------------------------
Name: William Ott
Title: President
COUNTY OF NEW YORK :
:ss:
STATE OF NEW YORK :
On this 5th day of November, 1997, before me personally appeared
William Ott, to me personally known, who, being duly sworn, did say that he
is President of Brookhurst, Inc., a California corporation, and that
the foregoing instrument was signed and sealed on behalf of the corporation by
authority of its Board of Directors, and that he acknowledges such instrument to
be the free deed and act of said corporation for the purposes therein set forth
and intending that this instrument be recorded.
/s/ Lynn Micholson
--------------------------------
Notary Public
-2-
<PAGE>
SCHEDULE OF TRADEMARKS
Brookhurst, Inc.'s BOSS
U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
=========================================================================================
REG. NO. GOODS** COUNTRY/
TRADEMARK APP NO. (CLASS) STATE STATUS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B (Stylized) 1,756,992 clothing (25) USA registered/date
- -----------------------------------------------------------------------------------------
BOSS 1,023,305 work clothes (25) USA renewed
- -----------------------------------------------------------------------------------------
BOSS 1,933,326 golf clubs (28) USA registered
- -----------------------------------------------------------------------------------------
LADY BOSS 1,214,960 work clothes (25) USA registered
- -----------------------------------------------------------------------------------------
BOSS 101509 clothing (25) California registered
- -----------------------------------------------------------------------------------------
BABY BOSS 74/346,231 hand tools (8); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- -----------------------------------------------------------------------------------------
BABY BOSS 74/801,565 linens (24); USA applied/suspended
lace and embroidery (26)
- -----------------------------------------------------------------------------------------
BOSS 75/013,293 machines and tools (7); USA applied/suspended
hand tools and instruments (8);
appliances (11);
vehicles (12);
jewelry (14);
household utensils (21)
- -----------------------------------------------------------------------------------------
BOSS 74/323,654 vehicles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- -----------------------------------------------------------------------------------------
</TABLE>
* Prior to Closing, the Acquisition Agreement shall not be deemed to be
breached by inclusion of incorrect information relating to the
Classification or Status in this Schedule. Said information shall be
reviewed, corrected if necessary, updated and confirmed by Seller prior to
Closing.
** For ease of reference the description of goods in this chart is
generalized.
<PAGE>
U.S. Trademark Applications/Registrations (Page 2 of 3)
<TABLE>
<CAPTION>
==================================================================================
REG. NO. GOODS** COUNTRY/
TRADEMARK APP NO. (CLASS) STATE STATUS
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BOSS 74/074,962 household utensils (21); USA applied/suspended
linens (24);
clothing (25);
toys/sporting goods (28)
- ----------------------------------------------------------------------------------
BOSS 74/801,552 linens (24); USA applied/suspended
lace and embroidery (26)
- ----------------------------------------------------------------------------------
BOSS 74/075,953 clothing (25) USA applied/suspended
- ----------------------------------------------------------------------------------
BOSS 74/326,997 clothing (25) USA applied/suspended
- ----------------------------------------------------------------------------------
BOSS 74/263,623 toys/sporting goods (28) USA applied/suspended
- ----------------------------------------------------------------------------------
BOSS 74/269,769 toys/sporting goods (28) USA applied/suspended
- ----------------------------------------------------------------------------------
BOSS AMERICA 74/346,232 vehicles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ----------------------------------------------------------------------------------
BOSS AMERICA 74/801,551 linens (24); USA applied/suspended
lace and embroidery (26)
- ----------------------------------------------------------------------------------
BOSS BUSINESS 74/355,226 vehicles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- ----------------------------------------------------------------------------------
BOSS BUSINESS 74/801,657 linens (24); USA applied/suspended
lace and embroidery (26)
- ----------------------------------------------------------------------------------
</TABLE>
<PAGE>
U.S. Trademark Applications/Registrations (Page 3 of 3)
================================================================================
REG. NO. GOODS** COUNTRY/
TRADEMARK APP NO. (CLASS) STATE STATUS
- --------------------------------------------------------------------------------
BOSS GOLF 74/346,233 vehicles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- --------------------------------------------------------------------------------
BOSS GOLF 74/801,554 linens (24); USA applied/suspended
lace and embroidery (26)
- --------------------------------------------------------------------------------
LADY BOSS 74/346,230 vehicles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- --------------------------------------------------------------------------------
LADY BOSS 74/801,550 linens (24); USA applied/suspended
lace and embroidery (26)
- --------------------------------------------------------------------------------
LITTLE BOSS 74/346,234 hand tools (8); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
- --------------------------------------------------------------------------------
LITTLE BOSS 74/801,545 linens (24); USA applied/suspended
lace and embroidery (26)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 10.10(e)
TRADEMARK ASSIGNMENT
This Assignment is effective as of the 5th day of November,
1997, by and between Brookhurst, Inc., a California corporation with its
principal place of business at 107 West Carob Street, Compton, California 90220
("Assignor") and I.C. Isaacs, L.P., a Delaware Limited Partnership with its
principal place of business at 3840 Bank Street, Baltimore, Maryland 21224
("Assignee").
WITNESSETH:
WHEREAS, Assignor is the owner of certain trademarks outside of the United
States of America except Mexico constituting or containing the word BOSS and the
Stylized B, including common law rights and rights in trademark registrations
and applications for registration outside the United States of America except
Mexico and listed on the Schedule of Trademarks attached hereto, together with
the good will of the business outside the United States of America except Mexico
associated therewith throughout the world (the "Trademarks");
WHEREAS, Assignee desires to acquire all right, title and interest of
Assignor in and to the Trademarks;
NOW, THEREFORE, to All Whom It May Concern, be it known that for and in
consideration of good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged. Assignor does hereby sell, assign, transfer and
set over, to Assignee, its successors and assigns forever, its entire right,
title and interest in and to the Trademarks, the same to be held and enjoyed by
Assignee for its own use and enjoyment, and for the use and enjoyment of its
successors, assigns or other legal representatives forever, as fully and
entirely as the same would have been held and enjoyed by Assignor had the
assignment and sale set forth herein not been made.
<PAGE>
IN TESTIMONY WHEREOF, Assignor has caused these presents to be signed by
its officer thereunto duly authorized, and its corporate seal to be hereto
affixed.
BROOKHURST, INC.
By: /s/ William Ott
_________________________
Name: William Ott
Title: President
COUNTY OF NEW YORK :
:ss:
STATE OF NEW YORK :
On this 5th day of November, 1997, before me personally appeared
William Ott, to me personally known, who, being duly sworn, did say that he is
President of Brookhurst, Inc., a California corporation, and that the
foregoing instrument was signed and sealed on behalf of the corporation by
authority of its Board of Directors, and that he acknowledges such instrument to
be the free deed and act of said corporation for the purposes therein set forth
and intending that this instrument be recorded.
/s/ Lynn Micholson
______________________
Notary Public
-2-
<PAGE>
SCHEDULE OF TRADEMARKS
Brookhurst Inc.'s BOSS
Non-U.S. Trademark Applications/Registrations*
================================================================================
TRADEMARK REG/APP NO. GOODS** COUNTRY STATUS
- --------------------------------------------------------------------------------
BOSS 721562 clothing Canada pending
- --------------------------------------------------------------------------------
BOSS 96/06527 clothing for export Hong Kong applied
- --------------------------------------------------------------------------------
BOSS (Stylized) 96/06527 clothing for export Hong Kong applied
- --------------------------------------------------------------------------------
BOSS AMERICA 643416 clothing Italy registered
- --------------------------------------------------------------------------------
BOSS AMERICA 643416 sporting goods Italy registered
- --------------------------------------------------------------------------------
BOSS AMERICA 330801/1992 eyewear Japan pending
- --------------------------------------------------------------------------------
BOSS AMERICA 330803/1992 furniture Japan pending
- --------------------------------------------------------------------------------
BOSS AMERICA 330804/1992 clothing Japan pending
- --------------------------------------------------------------------------------
BOSS AMERICA 330805/1992 embroidery Japan pending
- --------------------------------------------------------------------------------
BOSS 96/06531 clothing Malaysia applied
- --------------------------------------------------------------------------------
BOSS GOLF COMPANY INC. -- business name PRC pending
- --------------------------------------------------------------------------------
BOSS BUSINESS 85032505 clothing Taiwan applied
================================================================================
* Prior to Closing, the Acquisition Agreement shall not be deemed to be
breached by inclusion of incorrect information relating to the
Classification or Status in this Schedule. Said information shall be
reviewed, corrected if necessary, updated and confirmed by Seller prior to
Closing.
** For ease of reference the description of goods in this chart is
generalized.
<PAGE>
EXHIBIT 10.10 (f)
TRADEMARK ASSIGNMENT
This Assignment is effective as of the 5th day of November, 1997, by and
between Brookhurst, Inc., a California corporation with its principal place
of business at 107 West Carob Street, Compton, California 90220 ("Assignor")
and I.C. Isaacs & Company L.P., a Delaware limited partnership with its
principal place of business at 3840 Bank Street, Baltimore, Maryland 21224
("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor is the owner of certain trademarks outside of the
United States of America except Mexico constituting or containing the word
BOSS and, if any, the Stylized B, including common law rights and rights in
certain trademark registrations and applications for registration outside the
United States of America except Mexico and listed on the "Schedule of
Trademarks" attached hereto, together with the good will of the business
outside the United States of America except Mexico associated therewith
throughout the world (the "Trademarks");
WHEREAS, Assignee desires to acquire all right, title and interest of
Assignor in and to the Trademarks;
NOW, THEREFORE, to All Whom It May Concern, be it known that for good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Assignor does hereby sell, assign, transfer and set over, to
Assignee, its successors and assigns forever, its entire right, title and
interest in and to the Trademarks, the same to be held and enjoyed by Assignee
for its own use and enjoyment, and for the use and enjoyment of its
successors, assigns or other legal representatives forever, as fully and
entirely as the same would have been held and enjoyed by Assignor had the
assignment and sale set forth herein not been made.
<PAGE>
IN TESTIMONY WHEREOF, Assignor has caused these presents to be signed by
its officer thereunto duly authorized, and its corporate seal to be hereto
affixed.
BROOKHURST, INC.
By: /s/ William Ott
------------------
Name: William Ott
Title: President
COUNTY OF NEW YORK :
:ss:
STATE OF NEW YORK :
On this 5th day of November, 1997, before me personally appeared William
Ott, to me personally known, who, being duly sworn, did say that he is
President of Brookhurst, Inc., a California corporation, and that the
foregoing instrument was signed and sealed on behalf of the corporation by
authority of its Board of Directors, and that he acknowledges such instrument
to be the free deed and act of said corporation for the purposes therein set
forth and intending that this instrument be recorded.
/s/ Lynn Michalson
--------------------
Notary Public
-2-
<PAGE>
SCHEDULE OF TRADEMARKS
Brookhurst Inc.'s BOSS
Non-U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
TRADEMARK REG/APP NO. GOODS* COUNTRY STATUS
- --------- ----------- ----- ------- ------
<S> <C> <C> <C> <C>
BOSS AMERICA 643416 clothing Italy registered
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 643416 sporting goods Italy registered
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330801/1992 apparatus, instruments Japan pending
and machines
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330803/1992 furniture Japan pending
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330804/1992 clothing Japan pending
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330805/1992 head ornaments Japan pending
- ----------------------------------------------------------------------------------------------
</TABLE>
* For ease of reference the description of goods in this chart is
generalized. (See trademark files for specific goods which may be much more
limited than the generalized terms used above.)
<PAGE>
EXHIBIT 10.10 (g)
TRADEMARK ASSIGNMENT
This Assignment is effective as of the 5th day of November, 1997, by and
between I.C. Isaacs & Company L.P., a Delaware Limited Partnership with its
principal place of business at 3840 Bank Street, Baltimore, Maryland 21224
("Assignor") and Ambra Inc., a Delaware corporation with its principal place
of business at 1209 Orange Street, Wilmington, Delaware 19801 and ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor is the owner of certain trademarks outside of the
United States of America except Mexico constituting or containing the word
BOSS and the Stylized B, including common law rights and rights in
trademark registrations and applications for registration outside the
United States of America except Mexico listed on the "Schedule of
Trademarks" attached hereto, together with the good will of the business
outside the United States of America except Mexico associated therewith
(the "Trademarks");
WHEREAS, Assignee desires to acquire all right, title and interest of
Assignor in and to the Trademarks;
NOW, THEREFORE, to All Whom It May Concern, be it known that for good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Assignor does hereby sell, assign, transfer and set over, to
Assignee, its successors and assigns forever, its entire right, title and
interest in and to the Trademarks, the same to be held and enjoyed by Assignee
for its own use and enjoyment, and for the use and enjoyment of its
successors, assigns or other legal representatives forever, as fully and
entirely as the same would have been held and enjoyed by Assignor had the
assignment and sale set forth herein not been made.
<PAGE>
IN TESTIMONY WHEREOF, Assignor has caused these presents to be signed by
its officer thereunto duly authorized, and its corporate seal to be hereto
affixed.
I.C. ISAACS & COMPANY L.P.,
A DELAWARE LIMITED PARTNERSHIP
BY: I.G. DESIGN, INC., A DELAWARE
CORPORATION, ITS GENERAL PARTNER
By: /s/ Robert J. Arnot
---------------------------------
Name: Robert J. Arnot
Title: Chairman and
Co-Chief Executive Officer
By: /s/ Gerald W. Lear
----------------------------------
Name: Gerald W. Lear
Title: President and
Co-Chief Executive Officer
COUNTY OF NEW YORK :
:ss:
STATE OF NEW YORK :
On this 5th day of November, 1997, before me personally appeared Robert
J. Arnot and Gerald W. Lear, to me personally known, who, being duly sworn,
did say that they are the Chairman and Co-Chief Executive Officer and
President and Co-Chief Executive Officer, respectively, of I.G. Design, Inc.,
a Delaware Corporation, which is the General Partner of I.C. Isaacs & Company
L.P. a Delaware Limited Partnership, and that the foregoing instrument was
signed and sealed on behalf of the Limited Partnership by authority of its
General Partner, and that they acknowledge such instrument to be the free
deed and act of said Limited Partnership for the purposes therein set forth
and intending that this instrument be recorded.
/s/ Lynn Michalson
--------------------
Notary Public
-2-
<PAGE>
SCHEDULE OF TRADEMARKS
I.C. Isaacs & Co., L.P.'s BOSS
Non-U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
TRADEMARK REG/APP NO. GOODS* COUNTRY STATUS
- --------- ----------- ----- ------- ------
<S> <C> <C> <C> <C>
BOSS AMERICA 643416 clothing Italy registered
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 643416 sporting goods Italy registered
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330801/1992 apparatus, instruments Japan pending
and machines
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330803/1992 furniture Japan pending
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330804/1992 clothing Japan pending
- ----------------------------------------------------------------------------------------------
BOSS AMERICA 330805/1992 head ornaments Japan pending
- ----------------------------------------------------------------------------------------------
</TABLE>
* For ease of reference the description of goods in this chart is
generalized. (See trademark files for specific goods which may be much more
limited than the generalized terms used above.)
<PAGE>
EXHIBIT 10.10(h)
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into this
5th day of November, 1997, by and between Brookhurst, Inc., a California
corporation ("Brookhurst") and I.C. Isaacs & Company L.P., a Delaware limited
partnership ("Isaacs").
W I T N E S S E T H:
WHEREAS, Brookhurst has agreed to sell, transfer and assign to Isaacs, and
Isaacs has agreed to purchase and accept from Brookhurst certain assets of
Brookhurst pursuant to a Worldwide Rights Acquisition Agreement entered into on
November 5, 1997 between Brookhurst and Isaacs (the "Acquisition Agreement");
WHEREAS, Isaacs has agreed to assume certain obligations related to said
acquired assets;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, it is agreed as follows:
1. Capitalized terms used herein and not defined herein shall have the
meanings given such terms in the Acquisition Agreement.
2. Brookhurst hereby assigns to Isaacs all its rights under the agreements
identified on the schedule attached hereto constituting the Assumed Agreements,
and all files relating thereto, free and clear of all Encumbrances.
3. Isaacs hereby assumes all obligations of Seller arising from and after
the date hereof under the Assumed Agreements solely insofar as they arise after
Closing.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day, month and year first above written.
BROOKHURST, INC.
By: /s/ William Ott
-------------------------
Name: William Ott
Title: President
<PAGE>
I. C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: /s/ Robert J. Arnot
-----------------------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief Executive Officer
By: /s/ Gerald W. Lear
-----------------------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief Executive Officer
-2-
<PAGE>
SCHEDULE
See Schedule 1.1(b) to the Acquisition Agreement
<PAGE>
Exhibit 10.10(i)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into this 5th day of November 1997, by
and among (i) I. C. Isaacs & Company L.P., a Delaware limited partnership
("Buyer"); (ii) Brookhurst, Inc., a California corporation ("Seller") and
(iii) Paine Webber Inc. (the "Escrow Agent").
W I T N E S S E T H :
WHEREAS, Seller and Buyer are parties to a Worldwide Rights Acquisition
Agreement dated September 30, 1997 (the "Acquisition Agreement") pursuant to
which Seller has sold to Buyer, and Buyer has purchased from Seller, subject
to the terms and conditions set forth in the Agreement, certain assets,
subject to certain liabilities, of Seller constituting the assets of the
BOSS business of Seller;
WHEREAS, Buyer and Seller wish to enter into this Escrow Agreement in
order to establish an escrow arrangement for certain funds that are being and
will be deposited with the Escrow Agent pursuant to the terms of the
Acquisition Agreement and a promissory note of even date herewith in favor of
Seller (the "Note");
WHEREAS, funds deposited with the Escrow Agent hereunder shall be
referred to as the "Escrow Fund";
WHEREAS, Buyer and Seller wish to appoint the Escrow Agent, and the
Escrow Agent has agreed to act, as a depository and administrator of the
Escrow Fund upon the terms, conditions and provisions hereinafter set forth;
and
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, receipt of which
is hereby acknowledged by the Escrow Agent, it is hereby agreed among the
parties hereto as follows:
1. Appointment of the Escrow Agent
1.1 Buyer and Seller hereby designate the Escrow Agent, and the Escrow
Agent hereby agrees to act, as a depository and administrator of the Escrow
Fund, subject to the terms and conditions set forth herein.
<PAGE>
1.2 The Escrow Agent's duties and responsibilities, in its capacity as
such, shall be limited to those expressly set forth in this Escrow Agreement,
and the Escrow Agent shall not be subject to, nor obligated to recognize, any
other agreement between any or all of the parties hereto even though
reference thereto may be made herein, except to the extent that definitions
contained in the Acquisition Agreement are incorporated into this Escrow
Agreement. This Escrow Agreement may not be amended at any time in such a
way as to affect the rights, responsibilities, obligations, liabilities or
fees of the Escrow Agent except with the Escrow Agent's prior written
consent, as evidenced by an instrument in writing signed by all the parties
hereto.
1.3 The Escrow Agent, in its capacity as such, is authorized, in its
sole discretion, to disregard any and all notices or directions given by
Buyer or Seller or by any other person, firm or corporation, except (i) such
notices, directions, instructions as are specifically provided for herein,
(ii) joint written instructions received by the Escrow Agent from Buyer and
Seller and (iii) a Final Order (as hereinafter defined). If any property
subject hereto is at any time attached, garnished or levied upon under a
Final Order, or in case the payment, assignment, transfer, conveyance or
delivery of any such property shall be stayed or enjoined by the Final Order,
or in case the Final Order shall be made or entered affecting such property
or any part thereof, then and in any of such events the Escrow Agent is
authorized to rely upon and comply with any such Final Order which the Escrow
Agent is advised by competent and experienced legal counsel of its own
choosing, or by legal counsel selected by mutual consent of Seller and Buyer,
is not subject to further review or appeal and is binding upon the Escrow
Agent for purposes hereof . The term "Final Order" as used herein shall mean
a final judgment, order or award of a court of competent jurisdiction or
arbitrator, as evidenced by a certified copy of such judgment, order or
award, as certified by such court or arbitrator, as the case may be, provided
that such judgment, order or award is not appealable or the time for taking
an appeal has expired, or in the case of an arbitral award, payment is not
stayed by a court of competent jurisdiction.
1.4 (a) In the event that the Escrow Agent shall be uncertain as to its
duties or actions hereunder, or shall receive instructions from Buyer or
Seller which, in the opinion of the Escrow Agent, are in conflict with any of
the provisions of this Agreement, it shall be entitled to maintain the Escrow
Fund and may decline to take any further action until the Escrow Agent
receives joint written instructions from Buyer and Seller (or a Final Order)
directing the disbursement of all or any portion of such Escrow Fund, in
which case the Escrow Agent shall then make such disbursement in accordance
with such instructions (or Final Order). Should any dispute arise with
respect to the payment or ownership or right of possession of any proposed
disbursement, the Escrow Agent is authorized and directed to retain in its
possession, without liability to anyone, all or any part of the amount of
such proposed disbursement until such dispute shall have been settled either
by mutual agreement of the parties concerned or by a Final Order, provided
that the Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings, and, provided further, that if any such dispute
continues for more than 120 days, the Escrow Agent may, in its discretion,
upon written notice to Buyer and Seller
<PAGE>
interplead the Escrow Fund (or that portion thereof which is the subject of such
dispute) to a court of competent jurisdiction (subject to the provisions of
Section 6.4(b) hereof).
(b) Notwithstanding the foregoing, the interpleader by the Escrow
Agent of any sum to a court of competent jurisdiction (the "Interpleader
Action") shall in no way operate to alter or affect the parties' obligations
to arbitrate any dispute pursuant to paragraph 6.4(b) of this Agreement. In
furtherance of the parties' obligations to arbitrate any dispute arising
hereunder the parties agree to execute any reasonably necessary document,
including but not limited to any stipulation, stipulated order and/or
stipulation of discontinuance, to cause any sum interpleaded to a court of
competent jurisdiction by the Escrow Agent to be transferred to an account
under the control of the arbitrator(s) selected pursuant to paragraph 6.4(b)
of this Agreement and to have the Interpleader Action dismissed.
Thereafter, the dispute related to the interpleaded funds shall be resolved
in arbitration pursuant to paragraph 6.4(b) of the Agreement.
1.5 (a) It is understood and agreed that the Escrow Agent shall:
(i) be under no duty to accept notices or instructions from any
person other than as expressly provided for in this Escrow Agreement;
(ii) be protected in acting upon any notice, opinion, request,
certificate, approval, consent or other document reasonably believed by it
to be genuine and what it purports to be;
(iii)be deemed conclusively to have given and delivered any
notice required to be given or delivered hereunder if the same is in
writing, signed by any one of its authorized officers and (A) mailed, by
registered or certified mail, return receipt requested, postage prepaid,
(B) sent via expedited courier service that regularly requires signed
receipts evidencing delivery, or (C) hand delivered, in a sealed wrapper,
manually receipted for by the addressee, in each case to Buyer or Seller
with a copy to the other party to this Agreement at the addresses set
forth in Section 6.3 hereof;
(iv) be indemnified and held harmless jointly by Buyer and
Seller from and against any claim made against it by reason of its acting
or failing to act in connection with any of the transactions contemplated
hereby and against any loss, liability or expense, including reasonable
attorneys' fees and other reasonable expenses of defending itself against
any claim of liability it may sustain in carrying out the terms of this
Escrow Agreement, except for claims which are successfully asserted
against the Escrow Agent based upon the Escrow Agent's failure to comply
with the terms and conditions of this Escrow Agreement or the bad faith,
gross negligence or willful misconduct of the Escrow Agent; provided
however, that (A) promptly after the receipt by the Escrow Agent of
notice of any demand or claim or the commencement of any such action,
suit or proceeding, the Escrow Agent shall notify all parties hereto in
writing of the existence of such demand, claim, action, suit or
proceeding; (B) the
<PAGE>
indemnitor shall be entitled, at its own expense, to participate in
and assume the defense of any such action, suit or proceeding; and (C)
the aforesaid indemnity obligations shall survive the termination of
this Escrow Agreement or the resignation of the Escrow Agent;
(v) have no liability in respect of or duty to inquire into
the terms and conditions of the Acquisition Agreement or any other
document or agreement executed in connection with or pursuant to the
Acquisition Agreement, its duties under this Escrow Agreement being
understood by the parties to be ministerial in nature;
(vi) be permitted to consult with counsel of its choice which
is reasonably experienced in legal matters of a nature similar to those
arising under this Escrow Agreement, and shall not be liable for any
action taken, suffered or omitted by it in good faith in accordance with
the advice of such counsel; provided, however, that nothing contained in
this subsection (vi), nor any action taken by the Escrow Agent or by such
counsel, shall relieve the Escrow Agent from liability for any claims
which are occasioned by its failure to comply with the terms and
conditions of this Escrow Agreement or the bad faith, gross negligence or
willful misconduct of the Escrow Agent, as provided in subparagraph (iv)
above;
(vii) not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Escrow Agreement, unless
the same shall be in writing and signed by both Buyer and Seller and
notice thereof is provided to the Escrow Agent, except to the extent that
any such modification, amendment, termination, cancellation, rescission
or supersession affects the rights, responsibilities, obligations,
liabilities or fees of the Escrow Agent hereunder, in which case any
document or instrument reflecting such changes shall also be signed by
the Escrow Agent;
(viii) be entitled to refrain from taking any action other than
to keep all cash and other payments and all other property held by it in
escrow and to make the investments as herein provided until it shall be
directed otherwise in writing by Buyer and Seller, or as otherwise
provided herein or by a Final Order; and
(ix) not have any interest in the Escrow Fund, other than
possession thereof in its capacity as escrow agent hereunder.
(b) Any payments of interest or income from the Escrow Fund shall
be subject to withholding regulations then in force with respect to federal,
state and local taxes. The parties will provide the Escrow Agent with
appropriate W-9 forms for taxpayer identification number certifications. It
is understood that the Escrow Agent shall be responsible for income reporting
only with respect to income earned on investment of funds which are part of
the Escrow Fund and shall not be responsible for any other reporting. This
paragraph shall survive
<PAGE>
notwithstanding any termination of this Escrow Agreement or the resignation
of the Escrow Agent.
(c) Notwithstanding anything to the contrary herein, unless and
until funds are deposited with the Escrow Agent pursuant to Section 2.1, the
Escrow Agent shall not have any liability or responsibility whatsoever to
Buyer or Seller or any other person under this Escrow Agreement, except for
its failure or refusal to accept delivery of any funds deposited in escrow
with the Escrow Agent in the manner specified in Section 2.1 or to hold such
funds thereafter pursuant to the terms hereof.
1.6 From and after the date hereof, Buyer and Seller shall deliver or
cause to be delivered to the Escrow Agent such further documents and
instruments, or cause to be done such further acts, as the Escrow Agent may
reasonably request in order to enable the Escrow Agent to carry out more
effectively the provisions and purposes of this Escrow Agreement, to evidence
compliance with this Escrow Agreement or to assure itself that it is
reasonably protected in acting under this Escrow Agreement.
1.7 (a) For its services hereunder, the Escrow Agent shall be entitled
to be paid an annual fee in the amount specified in Exhibit A, payable in
advance. The Escrow Agent hereby acknowledges receipt from Buyer and Seller
of the fee for the first annual period hereunder. Payment of the relevant
fee for all subsequent annual periods shall be due on each anniversary of
the date hereof.
(b) All fees of the Escrow Agent hereunder shall be paid by Buyer
and Seller, such parties sharing equally in such costs.
2. Establishment of Escrow Fund
2.1 The parties acknowledge and agree that $5,625,000 has been deposited
with the Escrow Agent as of the date hereof and from time to time further
funds will be deposited with the Escrow Agent. The parties further agree
that subject to the provisions of paragraph 3.2(e), one-half (1/2) of all
principal and interest payments due under paragraph 2 of the Note shall be
transmitted by the maker thereunder to the Escrow Agent for deposit in the
Escrow Fund. Under no circumstances shall Seller be obligated to deposit any
funds in the Escrow Fund beyond the amounts set forth in this Section 2.1
which are deposited by the maker with the Escrow Agent.
2.2 The Escrow Fund shall be held by the Escrow Agent in a separate
account and disbursed to Buyer or Seller in accordance with the terms of this
Agreement.
2.3 The Escrow Agent shall invest all funds on deposit from time to time
in the Escrow Fund, and all undistributed income earned thereon, and keep the
same invested in certain instruments as Seller shall from time to time direct
the Escrow Agent in writing, subject to the restrictions and limitations
hereinafter provided, and disburse the same
<PAGE>
terms, conditions and provisions hereof. The Escrow Agent shall invest the
Escrow Fund solely in accordance with Seller's instructions, provided that
Seller's instructions and the Escrow Agent's authority shall be restricted
to: (i) obligations issued or unconditionally guaranteed by the Government of
the United States of America or any State or political subdivision thereof;
(ii) certificates of deposit and interest-bearing deposit accounts of any
domestic bank or trust company which has a combined capital and surplus of at
least $200,000,000; (iii) certificates of deposit with a maturity not to
exceed one year or (iv) commercial paper with a maturity of no more than one
year issued by any corporation organized and existing under the laws of the
United States of America or any state thereof, which at the time of purchase
has been rated, and the ratings for which are not less than, "A-1" if rated
by Standard and Poor's Corporation or "P-1" if rated by Moody's Investors
Services, Inc. In no event shall the Escrow Agent invest the Escrow Fund or
any undistributed income earned thereon in any security or instrument having
a maturity extending beyond one year, provided, that such limitation shall
not apply to the obligations described in clause (i) above. The Escrow Agent
shall have authority to invest daily cash receipts received by the Escrow
Fund in the Paine Webber Money Market Fund, or equivalent brokerage house
money market fund pending investment of such funds in accordance with the
provisions of this Section 2.3.
3. Disposition of Escrow Fund
3.1 All funds on deposit from time to time in the Escrow Fund shall be
held, invested and reinvested by the Escrow Agent pursuant to the terms of
this Escrow Agreement until the funds therein shall be disbursed in
accordance with the terms of this Escrow Agreement.
3.2 The Escrow Agent shall make disbursement of funds on deposit in the
Escrow Fund only as set forth in this Section 3.2.
(a) Buyer shall promptly provide Seller and the Escrow Agent with a
copy of all Buyer Indemnity Claims submitted by Buyer pursuant to Section 8.2
of the Acquisition Agreement, whether such Buyer Indemnity Claims are issued
before or after any funds are deposited into escrow hereunder.
(b) Promptly following its receipt of notice of any Buyer Indemnity
Claims, and without any further duty of investigation or inquiry on its part,
the Escrow Agent shall establish a reserve (a "Reserve") in the Escrow Fund,
which in all events shall be equal to the full amount of each claim
identified in such notice (which shall include, without limitation, Buyer's
good faith estimate of the costs and expenses reasonably expected to be
incurred by Buyer in investigating and disposing of any such claim). Subject
to Sections 9.12(b) and (c) of the Acquisition Agreement concerning release
of funds from the Escrow Fund following expedited arbitration, the Escrow
Agent shall not be authorized to release any funds from the Escrow Fund as to
which a Reserve has been established pursuant to this Section 3.2(b) unless
and until the relevant Buyer Indemnity Claim that gave rise to such Reserve
has been Definitively Resolved and the Escrow Agent has received written
notice of such resolution pursuant to the requirements of Section 3.2(c)
below. Until they are Definitively Resolved in
<PAGE>
the manner hereinafter provided, all unresolved Buyer Indemnity Claims shall
be referred to herein as "Pending Claims."
(c) For purposes hereof, a Pending Claim shall be deemed to have
been "Definitively Resolved" when any of the following events has occurred:
(i) a claim is settled by mutual written agreement of Buyer and Seller; or
(ii) a Final Order deciding such claim has been rendered; or
(iii) ninety (90) days have elapsed since Seller's initial receipt of
notice of a Buyer Indemnity Claim ("First Notice") and neither
Buyer nor Escrow Agent has received, on or before that date, a
written notice from Seller disputing such claim in whole or in
part, and Buyer has provided a further notice ("Second Notice")
sent to Seller by registered or certified mail to the effect that
Seller has not disputed such claim and that Buyer intends to submit
a Settlement Notice (as hereinafter defined) and Seller has not
within thirty (30) days after receipt of such Second Notice
disputed in writing the Buyer Indemnity Claim by written notice to
Buyer or Escrow Agent.
The Escrow Agent shall not be deemed to have received notice that a Pending
Claim has been Definitively Resolved, and shall not be obligated to take any
action with respect thereto, until 10 days after the Escrow Agent shall have
received one of the following (a "Settlement Notice"): (A) with respect to
subparagraph (i) above, a copy of joint written instructions duly signed by
Buyer and Seller stating that a Pending Claim has been settled by mutual
agreement of Buyer and Seller; (B) with respect to subparagraph (ii) above, a
certified copy of the final arbitration award which has not been stayed by a
court of competent jurisdiction within 30 days thereafter, or the final
non-appealable judgment, order or award of the relevant court, together with
a certificate duly signed by the prevailing party in such proceeding
certifying that such judgement, order or award is final and non-appealable
for all purposes hereof; and (C) with respect to subparagraph (iii) above,
written certification from Buyer issued to the Escrow Agent in good faith to
the effect that Buyer has provided the First Notice and the Second Notice as
described in subparagraph (iii) above without having received a written
dispute notice from Seller, as provided above. Each Settlement Notice shall
stipulate the amount(s) to be paid to Buyer or Seller in connection with
such Definitively Resolved claim, and copies thereof shall be provided to
each of the parties hereunder at the same time it is provided to the Escrow
Agent. Buyer and Seller hereby acknowledge and agree that the Escrow Agent
shall have the right to rely upon any Settlement Notice duly given jointly by
Buyer and Seller under (A) in the preceding sentence, by Buyer or Seller
under (B) in the preceding sentence and by Buyer under (C) in the preceding
sentence, and shall be authorized to act upon any such written notice.
(d) A Buyer Indemnity Claim that has been Definitively Resolved
shall be referred to herein as a "Settled Claim". To the extent that a
Settled Claim has been resolved in favor of Buyer, the Escrow Agent shall
promptly disburse the full amount (or the relevant
<PAGE>
portion, as applicable) of such claim to Buyer (or such other person as Buyer
may direct) from the Escrow Fund (to the extent of funds in the Escrow Fund)
in accordance with the relevant Settlement Notice. Following such payment,
all Reserves that relate to such Buyer Indemnity Claim and are not due Buyer
in accordance with the terms of the Settlement Notice shall be released, but
the funds subject thereto shall remain in the Escrow Fund until otherwise
disbursed in accordance with the terms hereof.
(e) On November 30, 1999, the excess of the outstanding principal
amount of the Escrow Fund over $10,050,000, as such excess amount is further
reduced by the aggregate amount of all outstanding Reserves, shall be
disbursed by the Escrow Agent to Seller on five (5) days' prior written
notice to Buyer. On November 30, 2000, the excess of the outstanding
principal amount of the Escrow Fund over $8,250,000, as such excess amount is
further reduced by the aggregate amount of all outstanding Reserves, shall be
disbursed by the Escrow Agent to Seller on five (5) days' prior written
notice to Buyer. On November 30, 2001, the excess of the outstanding
principal amount of the Escrow Fund over $4,750,000, as such amount is
further reduced by the aggregate amount of all outstanding Reserves, shall be
disbursed by the Escrow Agent to Seller on five (5) days' prior written
notice to Buyer. On November 30, 2002, the excess of the outstanding
principal amount of the Escrow Fund over the aggregate amount of all
outstanding Reserves, shall be disbursed by the Escrow Agent to Seller on
five (5) days' prior written notice to Buyer.
(f) Subject to paragraph (e) above, all funds deposited with the
Escrow Agent shall continue to be held in escrow hereunder until November 30,
2002, on which date the balance of the Escrow Fund, net of any Reserves,
shall be distributed to Seller. Any amounts remaining with the Escrow Agent
thereafter shall be released from time to time as and when all remaining
Pending Claims to which such funds relate have been Definitively Resolved.
The Escrow Agent shall promptly disburse to Buyer the full amount of each
Settled Claim resolved in favor of Buyer in accordance with the relevant
Settlement Notice and any funds in the Escrow Fund in excess of remaining
Reserves shall be distributed to Seller. Notwithstanding the foregoing, all
funds deposited with the Escrow Agent shall be distributed to Buyer and/or
Seller in accordance with any joint written instructions of Buyer and Seller.
(g) The Escrow Agent shall provide written notice of any proposed
distributions of funds to Buyer or Seller hereunder five (5) days before
making any such disbursement. For purposes of such five (5)-day notice
period, such period shall commence on the date on which the relevant notice
is given by the Escrow Agent to Buyer and Seller and shall terminate at
midnight on the fifth business day thereafter. The Escrow Agent shall also
send copies of all notices it receives hereunder to the other parties hereto.
3.3 The party or parties receiving a disbursement from the Escrow Fund
shall, upon request, furnish to the Escrow Agent concurrently with its
receipt of such disbursement, a signed receipt for the amount of such
disbursement.
<PAGE>
4. Disposition of Income
All income earned from time to time by the Escrow Fund ("Income") shall
be pooled with all other funds held in the Escrow Fund for investment
purposes and shall become part of the Escrow Fund for all purposes, provided
that on December 31 of each calendar year or any other date mutually
agreeable to Buyer, Seller and the Escrow Agent, Escrow Agent shall disburse
to Seller 35% of all accrued Income (net of losses or any other expenses)
unless such Income amounts are subject to a Reserve, Pending Claim or Settled
Claim. Any losses realized upon any investment of the Escrow Fund pursuant
to Section 2.3 or otherwise shall be charged to the Escrow Fund.
5. Term
5.1 The term of this Escrow Agreement shall commence on the date hereof
and continue until the entire amount of principal and Income on deposit in
the Escrow Fund shall have been disbursed by the Escrow Agent as provided in
this Escrow Agreement, whereupon this Escrow Agreement and the escrow
arrangements created hereunder shall terminate, and the Escrow Agent shall be
released and discharged from all further duties and obligations hereunder,
but without prejudice to any liability of the Escrow Agent for its failure to
comply with the terms and conditions of this Escrow Agreement or its bad
faith, gross negligence or willful misconduct hereunder.
5.2 The Escrow Agent shall have the right, upon termination of this
Escrow Agreement as hereinabove provided, to require the other parties
hereto, as a condition to receiving a final disbursement from the Escrow
Fund, if applicable, to execute, acknowledge and deliver to the Escrow Agent
releases of the Escrow Agent, in its capacity as such, reasonably
satisfactory to the Escrow Agent in form and content; provided, however, that
the Escrow Agent shall have accounted to each party delivering such release
with respect to the Escrow Agent's administration of the Escrow Fund and
provided further that any such release shall not extend to any acts of bad
faith, gross negligence or willful misconduct on its part in connection with
the Escrow Agent's administration of the Escrow Fund.
6. Miscellaneous
6.1 (a) Buyer and Seller may, upon at least 30 days' prior written
notice to the Escrow Agent executed by each of them, dismiss the Escrow Agent
hereunder and jointly appoint a successor. In such event, the Escrow Agent
shall promptly account for and deliver to the successor escrow agent named in
such notice the then balance of the Escrow Fund, if any, including all
investments thereof and accrued income thereon. Upon acceptance thereof and
of such accounting by such successor escrow agent, and upon reimbursement to
the Escrow Agent by Buyer and Seller of all expenses due to it hereunder
through the date of such accounting and delivery, the Escrow Agent, in its
capacity as such, shall be released and discharged from all of its duties and
obligations hereunder, but without prejudice to any liability of the Escrow
<PAGE>
Agent for failure to comply with the terms and conditions of this Escrow
Agreement or its bad faith, gross negligence or willful misconduct hereunder.
(b) (i) Without limiting the foregoing, the Escrow Agent (and any
successor escrow agent hereunder) shall have the right, as provided in (ii)
below, at any time to resign as such by delivering the Escrow Fund to any
successor escrow agent jointly designated by the other parties hereto in
writing , or to any escrow agent which constitutes a national banking
association with assets in excess of $500,000,000 who is willing to
serve under this Agreement], or to any court of competent jurisdiction,
[or to an account under the control of the arbitrator(s) selected pursuant to
paragraph 9.12 of the Acquisition Agreement, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement, but without prejudice to any liability of the
Escrow Agent for its bad faith, gross negligence or willful misconduct
hereunder.
(ii) The resignation of the Escrow Agent will take effect on the
earlier of (a) the appointment of a successor escrow agent (including a
court of competent jurisdiction) or (b) the day which is 30 business days
after the date of delivery of its written notice of resignation to the
other parties hereto. If at that time the Escrow Agent has not received a
designation of a successor escrow agent hereunder, the Escrow Agent's sole
responsibility after that time shall be to safekeep the Escrow Fund until
receipt of a designation of successor escrow agent hereunder or a joint
written disposition instruction by the other parties hereto or a final
order.
6.2 This Escrow Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors, heirs,
remaindermen, assigns, executors, administrators, personal representatives,
trustees and fiduciaries. The Escrow Agent shall have the right to rely upon
any proper evidence of the authority of any such successors, heirs,
remaindermen, assigns, executors, administrators, personal representatives,
trustees and fiduciaries. Notwithstanding anything to the contrary herein
contained, no beneficial interest of any person in the Escrow Fund shall be
subject to anticipation or assignment by such person, nor shall the Escrow
Fund be subject to interference or control of any creditor of such person, or
be taken or reached by any legal or equitable process in satisfaction of any
debt or other liability of such person prior to disbursement, and each party
hereby agrees to indemnify the other parties in connection with any loss or
diminution of such party's interest in the Escrow Fund as a result of any
such matter.
6.3 Any notice, direction, instruction or other communications required
or permitted hereunder shall be given or made in writing and shall be (i)
delivered personally (including commercial carrier), (ii) sent by registered
or certified airmail, return receipt requested, postage prepaid or (iii) sent
by telecopier, addressed to the party to whom they are directed at the
following addresses, or at such other address as may from time to time be
designated by such party to the others in accordance with this Section 6.3:
<PAGE>
If to Buyer, to:
I. C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: President and Co-Chief Executive Officer
Telecopier: 410/558-2096
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and Co-Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1604
If to Seller, to:
Brookhurst, Inc.
107 West Carob Street
Compton, California 90220
Attention: William E. Ott
Telecopier: 310/763-3846
With a copy to:
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Attention: Robert J. Jossen, Esq.
Telecopier: 212/758-9526
<PAGE>
If to the Escrow Agent, to:
Paine Webber Inc.
777 South Figueroa
52nd Floor
Los Angeles, CA 90017
Attention: Robert Donato
Telecopier: 213/972-1539
Copies of any written communications sent by Buyer or Seller to the
Escrow Agent relating to this Escrow Agreement shall be sent to the other
parties hereto, and copies of any written communications sent by the Escrow
Agent relating to this Escrow Agreement shall be sent to Buyer and Seller.
Notwithstanding the foregoing, Buyer and Seller shall have the right to
engage in direct written communications between themselves relating to this
Escrow Agreement without providing copies thereof to the Escrow Agent, except
to the extent otherwise required under the terms of this Escrow Agreement.
All notices, directions, instructions and communications hereunder shall
be effective, and deemed given, if and when delivered, on and as of the date
of receipt thereof, as evidenced by a written receipt by or on behalf of the
party to which the same is so delivered, and, if mailed or sent by expedited
courier, on and as of the date of delivery, as evidenced by the
acknowledgement of delivery issued with respect thereto by the applicable
postal authorities or by the confirmation of delivery issued by the
applicable courier service. Any party may change its address for notices
hereunder, effective upon giving of notice of such change hereunder to the
other parties.
6.4 (a) The validity, construction, operation, and effect of any and
all of the terms and provisions of this Agreement shall be determined and
enforced in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law thereunder, except as to matters
solely involving foreign trademark rights, in which case the applicable
foreign trademark laws shall be applied to determine such foreign trademark
rights. In the event any legal action becomes necessary to enforce or
interpret the terms of this Agreement, the parties agree that such action
will be brought in the U.S. District Court for the Southern District of New
York, and the parties hereby submit to the jurisdiction of such court;
provided, however, that any party may enforce an arbitration award in any
court of competent jurisdiction located in New York City and the parties
hereby submit to the jurisdiction of any such court.
(b) Notwithstanding Section 6.4(a) above, except as provided in
this Section 6.4(b), all disputes arising from or in any way in connection
with this Agreement shall be finally settled through binding arbitration
conducted pursuant to the Rules of Conciliation and Arbitration of the
International Chamber of Commerce in effect as of the date of the initiation
of any dispute submitted to arbitration under this section ("ICC Rules") by
three arbitrators appointed in accordance with the ICC Rules. Except as
provided in this Section, no modification or amendment of the ICC Rules
applicable to any such arbitration shall be binding upon the parties unless
agreed to in writing by the parties. In each such arbitration, each party to
the dispute
<PAGE>
shall appoint one arbitrator within 30 days of receipt by the defendant of
the request for arbitration, and the arbitrators so appointed by the parties
shall appoint the third arbitrator (who shall be the Chairman), within 30
days of the confirmation of the later of the two arbitrators appointed by the
parties. If any such arbitration involves multiple claimants or multiple
defendants, nomination of arbitrator shall be governed by the applicable ICC
rules. Notwithstanding anything to the contrary contained in the ICC rules:
(i) the arbitration proceedings shall be conducted in the City of New York,
State of New York; (ii) the arbitration proceedings shall be conducted in the
English language; and (iii) the arbitrators shall apply New York law without
regard to such state's choice of law rules except as to matters involving
issues of foreign trademark law, in which case the applicable foreign
trademark laws shall be applied. If the non-prevailing party does not comply
with an arbitration decision, the prevailing parties may immediately enforce
the arbitration decision in an equitable proceeding in court with both
parties' court costs and related attorneys' fees paid by the non-prevailing
party in the arbitration, unless the arbitration decision is modified, or not
upheld or enforced, in which case, each side shall bear its own costs and
attorneys' fees.
6.5 This Escrow Agreement, and any notice, direction or other document
or instrument delivered in connection herewith, may be executed in
counterparts, each of which shall constitute an original instrument, but all
of which together shall constitute a single agreement, notice, direction,
document or instrument as the case may be. Buyer and Seller agree to
cooperate with each other in good faith in joining in any notices or written
instructions that are required to be delivered to the Escrow Agent jointly by
Buyer and Seller.
6.6 The provisions of this Escrow Agreement shall not be altered or
terminated by operation of law or by the occurrence of any event (except as
otherwise specified herein), including, without limitation, the death or
incapacity or the termination of the legal existence of any party hereto.
6.7 No party hereto may assign any of its interests, rights or
obligations under this Agreement without the prior written consent of the
other parties. Notwithstanding the foregoing, Buyer may, without the consent
of Seller, assign rights and obligations under this Agreement to any entity
under common control with Buyer or to any successor-in-interest, in whole or
in part, to the assets acquired by Buyer from Seller, and Seller may assign
its rights and obligations to any successor-in-interest to the assets of
Seller by merger or liquidation. In addition, Seller may direct in writing
to Escrow Agent (with a copy sent to Buyer) that proceeds of the Escrow Fund
be paid to any third party Seller shall designate in writing. Nothing in
this Agreement shall be construed as requiring Seller's or the Escrow Agent's
consent to (a) the assignment, in whole or in part, of ICI's (as hereinafter
defined) rights under this Agreement (including the right to make claims
against and obtain proceeds from the Escrow Fund) to Ambra Inc., any
affiliate of Hugo Boss AG ("Ambra"), or (b) the assumption, in whole or in
part, of ICI's obligations under this Agreement by Ambra. In the event of
such assignment and/or assumption, Ambra shall be recognized as "Buyer" for
purposes of all claims submitted by Ambra as Buyer pursuant to Section 3,
including, without limitation, for purposes of
<PAGE>
distribution of funds pursuant to Settled Claims resulting therefrom.
Nothing in this Agreement shall be construed as affecting Buyer's rights
under Section 6.10.
6.8 All monetary amounts stated herein or determined hereunder are and
shall be denominated in United States dollars, and all liabilities and
obligations of any party hereunder, to the extent calling for the payment of
money, shall be satisfied in United States dollars.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the day and year first above written.
I. C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: /s/ Robert J. Arnot
------------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief Executive
Officer
By: /s/ Gerald W. Lear
------------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief Executive
Officer
BROOKHURST, INC.
By: /s/ William Ott
------------------------------------
Name: William Ott
Title: President
Paine Webber Inc.
-----------------------------,
as Escrow Agent
By: /s/ Illegible
Name: Illegible
Title: Branch Manager
<PAGE>
EXHIBIT 10.10(j)
COLLATERAL ASSIGNMENT OF TRADEMARKS
This COLLATERAL ASSIGNMENT OF TRADEMARKS is effective as of the 5th day
of November, 1997, by and between I.C. Isaacs & Company L.P., a Delaware
Limited Partnership with its principal place of business at 3840 Bank Street,
Baltimore, Maryland 21224 ("Assignor") and Ambra Inc., a Delaware corporation
with its principal place of business at 1209 Orange Street, Wilmington,
Delaware 19801 ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor is the owner of certain trademarks in the United
States of America constituting or containing the word "BOSS" and the
"Stylized B", including common law rights and rights in certain trademark
registrations and applications for registration listed on the "Schedule of
Trademarks" attached hereto, together with the good will of the business
associated therewith (the "Trademarks");
WHEREAS, pursuant to a secured limited recourse promissory note of even
date herewith between Assignor and Assignee (the "Secured Note"), Assignor
has granted to Assignee a security interest in and to the collateral
described therein, including, without limitation, the Trademarks;
NOW, THEREFORE, to All Whom It May Concern, be it known that for good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and in order to secure the performance by Assignor of the
Obligations, as that term is defined in the Secured Note, Assignor does
hereby assign, transfer and set over to Assignee, its successors and assigns,
its entire right, title and interest in and to the Trademarks (excluding any
intent-to-use applications for trademark registration) and any and all of
Assignor's right, title and interest in and to any service marks, trade
names, logos, insignias, designs, copyrights (if any) and other proprietary
interests containing or constituting the word "BOSS" or the Stylized B, the
same to be held and enjoyed by Assignee for its own use and enjoyment, and
for the use and enjoyment of its successors, assigns or other legal
representatives as fully and entirely as the same would have been held and
enjoyed by Assignor had the assignment and transfer set forth herein not been
made.
<PAGE>
IN TESTIMONY WHEREOF, Assignor has caused these presents to be signed by
its officer thereunto duly authorized, and its corporate seal to be hereto
affixed.
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: I.G. DESIGN, INC., a Delaware
corporation, its general partner
By: /s/ Robert J. Arnot
-----------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
-----------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
COUNTY OF NEW YORK :
:ss:
STATE OF NEW YORK :
On this ____ day of November, 1997, before me personally appeared Robert
J. Arnot and Gerald W. Lear, to me personally known, who, being duly sworn,
did say that they are Chairman and Co-Chief Executive Officer and President
and Co-Chief Executive Officer, respectively, of I.G. Design, Inc., the
general partner of I.C. Isaacs & Company L.P., a Delaware limited
partnership, and that the foregoing instrument was signed and sealed on
behalf of the limited partnership by authority of its general partner, and
that they acknowledge such instrument to be the free deed and act of said
limited partnership for the purposes therein set forth and intending that
this instrument be recorded.
/s/ Lynn Michalson
--------------------
Notary Public
LYNN MICHALSON
NOTARY PUBLIC, State of New York
Reg. No 01MI4753246
Qualified in New York County
Commission Expires June 30, 1999
<PAGE>
SCHEDULE OF TRADEMARKS
I.C. Isaacs & Company L.P.'s BOSS
U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B (Stylized) 1,756,992 clothing (25) USA registered/date*
BOSS 1,023,305 work clothes (25) USA renewed
BOSS 1,933,326 golf clubs (28) USA registered
LADY BOSS 1,214,960 work clothes for women (25) USA registered
BOSS 101,509 clothing (25) California registered
BABY BOSS 74/346,231 children's flatware (8); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
BABY BOSS 74/801,565 linens (24); USA applied/suspended
lace and embroidery (26)
BOSS 75/013,293 machines and tools (7); USA applied/suspended
hand tools and instruments (8);
appliances (11);
vehicle parts (12);
clocks (14);
household utensils (21)
BOSS 74/323,654 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
</TABLE>
* For ease of reference the description of goods in this chart is generalized.
(See registrations and applications for specific goods covered.)
<PAGE>
U.S. Trademark Applications/Registrations (Page 2 of 3)
<TABLE>
<CAPTION>
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BOSS 74/074,962 mugs (21); USA applied/suspended
towels (24);
socks and sweatbands (25);
golf bags (28)
BOSS 74/801,552 linens (24); USA applied/suspended
lace and embroidery (26)
BOSS 74/075,953 clothing (25) USA applied/suspended
BOSS 74/326,997 clothing (25) USA applied/suspended
BOSS 74/263,623 skis and roller skates (28) USA applied/suspended
BOSS 74/269,769 toys/sporting goods (28) USA applied/suspended
BOSS AMERICA 74/346,232 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
BOSS AMERICA 74/801,551 linens (24); USA applied/suspended
lace and embroidery (26)
BOSS BUSINESS 74/355,226 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
BOSS BUSINESS 74/801,657 linens (24); USA applied/suspended
hair ornaments (26)
</TABLE>
<PAGE>
U.S. Trademark Applications/Registrations (Page 3 of 3)
<TABLE>
<CAPTION>
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BOSS GOLF 74/346,233 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
BOSS GOLF 74/801,554 linens (24); USA applied/suspended
lace and embroidery (26)
LADY BOSS 74/346,230 golf carts and bicycles (12); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
LADY BOSS 74/801,550 linens (24); USA applied/suspended
lace and embroidery (26)
LITTLE BOSS 74/346,234 children's flatware (8); USA applied/suspended
jewelry (14);
paper goods (16);
leather goods (18);
clothing (25);
toys/sporting goods (28)
LITTLE BOSS 74/801,545 linens (24); USA applied/suspended
lace and embroidery (26)
</TABLE>
<PAGE>
EXHIBIT 10.10(k)
TERMINATION OF LICENSE AGREEMENT
THIS TERMINATION OF LICENSE AGREEMENT ("Agreement") is entered into and
effective as of the 5th day of November, 1997 ("Effective Date"), by and between
BROOKHURST, INC., a California corporation ("LICENSOR"), and I.C. ISAACS & CO.,
L.P., a Delaware limited partnership ("LICENSEE").
RECITALS
A. LICENSOR and LICENSEE entered into that certain License Agreement dated
August 11, 1994 regarding the use of the mark BOSS ("License Agreement").
B. LICENSOR and LICENSEE mutually desire to terminate the License
Agreement effective as of the Effective Date.
NOW, THEREFORE, the parties agree as follows:
1. TERMINATION
The License Agreement is hereby terminated in all respects except as
otherwise provided herein, effective as of the Effective Date.
2. ROYALTIES
On or before 30 days after the Effective Date, LICENSEE shall pay to
LICENSOR *% (* percent) of all royalties earned pursuant to the License
Agreement as of the Effective Date. On or before 90 days after the Effective
Date, Licensee shall pay to Licensor the remaining *% of all royalties earned
pursuant to the License Agreement. Notwithstanding anything to the contrary
contained in the License Agreement, the sole permitted deduction from Royalties
earned shall be a deduction for bad debts incurred by the Licensee in connection
with the sale of the Licensed Products. LICENSOR shall have the right to audit
the books and records of LICENSEE with respect to all royalties paid under the
License Agreement for a period of six (6) months following the date hereof. If
such audit discloses that payments due to LICENSOR under the License Agreement
exceed the amount of payments actually made to LICENSOR, LICENSEE shall remit
such additional amount to LICENSOR within ten (10) days of notification from
LICENSOR.
- ------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
3. TERMINATION PROCEDURES
The termination procedures provided in paragraphs 19.a. through 19.c. of
the License Agreement are not applicable to this termination.
4. RELEASE
Notwithstanding anything to the contrary contained in the License
Agreement, LICENSOR and LICENSEE, on behalf of themselves and their respective
subsidiaries, successors and assigns, hereby remises, releases and forever
discharges the other from all attorneys fees, costs, settlement amounts and/or
damages arising out of the lawsuit in the United States District Court for the
Southern District of New York, Hugo Boss Fashions, Inc., et al. v. Brookhurst,
Inc., et al., 93 Civ. 0875 (LMM) (THK) or any other currently pending lawsuit
anywhere in the world brought by Hugo Boss (or any of its affiliates or
licensees) against LICENSOR, LICENSEE or any of their respective agents,
suppliers or manufacturers. This release does not extend to and shall not be
deemed to release any claim arising out of any conduct other than that
specifically released herein.
IN WITNESS WHEREOF, the parties agree that this Agreement shall take
effect as of the date first written above.
BROOKHURST, INC., a
California corporation
By:/s/ William Ott
-------------------------
William Ott, President
I.C. ISAACS & CO., L.P., a
Delaware limited partnership
By: /s/ Robert J. Arnot
-------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
-------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
<PAGE>
EXHIBIT 10.10(l)
Exhibit G
["Boss by Brookhurst." logo typeface]
<PAGE>
EXHIBIT 10.10(m)
1. Brookhurst may retain copies of records and documents containing the
name and mark "BOSS" for archival purposes and may make (i) oral references,
(ii) the written references set forth in the Attachment hereto, and (iii) with
the prior written approval of Hugo Boss, which shall not be unreasonably
withheld, other written references to the name and mark "BOSS", in each such
case in connection with its uniform business solely for purposes of describing
the history of Brookhurst but shall not be used for sales or promotional
purposes. In addition, Brookhurst may make reference to its past use of the name
and mark BOSS in its financial statements and, to the extent required, in any
public filing. In addition, posters bearing the Trademarks may be retained and
displayed in the private offices of Brookhurst's executives but may not, under
any circumstances, be displayed in any public areas of Brookhurst's business
premises such as reception areas and showrooms.
2. Isaacs Samples. Brookhurst owns approximately 4000 finished sportswear
garments manufactured by Isaacs with a label that bears a BOSS logo in its
possession, including but not limited to denim jeans, shorts, jackets, coats,
skirts, crew neck shirts, sweat shirts, collar and placket shirts, blouses and
hats (such garments referred to in this paragraph 2 being hereinafter referred
to as the "Isaacs Samples"). Brookhurst shall permit Hugo Boss and/or its
attorneys to (i) review; (ii) obtain two dozen Isaacs Samples at no cost to Hugo
Boss; and (iii) purchase, at wholesale cost, any additional Isaacs Samples.
Thereafter, Brookhurst may, only for a period of six months after the Closing
Date, sell and distribute the Isaacs Samples in its possession; provided,
however, that Brookhurst shall not sell or offer any Isaacs Samples for sale or
resale (i) outside of the United States, its territories, possessions or
commonwealths or (ii) to athletic stores whose primary product line is composed
of products intended to be used in connection with golf, tennis, skiing,
sailing, windsurfing, motor sports or any combination thereof, or at golf,
tennis, skiing, sailing, windsurfing, or motor sports athletic events.
3. Old Logo Samples. Brookhurst owns approximately 119 finished sportswear
garments manufactured by or on behalf of Boss Sportswear (USA), Inc. and/or Boss
Golf Company, Inc. with a label, logo and/or graphic image that bears a BOSS or
BOSS AMERICA logo and/or label in a typestyle depicted on Exhibit A to the
Court's June 13, 1993 order in Hugo Boss Fashions, Inc. v. Brookhurst, Inc., et
al., 93 Civ. 0875 (S.D.N.Y.), including but not limited to crew neck shirts,
sweat shirts, collar and placket shirts, hats, and jackets (such garments
referred to in this paragraph 3 being hereinafter referred to as the "Old Logo
Samples"). Brookhurst shall not sell or otherwise distribute the Old Logo
Samples in its possession except in accordance with this paragraph 3. Brookhurst
may retain and distribute to its executives and attorneys no more than
twenty-four (24) Old Logo Samples. Brookhurst shall tender, at no cost to Hugo
Boss, the remaining Old Logo Samples, and Hugo Boss within 60 days shall either
donate the Old Logo Samples to charity, or otherwise dispose of the Old Logo
Samples, in Hugo Boss' sole discretion. If Hugo Boss donates the Old Logo
Samples to charity, Hugo Boss shall make reasonable efforts to obtain a receipt
on behalf of Brookhurst evidencing such donation. If Hugo Boss fails to donate
the Old Logo Samples to charity or dispose of them within 60 days, Brookhurst
may donate such samples to the charity or charities of its choice.
<PAGE>
4. New Logo Samples. Brookhurst owns approximately _____ finished
sportswear garments manufactured by or on behalf of Boss Sportswear (USA), Inc.
and/or Boss Golf Company, Inc. with a label, logo and/or graphic image that
bears a BOSS or BOSS AMERICA logo and/or label in a typestyle depicted in the
Court's August 19, 1993 order, as amended, in Hugo Boss Fashions, Inc. v.
Brookhurst, Inc., et al., 93 Civ. 0875 (S.D.N.Y.), including but not limited to
crew neck shirts, sweat shirts, collar and placket shirts, hats, and jackets
(such garments referred to in this paragraph 4 being hereinafter referred to as
the "New Logo Samples"). Brookhurst shall permit Hugo Boss and/or its attorneys
to (i) review; (ii) obtain two dozen New Logo Samples at no cost to Hugo Boss
and (iii) purchase, at wholesale cost, any additional New Logo Samples.
Thereafter, Brookhurst may, only for a period of six (6) months after the
Closing Date, sell and distribute the New Logo Samples in its possession,
provided; however, that neither Brookhurst nor any affiliate thereof shall sell,
or offer any New Logo Samples for sale or resale (i) outside of the United
States, its territories, possessions or commonwealths or (ii) to athletic stores
whose primary product line is composed of products intended to be used in
connection with golf, tennis, skiing, sailing, windsurfing, motor sports or any
combination thereof or at golf, tennis, skiing, sailing, windsurfing, or motor
sports athletic events.
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ATTACHMENT TO EXHIBIT H
From 1889 to 1997, Brookhurst and its predecessor companies manufactured and
sold clothing under the Brookhurst BOSS label.
<PAGE>
Exhibit 10.11(a)
CBYNO
September 30, 1997
FOREIGN BOSS RIGHTS ACQUISITION AGREEMENT
AGREEMENT dated as of September 30, 1997, by and between Ambra Inc., a
corporation organized and existing under the laws of Delaware ("Buyer") and
I. C. Isaacs & Company L.P., a limited partnership organized and existing
under the laws of Delaware ("Seller").
W I T N E S S E T H :
WHEREAS, Seller has entered into a Worldwide Rights Acquisition Agreement
dated as of September 30, 1997 with Brookhurst, Inc. ("Brookhurst") and
William Ott to acquire all of Brookhurst's right, title and interest in and
to all "BOSS" trademarks and other proprietary interests, if any, related
thereto owned by Brookhurst and used in connection with its business
throughout the world together with the goodwill symbolized thereby (the
"Worldwide Rights Acquisition Agreement").
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, all of Seller's right, title and interest outside of the
United States of America and its territories and possessions (hereinafter,
the "United States of America") in and to all "BOSS" trademarks and other
proprietary interests outside of the United States of America, if any,
related thereto acquired and owned by Seller and used in connection with its
business outside of the United States of America, together with the goodwill
symbolized by such trademarks, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein
the parties hereby agree as follows:
<PAGE>
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of BOSS Assets. Upon the terms and conditions
herein set forth, Seller shall sell, convey, transfer, assign and deliver to
Buyer on the Closing Date (as hereinafter defined), and Buyer shall purchase
from Seller on the Closing Date, the following assets, properties and rights
of Seller (the "Trademark Assets"), all of which, taken together, represent
the business of Seller operating under the BOSS marks outside of the United
States of America acquired from Brookhurst:
(a) any and all right, title and interest of Seller in and to the
trademarks, service marks, trade names, logos, insignias, designs, copyrights
(if any), and other proprietary interests therein, containing the term "BOSS"
or constituting a stylized B, outside of the United States of America,
including, without limitation, all registrations and applications for
registration therefor throughout the world but not including the United
States of America (collectively, the "Trademarks"), and the goodwill
symbolized by the Trademarks relating to their use outside the United States
of America, together with all causes of action and the proceeds thereof in
favor of Seller heretofore accrued with respect to the Trademarks outside of
the United States of America;
(b) all rights of Seller under license agreements, concurrent use
agreements and other agreements listed on Schedule 1.1(b) insofar as they
relate to the Trademarks being acquired by Buyer from Seller hereunder,
including, without limitation, all rights of Seller under the Worldwide
Rights Acquisition Agreement and the Escrow Agreement referred to therein
relating to the Trademarks (the "Assumed Agreements") and all files relating
thereto, it being
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agreed that Seller shall retain all of Seller's rights under the Worldwide
Rights Acquisition Agreement and the Escrow Agreement insofar as they relate
to the trademark properties retained by Seller in the United States of
America. In clarification of the foregoing, the parties acknowledge and
agree that Buyer shall have recourse directly against Brookhurst and Ott
under the Worldwide Rights Acquisition Agreement and the Escrow Fund as
defined and set forth in the Escrow Agreement for any matters involving the
breach of covenants, representations, warranties or conditions set forth in
the Worldwide Rights Acquisition Agreement insofar as they relate to the
Trademark Assets acquired by Buyer hereunder from Seller;
(c) all right, title and interest in and to all records and other
information the Selling Parties (as defined in the Worldwide Rights
Acquisition Agreement) or either of them have within their possession or
control applicable to the products they or either of them have previously
licensed under the Trademarks and all trademark files relating to the
Trademark Assets.
(d) any and all copyrights that Seller may own arising outside of the
United States of America as a result of designs and other works created by
Seller, Brookhurst, or any licensee, nominee or manufacturer of either of
them, in connection with the BOSS business.
1.2 Liabilities. Buyer shall assume the obligations of Seller arising
from and after Closing under the Assumed Agreements solely insofar as they
relate to the use of the Trademark Assets after Closing. Buyer shall assume
no liabilities or obligations, whether now existing or arising in the future,
fixed or contingent, known, or unknown, relating to the use by Seller
(including, without limitation, use by any of Seller's affiliates,
subsidiaries, predecessors or
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licensees) of the Trademarks and any other matter relating to the conduct of
any business relating thereto prior to the Closing ("Excluded Liabilities").
1.3 Encumbrances. The sale and transfer of the Trademark Assets shall
be free and clear of all pledges, security interests, mortgages and liens
made or created by Seller ("Encumbrances").
1.4 Exclusions. Notwithstanding any other provision of this Agreement,
Seller makes no representations or warranties of any kind, and shall have no
responsibility, liability or obligations whatsoever to Buyer or any affiliate
thereof (including, without limitation, for any claims for indemnity), with
respect to any matter relating to the Trademark Assets prior to the time
Seller acquired the Trademark Assets, including, without limitation, the
quality of title, the condition or use of the Trademark Assets or the conduct
of the business thereunder prior to the time Seller acquired the Trademark
Assets from Brookhurst except as expressly set forth in this Agreement.
ARTICLE II
CONSIDERATION
2.1 Consideration. In consideration of the sale and transfer of the
Trademark Assets to Buyer on the Closing Date, Buyer shall assume any and all
obligations of Seller under the Promissory Note in the principal amount of
U.S. $11,000,000 of Seller referred to in the Worldwide Rights Acquisition
Agreement and payable to the order of Brookhurst (the "Note").
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ARTICLE III
THE CLOSING
3.1 Time and Place of Closing. The closing of the purchase and sale of
the Trademark Assets hereunder (the "Closing") shall take place at the
offices of Coudert Brothers located at 1114 Avenue of the Americas, New York,
New York 10036 at 10:00 a.m. local time on a date agreed to by the parties
(the "Closing Date"), which date shall not be later than eight (8) business
days following the date on which the applicable waiting period, including any
extension thereof, under the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended, relating to the transactions contemplated by the Worldwide
Rights Acquisition Agreement shall have expired.
3.2 Deliveries To Be Made by the Seller. On the Closing Date, Seller
shall have executed and delivered to Buyer the following:
(a) executed trademark assignments in the forms attached hereto as
Exhibit A;
(b) an agreement of assignment and assumption of Assumed Agreements
in the form annexed hereto as Exhibit B (the "Assumption Agreement");
(c) a concurrent use agreement between Seller and Hugo Boss AG
("Hugo Boss") in the form annexed hereto as Exhibit C (the "Concurrent
Use Agreement");
(d) a foreign manufacturing rights agreement between Seller and
Buyer in the form annexed as Exhibit D (the "Foreign Manufacturing Rights
Agreement");
(e) an option agreement between Seller and Buyer in the form
annexed as Exhibit F (the "Option Agreement");
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(f) a secured limited recourse promissory note in the form annexed as
Exhibit F (the "ICI Note");
(g) an agreement of assumption of the Note and assignment of all rights
related thereto (the "Note Assumption Agreement") in the form annexed hereto
as Exhibit G; and
(h) such other instruments and documents as may be elsewhere herein
required.
3.3 Deliveries To Be Made by Buyer. On the Closing Date, Buyer shall
have executed or caused to be executed and delivered to Seller the following:
(a) the Note Assumption Agreement;
(b) the Assumption Agreement;
(c) the Concurrent Use Agreement, duly executed by Hugo Boss;
(d) the Foreign Manufacturing Rights Agreement;
(e) the Option Agreement;
(f) the ICI Note; and
(g) A Guaranty by Hugo Boss AG of the Note in the form annexed
hereto as Exhibit H (the "Guaranty");
(h) an Agreement regarding Consent to Release and Waiver of
Brookhurst Note Claims in the form annexed hereto as Exhibit I (the "Consent
Agreement"); and
(i) such other instruments and documents as may be elsewhere herein
required.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller makes the following representations and warranties, each of which
is complete and correct on and as of the date hereof. As used in this
Agreement, including, without limitation, this Article IV, the term Seller
shall not be construed to include reference to Seller's
predecessor-in-interest to the Trademark Assets, namely Brookhurst.
4.1 Organization and Good Standing of the Seller. Seller is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware.
4.2 Authority; Execution. Seller has all the requisite power and
authority, corporate and otherwise, to execute, deliver and perform its
obligations under this Agreement. The execution and delivery of this
Agreement, and each of the other instruments of transfer, conveyance and
assignment delivered hereunder, have been duly and validly authorized by all
necessary corporate and other action on the part of Seller, and this
Agreement and each of such other instruments has been duly executed by
Seller. This Agreement constitutes the valid and binding agreement of Seller
enforceable against Seller in accordance with its respective terms.
4.3 Breach of Statute or Contract.
(a) The execution, delivery and performance of this Agreement by Seller
and the consummation of the transactions contemplated hereby will not: (i)
violate or conflict with any provision of the charter documents or by-laws of
Seller; (ii) violate or conflict with, result in the breach or termination of
or otherwise give any other contracting party the right to terminate, or
constitute a default (or an event which, with the lapse of time, or the
giving of notice, or both, will constitute a default) under, any contract or
other instrument to which Seller is a party
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and which relate to the Trademark Assets or by which Seller is bound, or
result in the creation of any Encumbrance upon any of the Trademark Assets
pursuant to the terms of any such contract or instrument, or (iii) violate or
conflict with any judgment, order, writ, injunction or decree of any court or
governmental body of any jurisdiction applicable to Seller (excluding any
judgments, orders, writs, injunctions or decrees in any actions or
proceedings involving Hugo Boss or its affiliates) or, to the knowledge of
Seller, any law or regulation materially adversely affecting Buyer's ability
to exploit the Trademark Assets.
(b) Except as set forth on Schedule 4.3(b), there are no notices,
licenses, consents, permissions or approvals of any nature whatsoever which
are required to be obtained by Seller from any Federal, state or local
governmental or regulatory body or other third party or, to Seller's
knowledge, from any foreign governmental or regulatory body for the
consummation of the transactions contemplated by this Agreement, or as a
condition to the sale, assignment and transfer of the Trademark Assets to be
effected hereunder.
4.4 No Claims or Litigation. Except as set forth on Schedule 4.4(a), no
litigation, judicial or arbitral action, claim asserted in writing and
received by Seller within the preceding two years or, to the knowledge of
Seller, administrative or regulatory proceeding or adversarial proceeding in
any trademark office, or governmental investigation involving the Trademark
Assets or the transactions contemplated by this Agreement, including, without
limitation, any claim of conflict with or violation of any proprietary or
other right (collectively, "Litigation") is pending or, to the knowledge of
Seller, threatened against Seller. For purposes of the foregoing,
"Litigation" shall not be deemed to include any actions, proceedings or
claims involving Hugo Boss or its affiliates. Except as set forth on
Schedule 4.4(b), there is no
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judgment, order, injunction, decree or award outstanding (whether rendered by
a court, tribunal, administrative agency or arbitral tribunal and excluding
any judgments, orders, injunctions, decrees or awards in any actions or
proceedings involving Hugo Boss or its affiliates), against Seller or
referencing Seller by name or, to Seller's knowledge, by which Seller is
bound which affects the Trademark Assets or the use of the Trademark Assets
in any way.
4.5 Trademarks. Except as set forth in Schedule 4.5.A, Seller is not
currently licensing any person to use or operate under any of the Trademarks.
True and complete copies and, if not available, descriptions of all such
licenses, including all amendments or modifications, have heretofore been
delivered to Buyer. Except as set forth in Schedule 4.5.B, and except for
customary sell-off rights granted to alleged infringers, Seller has not
affirmatively agreed or consented to the non-use by Seller, or use by any
third party, of any mark containing the word BOSS. To Seller's knowledge
(such knowledge being based solely on Seller's actual knowledge), the
countries in which Seller currently manufactures products bearing the
Trademarks are: Hong Kong, Indonesia, Macao, Mexico, People's Republic of
China, Phillipines, Republic of South Korea, Taiwan and Thailand. Seller
has paid, or will pay within a reasonable period of time, in full (or
otherwise to the satisfaction of the invoicing party) all outstanding
invoices of domestic and foreign trademark counsel for work done and
disbursements incurred on behalf of Seller (whether or not billed on or by
the date hereof).
4.6 No Alienation of Rights By Seller. Except as set forth in the
Assumed Agreements or any other documents identified on Schedule 4.5.A or B
or Schedule 4.6, Seller has not transferred, assigned, licensed (which
license is currently outstanding) or otherwise encumbered with Encumbrances
any of its rights in any Trademark Asset.
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4.7 Ownership Trademark Assets. As between Seller and all affiliates
and other persons or entities who have an ownership interest in Seller (or
any affiliate thereof) or who may have been expressly authorized by Seller to
use the Trademark Assets, Seller owns all rights in and to the Trademark
Assets (as defined in the Worldwide Rights Acquisition Agreement and as
acquired from Brookhurst under said agreement).
4.8 Knowledge. Whenever a statement regarding the existence or absence
of facts in this Agreement is qualified by a phrase such as to Seller's
knowledge or words to similar effect, it is intended by the parties that the
information attributed to Seller be actually known, or information which
should have been known based on reasonable inquiry by the Chairman and
Co-Chief Executive Officer, President and Co-Chief Executive Officer or Chief
Financial Officer of Seller.
4.9 Materiality. The phrase "materially adversely affecting Buyer's
ability to exploit the Trademark Assets" or words of similar effect, shall be
deemed to mean (i) the existence or occurrence at any time from and after the
date hereof of any actual harm, or the existence of any reasonably
anticipated actual harm, to Buyer's ability to exploit the Trademark Assets
or (ii) either (x) the failure of Seller to remedy the breach in question
assuming the breach is remediable or (y) the inability of Seller to remedy
the breach in question without prejudice to Buyer's ability to exploit the
Trademark Assets. For purposes of this Section 4.10, no "actual
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harm" shall be deemed to exist as to any of the first three claims of harm
unless any such claim of harm reasonably involves at least the following
amounts in damage or loss:
First Claim $35,000
Second Claim $25,000
Third Claim $25,000
it being agreed that, without prejudice to, or limitation of, Seller's
ability to claim that any subsequent claim involves no "actual harm", no such
monetary threshold applies to any subsequent claims.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties each of
which is complete and correct on and as of the date hereof:
5.1 Organization and Good Standing of Buyer. Buyer is a corporation
duly organized and validly existing under the laws of Delaware. Buyer is a
wholly-owned direct subsidiary of Hugo Boss AG, a corporation organized and
existing under the laws of the Federal Republic of Germany ("Hugo Boss").
5.2 Authority; Execution. Buyer has all requisite power and authority,
corporate and otherwise, to execute, deliver and perform its obligations
under this Agreement. The execution and delivery of this Agreement, and each
of the other instruments of transfer, conveyance and assignment delivered
hereunder, by Buyer have been duly and validly authorized by all necessary
corporate and other action on the part of Buyer, and this Agreement and each
of such other
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instruments has been duly executed by Buyer, as applicable. This Agreement
constitutes the valid and binding agreement of Buyer, enforceable against
Buyer in accordance with its terms.
5.3 Breach of Statute or Contract.
(a) The execution, delivery and performance of this Agreement by Buyer
and the consummation of the transactions contemplated hereby will not: (i)
violate or conflict with any provision of the Certificate of Incorporation or
by-laws of Buyer; (ii) violate or conflict with, result in the breach or
termination of or otherwise give any other contracting party the right to
terminate, or constitute a default (or an event which, with the lapse of
time, or the giving of notice, or both, will constitute a default) under, any
contract or other instrument to which Buyer is a party; or (iii) violate or
conflict with any judgment, order, writ, injunction or decree of any court or
governmental body of any jurisdiction applicable to Buyer (excluding any
judgments, orders, injunctions, decrees or awards in any actions or
proceedings involving Seller or its affiliates) or, to the knowledge of
Buyer, any law or regulation materially adversely affecting Buyer's ability
to consummate the transaction contemplated by this Agreement.
(b) Except as provided in Schedule 5.3(b), there are no notices,
licenses, consents, permissions or approvals of any nature whatsoever which
are required to be obtained by Buyer from any Federal, state or local
governmental or regulatory body or other third party or, to Buyer's
knowledge, from any foreign governmental or regulatory body for the
consummation of the transactions contemplated by this Agreement, or as a
condition to the sale, assignment and transfer of the Trademark Assets to be
effected hereunder.
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ARTICLE VI
COVENANTS
6.1 Further Assurances.
(a) From time to time until the expiration of six (6) years from
the Closing Date, upon the request and at the expense of Buyer but without
further consideration, Seller shall:
(i) do, execute, acknowledge, deliver and file, or shall cause
to be done, executed, acknowledged, delivered and filed, all such further
acts, deeds, transfers, conveyances, assignments or assurances (including,
without limitation, for purposes of transferring record ownership of the
Trademark Assets to Buyer) as may be reasonably requested by Buyer for
transferring, conveying, assigning and reducing to Buyer's possession,
ownership and use of the Trademark Assets, including, without limitation,
executing on the Closing Date any assignments of Trademarks in recordable
form requested by Buyer; and
(ii) deliver to Buyer such other records, documentation and
information in Seller's possession or control as may be reasonably requested
by Buyer to assist Buyer in the use and protection of the Trademark Assets.
(b) Seller shall keep and preserve any and all invoices, letters of
credit, bills of lading, and purchase orders which relate to the Trademark
Assets for three (3) years from and after the Closing Date, except as
otherwise provided herein. Seller may dispose or destroy any such records,
documentation and information at any time, provided that Seller first shall
notify Buyer so that Buyer may, at its expense and within a reasonable time
after receipt of such notice, obtain from Seller any or all of said records,
documentation and information. Seller
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shall not be responsible for (i) destruction of records caused by an Act of
God or other "Force Majeure" event, or (ii) any immaterial non-intentional
destruction of records.
6.2 Mail and Communications. From and after the Closing Date, Seller
shall promptly remit or refer to Buyer any mail or other communications,
including, without limitation, any written inquiries, relating solely to the
Trademark Assets, and copies of any such mail or communications which relate
to the Trademark Assets and other matters, which are received by Seller from
and after the Closing for a period of six (6) years from the date hereof.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER
7.1 Conditions Precedent to Obligations of Buyer. The obligation of
Buyer to consummate the transactions contemplated under this Agreement is
subject to the fulfillment, as of the Closing Date, of each of the following
conditions (any or all of which may be waived by Buyer):
(a) the representations and warranties of Seller set forth in
Article IV hereof shall be true and correct in all material respects as of
the Closing Date;
(b) Seller shall have performed and complied in all material
respects with all covenants, obligations and undertakings required by this
Agreement to be performed or complied with on or prior to the Closing Date:
(c) Buyer shall have been furnished with a certificate, dated the
Closing Date and executed by an officer of Seller, certifying to the
fulfillment of the conditions specified in Sections 7.1(a) and (b);
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(d) a settlement agreement by and among Hugo Boss AG, Hugo Boss
USA, Inc., Hugo Boss Fashions, Inc., Brookhurst, Inc., I.C. Isaacs & Company
L.P. and Boss Golf Company, Inc. shall have been entered into by all parties
thereto including, among other things, (i) settling the action commenced by
the filing of a complaint dated February 11, 1993, which complaint was
subsequently amended and superseded by Amended Complaint dated November 5,
1993, (ii) providing for the payment by defendants therein to Hugo Boss of
U.S. $2,000,000, (iii) settling any and all proceedings between Hugo Boss and
Brookhurst or Seller throughout the world (except Canada, Hong Kong and
Mexico) and (iv) including the provisions set forth on Exhibit J and
otherwise on terms mutually satisfactory to all parties thereto (the
"Settlement Agreement") ;
(e) settlement agreements by and between Hugo Boss and Brookhurst
shall have been entered into settling any and all proceedings in Canada, Hong
Kong and Mexico on terms mutually satisfactory to all parties thereto (the
"Foreign Settlement Agreements");
(f) stipulated resolutions of all proceedings in Hong Kong by and
between Hugo Boss, on the one hand, and third party agents or manufacturers
of Seller, on the other, shall have been entered into on terms satisfactory
to Hugo Boss (the "Hong Kong Resolutions");
(g) no judgment, order or decree shall have been rendered which has
the effect of enjoining the consummation of the transactions contemplated by
this Agreement;
(h) the closing under the Worldwide Rights Acquisition Agreement
shall have been completed;
(i) Seller and all other parties thereto shall have executed and
delivered the Foreign Manufacturing Rights Agreement;
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(j) Seller shall have delivered to Buyer possession of (i) an
original of each of Seller's Trademark registrations currently in effect;
(ii) an original of any other registrations for the Trademarks to the extent
in Seller's possession, custody or control; and (iii) Seller's original
trademark application and registration files relating to the Trademarks
including, for example, letters or other materials from each of Seller's
domestic and foreign trademark counsel showing deadlines for trademark office
actions to the extent in Seller's possession, custody or control; provided,
however, if any of such items apply to both the Trademark Assets and the
trademark properties retained by Seller with respect to its BOSS business in
the United States of America, then such information may be provided to Buyer
by photocopy rather than original;
(k) Seller and all other parties thereto shall have executed and
delivered the Concurrent Use Agreement;
(l) Brookhurst and William Ott shall have consented to the
assignment and assumption by Buyer of all rights and obligations of Seller
under the Note and of all rights and obligations of Seller under the
Worldwide Rights Acquisition Agreement (except all "intent-to-use" trademark
applications) and Escrow Agreement relating to the Trademark Assets;
(m) Buyer and Seller shall have entered into a license agreement,
consistent with the terms of Exhibit C, providing for an exclusive
royalty-free license to Buyer of the right to use the Trademarks which are
the subject of intent-to-use applications in the U.S. Patent & Trademark
Office ("PTO") which were acquired by Seller from Brookhurst, on the products
referred to in said applications, together with the right to have such
trademarks transferred to Buyer upon such marks becoming registered with the
PTO, and on such other terms as shall be mutually agreed by the parties (the
"BOSS GOLF et al. License Agreement"); and
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(n) Hugo Boss and Isaacs shall have executed and delivered the
Indemnification Agreement in the form annexed hereto as Exhibit L.
7.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated under this Agreement are
subject to the fulfillment, as of the Closing Date, of each of the following
conditions (any or all of which may be waived by Seller):
(a) the representations and warranties of Buyer set forth in
Article V shall be true and correct in all material respects as of the
Closing Date;
(b) Buyer shall have performed and complied in all material
respects with all obligations and undertakings required by this Agreement to
be performed or complied with by Buyer on or prior to the Closing Date;
(c) Seller shall have been furnished with a certificate, dated the
Closing Date and executed by an officer of Buyer certifying to the
fulfillment of the conditions specified in Sections 7.2(a) and (b);
(d) the Settlement Agreement shall have been entered into by all
parties thereto;
(e) the Foreign Settlement Agreements shall have been entered into
by all parties thereto;
(f) The Hong Kong Resolutions shall have been entered into;
(g) no judgment, order or decree shall have been rendered which has
the effect of enjoining the consummation of the transactions contemplated by
this Agreement;
(h) the closing under the Worldwide Rights Acquisition Agreement
shall have been completed;
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(i) Buyer and all other parties thereto shall have executed and
delivered the Foreign Manufacturing Rights Agreement;
(j) Hugo Boss and all other parties thereto shall have executed and
delivered the Concurrent Use Agreement; and
(k) Brookhurst and William Ott shall have consented to the
assignment and assumption by Buyer of all rights and obligations of Seller
under the Note and of all rights and obligations of Seller under the
Worldwide Rights Acquisition Agreement (except all "intent-to-use" trademark
applications) and Escrow Agreement relating to the Trademark Assets and
Brookhurst and William Ott shall have fully and unconditionally released
Seller from such obligations in the form attached hereto as Exhibit K;
(l) the BOSS GOLF et al License Agreement shall have been entered
by all Parties thereto; and
(m) Hugo Boss and Isaacs shall have executed and delivered the
Indemnification Agreement in the form annexed hereto as Exhibit L.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
INDEMNIFICATION
8.1 All representations and warranties contained in or made pursuant to
this Agreement shall be continuing and shall survive and remain in full force
and effect after the date hereof for a period of five (5) years
notwithstanding any investigation conducted by any party hereto. All claims
for indemnification under this Agreement shall be brought by the parties
exclusively
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pursuant to, and shall be disposed of exclusively in accordance with the
terms of, this Article VIII.
8.2 Indemnity Obligations of the Selling Parties. The Seller hereby
agrees to indemnify and hold Buyer and its parent corporations, subsidiaries,
shareholders, affiliates, directors, officers, employees, agents, successors
and assigns (collectively, "Buyer Affiliates") harmless from, and to
reimburse Buyer and each Buyer Affiliate for, any Buyer Indemnity Claims (as
that term is hereinafter defined) arising under this Agreement. For
purposes of this Agreement, the term "Buyer Indemnity Claim" shall mean any
loss, damage, deficiency, claim, liability, obligation, suit, action, fee,
cost or expense of any nature whatsoever arising out of, based upon or
resulting from (i) the breach by Seller of any representations and warranties
of Seller which are contained in or made pursuant to this Agreement; (ii) any
breach or nonfulfillment of, or any failure to perform, any of the covenants,
agreements, obligations or undertakings made by Seller in or pursuant to this
Agreement which shall not be deemed for purposes of this Section 8.2 to
include covenants, agreements, obligations or undertakings made by Seller in
the agreements attached as Exhibits C, D, E, F and G hereto; (iii) any
liabilities or obligations arising out of any and all actions, claims, suits,
proceedings, demands, assessments, judgments, recoveries, damages, costs and
expenses or deficiencies incident to the disposal of any matter which is the
subject of indemnification under this Section 8.2; and (iv) all interest,
penalties, costs and expenses (including, without limitation, all
out-of-pocket expenses, reasonable investigation expenses and reasonable fees
and disbursements of accountants and counsel) arising out of any matter which
is the subject of indemnification under this Section 8.2 and in which and to
the proportionate extent Buyer Affiliates prevail.
-19-
<PAGE>
8.3 Indemnity Obligations of Buyer. Buyer hereby agrees to indemnify
and hold Seller, and its respective subsidiaries, partners, shareholders,
affiliates, directors, officers, employees, agents, successors and permitted
assigns (collectively, "Seller Affiliates"), harmless from, and to reimburse
Seller and each Seller Affiliate for, any Seller Indemnity Claims (as that
term, is hereinafter defined) arising under this Agreement which shall not be
deemed for purposes of this Section 8.3 to include covenants, agreements,
obligations or undertakings made by Buyer in the agreements attached as
Exhibits C, D, E, F and G hereto. For purposes of this Agreement, the term
"Seller Indemnity Claims" shall mean any loss, damage, deficiency, claim,
liability, suit, action, fee, cost or expense of any nature whatsoever
arising out of, based upon or resulting from (i) the breach of any
representations and warranties of Buyer which are contained in or made
pursuant to this Agreement; (ii) any breach of nonfulfillment of, or failure
to perform, any of the covenants, agreements, obligations or undertakings
made by Buyer in or pursuant to this Agreement; (iii) any liabilities or
obligations assumed by Buyer pursuant to the terms hereof; (iv) any
obligations or liabilities arising out of any and all actions, claims, suits,
proceedings, demands, assessments, judgments, recoveries, damages, costs and
expenses or deficiencies incident to the disposal of any matter which is the
subject of indemnification under this Section 8.3; and (v) all interest,
penalties, costs and expenses (including, without limitation, all
out-of-pocket expenses, reasonable investigation expenses and reasonable fees
and disbursements of counsel and accountants) arising out of any matter which
is the subject of indemnification under this Section 8.3 and in which and to
the proportionate extent Seller Affiliates prevail.
8.4 Notification of Claims. In the event of the occurrence of any event
which any party asserts constitutes a Buyer Indemnity Claim or Seller
Indemnity Claim, as applicable, the
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<PAGE>
indemnified party shall provide the indemnifying party with prompt notice of
such event, including, without limitation, any facts and circumstances which
give rise to such claim, and shall otherwise make available to the
indemnifying party all relevant information which is material to the claim
and which is in the possession of the indemnified party. If such event
involves the claim of any third party (a "Third-Party Claim"), the
indemnifying party shall have the right to elect to join in the defense,
settlement, adjustment or compromise of any such Third-Party Claim, and to
employ counsel to assist such indemnifying party in connection with the
handling of such claim, at the sole expense of the indemnifying party, and no
such claim shall be settled, adjusted or compromised, or the defense thereof
terminated, without the prior consent of the indemnifying party unless and
until the indemnifying party shall have failed, after the lapse of a
reasonable period of time, but in no event more than 30 days after written
notice to it of the Third-Party Claim, to join in the defense, settlement,
adjustment or compromise of the same. An indemnified party's failure within a
reasonable time to give notice or to furnish the indemnifying party with any
relevant data and documents in its possession in connection with any
Third-Party Claim shall not constitute a defense (in part or in whole) to any
claim for indemnification by such party, except and only to the extent that
such failure shall result in any material prejudice to the indemnifying
party. If so desired by any indemnifying party, such party may elect, at
such party's sole expense, to assume control of the defense, settlement,
adjustment or compromise of any Third-Party Claim, insofar as the claim
relates to the liability of the indemnifying party, provided that such
indemnifying party shall obtain the consent of all indemnified parties before
entering into any settlement, adjustment and compromise of such claim, or
ceasing to defend against such claim, if as a result thereof, or pursuant
thereto, there
-21-
<PAGE>
would be imposed on an indemnified party any liability or obligation not
covered by the indemnification obligations of the indemnifying party under
this Agreement (including, without limitation, any injunctive relief or other
remedy).
8.5 Termination. This Agreement may be terminated, and the transactions
contemplated herein may be abandoned, (a) by mutual written agreement of the
parties hereto at any time or (b) by either party by written notice to the
other party if the Closing Date shall not have occurred on or before December
31, 1997, provided that the right to terminate this Agreement hereunder shall
not be available to any party whose breach of any representation or warranty
or failure to perform or comply with any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date.
ARTICLE IX
GENERAL
9.1 Waiver. Any failure of Buyer, on the one hand, or the Seller, on
the other, to comply with any of the obligations or agreements set forth in
this Agreement or to fulfill any condition set forth in this Agreement may be
waived only by written instrument signed by the other party. No failure by
any party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver of such right, nor shall any single or partial exercise
of any right hereunder by any party preclude any other or future exercise of
that right or any other right hereunder by that party.
9.2 Notices. All notices, requests or other communications required or
permitted hereunder (excluding, however, mail and/or communications covered
under paragraph 6.2 hereof) shall be given or made in writing and shall be
(i) delivered personally (including
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<PAGE>
commercial carrier), (ii) sent by registered or certified airmail, return
receipt requested, postage prepaid or (iii) sent by telecopier, addressed to
the party to whom they are directed at the following addresses, or at such
other address as may from time to time be designated by such party to the
others in accordance with this Section 9.2:
If to Seller, to:
I. C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: President and Co-Chief Executive Officer
Telecopier: 410/558-2096
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and Co-Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1604
If to Buyer, to:
Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attention: Graziano DeBoni
Telecopier: 212/940-0619
-23-
<PAGE>
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attention: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
and
Howrey & Simon
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Robert M. Bruskin, Esq.
Telecopier: 202/383-6610
If to Hugo Boss, to:
Hugo Boss AG
12 Dieselstrasse
72555 Metzingen, Germany
Attention: General Counsel
Telecopier: 49/7123-942018
With a copy to:
Coudert Brothers
(as specified above)
and
Howrey & Simon
(as specified above)
Any notice, request or other communications shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any
party may change its address for notices hereunder, effective upon giving of
notice of such change hereunder to the other parties.
9.3 No Third Party Beneficiaries. Neither this Agreement nor any
provision hereof, nor any document or instrument executed or delivered
pursuant hereto, shall be deemed to create
-24-
<PAGE>
any right in favor of or impose any obligation upon any person or entity
other than Buyer and Seller and their respective successors and assigns.
9.4 Equitable Remedies. Seller, on the one hand, and Buyer, on the
other hand, each acknowledge that it will be impossible to measure in money
the damages that would be suffered by Buyer and Seller, respectively, if the
other party fails to comply with the obligations imposed on it pursuant to
paragraphs 1.1, 3.2, 3.3, 6.1 and 6.2 of this Agreement and that, in the
event of any such failure, the claiming party will be irreparably damaged and
will not have an adequate remedy at law. Each party shall, therefore, be
entitled to equitable relief, including, without limitation, injunctive
relief and/or specific performance to enforce such obligations of the other
party and, if any action should be brought in equity to enforce any
provisions of this Agreement, neither party shall raise the defense that
there is an adequate remedy at law. The parties further agree that
notwithstanding the provisions of Section 9.12, either party may, in
accordance with the provisions of this Section 9.4 hereof, seek immediate
injunctive relief in court prior to the initiation of or pending resolution
of any dispute in arbitration. Except as expressly provided in this
Agreement, all specific remedies provided for in this Agreement are
cumulative and are not exclusive of one another or of any other remedies
available at law or in equity. Notwithstanding anything to the contrary set
forth herein, nothing contained elsewhere in this Agreement, including,
without limitation, the monetary thresholds set forth in Section 4.9 with
respect to the definition of "actual harm", shall be deemed to limit in any
way the availability of equitable relief for any breach of this Agreement.
-25-
<PAGE>
9.5 Captions and Paragraph Headings. Captions and paragraph headings
used in this Agreement are for convenience only and are not a part of this
Agreement and shall not be used in interpreting or construing it.
9.6 Entire Agreement. The making, execution and delivery of this
Agreement by the parties has been induced by no representations, statements,
warranties or agreements other than those herein expressed. This Agreement
embodies the entire understanding of the parties with respect to the subject
matter hereof. Notwithstanding the foregoing, the parties acknowledge that a
number of different agreements and instruments of which the parties are
signatory are all being executed simultaneously, as of the Closing Date, with
this Agreement. The parties acknowledge that this Agreement or instrument is
to be interpreted and enforced separately and independently of any other such
agreement or instrument, and the breach of any such agreement by a party
shall not affect the rights of such party under this Agreement. This
Agreement may be amended or modified only by an instrument of equal formality
signed by the parties or their duly authorized representatives. The parties
have made no representations or warranties not expressly set forth in this
Agreement. This Agreement supersedes and terminates all prior discussions,
negotiations, understandings, arrangements and agreements among the parties
relating to the subject matter hereof, except as expressly set forth herein.
9.7 Counterparts. This Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
9.8 Assignability. No party hereto may assign any of its interests,
rights or obligations under this Agreement without the prior written consent
of the other parties. Notwithstanding
-26-
<PAGE>
the foregoing, Buyer may assign its rights, but not its obligations, under
this Agreement to any entity under common control with Buyer or to any
successor in interest to Trademark Assets without the consent of Seller. Any
impermissible attempted assignment of this Agreement without such prior
written consent shall be void as to the other parties to this Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, Seller
shall be permitted to assign and transfer Seller's rights under this
Agreement to any parent, subsidiary or other affiliate of Seller if Seller or
its successor in interest remains fully liable for the performance of this
Agreement by such assignee or transferee and indemnifies Buyer with respect
to any costs and damages Buyer may incur because of such assignment or
transfer.
9.9 Expenses. The parties shall each bear their own expenses in
connection with the negotiation, execution and delivery of this Agreement and
the performance of their respective obligations hereunder.
9.10 Successors and Assigns. This Agreement and the provisions thereof
shall be binding upon and inure to the benefit of the respective successors
and permitted assigns of the parties hereto.
9.11 Governing Law. The validity, construction, operation and effect of
any and all of the terms and provisions of this Agreement shall be determined
and enforced in accordance with the laws of the State of New York without
giving effect to principles of conflicts of law thereunder, except as to
matters involving issues of foreign trademark law, in which case the
applicable foreign trademark laws shall be applied. In the event any legal
action becomes necessary to enforce or interpret the terms of this Agreement,
the parties agree that such action will be brought in the U.S. District Court
for the Southern District of New York, and the parties
-27-
<PAGE>
hereby submit to the jurisdiction of such court; provided, however, that any
party may enforce an arbitration award in any court of competent jurisdiction
located in New York City and the parties hereby submit to the jurisdiction of
any such court.
9.12 Arbitration. Except as provided in paragraph 9.4 above, all
disputes arising from or in any way in connection with this Agreement shall
be finally settled through binding arbitration conducted pursuant to the
Rules of Conciliation and Arbitration of the International Chamber of
Commerce in effect as of the date of the initiation of any dispute submitted
to arbitration under this section ( ICC Rules ) by three arbitrators
appointed in accordance with the ICC Rules. Except as provided in this
Section, no modification or amendment of the ICC Rules applicable to any such
arbitration shall be binding upon the parties unless agreed to in writing by
the parties. In each such arbitration, each party to the dispute shall
appoint one arbitrator within 30 days of receipt by the defendant of the
request for arbitration, and the arbitrators so appointed by the parties
shall appoint the third arbitrator (who shall be the Chairman), within 30
days of the confirmation of the later of the two arbitrators appointed by the
parties. If any such arbitration involves multiple claimants or multiple
defendants, nomination of arbitrators shall be governed by the applicable ICC
rules. Notwithstanding anything to the contrary contained in the ICC rules:
(i) the arbitration proceedings shall be conducted in the City of New York,
State of New York; (ii) the arbitration proceedings shall be conducted in the
English language; and (iii) the arbitrators shall apply New York law without
regard to such state's choice of law rules, except as to matters involving
issues of foreign trademark law, in which case the applicable foreign
trademark laws shall be applied. If the non-prevailing party does not comply
with an arbitration decision, the prevailing parties may
-28-
<PAGE>
immediately enforce the arbitration decision in an equitable proceeding in
court with both parties' court costs and related attorneys' fees paid by the
non-prevailing party in the arbitration, unless the arbitration decision is
modified, or not upheld or enforced, in which case, each side shall bear its
own costs and attorneys' fees.
9.13 Confidentiality. This Agreement, its terms, conditions and
provisions, and the trade secrets and confidential information of the parties
are strictly confidential and shall not be disclosed by either party to any
other person or entity without the prior written consent of the other party,
or as required by law, (i) except financial institutions (including but not
limited to investment bankers and underwriters), attorneys and accountants
with which the parties transact business, provided, however, that such third
parties agree in writing to abide by the terms of this provision; or (ii)
except as appropriate for the parties to protect and/or enforce their
respective trademark rights. Buyer and Seller further agree that disclosure
of this Agreement within their organizations shall be limited to their
respective directors, officers and employees with a "need to know," to carry
out the purposes of this Agreement, or to protect the rights of either party.
Nothing in this provision is intended to prevent or substantially interfere
with Seller's or its partners', affiliates' or stockholders' ability to make
all disclosures required by law pursuant to offering and selling stock to the
public. Notwithstanding the provisions of this Section, in the event of
published reports regarding this Agreement or Seller's relationship with
Buyer or Hugo Boss, Buyer, Hugo Boss and Seller agree to cooperate in good
faith to provide appropriate public responses and comments and the parties
shall be free to make accurate public statements which are appropriate to
correct or clarify the public record.
-29-
<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day
and year first written above.
I. C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: /s/ Robert J. Arnot
----------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief Executive
Officer
By: /s/ Gerald W. Lear
-----------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief Executive
Officer
AMBRA INC.
By: /s/ Jorg-Viggo Muller
------------------------------------
Name:
Title:
Hugo Boss AG ("Hugo Boss") hereby irrevocably and unconditionally
guarantees to Seller the full and timely performance of Buyer's obligations
to Seller under this Agreement. Hugo Boss covenants and agrees to indemnify
and save harmless Seller from and against any damage, liability and expense
resulting from Buyer's breach of this Agreement.
HUGO BOSS AG
By: /s/ Jorg-Viggo Muller
---------------------------------------
Name:
Title:
-30-
<PAGE>
FOREIGN BOSS RIGHTS ACQUISITION AGREEMENT
EXHIBITS
Exhibit A Trademark Assignments
Exhibit B Assumption Agreement
Exhibit C Concurrent Use Agreement
Exhibit D Foreign Manufacturing Rights Agreement
Exhibit E Option Agreement
Exhibit F The ICI Note
Exhibit G Note Assumption Agreement
Exhibit H Hugo Boss AG Guaranty
Exhibit I Consent Agreement
Exhibit J Certain Provisions in Settlement Agreement
Exhibit K Form of Release
Exhibit L Indemnification Agreement
-31-
<PAGE>
FOREIGN
SCHEDULE 1.1(b)
ASSUMED AGREEMENTS
For all of the following agreements to the extent they apply outside the U.S.:
1. Trademark License Agreement by and between Brookhurst, Inc. and
ProGroup, Inc. dated February 1, 1993.
2. Agreement by and between Brookhurst, Inc. and Boss Manufacturing Company
dated January 17, 1994.
3. Settlement Agreement by and between Brookhurst, Inc. and Bravo
Corporation dated January 21, 1997.
4. Agreement by and between Brookhurst, Inc. and Hi-Tech Golf, Inc. dated
July 20, 1994.
5. Settlement Agreement by and between Brookhurst, Inc. and Le Boss Sports
Wear, Inc. dated August 9, 1994.
6. Settlement Agreement by and between Brookhurst, Inc. and Hassan Nijem
d.b.a. W-Two Tees dated March 31, 1995.
7. Agreement by and between Brookhurst, Inc. and Cooper Industries, Inc.
dated July 19, 1993.
8. Agreement by and between Brookhurst, Inc. and Dayang International, Inc.
dated February 28, 1994.
9. Agreement by and between Brookhurst, Inc. and Dong Jin Trading Co., Inc.
dated February 28, 1994.
10. Agreement by and between The Boss Group Companies and Millie and Sol
Friedman dated June 9, 1983.
11. Stipulation Terminating Opposition by and between Boss Group Companies,
Inc. and Levi Strauss & Co. dated June, 1976.
12. Agreement by and between Brookhurst, Inc., Yogi Enterprises, Inc. and
New York Wholesale dated February 21, 1994.
<PAGE>
FOREIGN
SCHEDULE 4.3(b)
THIRD PARTY CONSENTS AND WAIVERS
Hart-Scott-Rodino approval.
Approval from secured lender, Congress Financial Corporation.
<PAGE>
FOREIGN
SCHEDULE 4.4(a)
LITIGATION
CANADA
Brookhurst, Inc. v. Hugo Boss AG, Hugo Boss Canada Inc., Carrera Optic AG,
Falke Fashion, Siga Corp., La Seta Mantero, S.p.A., Franz Falke-Rohen
Strumpffabriken, New Pel, S.p.A., Federal Court of Canada, Court No. T-1333-93
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BOSS ELEMENTS, Application Number 766,156,
owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BOSS HUGO BOSS ELEMENTS, Application Number
766,155, owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark HUGO HUGO BOSS & DESIGN, Application Number
740,329, owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark HUGO HUGO BOSS DESIGN, Application Number
732,019, owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BOSS HUGO BOSS DESIGN, Application Number
701,377, owned by Hugo Boss AG
Opposition in the Canadian Trade-Marks Office by Brookhurst, Inc. to the
registration of the Trade-mark BALDESSARINI HUGO BOSS DESIGN, Application
Number 732,110, owned by Hugo Boss AG
HONG KONG, CHINA AND MACAU
See attached.
JAPAN
See attached.
<PAGE>
FOREIGN
SCHEDULE 4.4(a)
MEXICO
Letters received from Merchant & Gould dated August 22 and September 4,
1997.
<PAGE>
LIST OF HONG KONG PROCEEDINGS
<TABLE>
<CAPTION>
DATE OF CEASE AND DATE OF WRIT 1996
DESIST LETTER ACTION NO.
<S> <C> <C> <C>
Brookhurst, Inc. vs. Hugo Boss AG 16 August 1996 20 September 1996 10808
Brookhurst, Inc. vs. Hugo Boss AG 16 August 1996 20 December 1996 14585
and Hugo Boss Hong Kong Limited
Hugo Boss AG vs. CAC Garment Ltd. 26 July 1996 24 September 1996 10896
Hugo Boss AG vs. Chungkuo Chung 26 July 1996 24 September 1996 10897
Fah Co Ltd
Hugo Boss AG vs. P'NT
Merchandising Co Ltd 13 July 1996 24 September 1996 10898
Hugo Boss AG and Hugo Boss Hong 13 July 1996 8707
Kong Limited vs. Ace Merchandising
Corp.(a firm)(3rd party)
Pro-Knit Mfg. Ltd. (Defendant)
Hugo Boss AG vs. Gofar Textiles 13 July 1996 5 August 1996 8857
Limited
Hugo Boss AG and Hugo Boss Hong Amended 174
Kong Limited vs. Dodge International Statement of Claim
Trading Ltd, Dodge Knitting Company pursuant to
Ltd, Dodge Trading Ltd (5th to 7th Summons dated 9
Defendants); August 1995
(Sun Cheung Tak Manufacturing Ltd,
Cheung Fat Trading Co. (a firm)(1st
and 4th Defendants); Garment Express
Fashions Co.(a firm)(2nd Defendant);
Hari Sharan (HK) Co. (3rd Defendant);
Wah Kel Garment Co. (a firm)(8th and
9th Defendants))
Times Trademark Industrial Ltd. 28 October 1996
</TABLE>
<PAGE>
LIST OF MACAU PROCEEDINGS
<TABLE>
<CAPTION>
DATE OF CEASE AND DATE OF WRIT 1996
DESIST LETTER ACTION NO.
<S> <C> <C> <C>
Fabrica de Vestuario Best Found 26 July 1996 --
Limitada (received by Eldex Limited
in HK)
</TABLE>
[LIST OF PRC PROCEEDINGS]
<TABLE>
<CAPTION>
DATE OF CEASE AND DATE OF WRIT 1996
DESIST LETTER ACTION NO.
<S> <C> <C> <C>
[Hugo Boss AG vs. Boss Sportswear unknown unknown
(USA), Inc.]
</TABLE>
<PAGE>
JAPAN
-----
List of All Legal Matters Involving Boss Trademark
TRIALS
- ------------------------------------------------------------------------------
Trial No. Our Case
- ------------------------------------------------------------------------------
554/1993 S7069 Non-Use Cancellation
Trial against Trademark
Reg. No. 695865 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
555/1993 S7070 Non-Use Cancellation
Trial against Trademark
Reg. No. 695865 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
564/1993 S7071 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
565/1993 S7072 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
566/1993 S7073 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
567/1993 S7074 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
568/1993 S7075 Non-Use Cancellation
Trial against Trademark
Reg. No. 2190696 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
569/1993 S7076 Non-Use Cancellation
Trial against Trademark
Reg. No. 2197845 "BOSS"
owned by Hugo Boss A.G.
- ------------------------------------------------------------------------------
<PAGE>
FOREIGN
SCHEDULE 4.4(b)
JUDGMENTS AND ORDERS
See Schedule 4.5.B for references to Levi Strauss & Co.
<PAGE>
FOREIGN
SCHEDULE 4.5.A
CURRENT BOSS LICENSES
LICENSE AGREEMENT dated August 11, 1994 by and between BROOKHURST, INC. and
I.C. ISAACS & CO., L.P.
TRADEMARK LICENSE AGREEMENT dated February 1, 1993 by and between BROOKHURST,
INC. and PROGROUP, INC.
TRADEMARK LICENSE AGREEMENT dated August 25, 1992 by and between BROOKHURST,
INC. and BOSS AMERICA, S.A. DE C.V.: terminated but there are sell-off rights
in Paragraph Thirteenth of said Agreement.
<PAGE>
FOREIGN
SCHEDULE 4.5.B
AGREEMENTS RE USE OF TRADEMARK
1. Agreement by and between Brookhurst, Inc. and Boss Manufacturing Company
dated January 17, 1994.
2. Settlement Agreement by and between Brookhurst, Inc. and Bravo Corporation
dated January 21, 1997.
3. Letter to Jeffrey A. Pine, attorney for Enjoylife, Inc. dated April 30,
1993.
4. Agreement by and between Brookhurst, Inc. and Hi-Tech Golf, Inc. dated
July 20, 1994.
5. Settlement Agreement by and between Brookhurst, Inc. and Le Boss Sports
Wear, Inc. dated August 9, 1994.
6. Settlement Agreement by and between Brookhurst, Inc. and Hassan Nijem
d.b.a. W-Two Tees dated March 31, 1995.
7. Trademark License Agreement by and between Brookhurst, Inc. and ProGroup,
Inc. dated February 1, 1993.
8. Letter to John F. McKenna, Jr., Esq., attorney for Boss Uniform Service,
from Roger A. Browning, attorney for The Boss Group Companies, dated
March 20, 1974.
9. Agreement by and between Brookhurst, Inc. and Cooper Industries, Inc.
dated July 19, 1993.
10. Agreement by and between Brookhurst, Inc. and Dayang International, Inc.
dated February 28, 1994.
11. Agreement by and between Brookhurst, Inc. and Don Jin Trading Co., Inc.
dated February 28, 1994.
12. Agreement by and between The Boss Group Companies and Millie and Sol
Friedman dated June 9, 1983.
13. Letter from William H. Pavitt, Jr., attorney for Boss Group Companies,
Inc., to Claude W. Lowe, Esq., attorney for H.D. Lee Company, dated
January 13, 1976.
14. Stipulation Terminating Opposition by and between Boss Group Companies,
Inc. and Levi Strauss & Co. dated June, 1976.
<PAGE>
FOREIGN
SCHEDULE 4.5.B
15. Agreement (undated and unsigned) by and between Boss Group Companies,
Inc. and Levi Strauss & Co.
16. Agreement by and among Brookhurst, Inc., Yogi Enterprises, Inc. and New
York Wholesale dated February 21, 1994.
17. Letter Agreement by and between Brookhurst, Inc. and Reebok
International Limited dated May 28, 1993.
18. Settlement Agreement by and among Brookhurst, Inc., Hugo Boss AG and
Stefano Herren Mode dated January 6, 1988.
2
<PAGE>
SCHEDULE 4.6
ALIENATION OF RIGHTS
NONE
<PAGE>
FOREIGN
SCHEDULE 5.3(B)
THIRD PARTY CONSENTS
NONE
<PAGE>
EXHIBIT 10.11(b)
TRADEMARK ASSIGNMENT
This Assignment is effective as of the 5th day of November,
1997, by and between I.C. Isaacs, L.P., a Delaware Limited Partnership with its
principal place of business at 3840 Bank Street Baltimore, Maryland 21224
("Assignor") and Ambra Inc., a Delaware corporation with its principal place of
business at 1209 Orange Street, Wilmington, Delaware 19801 and ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor is the owner of certain trademarks outside of the United
States of America except Mexico constituting or containing the word BOSS and the
Stylized B, including common law rights and rights in trademark registrations
and applications for registration outside the United States of America except
Mexico listed on the "Schedule of Trademarks" attached hereto, together with the
good will of the business outside the United States of America except Mexico
associated therewith (the "Trademarks");
WHEREAS Assignee desires to acquire all right, title and interest of
Assignor in and to the Trademarks;
NOW, THEREFORE, to All Whom It May Concern, be it known that for good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Assignor does hereby sell, assign, transfer and set over, to
Assignee, its successors and assigns forever, its entire right, title and
interest in and to the Trademarks, the same to be held and enjoyed by Assignee
for its own use and enjoyment, and for the use and enjoyment of its successors,
assigns or other legal representatives forever, as fully and entirely as the
same would have been held and enjoyed by Assignor had the assignment and sale
set forth herein not been made.
<PAGE>
IN TESTIMONY WHEREOF, Assignor has caused these presents to be signed by
its officer thereunto duly authorized, and its corporate seal to be hereto
affixed.
I.C. Isaacs & Company L.P.,
a Delaware Limited Partnership
By: I.G. Design, Inc., a Delaware
Corporation, Its General Partner
By: /s/ Robert J. Arnot
------------------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief Executive
Officer
By: /s/ Gerald W. Lear
------------------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief Executive
Officer
COUNTY OF NEW YORK :
:ss:
STATE OF NEW YORK :
On this 5th day of November, 1997, before me personally appeared Robert
J. Arnot and Gerald W. Lear, to me personally known, who, being duty sworn,
did say that that they are the Chairman and Co-Chief Executive Officer and
President and Co-Chief Executive Officer, respectively, of I.G. Design, Inc.,
a Delaware corporation, which is the General Partner of I.C. Isaacs & Company
L.P., a Delaware Limited Partnership, and that the foregoing instrument was
signed and sealed on behalf of the Limited Partnership by authority of its
General Partner, and that they acknowledge such instrument to be the free
deed and act of said Limited Partnership for the purposes therein set forth
and intending that this instrument be recorded.
/s/ Lynn Micholson
----------------------
Notary Public
[Notary Seal]
-2-
<PAGE>
SCHEDULE OF TRADEMARKS
I.C. Isaacs & Co., L.P.'s BOSS
Non-U.S. Trademark Applications/Registrations
<TABLE>
<CAPTION>
=========================================================================================================
TRADEMARK REGT/APP NO. GOODS* COUNTRY STATUS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BOSS AMERICA 643416 clothing Italy registered
- ---------------------------------------------------------------------------------------------------------
BOSS AMERICA 643416 sporting goods Italy registered
- ---------------------------------------------------------------------------------------------------------
BOSS AMERICA 330801/1992 apparatus, instruments Japan pending
and machines
- ---------------------------------------------------------------------------------------------------------
BOSS AMERICA 330803/1992 furniture Japan pending
- ---------------------------------------------------------------------------------------------------------
BOSS AMERICA 330804/1992 clothing Japan pending
- ---------------------------------------------------------------------------------------------------------
BOSS AMERICA 330805/1992 head ornaments Japan pending
=========================================================================================================
</TABLE>
* For ease of reference the description of goods in this chart is
generalized.
<PAGE>
EXHIBIT 10.11(c)
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into this
5th day of November, 1997, by and between I.C. Isaacs & Company L.P., a
Delaware limited partnership ("Isaacs") and Ambra Inc., a Delaware corporation
("Ambra").
W I T N E S S E T H:
WHEREAS, Isaacs has agreed to sell, transfer and assign to Ambra, and
Ambra has agreed to purchase and accept from Isaacs certain assets of Isaacs
pursuant to a Foreign Boss Rights Acquisition Agreement entered into on
September 30, 1997 between Isaacs and Ambra (the "Acquisition Agreement");
WHEREAS. Ambra has agreed to assume certain obligations of Isaacs related
to said acquired assets;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, it is agreed as follows:
1. Capitalized terms used herein and not defined herein shall have the
meanings given such terms in the Acquisition Agreement.
2. Isaacs hereby assigns to Ambra all its rights under the agreements
identified on the schedule attached hereto constituting the Assumed Agreements
insofar as they relate to the Trademarks acquired by Ambra from Isaacs pursuant
to the Acquisition Agreement, and all files relating thereto, free and clear of
all Encumbrances.
3. Ambra hereby assumes all obligations of Isaacs arising from and after
the date hereof under the Assumed Agreements solely insofar as they relate to
the use of the Trademark Assets after Closing.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day, month and year first above written.
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By /s/ Robert J. Arnot
----------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief Executive
Officer
By: /s/ Gerald W. Lear
----------------------------
Name: Gerald W. Lear
Title: President and Co-Chief Executive
Officer
AMBRA INC.
By: /s/ Jorg-Viggo Muller
--------------------------
Name: Jorg-Viggo Muller
Title: Chairman
By: /s/ Gert-Jorgen Frisch
--------------------------
Name: Gert-Jorgen Frisch
Title: Vice President
-2-
<PAGE>
FOREIGN
SCHEDULE 1.1(b)
ASSUMED AGREEMENTS
For all of the following agreements to the extent they apply outside the U.S.:
1. Trademark License Agreement by and between Brookhurst, Inc. and ProGroup,
Inc. dated February 1, 1993.
2. Agreement by and between Brookhurst, Inc. and Boss Manufacturing Company
dated January 17, 1994.
3. Settlement Agreement by and between Brookhurst, Inc. and Bravo
Corporation dated January 21, 1997.
4. Agreement by and between Brookhurst, Inc. and Hi-Tech Golf, Inc. dated
July 20, 1994.
5. Settlement Agreement by and between Brookhurst, Inc. and Le Boss Sports
Wear, Inc. dated August 9, 1994.
6. Settlement Agreement by and between Brookhurst, Inc. and Hassan Nijem
d.b.a. W-Two Tees dated March 31, 1995.
7. Agreement by and between Brookhurst, Inc. and Cooper Industries, Inc.
dated July 19, 1993.
8. Agreement by and between Brookhurst, Inc. and Dayang International, Inc.
dated February 28, 1994.
9. Agreement by and between Brookhurst, Inc. and Dong Jin Trading Co., Inc.
dated February 28, 1994.
10. Agreement by and between The Boss Group Companies and Millie and Sol
Friedman dated June 9, 1983.
11. Stipulation Terminating Opposition by and between Boss Group Companies,
Inc. and Levi Strauss & Co. dated June, 1976.
12. Agreement by and between Brookhurst, Inc., Yogi Enterprises, Inc. and
New York Wholesale dated February 21, 1994.
13. Worldwide Rights Acquisition Agreement by and between Brookhurst, Inc.
and I.C. Isaacs & Company L.P. dated September 30, 1997.
<PAGE>
FOREIGN
SCHEDULE 1.1(b) 2
14. Escrow Agreement by and among Brookhurst, Inc., I.C. Isaacs & Company L.P.
and Paine Webber, Inc., dated November 5, 1997.
-
<PAGE>
Exhibit 10.11(d)
CONCURRENT USE AGREEMENT
THIS CONCURRENT USE AGREEMENT ("Agreement") is effective as of the 5th day
of November, 1997 ("Effective Date"), by and between Hugo Boss AG
("HUGO BOSS"), a corporation of the Federal Republic of Germany, and I. C.
Isaacs & Company L.P. ("ISAACS"), a Delaware Limited Partnership.
R E C I T A L S
A. HUGO BOSS is the owner of various trademarks including the word
"BOSS" throughout the world and in the United States ("Hugo Boss' Marks").
HUGO BOSS and its predecessors in interest have used for many years the mark
BOSS and Hugo Boss' Marks and have developed certain intellectual property
rights in connection therewith.
B. ISAACS, as the successor in interest of Brookhurst, Inc., is the
owner of certain United States trademark rights in and registrations of the
word BOSS. ISAACS and its predecessors in interest have used for many years
the mark BOSS on certain products in the United States and have developed
certain intellectual property rights in connection therewith.
C. The parties intend that consistent with the terms of this Agreement,
ISAACS will be able to market Isaacs' Trademark Products (as defined below)
contemplated by this Agreement without causing confusion in the marketplace
with the HUGO BOSS and related brands marketed by HUGO BOSS ("Hugo Boss'
Trademark Products"), and that HUGO BOSS will be able to continue to market
Hugo Boss' Trademark Products without causing confusion in the marketplace
with the BOSS and related brands marketed by ISAACS.
NOW, THEREFORE, in consideration of the mutual agreements set forth in
this Agreement, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
a. "Isaacs' Mark" or "Isaacs' Marks" shall mean the trademarks BOSS in
the Microgramma Typestyle and the stylized B (as set forth on Exhibit A
attached hereto) whether used alone or in combination with other words or
symbols, with the appearance and/or style of the said trademark in compliance
with the provisions of Exhibit A.
b. "Isaacs' Trademark Product" or "Isaacs' Trademark Products" shall
mean solely the products listed in Exhibit B, Section I, as modified by
Section II, bearing Isaacs' Marks in compliance with Exhibit A and sold
pursuant to the schedule in Exhibit C.
- ----------------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
c. "United States" mean the United States of America, its territories,
possessions and commonwealths, except Saipan and American Samoa. "United
States" includes, without limitations, Puerto Rico.
2. CONCURRENT USE AGREEMENT
a. Unless otherwise agreed to by the parties in writing, ISAACS
agrees to use Isaacs' Trademark Products solely in accordance with Exhibits
A, B and C. The parties recognize, however, that the marketplace is an
ever changing environment and that it is not possible to predict the future
trends. Accordingly, to ensure that there is no substantial likelihood of
confusion between the marks of the parties, the parties agree that Hugo Boss
shall, solely at its discretion, have the right, commencing on January 1, 2008,
to evaluate whether the type style and appearance of Isaacs' Marks remains
unlikely to cause confusion with the Hugo Boss Marks and may, in its sole
discretion, cause Isaacs to alter, change, amend or revise the typestyle and
appearance of Isaacs' Marks.
b. Unless otherwise agreed to by the parties in writing, ISAACS agrees
that it shall not use the Isaacs' Marks in connection with the advertisement,
promotion, distribution or sale of any products other than Isaacs' Trademark
Products.
c. Unless otherwise agreed to by the parties in writing, ISAACS agrees
that it will not distribute or sell any Isaacs' Trademark Products bearing
the Isaacs' Marks to athletic stores whose primary product line is composed
of products intended to be used in connection with golf, tennis, skiing,
sailing, windsurfing, motor sports or any combination thereof or at golf,
tennis, skiing, sailing, windsurfing, or motor sports athletic events,
without the prior written consent of HUGO BOSS. The foregoing shall not
prevent ISAACS from selling Isaacs' Trademark Products to general sporting
goods stores selling multiple lines of products for a variety of sports
(e.g., Modell's and Sports Authority).
d. With respect to the limitations on the use of the Isaacs' Marks on
Isaacs' Trademark Products described in Exhibit A, ISAACS shall begin to
phase some of the limitations into its product line beginning with products
produced by or for ISAACS after January 1, 1998. Thereafter, fifty percent
(50%) of the products bearing Isaacs' Marks produced by or for ISAACS during
the period August 1, 1998 through December 31, 1998 (as measured by the
number of styles) must comply therewith. ISAACS agrees to use its reasonable
efforts to ensure that fifty percent (50%) of its projected volume of such
goods comply with the limitations described in Exhibit A. ISAACS shall be in
full compliance with Exhibit A for all products bearing a BOSS mark produced
on or after December 31, 1998 and for that season and thereafter may not
manufacture or produce any products bearing a BOSS mark which are not in
full compliance with Exhibit A.
e. On those products listed on Exhibit C, HUGO BOSS agrees to use the
word BOSS, whether used alone or in combination with other words, phrases or
designs on such
2
<PAGE>
products solely in accordance with the price points contained
in Exhibit C; provided, however, that such Exhibit C shall not apply to such
products used or distributed by HUGO BOSS or its licensees for promotional
purposes.
f. HUGO BOSS agrees that without ISAACS' written consent, which consent
may be withheld in ISAACS' sole discretion, HUGO BOSS shall not license any
nonaffiliated third party to use Hugo Boss' Marks alone in connection with
the sale of the sportswear products listed in Exhibit C at or below ISAACS'
maximum wholesale prices listed therein.
g. Nothing herein is intended to or shall prevent or otherwise restrict
HUGO BOSS from designing, manufacturing, advertising, promoting, distributing
or selling or licensing others to design, manufacture, distribute, advertise,
promote or sell in the United States any product, whether or not bearing a
mark including the word BOSS, listed in and consistent with Exhibit C, or any
other product not listed in Exhibit C, provided that such products do not use
the Microgramma typestyle shown in Exhibit A.
h. Neither HUGO BOSS nor ISAACS shall use on or in connection with
apparel bearing the word "BOSS" sold in the United States, any apparel style,
design, pattern, art work or color which are or have been primarily
associated with products distributed by the other (or any licensee of the
other) except those which are traditional or standard in the industry.
i. Notwithstanding any other provision of this Agreement, Isaacs may,
during 1998, use the Isaacs' Marks on the following goods so long as such
goods are not intended to be sold to the public and are intended to be used
solely in connection with and for the promotion of Isaacs' Trademark
Products: compact discs, videos, stickers, stick-on-tattoos, photographs and
posters, whistles, notebooks, lanyards, non-leather I.D. tags, basketballs,
cassette tapes, sweatbands and visors; provided further that ISAACS shall not
contest in any way the manufacturing, distributing or selling by HUGO BOSS
or its licensees of any of the above items with Hugo Boss' Marks. Each year
thereafter ISAACS shall submit for approval a list of goods it intends to use
(subject to the terms and conditions of this Section 2.i.) for promotional
purposes. HUGO BOSS shall consider the request in good faith and advise
ISAACS within ten (10) business days of receipt of such list which of the
goods HUGO BOSS, in the exercise of its sole discretion, approves; provided
however, that notwithstanding the provision of Section 12.d., ISAACS may seek
arbitration solely as to whether HUGO BOSS has acted in good faith in
considering ISAACS' request. Absent such approval, ISAACS shall not use
Isaacs' Marks on such goods.
j. Each party acknowledges the other party's legal and beneficial
ownership interests in and to its respective trademarks referred to herein
and undertakes that it will not take any action which may in any way impair
the other party's rights in its marks, including, without limitation, by
challenging or opposing, or raising or allowing to be raised, on any grounds
whatsoever, any questions concerning or obligations to the validity of the
other party's trademarks.
3
<PAGE>
3. GEOGRAPHIC SCOPE OF AGREEMENT
a. ISAACS acknowledges that HUGO BOSS owns extensive trademark rights
relating to the word BOSS both within and outside of the United States.
ISAACS does not and shall not own, or purport to own, any trademark rights
relating to the word BOSS outside of the United States.
b. ISAACS agrees that it will not sell or offer for sale or resale
Isaacs Trademark Products anywhere in the world other than in the United
States. ISAACS shall not sell or cause to be sold, directly or indirectly,
any Isaacs' Trademark Products to any party which ISAACS knows, or has reason
to know, has resold or distributed, is reselling or distributing, or is
likely to resell or distribute such Isaacs' Trademark Products (i) outside of
the United States; or (ii) as duty free merchandise. Within thirty (30) days
after the Effective Date of this Agreement and thereafter from time to time
as is reasonable, ISAACS shall advise each of its customers (other than
consumers or other end users) in writing of the restrictions on such sales.
c. The parties agree that ISAACS may sell Isaacs' Trademark Products to
the United States military solely for resale on United States military
installations in the United States. In making such sales, ISAACS shall seek
to obtain agreement from ISAACS' United States military customers that
Isaacs' Trademark Products will not be sold in United States military
installations outside the United States ("Military Agreement").
(i) If ISAACS is unable to obtain a Military Agreement with any
military customer, or if the obtaining of any such Military Agreement
substantially adversely affects ISAACS' ability to make military sales in
the United States, then ISAACS shall promptly notify HUGO BOSS. Any such
notice by ISAACS shall include a written explanation and documentation of
all efforts by ISAACS to obtain such agreement and shall include (1) data
disclosing ISAACS' sales of Isaacs' Trademark Products to the military
customer(s) at issue during the immediate prior 12-month period, (2)
projected sales of Isaacs' Trademark Products over the next 12-month
period, (3) the basis for ISAACS' belief that obtaining such an agreement
will substantially adversely affect ISAACS' military sales, and (4) all
information known or reasonably available to ISAACS about sales of Isaacs'
Trademark Products by the military customer(s) at U.S. military
installations outside the United States.
(ii) Upon receipt of such notice and at HUGO BOSS' request, the
parties shall meet and confer within five (5) business days, to agree upon
any further steps to be taken by ISAACS to obtain the Military Agreement.
Thereafter, absent an agreement between the parties on this issue, or in
the event such steps as may be agreed upon do not result in a Military
Agreement and ISAACS does not agree to discontinue sales of Isaacs'
Trademark Products to any such military customer, HUGO BOSS may initiate
arbitration under the principles set forth in Exhibit F1. In any such
proceeding, the arbiter shall decide whether ISAACS shall be permitted to
continue selling Isaacs' Trademark Products to the military customer(s),
absent a
4
<PAGE>
Military Agreement, and if so under what circumstances, conditions
or limitations, if any. In considering these issues, the arbiter shall
consider, inter alia, the extent of ISAACS' efforts to obtain a Military
Agreement, the extent to which ISAACS' military sales are affected) the
extent to which the absence of a Military Agreement has, is or will
contribute to the sale of Isaacs' Trademark Products outside the United
States, and the actual or threatened harm to HUGO BOSS from such sales.
Pending the resolution of such arbitration, ISAACS may continue to make
sales of Isaacs' Trademark Products to any such military customer(s) absent
a Military Agreement; provided, however, that the continuation of such
sales does not constitute (1) a waiver by HUGO BOSS of any rights it may
have under this Agreement, or (2) HUGO BOSS' consent to such sales.
(iii) Notwithstanding the foregoing or the decision of any arbitration,
nothing in this agreement shall prevent HUGO BOSS from fully enforcing all
of its rights to prevent the unauthorized sale of products bearing Hugo
Boss' Marks at any U.S. military installation outside the United States or
elsewhere outside the United States.
4. ADVERTISING AND PROMOTION
a. ISAACS agrees that any and all of its advertising and sales
promotion activities regarding Isaacs' Trademark Products (including
cooperative advertising) shall be subject to the provisions established by
Exhibit D. All such advertising and promotional materials arranged or placed
by ISAACS shall conform to the standards of Exhibit D on or before February
1, 1998. After February 1, 1998, ISAACS shall not create, or cause to be
created, any advertising or promotional materials that do not comply with
Exhibit D and shall use reasonable efforts, including termination of
relationships, to cause third parties who advertise or otherwise promote
Isaacs' Trademark Products to comply with the standards of Exhibit D.
Notwithstanding the foregoing, ISAACS shall within twelve months of the
Effective Date of this Agreement, provide its retail customers with materials
designed to (i) replace existing signage with signage conforming to the
requirements of this Section 4.a. and Exhibit D and/or (ii) bring existing
signage into such conformity. ISAACS shall use reasonable efforts to cause
its retail customers to use such materials, but ISAACS shall not be required
to terminate its relationship with any retailer solely on the basis that the
retailer continues to use existing non-conforming signage.
b. HUGO BOSS agrees that any and all of its advertising activities
(including cooperative advertising) for products listed in Exhibit B, Section
I, as modified by Section II, shall be subject to the provisions established
in Exhibit E.
c. ISAACS shall have exclusive rights as between the parties to use the
Isaacs' Marks with respect to boxing sports sponsorship in the United States,
except that HUGO BOSS retains the right to use the Hugo Boss' Marks in
connection with the sponsoring of boxers in the United States who are neither
U.S. citizens, nor residents of the United States. Unless otherwise agreed
to in writing by the parties, HUGO BOSS shall have exclusive
5
<PAGE>
rights as between the parties to use BOSS with respect to golf, tennis, motor
sports, skiing, sailing, and windsurfing sports sponsorship in the United
States. With regard to all other sports, HUGO BOSS and ISAACS agree to
cooperate with each other to avoid interference with the other party's sports
sponsorships in the United States. If HUGO BOSS or ISAACS notifies the other
party of the existence of sports sponsorship relationships in other sports,
the party receiving such notice will then avoid interfering with the
sponsorship relationship established by the other party. For example, the
party receiving such notice will not establish, or attempt to establish, any
sponsorship relationship with the same athlete or the same team while the
sponsorship relationship of the other party to this Agreement remains in
effect, although the party receiving the notice would not be prevented from
establishing other sponsorship relationships in the same sports. After
notification, and upon request by the notified party, the notifying party
shall provide evidence of any such sponsorships to the notified party. The
parties agree that ISAACS may use Isaacs' Marks in the United States in
connection with the sponsorship of United States Olympic Athletes and United
States Olympic Teams; provided, however, that Isaacs' Marks are not used in
advertisements intended to be seen in countries outside the United States and
provided, further, that such Olympic athletes and teams agree not to display
Isaacs' Marks outside the United States. Nothing in this Agreement entitles
either HUGO BOSS or ISAACS to exclusive rights as between the parties with
regard to any Olympic events occurring within the United States, except with
regard to the sports expressly identified above.
d. ISAACS may submit to HUGO BOSS for prior approval samples of tags,
labels, packaging (including cartons, containers and wrapping or packing
materials) stationery, sales documents, advertising, promotional and display
materials, and other items bearing or using the Marks, so that HUGO BOSS can
ensure that such items comply with the terms of this Agreement. If ISAACS
does not submit such items to HUGO BOSS for approval, and items are
determined to materially breach the terms of this Agreement on two occasions
within a twelve (12) month period, ISAACS must thereafter submit all such
items for approval by HUGO BOSS. Under these circumstances, ISAACS shall not
use any item in that category until corresponding samples have been approved
by HUGO BOSS in writing, and ISAACS shall not depart therefrom in any respect
without again obtaining HUGO BOSS' prior written approval. If there have
been no further material violations for a twelve (12) month period, approval
for such category shall return to permissive instead of mandatory. When its
samples are submitted for approval (whether mandatory or permissive), HUGO
BOSS shall either approve or set forth in writing its reasons for withholding
approval within twenty (20) days of receipt of such samples. Failure by HUGO
BOSS to so respond within twenty (20) days shall be deemed as approval.
5 PREVENTION OF CONFUSION
a. The parties agree that adherence by both parties to the terms of
this Agreement will avoid confusion between their respective products.
b. The parties agree that nothing in this Agreement shall require
either party to do business with any third party wholesaler or retailer. The
parties further agree that each
6
<PAGE>
party shall have the right at its sole discretion to take all steps necessary
to prevent its products from being offered for sale to the public in
proximity to the products of the other party or one of its licensees.
c. Except as otherwise provided herein, the parties agree that each
shall have no right to require the other to make any change in the rights or
obligations set forth in this Agreement. The parties further agree that they
will institute no legal action against each other based solely upon conduct
which is expressly permitted by and in accordance with this Agreement.
6. USE AND DISPLAY OF THE MARKS
ISAACS agrees to use, in connection with the Isaacs' Trademark Products
only, labels, tags, signs, banners, stationery, order forms, business cards
and other forms of identification for such products which are consistent with
the terms of Exhibit A and Exhibit D. ISAACS agrees that it shall not use
the name BOSS in any corporate, partnership or other trade name or as a form
of entity identification. ISAACS shall not use the word BOSS or authorize
any third party to use the word BOSS in connection with the name of any store
or retail establishment; provided that nothing in this Section 6 shall be
construed as prohibiting use of the Isaacs' Marks in shop-within-a-shop
situations. ISAACS may continue its factory outlet operations in proximity
to its distribution facilities which are currently located in Milford,
Delaware; provided, however, that the word BOSS shall not be used in or as
part of the name of the store. ISAACS agrees to provide HUGO BOSS with
written notice of any change in the location of such factory outlet. To the
extent ISAACS uses and/or provides design layouts and/or fixtures for use in
stores or retail establishments, it shall not use design layouts and/or
fixtures which are or have been primarily associated with products
distributed by HUGO BOSS or its licensees, except those which are traditional
or standard in the industry.
7. NONTRANSFERABILITY OF RIGHTS
a. ISAACS shall not grant, assign or otherwise convey or transfer any
rights inuring to ISAACS or any obligations or duties owed by ISAACS to HUGO
BOSS under this Agreement, without the prior written consent of HUGO BOSS and
any attempted transfer or assignment shall be null and void. HUGO BOSS shall
consider in good faith any request for such consent and promptly notify
ISAACS of HUGO BOSS' decision, said decision to be in HUGO BOSS' sole
discretion. Nothing in this Section 7 is intended to prevent ISAACS from
offering and selling stock to the public.
b. Notwithstanding anything to the contrary set forth in this
Agreement, ISAACS shall be permitted to assign and transfer ISAACS' rights
under this Agreement to any parent, subsidiary or other affiliate of ISAACS
if ISAACS or its successor in interest remains fully liable for the
performance of this Agreement by such Assignee or Transferee and indemnifies
7
<PAGE>
HUGO BOSS with respect to any costs and damages HUGO BOSS may incur because
of such assignment or transfer.
c. HUGO BOSS shall provide ISAACS with written notice if HUGO BOSS
intends to assign or transfer to any third party any of its rights or
obligations under this Agreement.
8. NO AFFILIATION
The parties hereby agree that ISAACS is and shall be wholly independent
of HUGO BOSS, and vice-versa, and that no agency, license, joint venture,
partnership, franchise or affiliation is created by this Agreement. Neither
party shall incur any obligation in the name of the other party.
9. EQUITABLE RELIEF
The parties acknowledge that it will be impossible to measure in money
the damages that would be suffered by one if the other breaches or otherwise
fails to comply with the obligations imposed on it pursuant to this Agreement
and that, in the event of any such failure, the non-breaching party will be
irreparably damaged and will not have an adequate remedy at law. The
non-breaching party shall, therefore, be entitled to equitable relief,
including, without limitation, injunctive relief and/or specific performance
to enforce such obligations and, if any action should be brought in equity to
enforce any provisions of this Agreement, the breaching party shall not raise
the defense that there is an adequate remedy at law. Except as expressly
provided in this Agreement, all specific remedies provided for in this
Agreement are cumulative and are not exclusive of one another or of any other
remedies available at law or in equity.
10. LEGAL ACTIONS
a. Unless otherwise agreed to by the parties, the parties shall be
responsible for the protection and enforcement of their respective marks
(HUGO BOSS for Hugo Boss' Marks and ISAACS for Isaacs' Marks) in the United
States.
b. The parties agree to reasonably cooperate with and assist each
other in protecting and defending the parties' trademark rights (Hugo Boss'
Marks and Isaacs' Marks). Each party shall promptly notify the other in
writing of any infringements, counterfeiting, claims or actions by third
parties that the party reasonably believes may be a violation of the other
party's trademark rights.
8
<PAGE>
c. The parties agree that they shall determine solely at their own
discretion and not subject to dispute by the other party or review in any
arbitration or litigation their respective conduct of such protection and
enforcement, and neither party shall have a claim for damages or other relief
against the other based thereon.
d. HUGO BOSS and ISAACS shall each have the right to record, or
continue the recordation of, their respective trademarks (Hugo Boss' Marks
and Isaacs' Marks) with the Customs Service of the United States and neither
party shall interfere with the efforts of the other, and each party shall
cooperate with the other in such efforts.
11. NOTICES
All notices, requests or other communications required or permitted
hereunder shall be given or made in writing and shall be (i) delivered
personally (including commercial carrier), (ii) sent by registered or
certified airmail, return receipt requested, postage prepaid or (iii) sent by
telecopier, addressed to the party to whom they are directed at the following
addresses, or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 11:
If to HUGO BOSS, to:
Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attention: General Counsel
Telecopier: 49-7123-942035
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attention: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
and
Howrey & Simon
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Robert M. Bruskin, Esq.
Telecopier: 202/383-6610
9
<PAGE>
If to ISAACS, to:
I. C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: Gerald W. Lear, President and Co-Chief Executive Officer
Telecopier: 410/558-2096
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attn: Robert J. Arnot, Chairman and Co-Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1604
Any notice, request or other communications shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any party
may change its address for notices hereunder, effective upon giving of notice of
such change hereunder to the other parties.
12. GOVERNING LAW AND RESOLUTION OF DISPUTES
a. The validity, construction and effect of any and all of the terms and
provisions of this Agreement shall be determined and enforced in accordance
with the laws of the State of New York without giving effect to principles of
conflicts of law thereunder except as to matters involving issues of foreign
trademark laws, in which case the applicable foreign trademark laws shall be
applied. In the event any legal action becomes necessary to enforce or
interpret the terms of this Agreement, the parties agree that such action
will be brought in the U.S District Court for the Southern District of New
York, and the parties hereby submit to the jurisdiction of such court;
provided, however, that any party may enforce an arbitration award in any
court of competent jurisdiction located in New York City and the parties
hereby submit to the jurisdiction of any such court.
b. Notwithstanding the foregoing, and except as provided in Section 12.c.
below, in order to expedite the resolution of legal disputes, the parties
agree to have disputes
10
<PAGE>
arising in connection with this Agreement finally settled in accordance with
the rules established in Exhibit F1, which decision shall be binding on the
parties. The parties further agree that the first such arbitration
proceeding initiated by either party shall be conducted at a location and
under the auspices and arbitration rules (either the American Arbitration
Association Rules or the Rules of Conciliation and Arbitration of the
International Chamber of Commerce) selected by the non-complaining party;
provided that English shall be the official language of all arbitration
proceedings. For all subsequent arbitrations, the selection of location and
selection of the auspices and the auspices' established rules shall alternate
between the parties, i.e., if HUGO BOSS is the complaining party in the first
arbitration under this Section, ISAACS shall select the location and
selection of the auspices and the auspices' established rules for that
arbitration and for the third, fifth, seventh, et seq. arbitrations, and HUGO
BOSS shall select the location and selection of the auspices and the
auspices' established rules for the second, fourth, sixth, et seq.
arbitrations. The parties further agree that notwithstanding this provision,
either party may, consistent with the provisions of Section 9 herein, seek
injunctive relief in court prior to the initiation or pending resolution of
any dispute in arbitration, or otherwise. If the non-prevailing party does
not comply with an arbitration decision, the prevailing party therein may
immediately enforce the arbitration decision in an equitable proceeding in
court with both parties' court costs and related attorney's fees paid by the
non-prevailing party in the arbitration, unless the arbitration decision is
modified, or not upheld or enforced, in which case each side shall bear its
own costs and attorney's fees.
c. Notwithstanding anything in this Agreement, the parties agree
that disputes arising under Sections 2.a., 2.d., 2.e., 2.f., 2.g., 4.a.,
4.b. and 6 herein, may, at the option of either party, be finally settled
in accordance with the expedited arbitration procedures set forth in
Exhibit F2, which decision shall be binding on the parties.
d. The parties agree that any decision required by this Agreement
that is committed to a party's "sole discretion" shall not be the subject
of arbitration; any decision required by this Agreement that is committed
to a party's "sole reasonable discretion" or "reasonable discretion" may be
the subject of arbitration.
e. Nothing in this Agreement is intended to or shall prevent HUGO
BOSS (i) from enforcing any of its rights in any jurisdiction anywhere in
the world to prevent the unauthorized manufacture, sale or distribution of
Hugo Boss' Trademark Products; or (ii) from enforcing any of HUGO BOSS'
rights in any jurisdiction anywhere in the world under any other agreements
it may have with ISAACS.
f. The parties agree that in any arbitration proceeding brought
under this Section 12 where the interests of justice so require, the
arbitrator(s) shall have the discretion to require one party to pay some or
all of the costs and expenses, including legal fees, incurred by the other
party.
11
<PAGE>
13. BINDING EFFECT
This Agreement shall be binding on the parties, their subsidiaries,
successors, affiliates, permitted licensees and assigns (if any), and they each
warrant that the undersigned are authorized to execute this Agreement on behalf
of their respective parties.
14. GENERAL PROVISIONS
a. No waiver or modification of any of the terms or provisions of this
Agreement shall be valid unless contained in a written document signed by
both parties. No course of conduct of dealing between the parties shall act
as a waiver of any provision of this Agreement.
b. This Agreement, including the entirety of Exhibits A through F2,
attached hereto, contains the entire understanding of the parties as to the
subject matter herein, and there are no representations, warranties, promises
or undertakings other than those contained herein. This Agreement supersedes
and cancels all previous agreements between the parties hereto. This
Agreement shall be construed against both parties equally, regardless of the
party that drafted it. Notwithstanding the foregoing, nothing herein shall
affect the validity or enforceability of the Settlement Agreement and related
documents between the parties which terminated the litigation captioned Hugo
Boss Fashions, Inc., et al. v. Brookhurst, Inc., et al., Civil Action No. 93
Civ. 0875 (LMM).
c. This Agreement, its terms, conditions and provisions, and the trade
secrets and confidential information of the parties are strictly confidential
and shall not be disclosed by either party to any other person or entity
without the prior written consent of the other party, or as required by law,
(i) except financial institutions (including but not limited to investment
bankers and underwriters), attorneys and accountants with which the parties
transact business, provided, however, that such third parties agree in
writing to abide by the terms of this provision; or (ii) except as
appropriate for the parties to protect and/or enforce their respective
trademark rights. HUGO BOSS and ISAACS further agree that disclosure of this
Agreement within their organizations shall be limited to their respective
directors, officers and employees with a "need to know", to carry out the
purposes of this Agreement, or to protect the rights of either party.
Nothing in this provision is intended to prevent or substantially interfere
with ISAACS, its partners, its stockholders or its ability to make all
disclosures required by law pursuant to offering and selling stock to the
public. Notwithstanding the provisions of this Section 14.c., in the event
of published reports regarding the Agreement or ISAACS' relationship with
LICENSOR or HUGO BOSS AG, HUGO BOSS AG or any of its affiliates and ISAACS
agree to cooperate in good faith to provide appropriate public responses and
comments and the parties shall be free to make accurate public statements
which are appropriate to correct or clarify the public record.
12
<PAGE>
d. If any provision of this Agreement should be held to be void or
unenforceable, such provision will be treated as severable, leaving valid
the remainder of this Agreement.
e. The parties agree to execute promptly any documents necessary to
effectuate the purpose and intent of this Agreement.
f. This Agreement may be executed in any number of duplicate
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
g. Captions and paragraph headings used in this Agreement are for
convenience only and are not a part of this Agreement and shall not be used
in interpreting or construing it.
15. PENDING TRADEMARK APPLICATIONS
In recognition of terms of this Agreement, Isaacs agrees at the expense
of Hugo Boss to do the following within thirty (30) days of the Effective Date:
a. abandon Trademark Application No. 74/074,962 for BOSS, including
without limitation by filing an Express Abandonment with the Patent &
Trademark Office ("PTO");
b. delete "golf caps" from the description of goods in Trademark
Application No. 74/075,953 for BOSS;
c. abandon/delete that portion of Trademark Application No. 74/323,654
for BOSS which relates to Classes 14, 18 and 28 and all goods listed therein
as well as delete "robes, blazers, topcoats, pajamas, sleepwear, lingerie,
underclothing, bras, panties, petticoats, stockings, leggings, hosiery,
tights, wristbands, headbands, footwear, smocks, scarves, shawls and
suspenders" from the description of goods in the Class 25 portion of said
Application; and
d. delete "golf shirts" from the description of goods in Trademark
Application No. 74/326,997 for BOSS.
13
<PAGE>
IN WITNESS WHEREOF, the parties agree that this Agreement shall take effect
as of the Effective Date.
HUGO BOSS AG
By: /s/ Jorg-Viggo Muller
-------------------------------
Name: Jorg-Viggo Muller
Title: Chief Financial Officer
By: /s/ Gert-Jorgen Frisch
-------------------------------
Name: Gert-Jorgen Frisch
Title: Attorney-in-Fact
I. C. ISAACS & COMPANY L.P.
By: /s/ Robert J. Arnot
-------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
-------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
14
<PAGE>
LIST OF EXHIBITS
Exhibit A: Specifications and limitations on ISAACS' use of Isaacs' Marks
Exhibit B: List of products on which ISAACS is permitted and forbidden to
use Isaacs' Marks
Exhibit C: Price Points
Exhibit D: ISAACS advertising rules
Exhibit E: HUGO BOSS advertising rules
Exhibit F1: Non-expedited Arbitration provisions
Exhibit F2: Expedited Arbitration provisions
<PAGE>
EXHIBIT A
ISAACS MARKS
[LOGO]
( The Microgramma Typestyle )
[LOGO]
<PAGE>
In using these Isaacs' Marks on Isaacs' Trademark Products and in all
advertising and promotional uses, ISAACS will comply with the following:
1. ISAACS shall use the phrase "BOSS by I G Design" (or such other name
as approved by HUGO BOSS) on all interior labels, tags and other interior
identifiers, and on all temporary or removable exterior labels, tags,
flashers, jokers, hang tags, and similar items, consistent with the rules in
section 4 below. In addition, the phrase "by I G Design" shall be
prominently visible; this requirement is satisfied when the prominence, use,
and format of the phrase "BOSS by I G Design" are similar to the exemplars
shown in Attachment 1 to this Exhibit A or as to tops satisfies the criteria
set forth in Section 9.a.(iii) below. Notwithstanding the exemplars shown in
Attachment 1 to this Exhibit A, for all purposes under this Agreement where
the word "BOSS" is smaller than one inch, the ratio of the word "BOSS" to the
phrase "by I G Design" shall be no less than 4:1; in all other uses the ratio
shall be no less than 5:1.
2. On all Isaacs' Trademark Products other than Bottoms (Bottoms being
defined as jeans, casual pants, slacks, trousers, shorts, and overalls and
shortalls ) ISAACS shall use the phrase "BOSS by I G Design" (or such other
name as HUGO BOSS approves) as a permanent exterior means of identification
similar to the exemplars shown in Attachment 1 to this Exhibit A.
3. In addition to the use of the phrase "BOSS by I G Design" (or such
other name as approved by HUGO BOSS) as required by Section 1 of Exhibit A
and Exhibit E, ISAACS may also use the word "BOSS" without the phrase "by I G
Design" (i) permanently affixed to the exterior of any Isaacs' Trademark
Product or (ii) for advertisement or promotional purposes; but in all such
cases only in accordance with the rules in Sections 4 and 5 of this Exhibit A
and, in the case of advertising and promotional cases, in accordance with the
rules in Exhibit E to this Agreement.
4. On all Bottoms:
a. All Bottoms will be sold either with (i) a pocket flasher, (ii) a
waist band ticket, or (iii) some other form of temporary, removable exterior
identification bearing the phrase "BOSS by I G Design" (or such other name as
HUGO BOSS approves) or with a permanently affixed "BOSS by I G Design" (or
such other name as HUGO BOSS approves) exterior marking, as illustrated by
the exemplars shown in Attachment 1 to this Exhibit A; provided, however,
that all temporary removable exterior identification must use the phrase "BOSS
by I G Design" as illustrated by the exemplar shown in Attachment 1 to this
Exhibit A.
b. If the word "BOSS", whether used alone or with any other word, is
used on fly labels on Bottoms, the letters of the word "BOSS" must be slanted
no less than nineteen (19) degrees as shown in Attachment 6B to this Exhibit
A.
2
<PAGE>
c. If the word "BOSS" is used on a signature leather patch on a rear
jeans pocket, (i) the word "BOSS", whether used alone or with any other word,
except "I G Design" (or such other name as HUGO BOSS approves) will be
slanted no less than twenty-four (24) degrees, as illustrated by the examples
shown in Attachment 4 to this Exhibit A; or (ii) the phrase "BOSS/I G Design"
(or such other name as HUGO BOSS approves) will be used in a non-justified
4:1 ratio on the leather patch consistent with the terms of Section 5.d.
below; or (iii) the phrase "Boss/I G Design" (or such other name as HUGO BOSS
approves) will be otherwise permanently affixed to the garment, similar to
the exemplar shown in Attachment 1 of this Exhibit A.
5. Where the word "BOSS" does not appear immediately adjacent to the
phrase "I G Design" (or such other name as HUGO BOSS approves), the word
"BOSS" may appear either in capital letters of equal size, or, if the individual
letters comprising B-O-S-S are of different sizes, within seventy-five (75)
percent of any other letter; provided, however, that one or more of the
following rules are met:
a. The word "BOSS" is incorporated into a graphic environment as
illustrated by the acceptable exemplars shown in Attachment 2 to
this Exhibit A; not all graphic environments are acceptable as
illustrated by the unacceptable exemplars shown in Attachment 2
to this Exhibit A; or
b. All of the letters of the word "BOSS" are distorted as illustrated
by the acceptable exemplars shown in Attachment 3 to this Exhibit
A; not all distortions are acceptable as illustrated by the
unacceptable exemplars shown in Attachment 3 to this Exhibit A; or
c. The word "BOSS" appears other than in the Microgramma typestyle,
the non-Microgramma typestyle having first been approved in
accordance with the provisions of Section 10 of this Exhibit A;
or
d. All of the letters of the word "BOSS" are slanted as follows:
(i) If used with no vertical or angled lines, then no less than
twenty-two (22) degrees, as illustrated by the exemplar shown
in Attachment 5 to this Exhibit A; or
(ii) If used with vertical or angled lines as shown in Attachment
6A, then no less than nineteen (19) degrees, as illustrated
by the exemplar shown in Attachment 6B of this Exhibit A.
e. The requirements of this Section 5. a.-d. do not apply if the
word "BOSS" is used with the letters appearing in a vertical (up
and down) manner generally consistent with the acceptable
exemplars shown in Attachment 7A to this Exhibit A. Not all
vertical uses of the word
3
<PAGE>
"BOSS" are acceptable, as illustrated by the unacceptable exemplar
shown in Attachment 7B to this Exhibit A, in which case the
requirements of this Section 5. a.-d. apply.
f. All of the foregoing rules except 5.d. shall apply to headwear.
g. In the case of belts, ISAACS may use the word "BOSS" alone,
without the phrase "I G Design", (or such other name as approved
by HUGO BOSS) where the Isaacs' Mark appears only on the belt
buckle; where the Isaacs' Mark appears elsewhere on the exterior
of the belt, it shall incorporate the phrase "I G Design.
6. Any two-line logo or design using the word "BOSS" shall not have
justified margins or substantially justified margins.
7. ISAACS shall not use words which indicate that its product is the only
or first BOSS product, e.g., "authentic," "genuine" or "original," except that
ISAACS may use such words to directly modify the phrase "I G Design" (or such
other name as HUGO BOSS approves).
8. Unless otherwise agreed to by the parties, ISAACS shall not use the
terms BOSS AMERICA, HUGO BOSS, HUGO, BALDESSARINI, WORLDWIDE, EUROPEAN, BOSS
GOLF, GOLF, TENNIS, SKI, FORMULA I, MOTORSPORT, WINDSURFING, SAIL, GERMAN or
any other words that are similar in sound, sight or meaning, as exemplified
in Attachment 8 to this Exhibit A. The parties agree that ISAACS may use the
phrases "U.S.A." and "United States" on Isaacs' Trademark Products, including
in graphic depictions with or near Isaacs' Marks; provided, however, that
such words are not incorporated into a corporate identity, brand, or product
extension logo with the word "BOSS". In addition, the parties may, from
time to time, submit to each other exemplars of logos, designs or decorative
motifs which they are using or plan to use in the next selling season,
provided that such logos, designs, or decorative motifs shall not have been
used by the other party. The party so notified shall not use any such logos,
designs or decorative motifs, or anything similar to them in the following
selling season, without the other party's written permission; provided,
however, that either party may use logos, designs or decorative motifs that
are standard in the industry. Notwithstanding the foregoing, ISAACS shall
not use any design or decorative motif similar to the BOSS SPORT patch shown
in Attachment 9 to Exhibit A.
9. For purposes of this Agreement, "polo shirt" or "polo shirts"
shall mean a pullover shirt for sportswear that is made of knitted fabric and
has short or long sleeves and a turnover collar or a round banded collar and
placket. In addition to all other rules herein applicable to tops, ISAACS
may use the word "BOSS" by itself on the exterior of polo shirts only in
accordance with the following:
4
<PAGE>
a. Traditional Button Placket Knit Collar Style. To the extent
ISAACS uses the word "BOSS" by itself on the exterior left breast
area of polo shirts with button through plackets, knit turnover
collars and traditional coloration and designs the following
rules shall apply:
(i) on the exterior of men's shirts, the size of the word "BOSS"
shall be no smaller than three (3) inches long by
five-eighths (5/8) inches tall; on the exterior of boys' and
women's shirts, the size of the word "BOSS" shall be no
smaller than two and three-eighths (2 3/8) inches long by
seven-sixteenths (7/16) inches tall;
(ii) The word "BOSS" shall be slanted no less than
24 DEG.;
(iii) The phrase "I G Design" shall be prominently visible.
This requirement shall be satisfied by the following: the
phrase shall appear and be visible on the outside crease of
one sleeve; the typestyle shall be Microgramma; and the size
of the letters shall be no less than one fourth the size of
the letters used for the word "BOSS" on the exterior left
breast.
(iv) The color of the stitching on the shirt bearing the word
"BOSS" on the left breast area and the phrase "I G Design"
on the sleeve must be the same and clearly contrast with the
color of the shirt fabric, e.g., black on white; red, blue
or green on yellow; but not combinations like dark blue on
light blue; dark gray on black; dark green on dark blue.
Acceptable and unacceptable exemplars are shown in
Attachment 10 to this Exhibit A.
b. All Other Traditional Styles. To the extent ISAACS uses the word
"BOSS" by itself on the exterior left breast area of polo shirts
with non-button through plackets and traditional coloration and
designs, the phrase "BOSS by I G DESIGN" required by Section 2 of
this Exhibit A shall be located on the top half of the garment
and shall be prominently visible. This latter requirement is
satisfied when the prominence, use and format of the phrase "BOSS
by I G Design" are similar to the exemplars shown in Attachment 1
to this Exhibit A or satisfies the criteria set forth in Section
9.a.(iii) of this Exhibit A.
c. Non-traditional Styles. To the extent ISAACS uses the word
"BOSS" by itself on polo shirts other than those described in
Sections 9.a. and 9.b. of this Exhibit A, no additional rules
shall apply.
d. Exemplars of acceptable shirts for each category described in
this Section 9.a., 9.b., and 9.c. are depicted in Attachment 11
hereto.
5
<PAGE>
10. Prior to use, ISAACS may submit to HUGO BOSS for approval typestyles
other than Microgramma for the word "BOSS", provided those typestyles are
less similar to the typestyles used by HUGO BOSS than the Microgramma
typestyle used by ISAACS. ISAACS shall not use any such typestyle unless
HUGO BOSS, in its sole reasonable discretion, has approved such use in
writing.
<PAGE>
ATTACHMENT 1
TO EXHIBIT A
o Exemplars of interior and exterior permanent/temporary labels, tags, etc.
with acceptable "BOSS by I G Design."
<PAGE>
BMA-1368 -- info tag [Graphic Logo]
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
BMA-1241R -- [Graphic Logo]
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
Jr. Hang Tag/BJ-537W
FRONT
[Graphic Logo]
22 DEG. ANGLE
6 TO 1 RATIO
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
BMA-458 -- [Graphic Logo]
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
Jr. Hang Tag/BJ-537
BACK
[Graphic Logo]
22 DEG. ANGLE
6 TO 1 RATIO
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
[Graphic Logo]
BMA-1242
22 DEG. ANGLE
6 TO 1 RATIO
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 2
TO EXHIBIT A
o Exemplars of acceptable graphic environments.
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 3
TO EXHIBIT A
o Exemplars of acceptable distorted letters.
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 4
TO EXHIBIT A
o Exemplars of 24(degree) slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 5
TO EXHIBIT A
o Exemplars of 22(degree) slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 6A
TO EXHIBIT A
o Exemplars of vertical alignment.
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 6B
TO EXHIBIT A
o Exemplars of 19(degree) slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 7A
TO EXHIBIT A
o Exemplars of acceptable vertical BOSS logos.
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 7B
TO EXHIBIT A
o Exemplars of unacceptable vertical BOSS logos.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 8
TO EXHIBIT A
o Exemplars of forbidden words.
AMERICAN BOSS
BOSS AMERICAN
BOSS OF AMERICA
BOSS AMERIKA
BOSS AMERICAS
BOSS GOAL
YUGO
HUGE
BALDISSARENE
GLOBAL
CONTINENTAL
EUROPE
BAVARIAN
BAVARIA
GERMANY
INTERNATIONAL
<PAGE>
ATTACHMENT 9
TO EXHIBIT A
o The BOSS Sport Patch
<PAGE>
[Graphic Logo]--Shirt
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 10
TO EXHIBIT A
o Exemplars of acceptable coloration for "BOSS by I G Design" on polo
shirts.
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
o Exemplar of unacceptable coloration for "BOSS by I G Design" on polo
shirts.
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 11
TO EXHIBIT A
o Exemplar of acceptable shirts under Exhibit A, Section 9.a.
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
o Exemplar of acceptable shirts under Exhibit A, Section 9.b.
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
o Exemplar of acceptable shirts under Exhibit A, Section 9.c.
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
EXHIBIT B
I. PRODUCTS BEARING ISAACS' MARKS THAT ISAACS MAY SELL
A. Men's Apparel
1. Sportswear and Activewear. All sportswear and activewear clothing
other than the exclusions listed below. All fabrications may be
used.
2. Outerwear. All jackets, coats, vests, capes and ponchos other than
the exclusions listed below. Such outerwear garments may be
reversible, lined, unlined, filled and or fabric treated
(waterproofed, coated, etc.) and may have detachable sleeves, hoods
and/or interlinings. Lengths of such garments shall be 22" to 60".
All fabrications may be used except fur (except as trim) and leather
(except as trim).
3. Headwear. All sports hats, visors and caps.
4. Swimwear. All types of swimwear.
5. Jogging Suits. All types of warm-ups and jogging suits of any
fabrication
6. Belts. Belts bearing Isaacs' Marks provided that such belts shall be
sold only as part of a Bottom and shall not be made out of leather.
B. Women's Apparel
1. Sportswear and Activewear. All sportswear and activewear clothing
for juniors, contemporary, misses and large sizes other than the
exclusions listed below. All fabrications may be used.
2. Outerwear. All jackets coats, vests, capes and ponchos other than
the exclusions listed below. Such outerwear garments may be
reversible, lined, unlined, filled and/or fabric treated
(waterproofed coated, etc.) and may have detachable sleeves, hoods
and/or interlinings. Lengths of such garments shall be 22" to 60".
All fabrications may be used except fur (except as trim) and leather
(except as trim).
3. Headwear. All sports hats, visors and caps.
4. Swimwear. All types of swimwear.
5. Jogging Suits. All types of warm-ups and jogging suits of any
fabrication.
6. Belts. All belts bearing Isaacs' Marks provided that such belts
shall be sold only as part of a Bottom and shall not be made out of
leather.
<PAGE>
7. Other. Women's knit garments to be worn on the upper torso that are
either snapped or fixed through the crotch and the top portion of
which may be a halter, shoulder strap, short sleeve or long sleeve.
C. Children's Apparel
l. Children's Sportswear and Activewear. All sportswear and activewear
clothing other than the exclusions listed below. All fabrications
may be used.
2. Outerwear. All jackets, coats, vests, capes and ponchos other than
the exclusions listed below. Such outerwear garments may be
reversible, lined, unlined, filled and/or fabric treated
(waterproofed, coated, etc.) and may have detachable sleeves, hoods
and/or interlinings. All fabrications may be used except fur (except
as trim) and leather (except as trim).
3. Headwear. All sports hats, visors and caps.
4. Swimwear. All types of swimwear.
5. Jogging Suits. All types of warm-ups and jogging suits of any
fabrication.
6. Belts. All belts bearing Isaacs' Marks provided that such belts
shall be sold only as part of a Bottom and shall not be made out of
leather.
D. Other
1. All apparel, including uniforms and work clothes, which is intended to be
worn solely and exclusively while persons are performing the normal duties
of their employment.
<PAGE>
II. PRODUCTS BEARING ISAACS' MARKS THAT ISAACS SHALL NOT SELL
A. Notwithstanding the foregoing, the parties agree that Isaacs' Trademark
Products do not include any of the following men's, women's or children's
apparel:
1. All styles of tailored clothing, furnishings and accessories,
including but not limited to tuxedos, gowns and evening wear, sportcoats,
blazers, jackets, suits, dress pants, career apparel including blouses,
skirts and dresses, raincoats, top coats, dress shirts, ties, dress vests,
hosiery (including but not limited to socks, stockings and hose), and
leather belts.
2. All types of leather clothing (although leather trim may be used
on all products listed in Section I of this Exhibit B).
3. All styles of shoes and other footwear.
4. Clothing designed and sold for the primary purpose of engaging in
[to be deleted and dealt with in Ambra-ICI Boss Golf License Agreement]
golf, tennis, skiing, motor sports, windsurfing, or sailing.
5. Except as described in Exhibit B Section I.B.7. above, bodywear,
including but not limited to underwear (including t-shirts intended to be
worn as underwear); loungewear and intimate apparel; and sleepwear and
robes.
B. Except as agreed upon in writing by the parties, the parties further
agree that Isaacs' Trademark Products shall not include any non-apparel products
of any kind.
<PAGE>
EXHIBIT C
PRICE POINTS
1. ISAACS shall sell products bearing Isaacs' Marks and permitted under
the schedule contained in Exhibit B that bear wholesale prices prior to any bona
fide trade, quantity and early payment discounts and any other credits, no
greater than those listed below. HUGO BOSS shall sell or license others to sell
products bearing Hugo Boss' Marks and permitted under the schedule contained in
Exhibit B that bear wholesale prices prior to any bona fide trade, quantity and
early payment discounts and any other credits, no less than those listed below:
- --------------------------------------------------------------------------------
HUGO BOSS'
ISAACS' MAXIMUM MINIMUM
WHOLESALE WHOLESALE
- --------------------------------------------------------------------------------
All long bottoms except jeans and warm-up
(or jogging) suits
- --------------------------------------------------------------------------------
Cotton * *
- --------------------------------------------------------------------------------
Synthetic Blend * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
All short bottoms except jeans and warm-up
(or jogging) suits
- --------------------------------------------------------------------------------
Cotton * *
- --------------------------------------------------------------------------------
Synthetic Blend * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Jeans
- --------------------------------------------------------------------------------
Basic * *
- --------------------------------------------------------------------------------
Fashion * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Jean Shorts
- --------------------------------------------------------------------------------
Basic * *
- --------------------------------------------------------------------------------
Fashion * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Overalls
- --------------------------------------------------------------------------------
Short * *
- --------------------------------------------------------------------------------
Long * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Outerwear
- --------------------------------------------------------------------------------
Filled * *
- --------------------------------------------------------------------------------
Lined * *
- --------------------------------------------------------------------------------
Waterproof * *
- --------------------------------------------------------------------------------
- ---------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
HUGO BOSS'
ISAACS' MAXIMUM MINIMUM
WHOLESALE WHOLESALE
- --------------------------------------------------------------------------------
Vest
- --------------------------------------------------------------------------------
Filled * *
- --------------------------------------------------------------------------------
Lined * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Polo Shirts and Knit Tops
- --------------------------------------------------------------------------------
Basic Short * *
- --------------------------------------------------------------------------------
Basic Long * *
- --------------------------------------------------------------------------------
Fashion Short * *
- --------------------------------------------------------------------------------
Fashion Long * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sweatshirts
- --------------------------------------------------------------------------------
Basic * *
- --------------------------------------------------------------------------------
Fashion * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Warm-up (or jogging) suits
- --------------------------------------------------------------------------------
Cotton * *
- --------------------------------------------------------------------------------
Synthetic * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
T-shirts
- --------------------------------------------------------------------------------
Basic * *
- --------------------------------------------------------------------------------
Fashion * *
- --------------------------------------------------------------------------------
Embroidered * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sweaters
- --------------------------------------------------------------------------------
Basic * *
- --------------------------------------------------------------------------------
Fashion * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hats
- --------------------------------------------------------------------------------
Basic * *
- --------------------------------------------------------------------------------
Fashion * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Woven Shirts
- --------------------------------------------------------------------------------
Basic Short * *
- --------------------------------------------------------------------------------
Basic Long * *
- --------------------------------------------------------------------------------
Fashion Short * *
- --------------------------------------------------------------------------------
Fashion Long * *
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Swimwear
- --------------------------------------------------------------------------------
Basic * *
- --------------------------------------------------------------------------------
Fashion * *
- --------------------------------------------------------------------------------
- ---------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
2. All price points are expressed in 1997 dollars. ISAACS price points
shall adjust over the term of this Agreement with changes in the rate of
inflation applicable to clothing according to the Producer Price Index for
Apparel and Other Finished Products Made From Fabrics and Similar Materials.
HUGO BOSS' price points shall remain as stated herein.
3. To the extent ISAACS desires to add additional products to its line, or
to the extent either party desires to use fabrics or constructions materially
different from those currently being used consistent with the limitations of
Exhibit B, the parties will in good faith negotiate reasonable price points
applicable to such products.
4. The parties agree that the price points included in this Exhibit C are
based upon existing market conditions and reasonably foreseeable changes in such
market conditions. In the event that market conditions relating to the
manufacture, distribution or sale of products contained in Exhibit B should
change substantially, to a degree not contemplated by the price points in this
Exhibit C, and such change would result in economic hardship to a party to this
Agreement, the parties agree to negotiate in good faith to agree upon reasonable
alternative price points.
<PAGE>
EXHIBIT D
ADVERTISING AND PROMOTION
(ISAACS)
1. On all advertising and promotional materials for Isaac's Trademark
Products, ISAACS may use the word "BOSS", provided the phrase "BOSS by I G
Design" appears at least once in accordance with the rules listed in Sections 2.
3 and 4 below of this Exhibit D.
2. In all print or Internet advertising and promotions for Isaacs'
Trademark Products, whether by ISAACS, or by retailers, or by any other entity
authorized by ISAACS, each and every page shall prominently feature "BOSS by I G
Design" as illustrated by the acceptable exemplars shown in Attachment 1 to this
Exhibit D.
3. In all radio, television and motion picture advertising for Isaacs'
Trademark Products, the first and last time BOSS is shown or mentioned, it shall
be as part of the phrase "BOSS by I G Design".
4. In all visual presentations of the phrase "BOSS by I G Design" in
advertising and promotions for Isaacs' Trademark Products, including but not
limited to print, Internet, television, motion picture, billboards, posters,
flyers, in-store signage, point-of-sale displays, sports sponsorships,
promotional tie-ins and/or samples, whether by ISAACS, or by retailers, or by
any other entity authorized by ISAACS, the size ratio between the word "BOSS"
and the phrase "I G Design" shall be similar to, and in no event greater than,
that shown in Attachment 1 to this Exhibit D.
5. ISAACS shall be entitled to display Isaacs' Trademark Products and
people wearing Isaacs' Trademark Products in all advertising and promotional
material, provided that such Isaacs' Trademark Products comply with Exhibit A
and Exhibit B.
6. Nothing in this Agreement is intended to give HUGO BOSS any right to
approve or disapprove any aspect of the contents of any advertising other than
as expressly set forth above and in Exhibit A and Exhibit B; provided, however,
that ISAACS shall not use any advertising style or format which is or has been
primarily associated with HUGO BOSS' advertising of its products other than
those which are traditional or standard in the industry.
7. ISAACS agrees to take reasonable steps to achieve compliance with this
Exhibit D in advertising and promotions by retailers and other entities
authorized by ISAACS including, but not limited to, providing such entities
periodically with appropriate guidelines for use of the Isaacs' Marks consistent
with this Agreement. However, acts of retailers and other entities which are
beyond the control of ISAACS will not constitute a breach of this Agreement.
<PAGE>
ATTACHMENT 1 TO
EXHIBIT D
o Exemplars of BOSS/I G Design.
For all uses where the word "BOSS" is less than one inch (1"):
(4:1)
<PAGE>
1/2" 22(degrees) WIDE/CAPS 4-1
(graphic logo)
4/4/97
<PAGE>
1/2" 22(degrees) NARROW/LOWER CASE 4-1
(graphic logo)
4/4/97
<PAGE>
1/2" STRT.NARROW/LOWER CASE 4-1
(graphic logo)
4/4/97
<PAGE>
1/2" STRAIGHT NARROW/CAPS 4-1
(graphic logo)
4/4/97
<PAGE>
1/2" 22(degrees) NARROW/CAPS 4-1
(graphic logo)
4/4/97
<PAGE>
1/2" STRT.WIDE/CAPS 4-1
(graphic logo)
4/4/97
<PAGE>
1/2" 22(degrees) WIDE/LOWER CASE 4-1
(graphic logo)
4/4/97
<PAGE>
1/2" STRT.WIDE/LOWER CASE 4-1
(graphic logo)
4/4/97
<PAGE>
For all uses where the word "BOSS" is one inch (1") or larger:
(5:1)
<PAGE>
1" 22(degrees) WIDE/LOWER 5:1
(graphic logo)
4/4/97
<PAGE>
1" STRT.WIDE/CAPS 5:1
(graphic logo)
4/4/97
<PAGE>
1" STRT.(degree)WIDE/LOWER CASE 5:1
(graphic logo)
4/4/97
<PAGE>
1" 22(degrees)WIDE/CAPS 5:1
(graphic logo)
4/4/97
<PAGE>
EXHIBIT E
ADVERTISING
(HUGO BOSS)
1. In all print or Internet advertising for products listed in Exhibit B,
Section I as modified by Exhibit B, Section II, whether by HUGO BOSS, or by
retailers, or by any other entity authorized by HUGO BOSS, each and every page
shall prominently feature the words "HUGO BOSS", regardless of whether these
words appear alone or in connection or combination with any other words.
2. In all radio, television and motion picture advertising for products
listed in Exhibit B, Section I as modified by Exhibit B, Section II, the first
and last time the word "BOSS" is shown or mentioned, it shall include the phrase
"HUGO BOSS", regardless of whether these words appear alone or in connection or
combination with any other words.
3. Nothing in this Agreement is intended to give ISAACS any right to
approve or disapprove any aspect of the contents of any advertising other than
as set forth above; provided, however, that HUGO BOSS shall not use any
advertising style or format which is or has been primarily associated with
ISAACS' advertising of Isaacs' Trademark Products, other than those which are
traditional or standard in the industry.
4. HUGO BOSS agrees to take reasonable steps to achieve compliance with
this Exhibit E in advertising and promotions by retailers and other entities
authorized by HUGO BOSS including, but not limited to, providing such entities
periodically with appropriate guidelines for use of the words "HUGO BOSS"
consistent with this Agreement. However, acts of retailers and other entities
which are beyond the control of HUGO BOSS will not constitute a breach of this
Agreement.
<PAGE>
EXHIBIT F1
NON-EXPEDITED ADR PROCEDURES
In the event a dispute arises requiring non-expedited ADR procedures, the
following procedures shall be followed:
1. The parties shall attempt to resolve disputes arising under this
Agreement informally and in the normal course of business, by means of
negotiations between employees of the companies responsible for the parties'
day-to-day relationship.
2. In the event that either party believes that normal business
negotiations have not or are not likely to lead to a timely resolution, either
party may at any time without regard to Section 1 of this Exhibit F1 initiate
ADR proceedings by notifying the other in writing via facsimile of a demand for
ADR proceedings, with a succinct statement of the matters at issue. Notice shall
comply with the requirements of Section 21 of the Master License Agreement.
3. Upon receipt of such notification, both parties shall make arrangements
for an executive to confer, either in person or, if both agree, by telephone, in
an effort to negotiate a resolution of the dispute.
a. The executives will confer within five (5) business days of the
notification, and will work for at least ten (10) additional days to
try to reach a negotiated settlement.
b. By written agreement of both parties, the time period for
negotiation may be extended. The time period for negotiation will
automatically be extended until one party declares an impasse.
4. If the executive negotiations described in Section 3 of this Exhibit F1
fail to resolve the matter, then either party may thereafter notify the other
party in writing via facsimile that if agreement is not reached, mediation or
arbitration will be required. The notifying party shall state whether it elects
mediation or arbitration. If mediation is elected, the notified party may within
two (2) business days elect instead to proceed directly to arbitration, and will
so notify the notifying party. If the notified party takes no action, the matter
will proceed to mediation. If arbitration is elected by either party, the matter
will proceed directly to arbitration. In the case of arbitration, the party
selecting the location and choice of rules of the arbitration as specified under
Section 20.b. of this Agreement shall, within ten (10) business days of the
election to arbitrate, notify the other party of the selections of location and
choice of rules made.
<PAGE>
5. In the event of mediation, the parties agree that Jonathan Isaacs Marks
of J.A.M.S./Endispute or his designee shall select a mediator within five (5)
business days. If Mr. Isaacs Marks or his designee is unable to select a
mediator, the parties shall within ten (10) business days select a mediator
based on candidates provided by the Washington, D.C. office of
J.A.M.S./Endispute, or if J.A.M.S./Endispute is unavailable, the American
Arbitration Association.
a. Within two (2) business days of the mediator's selection, the
mediator will confer in a joint conference call with representatives
of the parties to discuss the issues in dispute and any further
preparation needed prior to holding a mediation session. The parties
shall defer to the mediator's recommendation about appropriate
procedures.
b. The parties shall attempt to resolve the dispute through mediation
for at least twenty (20) business days from the date of the
mediator's initial joint telephone conference.
c. The time period for mediation shall be extended automatically past
the initial twenty (20) business days until one party declares in
writing an impasse and demands arbitration. If an impasse is
declared by either party, the matter shall proceed to arbitration.
<PAGE>
EXHIBIT F2
EXPEDITED ADR PROCEDURES
In the event a dispute arises requiring expedited APR procedures, the
following procedures will be followed:
1. The parties will attempt to resolve disputes arising under this
Agreement informally and in the normal course of business, by means of
negotiations between employees of the companies responsible for the parties'
day-to-day relationship.
2. Either party may at any time request that the parties make arrangements
for an executive from each side not directly involved in the underlying dispute
to confer, either by telephone or in person, in an effort to negotiate a
resolution of the dispute.
3. Although the parties recognize that resolution of disputes through
direct negotiation under Sections 1 and 2 of this Exhibit F2 are to be
preferred, in the event that either party believes that normal business
negotiations are not likely to lead to a timely resolution, either party may at
any time without regard to Sections 1 and 2 of this Exhibit F2 initiate
expedited ADR proceedings by notifying the other in writing via facsimile of a
demand for expedited ADR proceedings, with a succinct statement of the matters
at issue, and by sending the notification and statement to the Washington, D.C.
office of J.A.M.S./ENDISPUTE. Notice will comply with the requirements of
Section 11 of this Agreement.
4. The expedited ADR proceedings will consist of an expedited arbitration
unless both parties agree in writing that they wish to pursue mediation, either
as a preliminary to arbitration or in parallel to the arbitration proceedings.
If the parties agree to pursue mediation, Jonathan Marks or another mediator
agreed to by the parties will serve as mediator, and the mediator shall follow
such procedures to which the mediator and the parties agree.
5. Unless the parties agree in writing to an alternative approach (as to
accommodate mediation or to fit the specifics of a particular dispute), the
parties will proceed as follows:
a. Within one (1) business day (a business day consists of a day,
excluding Saturdays, Sundays and all holidays generally recognized in
either the United States or the Federal Republic of Germany) of receipt of
the demand for expedited ADR proceedings, J.A.M.S./ENDISPUTE will inform
the parties by facsimile of the name of the arbitrator who will handle the
case.
<PAGE>
b. The matter will be heard and decided by one of the following
members of the J.A.M.S./ENDISPUTE panel of neutrals: The Honorable
Kathleen Roberts; The Honorable Robert Tarleton; The Honorable Curtis
Emery Von Kann.] In the event that one of the three pre-identified
neutrals ceases to be a member of the J.A.M.S./ENDISPUTE panel of
neutrals, J.A.M.S./ENDISPUTE will provide additional names of potential
arbitrators and the parties will agree on a replacement; if the parties
cannot agree, J.A.M.S./ENDISPUTE may appoint a replacement.
c. On the fifth (5th) business day after J.A.M.S./ENDISPUTE has
notified the parties of the arbitrator, the arbitrator will hold a
preliminary telephone conference during which the parties will describe
the dispute and discuss the procedure for resolving the dispute,
including, for example, the need for and content of pre-hearing
submissions. To the extent that the parties cannot agree on procedures,
the arbitrator will orally inform the parties at the close of the
telephone hearing of his procedural decisions. He will confirm those
decisions in writing no later than the following business day.
d. On the sixth (6th) business day after the preliminary telephone
conference, unless both parties agree to shorten the time or to extend the
time, the arbitrator will hold an in-person hearing to receive evidence
and consider arguments relating to the matter; provided, however, that if
the parties cannot agree to extend the time and the arbitrator concludes
that in the interest of justice the time should be extended, the
arbitrator may do so.
(1) The hearing will be conducted at a time decided by the
arbitrator, in either New York City or Washington, D.C., the
location to be decided by the arbitrator.
(2) The arbitrator will not be bound by the rules of evidence.
(3) The arbitrator will allow each side to present written and
oral evidence as they deem appropriate, except that the arbitrator
may set time limits to ensure that the hearing is completed within
one (1) working day.
(4) The arbitrator will declare the record closed at the end
of the hearing, except that the arbitrator may defer the closing of
the record for up to two (2) business days in order to allow the
parties to make post-hearing submissions.
(5) The arbitrator will hand down a binding award within one
(1) business day of the close of the record. The award will be
accompanied by a statement of reasons. "Statements of reasons" from
prior expedited
<PAGE>
arbitrations may be used by parties to later arbitrations to support
their positions.
e. Except as specifically set out herein, the arbitrator will have
sole discretion to determine procedures for the arbitration.
<PAGE>
Exhibit 10.11(e)
FOREIGN MANUFACTURING RIGHTS AGREEMENT
THIS FOREIGN MANUFACTURING RIGHTS AGREEMENT ("Agreement") is entered
into and effective as of the 5th day of November, 1997 ("Effective Date"), by
and between Ambra Inc. a Delaware corporation ("LICENSOR") and I. C. Isaacs &
Company L.P. ("LICENSEE"), a Delaware limited partnership.
R E C I T A L S
A. LICENSOR is the successor in interest of I. C. Isaacs & Company L.P.
which is in turn, the successor-in-interest of Brookhurst, Inc., to certain
trademark rights outside the United States (as defined below) including in
the Territory, as defined below, in the word BOSS.
B. LICENSEE desires to obtain a license to be able to cause others to
manufacture such products in the Territory and LICENSOR is willing to license
such trademarks to LICENSEE for such purpose in accordance with the terms
hereof.
C. In countries where necessary and appropriate, LICENSOR desires that
LICENSEE be recorded as a registered user of the Marks (as hereinafter
defined) in relation to the manufacture of the Licensed Products in the
Territory.
NOW, THEREFORE, in consideration of the mutual agreements set forth in
this Agreement, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
a. "Mark" or "Marks" shall mean the trademarks BOSS and the stylized
B (as set forth on Exhibit A attached hereto) whether used alone or in
combination with other words, phrases or designs, with the appearance and/or
style of the said trademark in compliance with the provisions of Exhibit A.
b. "Property" shall mean the intellectual property rights which
LICENSOR deems, in its sole reasonable discretion, to be desirable or
necessary for LICENSEE to enjoy the fruits of the license granted herein and
which are or become primarily associated with the Marks. Such Property shall
include, but not be limited to, certain titles, trademarks and names, as well
as any of the following used in connection with or as identifiers of the
Marks: fabrics, styles, designs, and colors other than those which are
standard or traditional in the industry; logos, symbols, copyrights, art
work, inventions (patentable or unpatentable), confidential information,
trade secrets, patents and pending patent applications.
- ----------------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
c. "Licensed Product" or "Licensed Products" shall mean solely the
products specified in Exhibit B attached hereto bearing Marks in compliance
with Exhibit A.
d. "Territory" or "Licensed Territory" shall mean any and all countries
listed on Exhibit C.
e. "United States" shall mean the United States of America, its
territories, possessions and commonwealths, except Saipan and American Samoa.
"United States" includes, without limitation, Puerto Rico.
f. "Territory Net Sales" shall mean the amount invoiced by or on behalf
of LICENSEE to third parties with respect to the Licensed Products
manufactured by or on behalf of LICENSEE in the Licensed Territory minus bona
fide trade, quantity and early payment discounts actually taken, actual
returns, shipping costs specifically itemized as such, uncollectible amounts
actually written off as bad debt by LICENSEE and sales or excise taxes (if
any) payable by LICENSEE in respect of and attributable directly and solely
to sales of such Licensed Products, provided that each such item is indicated
separately and appears clearly separate from product price; provided further
that for purposes of Territory Net Sales calculations uncollectible amounts
shall not exceed one half of one percent (0.5%) of Territory Net Sales
(including uncollectible amounts) for which LICENSEE is obligated to pay a
royalty. No costs incurred in the manufacture, sale, distribution,
advertisement or promotion of such Licensed Products shall be deducted from
the gross sales amounts or from any royalty payable to LICENSOR by LICENSEE.
Any sales or transfers of Licensed Products made by LICENSEE to any person or
entity that does not deal at arm's length with LICENSEE shall be computed,
for the purpose of determining Territory Net Sales, at an amount equal to the
price at which LICENSEE would have invoiced or charged purchasers which deal
at arm's length with LICENSEE, unless otherwise agreed to by LICENSOR in
writing.
g. "Total Net Sales" shall mean the amount invoiced to third parties by
or on behalf of LICENSEE with respect to all products bearing a BOSS mark
minus bona fide trade, quantity and early payment discounts actually taken,
actual returns, shipping costs specifically itemized as such, uncollectible
amounts actually written off as bad debt by LICENSEE and sales or excise
taxes (if any) payable by LICENSEE in respect of and attributable directly
and solely to sales of Licensed Products, provided that each such item is
indicated separately and appears clearly separate from product price;
provided further that for purposes of Total Net Sales calculations
uncollectible amounts shall not exceed one half of one percent (0.5%) of
Total Net Sales (including uncollectible amounts) of all products bearing a
BOSS mark. No costs incurred in the manufacture, sale, distribution,
advertisement or promotion of such products shall be deducted from the gross
sales amounts or from any royalty payable to LICENSOR by LICENSEE. Any sales
or transfers of such products made by LICENSEE to any person or entity that
does not deal at arm's length with LICENSEE shall be computed, for the
purpose of determining Total Net Sales, at an amount equal to the price at
which LICENSEE would have invoiced or charged purchasers which deal at arm's
length with LICENSEE, unless otherwise agreed to by LICENSOR in writing.
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2. RIGHTS GRANTED
a. LICENSEE acknowledges that LICENSOR owns, pursuant to that certain
Foreign Boss Rights Acquisition Agreement between LICENSOR and LICENSEE dated
September 30, 1997 any and all trademark rights relating to the word BOSS
within the Licensed Territory that BROOKHURST transferred to LICENSEE
pursuant to that certain Worldwide Rights Acquisition Agreement between
LICENSEE, BROOKHURST and William Ott dated September 30, 1997. LICENSEE
acknowledges that it does not own, or purport to own, any trademark rights
relating to the word BOSS in the Licensed Territory. Unless specifically
stated to the contrary, the provisions of this Agreement relate solely to use
of the Marks within the Licensed Territory and are not intended to apply to
LICENSEE'S activities in the United States.
b. LICENSOR hereby grants to LICENSEE, and LICENSEE accepts, upon the
terms and conditions set forth herein, a limited, nonexclusive right and
license to use, and to cause and permit third-party manufacturers
("Designated Manufacturer(s)") to use, the Marks solely in connection with
the manufacture of Licensed Products, labels, displays, and other materials
used in connection with the Licensed Products within the Territory for sale
solely to LICENSEE. The license and rights granted to LICENSEE under this
Agreement are sometimes referred to herein as the "Licensed Rights."
c. LICENSEE shall require that the Designated Manufacturer(s) perform
all obligations ascribed to such Designated Manufacturer(s) under this
Agreement, including but not limited to those obligations listed in Section
2.c. (i-xxii), and shall, within sixty (60) days of the effective date of
this Agreement, require each Designated Manufacturer(s) to enter into a
binding written agreement (whether by purchase order or otherwise) with
LICENSEE, under which each such Designated Manufacturer(s) agrees to
undertake the following obligations:
(i) The Designated Manufacturer(s) shall manufacture Licensed
Products only for and sell Licensed Products only to LICENSEE.
(ii) The Designated Manufacturer(s) shall not manufacture any
product bearing the Marks or any trademarks confusingly similar to the Marks,
other than Licensed Products.
(iii) The Designated Manufacturer(s) shall not use the name BOSS on
any corporate, partnership or other trade name or as a form of entity
identification.
(iv) The Designated Manufacturer(s) shall modify or terminate use of
the Marks if requested to do so by LICENSEE pursuant to Section 2.g. herein.
(v) The Designated Manufacturer(s) shall not use the Marks in the
Territory in any manner other than as expressly set forth in this Agreement.
(vi) The Designated Manufacturer(s) shall, following termination of
its agreement with LICENSEE, terminate any and all uses of the Marks in the
Territory.
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(vii) The Designated Manufacturer(s) shall (A) provide LICENSEE with
a list of all locations in which the Designated Manufacturer manufactures,
processes or stores Licensed Products, which list from time to time shall be
updated promptly with additional such locations as they are utilized, and (B)
provide reasonable access at each and every such location to LICENSEE and
LICENSOR; provided, however, that this provision does not apply to the
initial order placed with any Designated Manufacturer where the order does
not exceed 24,000 units. LICENSOR shall provide LICENSEE with notice and
opportunity to participate in any inspection under this provision provided
LICENSOR decides, in its sole discretion, that to do so would not impair or
hinder the purpose or effectiveness of any such inspection.
(viii) The Designated Manufacturer(s) shall comply with all
applicable labeling and other laws affecting the manufacture, storage,
shipment, labeling and sale of Licensed Products pursuant to the terms of
this Agreement, and at all times otherwise conduct its activities under its
agreement with LICENSEE in a lawful manner.
(ix) The Designated Manufacturer(s) shall permit LICENSOR, LICENSEE
and their respective agents and representatives to conduct audits with
respect to the books, records and all other documents and materials in the
possession or under the control of the Designated Manufacturer(s) relating to
the Licensed Products and its agreement with LICENSEE.
(x) The Designated Manufacturer(s) shall use the trademark and
copyright notices required by LICENSEE in connection with the Marks.
(xi) The Designated Manufacturer(s) shall acknowledge that the Marks
are owned solely and exclusively by LICENSOR and Hugo Boss AG and will not at
any time represent that it has any title or right of ownership in the Marks.
(xii) The Designated Manufacturer(s) shall acknowledge that
materials related to its agreement with LICENSEE and uniquely and
specifically associated with the Marks and/or the Licensed Products
(collectively "Works"), whether developed solely by such Designated
Manufacturer(s) or jointly with others, may qualify for copyright protection
under applicable local laws. The Designated Manufacturer(s) shall agree that
such works are to be deemed works "made for hire" for the benefit of LICENSOR
and that if such works, by operation of law or otherwise, are not works "made
for hire", such Designated Manufacturer(s) shall agree (A) to assign to
LICENSOR any or all of such Designated Manufacturer(s)' right, title and
interest in the copyright in such works throughout the world, and (B) not to
seek or obtain registration of such copyright in its own name.
(xiii) The Designated Manufacturer(s) shall agree not to seek or
obtain any registration of the Marks or any trademark confusingly similar
thereto in any name or participate directly or indirectly in such
registration without prior written permission of LICENSOR and LICENSEE.
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(xiv) In the event the Designated Manufacturer(s) has obtained or
obtains in the future in the Territory, any right, title or interest in the
Marks, or in any other trademark or service mark owned by LICENSOR, the
Designated Manufacturer(s) shall execute any and all instruments deemed by
LICENSOR and/or its attorneys or representatives to be necessary to transfer
such right, title or interest to LICENSOR.
(xv) The Designated Manufacturer(s) shall not take any action which
may in any way impair the rights of LICENSOR in the Marks, including, without
limitation, challenging or opposing, or raising or allowing to be raised,
either during the term of its agreement with LICENSEE or after its
termination, on any grounds whatsoever, any questions concerning, or
objections to, the validity of the Marks or LICENSOR'S rights therein, or any
other trademarks or service marks owned by LICENSOR containing the word BOSS
in any manner.
(xvi) The Designated Manufacturer(s) shall reasonably assist
LICENSOR in obtaining and/or maintaining registration for the Licensed Rights
including, without limitation, by providing information regarding the Marks
and samples of the Licensed Products.
(xvii) The Designated Manufacturer(s) shall appoint LICENSOR as its
respective attorney-in-fact for the limited purpose of executing any and all
documents and performing any and all other acts necessary to give effect and
legality to the provisions of this Section 2 of this Agreement.
(xviii) The Designated Manufacturer(s) shall not grant, assign,
sublicense or otherwise convey or transfer any rights inuring to such
Designated Manufacturer or any obligations or duties owed by such party to
LICENSEE or LICENSOR under this Agreement without the prior written consent
of LICENSEE, and any attempted transfer or assignment shall be null and void.
(xix) The Designated Manufacturer(s) shall cooperate with and assist
LICENSOR in protecting and defending the Marks, and shall promptly notify
LICENSEE in writing of any infringements, claims or actions by others in
derogation of the Marks in the Territory of which it becomes aware; provided,
however, that LICENSOR shall have the sole right to determine whether any
action shall be taken on account of such infringements, claims or actions.
The Designated Manufacturer(s) shall not take any action on account of any
such infringement, claim or action without the prior written consent of
LICENSOR.
(xx) In the event LICENSOR initiates or defends any legal
proceedings on account of any infringements, claims or actions by others in
derogation of the Licensed Rights, the Designated Manufacturer(s) shall
cooperate with and assist LICENSOR to the extent reasonably necessary to
protect the Licensed Rights including, but not limited to, being joined as a
necessary party to such proceedings. Any such legal proceedings which do not
result from LICENSEE'S breach of this Agreement or the Designated
Manufacturer's breach of its agreement with LICENSEE shall be initiated or
defended by LICENSOR; provided, however, that under no circumstances shall
LICENSOR be responsible for the costs or expenses incurred
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by the Designated Manufacturer(s) in any such legal proceeding in which it
elects to be represented by its own counsel.
(xxi) The Designated Manufacturer(s) shall obtain all government
approvals and registrations which are required under the laws of the
Territory as a result of the Designated Manufacturer(s) activities in
connection with its contract with LICENSEE and to pay any taxes or fees
required by any such foreign government as a result of its activities under
its contract with LICENSEE.
(xxii) In the manufacture of Licensed Products, the Designated
Manufacturer(s) shall not employ children under fourteen (14) years of age.
d. Beginning sixty (60) days after the Effective Date of this
Agreement, LICENSEE shall not authorize any third party to manufacture
Licensed Products in the Territory unless and until such third party executes
a binding written agreement (by purchase order or otherwise) with LICENSEE
containing all of the obligations listed above in Section 2.c. (i-xxii).
LICENSEE shall take reasonable steps to monitor each Designated
Manufacturer's compliance with its obligations under its agreement with
LICENSEE. If any such Designated Manufacturer(s) fails to comply with any of
the foregoing obligations listed above in Section 2.c. (i-xxii), LICENSEE,
upon having acquired knowledge thereof, shall immediately notify LICENSOR
thereof and of the steps being taken to obtain compliance by such Designated
Manufacturer(s) with such obligations. If any such failure to comply
constitutes a material breach of the Designated Manufacturer's obligations to
LICENSEE as listed above in Section 2.c. (i-xxii), LICENSEE shall, at the
request of LICENSOR, also terminate its business dealings with such
Designated Manufacturer as soon as commercially feasible; provided, however,
that as of the date LICENSEE acquires knowledge of any such breach, LICENSEE
shall not enter into any new manufacturing agreements or place any additional
orders with such noncomplying Designated Manufacturer without the written
consent of LICENSOR; provided further that such termination shall not relieve
LICENSEE of its obligations to continue to enforce its rights against such
Designated Manufacturer for breach of its obligations or LICENSEE's indemnity
obligations to LICENSOR under this Agreement.
e. LICENSEE shall bear all costs and expenses associated with or
incurred by it in carrying out its obligations under Sections 2.c. and 2.d.
above.
f. Notwithstanding Section 2.b. above, LICENSEE may manufacture or
cause others to manufacture the Licensed Products within the Licensed
Territory subject to the terms and restrictions contained in this Section.
The parties agree that they will amend Exhibit C to include countries listed
in Exhibit C1 upon (or as soon thereafter as is practicable) the issuance to
HUGO BOSS AG, or its designee, in each such country, of trademark
registration(s) for the word BOSS for use on products listed in Exhibit B,
Section I, as modified by Section II; provided, however, that any such
amendment shall conform to and be limited by the scope of any such trademark
registration obtained. In those countries listed in Exhibit C1 where HUGO
BOSS AG presently has no trademark application(s) pending, LICENSOR agrees,
upon the
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written request of LICENSEE, to cause HUGO BOSS AG to make such application,
and to take appropriate steps to prosecute such application and LICENSEE
agrees to reimburse HUGO BOSS AG for fifty percent (50%) of the costs,
including attorney's fees and filing fees, of obtaining such registration.
The parties agree that they will amend Exhibit C to include each country
listed on Exhibit C2 when the later of the following two events occurs (or as
soon thereafter as is practicable): (1) the issuance to HUGO BOSS AG or its
designee, of trademark registrations for the word BOSS for use on products
listed in Exhibit B, Section I, as modified by Section II, or (2) the
resolution to the satisfaction of HUGO BOSS AG of pending disputes among
third parties. At any time after the execution of this Agreement, LICENSEE
may notify LICENSOR of countries other than those referenced in Exhibits C,
C1 and C2 in which LICENSEE desires to manufacture Licensed Products.
LICENSOR shall consider such a request in good faith, and consistent with the
principles incorporated above relating to the countries listed in Exhibit C.
If LICENSOR agrees to any such request, LICENSOR and LICENSEE will either
amend this Agreement, or execute a separate manufacturing rights agreement
upon mutually agreeable terms as set forth above. The parties agree to
execute individual Manufacturing Rights Agreements for any country on Exhibit
C, if required by the laws or regulations of that country or to protect the
Mark. LICENSEE shall only manufacture or cause others to manufacture
Licensed Products in those countries identified in Exhibit C or any other
country as may be later agreed upon pursuant to this section; provided,
however, that nothing in this subsection 2.f. shall prevent LICENSEE from
manufacturing goods in the United States pursuant to its own trademark
rights.
g. Notwithstanding Section 2.b. hereof, neither LICENSEE nor the
Designated Manufacturer(s) shall have the right to use the Marks in the
Licensed Territory in any manner that conflicts with the rights of any third
party. For purposes of this Section 2.g., the term "third party" shall not
include any natural person under control of LICENSOR, any entity owned by,
controlled by, or affiliated with LICENSOR, any natural person or entity that
owns or controls LICENSOR, or any entity with whom LICENSOR enters into an
agreement relating to, or creating, the rights that conflict with LICENSEE'S
rights hereunder. If the use of the Marks on any or all of the Licensed
Products conflicts with the rights of any third party, or if a third party
makes a bona fide claim alleging such a conflict, LICENSEE agrees to
immediately terminate or modify such use in accordance with LICENSOR'S
reasonable instructions, and LICENSEE shall have no right of damage or offset
in connection with this Agreement. In the event LICENSEE fails to terminate
or modify such use, as reasonably directed by LICENSOR, LICENSOR may
terminate this Agreement under the provisions of Section 15 below as to such
country in which the rights of the third party exists or with respect to
which a bona fide claim has been made without limiting LICENSOR'S other
rights and remedies hereunder or at law or in equity. LICENSEE shall
indemnify and hold harmless LICENSOR for all damages, including attorney's
fees and costs incurred in any action or claim brought against LICENSOR by
such third party arising out of LICENSEE's actions under this Agreement.
LICENSOR agrees that neither it nor HUGO BOSS AG shall grant to any third
party an exclusive license for the manufacture of products listed on Exhibit
B, Section I, as modified by Section II, bearing a BOSS mark.
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h. LICENSEE acknowledges that it is often difficult to obtain clear,
registered title to trademarks and other intellectual property rights.
Accordingly, LICENSOR makes no representation whatsoever concerning any
rights, interest, information, agreements, restrictions or other matters
relating to the BOSS marks acquired by LICENSOR from LICENSEE under the
Foreign Rights Agreement, and LICENSEE agrees that the rights granted herein
exist only to the extent that LICENSOR owns such rights and no warranty,
express or implied, is made with respect thereto or with respect to the
rights of any third parties that may conflict with the rights granted herein.
LICENSOR warrants that the agreements listed on Exhibit D hereto are the
only agreements known to LICENSOR or HUGO BOSS AG which impose or may impose
restrictions on LICENSEE'S ability to manufacture Licensed Products in the
Territory.
i. LICENSOR shall obtain from HUGO BOSS AG throughout the term of this
Agreement a license of such of its rights (if any) relating to the
manufacture of the Products under the Marks as it possesses in the Territory
such that LICENSOR may sublicense said rights (if any) to LICENSEE to the
extent described in the grant of rights set forth in Section 2.a. and .b.
hereof, and LICENSOR hereby acknowledges that it is sublicensing said rights
to LICENSEE under said Section 2.a. and .b.
j. LICENSEE makes no representations and warranties to LICENSOR
hereunder with respect to the Marks, including, without limitation, any
matter relating to the existence, validity or enforceability of the Marks
acquired by LICENSEE from BROOKHURST Inc.
k. LICENSOR makes no representations and warranties to LICENSEE
hereunder with respect to the Licensed Marks, whether such Marks were derived
from the purchase by LICENSOR from LICENSEE (and ultimately from BROOKHURST)
or derived by license from HUGO BOSS AG.
3. TRANSFER AND OWNERSHIP OF PROPERTY
a. LICENSEE agrees that, during the term of this Agreement, it shall
not use the Marks in the Territory in any manner other than as expressly set
forth in this Agreement.
b. LICENSEE agrees that LICENSOR is and shall be the sole owner of all
items of Property. Subject to the express requirements of Exhibit A, Exhibit
B and Exhibit C of this Agreement, the parties agree that LICENSOR shall have
no right to prevent LICENSEE from using, during or after the term of this
Agreement, any fabrics, styles, designs and colors that are standard or
traditional in the industry or not primarily associated with the Licensed
Rights.
c. Following termination of this Agreement, LICENSEE agrees that it
will terminate any and all use of the Marks in the Territory, except as
otherwise expressly provided in this Agreement.
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4. QUALITY STANDARDS AND INSPECTION
a. The parties acknowledge and agree that great value is placed on the
Marks and the goodwill associated therewith, that the consuming public and
the industry now associate the Marks with products of consistently high
quality, and that the terms and conditions of this Agreement are necessary
and reasonable to assure the consuming public and the industry that all
Licensed Products sold hereunder are of the same consistently high quality as
Licensed Products previously sold by LICENSEE. Accordingly, LICENSEE agrees
that all Licensed Products manufactured hereunder shall be substantially
equivalent, in terms of quality, to the products manufactured by LICENSEE for
sale during the Spring and Fall 1996 seasons. LICENSOR acknowledges that the
products bearing the word BOSS manufactured by LICENSEE for sale during the
1996 Spring and Fall seasons were of sufficiently high quality standards as
required by this paragraph. If any Licensed Products fail to conform to the
aforementioned quality standards, upon notification from LICENSOR, LICENSEE
shall discontinue any and all manufacture, shipments and distribution of such
non-conforming Licensed Products. For purposes of this Agreement, the
parties acknowledge that the quality standards apply only to the sewing,
construction and fabric of the Licensed Products.
b. Within forty-five (45) days after the Effective Date of this
Agreement, LICENSEE shall notify LICENSOR, in writing, of the identities of
each Designated Manufacturer(s) (including full business name and address),
and the locations of all manufacturing, processing and storage facilities in
the Territory in which the LICENSEE or the Designated Manufacturer(s) is
manufacturing, processing or storing or intends to manufacture, process or
store Licensed Products which is currently manufacturing Licensed Products
for LICENSEE in the Territory. Within thirty (30) days of placing any order
for the manufacture of any Licensed Products with a Designated Manufacturer
not previously identified to LICENSOR, LICENSEE shall notify LICENSOR, in
writing, of the identity of such new Designated Manufacturer, (including full
business name and address) and within thirty (30) days after placing any
order (other than an initial order for 24,000 units or less) with any such
Designated Manufacturer, the locations of all manufacturing, processing and
storage facilities in the Territory in which the LICENSEE or the Designated
Manufacturer is manufacturing, processing or storing or intends to
manufacture, process or store Licensed Products. LICENSEE shall, from time
to time, provide LICENSOR promptly with additional such locations as they are
utilized. LICENSOR and its representatives may from time to time, during all
reasonable business hours and with prior reasonable notice to LICENSEE,
inspect the operations and facilities of LICENSEE, the Designated
Manufacturer(s) and their agents with respect to performance under this
Agreement.
c. LICENSEE agrees that it shall comply with all applicable labeling
and other laws affecting the manufacture, storage, shipment, labeling and
sale of the Licensed Products pursuant to the terms of this Agreement, and at
all times otherwise conduct its activities under this Agreement in a lawful
manner.
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d. The parties agree that they will not, without the written consent of
the other, knowingly seek to obtain products from each other's manufacturers
in the Territory or otherwise interfere in each other's lawful relationships
with any manufacturers in the Territory.
e. In order to ensure that LICENSOR is fully aware of all products
LICENSEE may manufacture in the Territory, beginning with product development
for the presentation to the trade beginning in February 1998, LICENSEE shall
not sell or distribute any Licensed Product manufactured, sold or distributed
anywhere in the world, unless and until a prototype or a Computer Assisted
Design ("CAD") which displays clearly and fully each and every use of the
Mark on such product has been offered to LICENSOR for inspection. LICENSEE
shall notify LICENSOR when such prototypes or CADs are available for
inspection at LICENSEE's offices in New York ("Notification of Prototype
Availability") and LICENSOR shall, within ten (10) business days complete its
inspection. At the inspection, or at an inspection to be held within fifteen
(15) business days after receipt by LICENSOR of CADs as provided for below,
LICENSEE shall make available representative samples of tags, labels,
packaging (including cartons, containers, and wrapping or packing material)
and other advertising, promotional or display materials or stationery, sale,
documents and other items bearing or using the Mark. LICENSOR shall, within
five (5) business days of implementing its inspection, notify LICENSEE in
writing of any product that LICENSOR believes fails to meet the terms and
conditions of this Agreement including the standards set forth in Exhibit A
("Disputed Garments"). To the extent LICENSEE intends to rely upon CADs,
LICENSEE may, at its option, ship such CADs to LICENSOR for its review.
Under these circumstances, LICENSOR shall, within ten (10) business days of
receipt of such materials, notify LICENSEE in writing of any Disputed
Garments. In the event there are Disputed Garments, LICENSOR and LICENSEE
shall then meet to resolve any differences concerning such Disputed Garment
and if, after five (5) business days, no resolution has been reached, the
matter may be submitted to arbitration according to the procedures set forth
in Exhibit H1. Pending resolution of any such arbitration, LICENSEE shall
not manufacture, distribute or sell any such Disputed Garments. LICENSOR's
failure to approve or disapprove any such prototype or CAD, within thirteen
(13) business days of notification shall be deemed approval of such prototype
or CAD. LICENSEE shall provide LICENSOR with a set of prototype garments,
CADs or salesperson's samples of each such garment, each in typical or
representative color, and each accompanied by a list of colors (by references
to Pantone or other technical specification) expected to be used in
production, within ten (10) business days of Notification of Prototype
Availability. Subject to the express requirements of Exhibit A and Exhibit
B, nothing in this Agreement is intended to give LICENSOR any rights to
approve or specify the apparel styling, design, patterns, art work or colors
of Licensed Products.
f. Beginning with product development for the presentation to the trade
in February 1998, LICENSEE shall adhere to all prototypes, or CADs reviewed
by LICENSOR. Any minor departure or variance from such prototypes or CADs as
to any of the requirements or limitations in Exhibit A and Exhibit B,
including but not limited to any change of logo design, must receive the
prior written approval of LICENSOR, which shall not be unreasonably withheld.
Prior to receipt of LICENSOR'S approval, LICENSEE may, solely at its own
risk and without prejudice
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to LICENSOR, take orders for and/or manufacture such Licensed Products.
Should a dispute arise between the parties over such products requiring
arbitration, the parties agree that the arbitrator shall not be advised that
such garments have been manufactured or that orders have been placed or taken
therefor.
g. LICENSEE shall notify LICENSOR in writing regarding any change to
LICENSEE's business that would materially affect the rights, obligations and
benefits of LICENSOR under this Agreement. LICENSOR shall notify LICENSEE in
writing regarding any change to LICENSOR's or HUGO BOSS AG's business that
would materially affect the rights, obligations and/or benefits of LICENSEE
under this Agreement.
h. Subject to the provisions of Section 5.c., LICENSEE agrees not to
manufacture, export, import, ship or distribute from or to any Licensed
Territory, nor give its permission to any third party to manufacture, export,
import, ship or distribute from or to any Licensed Territory, Substandard
Licensed Products without the prior written approval of LICENSOR.
Substandard Licensed Products shall be defined as damaged or defective
merchandise, irregulars, raw material seconds, made-up merchandise, and any
products not meeting the quality standards set forth in Section 4.a. above or
the logo standards set forth in Exhibit A. Nothing in this Agreement is
intended to prevent LICENSEE from manufacturing or selling seconds and
irregulars in the normal and ordinary course of business, consistent with the
past practices of LICENSEE in this regard.
i. Upon LICENSOR'S written request, LICENSEE shall furnish without cost
to LICENSOR a reasonable number of random production samples per year of each
Licensed Product being manufactured by or on behalf of LICENSEE hereunder,
together with samples of each tag, label, carton, container and packing or
wrapping material used in connection therewith.
j. LICENSEE shall submit to LICENSOR any trademark, service mark, logo
or name which is to be used in connection with the Licensed Rights other than
those referenced in Exhibit A. LICENSOR shall have the right, in its sole
reasonable discretion, to refuse to permit the use of any such trademarks,
service marks, logos or names.
k. LICENSEE shall not use the stitching designs for clothing pockets as
depicted in Exhibit E on jeans, trousers, shirts, skirts, dresses, shorts,
overalls, jackets, hats or vests or manufacture or distribute any Licensed
Products using any pocket stitching design which infringes the designs set
forth in Exhibit E. Prior to use, LICENSEE may submit to LICENSOR for
approval other stitching designs for use on clothing pockets on such
garments. In the event LICENSEE elects not to submit stitching to LICENSOR
for approval LICENSEE shall indemnify, defend and hold harmless LICENSOR from
and against any and all claims, liabilities and expenses, including
reasonable attorney's fees, disbursements and other charges relating to
LICENSEE's use of such unapproved stitching designs.
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l. LICENSOR and its representatives may, from time to time during all
reasonable business hours and with prior reasonable notice to LICENSEE,
inspect the operations and facilities of LICENSEE with respect to this
Agreement.
5. TERM
a. This Agreement shall continue in full force and effect until
December 31, 2001, when it shall terminate, unless renewed in accordance with
the terms below, or unless terminated sooner in accordance with the terms and
conditions set forth in this Agreement.
b. LICENSEE may, at it sole option, renew this Agreement for a period
of three (3) additional years commencing on January 1, 2002, and ending
December 31, 2004, if LICENSEE provides written notice of its intention to
extend by no later than June 30, 2001. LICENSEE may, at its sole option,
extend the term of this Agreement for an additional three (3) year period
commencing on January 1, 2005, and ending on December 31, 2007, if LICENSEE
provides written notice of its intention to extend by no later than June 30,
2004.
c. With respect to the limitations on the use of the Mark described in
Exhibit A, LICENSEE shall begin to phase some of the limitations into its
product line beginning with products produced by or for LICENSEE after
January 1, 1998. Thereafter, fifty percent (50%) of the products bearing the
Marks produced by or for LICENSEE during the period August 1, 1998 through
December 31, 1998 (as measured by the number of styles) must comply
therewith. LICENSEE agrees to use its reasonable efforts to ensure that
fifty percent (50%) of its projected volume of such goods comply with the
limitations described in Exhibit A. LICENSEE shall be in full compliance with
Exhibit A for all products bearing the Marks produced on or after December
31, 1998 and thereafter may not manufacture or produce
any products bearing the Marks which are not in full compliance with Exhibit
A.
6. LICENSE FEE AND ROYALTIES
a. LICENSEE agrees to pay to LICENSOR a royalty on Licensed Products
manufactured in the Territory by or on behalf of LICENSEE in accordance with
Exhibit F attached hereto. Each year during the initial term of this
Agreement, annual royalties shall be paid as follows: in anticipation of
substantial total annual royalties, and to be credited against the royalties
otherwise payable hereunder, four equal installments of one million dollars
($1,000,000), each within thirty (30) days after the end of each three month
period ending March 31, June 30, September 30 and December 31, the first such
payment being due on April 30, 1998 and within thirty (30) days of the end of
each year of this Agreement, any remaining royalties due under Exhibit F
("Annual Royalty Payment"). For each year during any of the option terms of
this Agreement royalty payments shall be based on actual sales as calculated
in accordance with Exhibit F payable quarterly and due within thirty (30)
days after the end of each three month period ending March 31, June 30,
September 30 and December 31.
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b. LICENSEE agrees (i) to generate Territory Net Sales for each year
during which this Agreement is in force as specified in Exhibit F1 and (ii)
for each such year in which such sales exceed these minimum amounts, to pay
royalties as if its Territory Net Sales are at least equal to ninety-five
percent (95%) of Total Net Sales. * Once LICENSEE's cumulative payment of
royalties under this Agreement and interest payable to LICENSOR under the
Secured Limited Recourse Promissory Note ("Note") between LICENSOR and
LICENSEE ("interest") exceed, respectively * paid in at any time during the
entire term of this Agreement, then (i) LICENSEE's covenant under Section
6.b.(i) above shall cease to have effect for the term in question, and (ii)
royalties thereafter shall be paid to LICENSOR in accordance with Exhibit F
as stated in Section 6.a. and 6.b(ii) above.
c. At the time of each Annual Royalty Payment, LICENSEE shall provide
to LICENSOR a written statement illustrating the calculation of the payment
due and the volume of all sales for each product covered by Exhibit B,
Section I, as modified by Section II. The statement should be certified by an
officer of LICENSEE to be complete and accurate and shall set forth a
detailed accounting of the aggregate amount of Territory Net Sales and Total
Net Sales of all Licensed Products shipped during the contract year.
LICENSOR may provide, in its sole and reasonable discretion, a statement
form, and LICENSEE agrees to supply the information requested on such form.
The parties agree that the form attached hereto as Exhibit F2 is acceptable.
In the event LICENSEE's Territory Net Sales do not equal or exceed
ninety-five percent (95%) of its Total Net Sales, LICENSEE may provide
detailed sales information only of its Total Net Sales.
7. PAYMENT TERMS
a. Without limiting LICENSOR's right to terminate this Agreement under
Section 15, below, in the event that LICENSEE fails to make timely payments
to LICENSOR under this Agreement, LICENSEE shall pay to LICENSOR on demand
the amounts due with interest at the rate of one and one-half percent (1.5%)
per month from the due date until paid. If this rate exceeds the maximum
interest rate allowable by law, then interest shall accrue at the maximum
rate allowable by law.
b. All payments required under this Agreement shall be in U.S. Dollars
and made payable to the order of "Ambra, Inc."
c. Acceptance by LICENSOR of any payments under this Agreement shall
not prevent LICENSOR at any later date within thirty-six (36) months from the
date of any payment from disputing the amount owed or from demanding more
information from LICENSEE regarding payments finally due, and such acceptance
of any payment by LICENSOR shall not
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* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
constitute a waiver of any breach of any term or provision of this Agreement
by LICENSEE if any such breach shall have occurred. Payment by LICENSEE of
any payments under this Agreement shall not prevent LICENSEE within twelve
(12) months from the date of such payment from disputing the amount owed or
from demanding from LICENSOR the repayment of any amounts overpaid by
LICENSEE; provided, however, that LICENSEE shall be entitled to reimbursement
for any overpayment made by LICENSEE discovered by an audit conducted by
LICENSOR of LICENSEE's books and records under Section 8.c. herein,
notwithstanding the date of any such audit.
d. LICENSEE acknowledges and agrees that any manner of payment other
than that stated herein, or as required by law, including, without
limitation, offsets, payment into an escrow account or to any other third
party, shall constitute a material breach of this Agreement.
8. BOOKS AND RECORDS
a. LICENSEE shall keep complete and accurate records of all Licensed
Products manufactured and of LICENSEE'S activities under this Agreement, and
shall make the same readily available to LICENSOR and its agents and
representatives at such reasonable times as LICENSOR may from time to time
request for inspection, copying and extracting.
b. Such books and records shall be kept in accordance with generally
accepted accounting principles, consistently applied, and shall be retained
by LICENSEE and kept available for at least three (3) years after termination
of this Agreement for possible inspection, copying, extracting and/or audit
by LICENSOR.
c. LICENSOR and its agents and representatives shall have the right to
conduct audits with respect to the books, records and all other documents and
materials in the possession or under the control of LICENSEE relating to this
Agreement, the cost of which shall be borne by LICENSOR. Any such audit
shall be done during normal business hours and upon reasonable notice to
LICENSEE. If any such audit, however, discloses that royalty payments due to
LICENSOR under this Agreement exceed the amount of payments actually made to
LICENSOR during the audited period by an amount greater than three percent
(3%) of the payments made, LICENSEE shall immediately pay the cost of the
audit, as well as unpaid royalties plus interest calculated from the date
such payment(s) were actually due until the date when such payment is, in
fact, actually made. In addition to the foregoing, if any such audit
discloses that payments due to LICENSOR under this Agreement exceed the
amount of payments actually made to LICENSOR by an amount greater than ten
percent (10%) of the payments made during the audited period ("Major Error
Audit"), LICENSOR shall be entitled, in addition to all other remedies
available to it and at its sole option, to an additional payment equal to ten
percent (10%) of the full amount of the unpaid royalties. If during an audit
of a subsequent period conducted within twelve (12) months of the completion
of a Major Error Audit, the payments due to LICENSOR under this Agreement
exceed the amount of payments actually made to LICENSOR by an amount greater
than ten percent (10%) of the payments made during the
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audited period, LICENSOR shall be entitled, * and all other remedies
available to it and at its sole option, to immediately terminate the
Agreement.
d. No later than one hundred twenty (120) days after the close of
LICENSEE's fiscal year, LICENSEE shall provide LICENSOR with its annual
financial statements, audited or unaudited, prepared by an independent
certified accountant. If unaudited, an officer of LICENSEE shall certify
under penalty of perjury that the financial statements are true and correct,
and have been prepared in accordance with generally accepted accounting
principles, consistently applied.
e. LICENSOR agrees that it will maintain in confidence those records of
LICENSEE disclosed to LICENSOR pursuant to paragraphs 8.a., 8.c., and 8.d.
above and any other oral or written confidential information about LICENSEE's
business and product line disclosed to LICENSOR.
9. LABELING
LICENSEE agrees to use the proper trademark and copyright notices in
connection with the Marks in the Territory. Upon the execution of this
Agreement, LICENSEE shall no longer place orders in the Territory for
Licensed Products bearing any prior trademark and copyright notice in
connection with the Licensed Rights and will take reasonable steps to ensure
that such goods are no longer manufactured in the Territory; provided,
however, that LICENSEE shall not be required to remove prior trademark and
copyright notices already affixed to such garments or to unreasonably disrupt
work in progress; any other changes shall be subject to a reasonable phase-in
period. Where appropriate, such notices shall appear in the screen for any
screen-printed design, in the salvage of any fabric, in the neck label or
waist label of any Licensed Products, and on any label or tag affixed to the
Licensed Products or otherwise attached to the Licensed Products.
10. OWNERSHIP OF THE MARKS
a. LICENSEE agrees that it has no right to ownership in the Marks in
the Territory and, in furtherance thereof, hereby transfers and conveys all
rights, title and interest, if any, in the Marks to HUGO BOSS AG, and will
not at any time represent or authorize a Designated Manufacturer(s) to
represent that such manufacturer has any title or right of ownership in the
Marks.
b. LICENSEE agrees that nothing contained in this Agreement shall give
to LICENSEE or the Designated Manufacturer(s) any right, title or interest in
the Marks except the limited license granted to LICENSEE herein, that such
Licensed Rights are the sole and exclusive property of LICENSOR and that all
such uses by LICENSEE or the Designated Manufacturer(s) of the Licensed
Rights shall inure only to the benefit of LICENSOR.
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* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
c. LICENSEE agrees that it will not seek or obtain any registration of
the Marks in any name or participate directly or indirectly in such
registration without LICENSOR'S prior written permission. Subject solely to
the rights and interest granted herein, LICENSEE further agrees and
acknowledges that if it has obtained or obtains in the future, in the
Territory, any right, title or interest in the Marks, or in any marks which
are confusingly similar to the Licensed Rights, or in any other trademark or
service mark owned by LICENSOR, that LICENSEE has acted or will act as an
agent and for the benefit of LICENSOR for the limited purpose of obtaining
such registrations in the name and on behalf of LICENSOR. LICENSEE further
agrees to execute any and all instruments deemed by LICENSOR and/or its
attorneys or representatives to be necessary to transfer such right, title or
interest to LICENSOR.
d. LICENSEE agrees not to take any action which may in any way impair
LICENSOR's rights in and to the Marks, including, without limitation,
challenging or opposing, or raising or allowing to be raised, either during
the term of this Agreement or after its termination, on any grounds
whatsoever, any questions concerning, or objections to, the validity of the
Marks or LICENSOR'S rights therein, or any other trademarks or service marks
owned by LICENSOR containing the word BOSS in any manner.
e. LICENSEE agrees to reasonably assist LICENSOR in obtaining and/or
maintaining registration for the Licensed Rights including, without
limitation, by providing information regarding the Marks and samples of the
Licensed Products.
f. LICENSEE acknowledges that materials related to this Agreement and
uniquely and specifically associated with the Marks and/or the Licensed
Products (collectively "Works"), whether developed solely by LICENSEE or
jointly with others may qualify for copyright protection under applicable
local laws. LICENSEE agrees that such Works are to be deemed as Works "made
for hire" for the benefit of LICENSOR and that if such Works, by operation of
law or otherwise, are not Works "made for Hire," LICENSEE agrees (i) to
assign, and does hereby assign, to LICENSOR or its designee any and all of
LICENSEE'S right, title and interest in the copyright in such Works
throughout the world, and (ii) not to seek or obtain registration of such
copyright in its own name.
g. LICENSEE will and does hereby irrevocably appoint LICENSOR as its
respective attorney-in-fact for the limited purpose of executing any and all
documents and performing any and all other acts necessary to give effect and
legality to the provisions of this Section 10 of this Agreement. LICENSOR
agrees to provide LICENSEE with copies of all such documents it executes
under this Section 10.g.
11. INSURANCE
a. LICENSEE agrees to obtain and keep in full force and effect, during
the term of this Agreement, at its sole cost and expense, a policy of
insurance insuring against those risks customarily insured under
comprehensive general liability policies including, but not limited to,
"product liability" and "completed operations." Such policies of insurance
shall have
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endorsements or coverage with combined single limits of not less than One
Million Dollars ($1,000,000) and shall name LICENSOR as an additional insured
thereunder. LICENSEE shall use reasonable efforts to obtain at a reasonable
cost an "advertising" rider and, if such rider is purchased, shall provide
that it cannot be canceled without thirty (30) days prior written notice to
LICENSOR. It is also agreed that the "other insurance" clause, if any, will
be deleted from such policy, that the insurance under such policy shall be
primary, and that other insurance in force is neither primary nor
contributing.
b. LICENSEE shall provide to LICENSOR, within thirty (30) days of the
Effective Date of this Agreement, a certificate showing proof that such
policy of insurance is in effect. In no event shall LICENSEE manufacture,
offer for sale, sell, advertise, promote, ship and/or distribute the Licensed
Products prior to the receipt by LICENSOR of such certificate of insurance.
c. LICENSEE agrees to give LICENSOR, or cause the insurer to give
LICENSOR, as the case may be, thirty (30) days prior written notice of any
reduction in limits or termination of such policy of insurance, or of any
intention on the part of LICENSEE not to pay the premium thereof.
12. NON-TRANSFERABILITY OF RIGHTS
a. LICENSEE shall not grant, assign, sublicense or otherwise convey or
transfer any rights inuring to LICENSEE or any obligations or duties owed by
LICENSEE to LICENSOR under this Agreement, without the prior written consent
of LICENSOR, and any attempted transfer or assignment shall be null and void.
LICENSOR shall consider in good faith any request for such consent and
promptly notify LICENSEE of LICENSOR'S decision, said decision to be in
LICENSOR's sole discretion. LICENSEE shall have the right to transfer or
assign its rights under this Agreement to an affiliate of LICENSEE (i.e., an
entity in control of, controlled by or under common control with LICENSEE),
provided that any such transfer or assignment does not in any way diminish,
extinguish, or adversely affect LICENSEE'S obligations to LICENSOR under this
Agreement. Nothing in this Section 12 is intended to prevent LICENSEE, its
partners or affiliates from offering and selling stock to the public.
LICENSOR shall provide LICENSEE with written notice if LICENSOR intends to
assign or transfer to any third party any of its rights or obligations under
this Agreement.
b. Notwithstanding anything to the contrary set forth in this
Agreement, LICENSEE shall be permitted to assign and transfer LICENSEE's
rights under this Agreement to any parent, subsidiary or other affiliate of
LICENSEE if LICENSEE or its successor in interest remains fully liable for
the performance of this Agreement by such assignee or transferee and
indemnifies LICENSOR with respect to any costs and damages LICENSOR may incur
because of such assignment or transfer.
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13. INDEPENDENT CONTRACTOR
The parties hereby agree that LICENSEE is and shall be an independent
contractor and that no agency (except as specified in Section 10.g.), joint
venture or partnership is created by this Agreement. The legal relationship
of any person or entity performing services for LICENSEE shall be one solely
between such parties. Neither party shall incur any obligation in the name
of the other party without the prior written consent of that party.
14. INDEMNIFICATION
a. LICENSEE agrees to indemnify, defend and hold harmless LICENSOR and
HUGO BOSS AG from and against any and all claims paid, liabilities incurred
and all other out-of-pocket expenses and costs (including reasonable
attorney's fees, disbursement and other charges but excluding lost profits)
(collectively referred to as "Expenses") actually incurred by LICENSOR or
HUGO BOSS AG arising out of any breach by LICENSEE of its obligations under
this Agreement or any breach by any Designated Manufacturer of its
obligations under its agreement with LICENSEE, including, without limitation,
Expenses incurred by LICENSOR or HUGO BOSS AG in efforts to stop the
manufacture, distribution or sale of unauthorized product bearing the Marks,
or out of any defect whether obvious or hidden and whether or not present in
any sample approved by LICENSOR, in any product bearing a BOSS mark
manufactured, distributed or sold by or on behalf of LICENSEE (regardless of
whether such product was manufactured in the Licensed Territory) under or
arising from personal injury or property damage or out of any infringement of
any rights of any other person by reason of the design, manufacture,
distribution, advertisement, promotion, sale, possession or use of the Marks
or any Licensed Products or LICENSEE's and Designated Manufacturer(s)'
failure to comply with applicable law, regulations and standards.
b. LICENSOR agrees to indemnify, defend and hold harmless LICENSEE from
and against any and all claims paid, liabilities incurred and all other
Expenses (as defined above) actually incurred by LICENSEE arising out of any
breach by LICENSOR of its obligations, if any, under this Agreement or
LICENSOR'S or HUGO BOSS' failure to comply with applicable law, solely
attributable to LICENSOR'S or HUGO BOSS' direct conduct (and not the conduct
of LICENSEE.)
15. TERMINATION
a. In the event LICENSEE commits any of the accelerating acts (defined
at Section 15.f.) or fails to make payments required under Section 15.f.,
LICENSOR may terminate this Agreement in its entirety.
b. LICENSOR may terminate this Agreement as it pertains to any country
included in the Licensed Territory only upon any of the following events in
that country:
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(i) A material breach by LICENSEE of any of the material terms and
conditions of this Agreement as it relates to a particular country, which
after due written notice of same from LICENSOR, remains uncured for a period
of thirty (30) days.
(ii) LICENSEE's failure to obtain compliance by any Designated
Manufacturer(s) with the list of locations required in Section 2.c.(vii)(A)
or Section 4b. It shall not be a breach of this Agreement, if,
notwithstanding the reasonable efforts of LICENSEE, a Designated Manufacturer
provides only a partial list of all manufacturing, processing and storage
facilities in the territory as required by Sections 2.c.(vii)(A) and 4.b.
herein, provided, however, that any such list as is provided includes all
significant locations. For purposes of a breach of LICENSEE'S obligation to
obtain lists of locations under Section 2.c.(vii)(A) or Section 4b., a cure
may be accomplished by, within thirty (30) days of receipt of a written
demand from LICENSOR, (A) delivering the required lists or (B) termination of
all business dealings with the Designated Manufacturer(s) at issue, as soon
as commercially feasible; provided however that as of the date of the written
demand from LICENSOR (and until a cure occurs), LICENSEE shall not enter into
any new manufacturing agreements or place any additional orders with such
noncomplying Designated Manufacturer(s) without the written consent of
LICENSOR; provided further that such termination shall not relieve LICENSEE
of its obligations to continue to enforce its rights against such Designated
Manufacturer(s) for breach of its obligations or LICENSEE's indemnity
obligations to LICENSOR under this Agreement.
(iii) LICENSEE's failure to obtain substantially full compliance by
any Designated Manufacturer(s) with the child labor restrictions in Section
2.c.(xxii). For purposes of a breach of LICENSEE's obligations under Section
2.c.(xxii), a cure may be accomplished by, within thirty (30) days of receipt
of a written demand, termination of all business dealings with the Designated
Manufacturer(s) at issue.
(iv) LICENSEE'S failure to obtain compliance by any Designated
Manufacturer(s) with any of the other material terms and conditions listed in
Section 2.c. (i-xxii) which, after due written notice of same from LICENSOR,
remains uncured for a period of thirty (30) days.
c. Termination shall be effective upon expiration of the applicable
cure period, if any, and receipt of written notice from LICENSOR of such
expiration. Upon any such termination, all of the rights and licenses granted
hereunder shall terminate. Any such termination by LICENSOR shall be without
prejudice to LICENSOR'S other rights and remedies for breach, including
damages.
d. If permitted under any applicable laws, including U.S. Bankruptcy
laws, LICENSOR may terminate this Agreement immediately upon: (i) the
insolvency of LICENSEE; (ii) the filing of a voluntary petition in bankruptcy
for liquidation by LICENSEE; (iii) the filing of an involuntary petition in
bankruptcy for liquidation against LICENSEE that is not vacated within one
hundred
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twenty (120) days from the date of filing; (iv) the appointment of a receiver
or trustee for LICENSEE, provided that such appointment is not vacated within
one hundred twenty (120) days from the date of such appointment; or (v) the
execution by LICENSEE of an assignment for the benefit of all creditors
generally.
e. LICENSEE shall notify LICENSOR of any change in ownership of more
than fifteen percent (15%) of LICENSEE'S total outstanding equity (on a fully
diluted basis) in any transaction or series of related transactions.
LICENSOR may terminate this Agreement upon a Change of Control. For purposes
of this Agreement, "Change of Control" shall mean:
(i) (A) the sale of all or substantially all of the assets of
LICENSEE; (B) the sale of fifteen percent (15%) or more of the
equity of LICENSEE on a nonpublic sale; (C) any merger or
consolidation of the LICENSEE; or (D) the transfer of control
(as that term is defined in Rule 405 under Regulation C of the
Securities Act of 1933, as Amended), of LICENSEE in a public
offering, in each of the foregoing circumstances (i.e., (i)
(A), (B), (C) or (D)) to, or with any one or more of the
following entities or persons, or persons or entities under
common control or ownership with them: Brookhurst, Inc., Boss
Golf Co., William Ott, Nicholas Yacobucci, James Ward, Boss
Sportswear (USA), Inc., Peter Chan, Paul Lee, Boss
Manufacturing Co., American Home Products, Inc., Vista 2000,
Inc., G. H. Bass Co., and/or Hugo Bosca; or
(ii) (A) the sale of all or substantially all of the assets of
LICENSEE; (B) the sale of fifty percent (50%) or more of the
equity of LICENSEE in a nonpublic sale; (C) any merger or
consolidation of the LICENSEE; or (D) the transfer of control
(as defined in Section 15.e.(i)) of LICENSEE in a public
offering, in each of the foregoing circumstances (i.e., (ii)
(A), (B), (C) or (D)) to, or with any entity engaged in the
manufacturing, distribution or sale (other than retail) of
clothing in direct competition with LICENSOR or HUGO BOSS AG,
(e.g., Zegna Corp., Donna Karan Corp., Hart, Shaffner & Marx;
Calvin Klein Corp., Designer Holdings, Liz Claiborne, or
Salant Corp.) LICENSOR agrees that LICENSEE, its partners and
affiliates, may offer and sell stock to the public and,
subject to the provisions of this Section 15.e., nothing in
this Agreement shall prevent or interfere with LICENSEE, or
its partners or affiliates offering and selling stock to the
public.
f. In addition to the right of termination and all other available
remedies, any of the following acts by LICENSEE during the initial term shall
at LICENSOR'S option accelerate all payments that would have been payable
during the initial term had LICENSEE achieved Territory Net Sales equal to
four times the Territory Net Sales attributable to the fourth quarter
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of 1997 in each of the years of the initial term of this Agreement and
require the immediate payment by LICENSEE to LICENSOR of the sum due and
payable throughout the initial term pursuant to Section 6 above, less the
cumulative payments made by LICENSEE to LICENSOR during this same period
under Section 6 above, but in no event shall the payment due be more than *
minus the cumulative interest previously paid under the note to LICENSOR
during the initial term of the Agreement: (i) a breach by LICENSEE of its
obligations to make the payments required by Sections 6 and 7 of this
Agreement or its obligations to achieve the minimum Territory Net Sales for
any year in accordance with Section 6.b.(i) (unless LICENSEE pays to LICENSOR
the difference between the amount actually paid in any such year and the
amount otherwise payable pursuant to this Agreement as if the applicable
minimum Territory Net Sales had actually been generated), which breach has
not been cured pursuant to the terms of this Agreement; (ii) LICENSEE'S
failure to manufacture any Licensed Products in the Licensed Territory, (iii)
any attempted termination of this Agreement by LICENSEE, except as expressly
permitted by this Agreement or as agreed to by the parties in writing during
the initial term of this Agreement; (iv) the manufacture, distribution or
sale by LICENSEE of any product bearing the marks BOSS/HUGO BOSS; HUGO/HUGO
BOSS; BALDESSARINI/HUGO BOSS; HUGO BOSS or any other trademarks owned by
LICENSOR or HUGO BOSS AG except those referenced in Section l.a. for the
products listed in Exhibit B, Section I as modified by Section II; (v) the
sale by LICENSEE of any product bearing a BOSS mark outside the United
States; (vi) any willful material breach of any term of this Agreement; (vii)
any attempt by LICENSEE other than as requested by LICENSOR or HUGO BOSS AG
to register or otherwise create or establish trademark rights in the word
BOSS in its own name anywhere outside the United States; or (viii) any act
described in Section 15.d. of this Agreement (collectively referred to as
"Accelerating Acts"). Any Accelerating Act(s) by LICENSEE during the first
option term of this Agreement shall at LICENSOR's option accelerate payment
of all payments payable during the first option term and require the
immediate payment by LICENSEE to LICENSOR of the sum of the payments due and
payable throughout the first option term pursuant to Section 6, had LICENSEE
achieved Territory Net Sales equal to four times the Territory Net Sales
attributable to the fourth quarter of 1997 in each of the years of the final
option term of this Agreement less the cumulative payments made by LICENSEE
to LICENSOR during this period under Section 6 above, but in no event shall
the payment due be more than * minus the cumulative interest previously paid
under the Note to LICENSOR during the first option term of the Agreement.
Any Accelerating Act(s) by LICENSEE during the second option term of this
Agreement shall at LICENSOR's option accelerate payment of all payments
payable during the second option term and require the immediate payment by
LICENSEE to LICENSOR of the sum of the annual payments due and payable
throughout the second option term pursuant to Section 6, had LICENSEE
achieved Territory Net Sales equal to four times the Territory Net Sales
attributable to the fourth quarter of 1997 in each of the years of the final
option term of this Agreement less the cumulative royalty payments made by
LICENSEE to LICENSOR during this same period under Section 6 above but in no
event shall the payment due be more than * minus the cumulative interest
previously paid under the Note to LICENSOR during the second option term of
the Agreement. The parties agree that this provision is not a liquidated
damages provision, but a quantification
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* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
of the benefit of the bargain to LICENSOR. In the event LICENSEE fails to
make immediate payment as required by this Section, any award, in arbitration
or otherwise, to LICENSOR for an Accelerating Act(s) of this Agreement by
LICENSEE shall include, but not be limited to, the payment required by this
Section, and such other relief as may be appropriate. In the event LICENSOR
exercises its option to demand accelerated payment as set forth above,
LICENSOR shall so notify LICENSEE in writing.
g. Either party may, by written notice to the other, terminate this
Agreement upon sale by LICENSEE of its United States trademark rights to BOSS
to LICENSOR or any of its affiliates (including parents).
h. In addition to all other available remedies, LICENSOR may, solely at
its option and upon written notice to LICENSEE, terminate this Agreement as
it pertains to a particular country in the Licensed Territory if substantial,
unauthorized sale or distribution of Licensed Products occurs (i) within any
such country and/or (ii) outside any such country (except for the United
States) where the unauthorized goods were manufactured, distributed or sold
by a Designated Manufacturer(s) in such country and is documented during (i)
each of three (3) consecutive quarters (a quarter being defined as any
three-month period beginning on January 1, April 1, July 1 or October 1) or
(ii) each of three (3) consecutive years.
i. LICENSEE shall have the option to terminate this Agreement at any
time, upon providing LICENSOR with ninety (90) days written notice, if all of
the following occur: (i) LICENSEE has used the BOSS mark as required by this
Agreement; (ii) LICENSEE is prohibited by a binding order of a court of
competent jurisdiction (which order has not been vacated within ninety (90)
days of issuance) from using the word BOSS in the Microgramma typestyle and
every variation thereof on a substantial portion (by sales volume) of the
Licensed Products; and (iii) there is no reasonable alternative available;
provided, however, that if such court order is based upon LICENSEE's use of
the Marks in a manner that is inconsistent with the requirements of this
Agreement, then LICENSOR, but not LICENSEE, shall have the option to
terminate this Agreement upon ninety (90) days written notice. In the event
this Agreement is terminated by LICENSEE under this Section 15.i, and
Territory Net Sales do not exceed that required under Exhibit F1 attached
hereto, royalties due shall be based on actual net sales as provided for in
Sections 6.a. and 6.b. above. Application of the minimum royalty shall be
pro rata based on the number of days in the period from January 1 in the year
of such termination until the day of the last sale permitted by the above
referenced court order.
j. Notwithstanding any other provision of this Agreement, upon
termination of this Agreement, LICENSEE (and its secured inventory lender),
shall be entitled, subject to the terms and conditions of this Agreement, on
a non-exclusive basis, for a period of nine (9) months from the date of
termination, to complete manufacture of Licensed Products in progress on the
date of termination, and to export such completed products and any products
in Licensee's inventory on the date of termination; provided, however, that
such rights as are granted herein apply only to orders placed and goods
manufactured in the ordinary course of LICENSEE's business. After
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the expiration of such nine (9) month period, LICENSEE shall completely
remove the marks from any products not manufactured before the expiration of
such nine (9) month period.
16. RESULTS OF TERMINATION
a. Upon termination of this Agreement, subject to the terms of Section
15.j. above, all rights relating to the Licensed Products within the Licensed
Territory hereunder, shall immediately cease and LICENSEE shall:
(i) cease the manufacture of the Licensed Products except in
accordance with this Section 16;
(ii) cease all use of the Licensed Rights;
(iii) within thirty (30) days of termination, delete and henceforth
cease from making any reference to the Licensed Rights and Marks in, on or in
connection with any advertising, promotional or directory materials,
including any reference to having been previously a licensee of LICENSOR;
(iv) within ten (10) days of termination, deliver all packaging,
labels, tags and other materials and property (other than actual Licensed
Products) relating to this Agreement to LICENSOR; and
(v) within ten (10) days of termination, furnish LICENSOR with a
full and complete statement setting forth (A) the inventory of Licensed
Products manufactured or in the process of manufacture, including the
wholesale price thereof, and (B) production and distribution schedules for
the Licensed Products.
b. The termination of this Agreement shall not relieve LICENSEE of any
duties or obligations contained herein including, without limitation, the
obligation to pay royalties and interest and furnish required statements; nor
shall termination extinguish any rights of LICENSOR necessary to ensure an
expeditious conclusion of this Agreement, including, without limitation, the
right to inspect the books, records and facilities of LICENSEE and the right
to obtain prior written consents.
c. Upon any termination of this Agreement, other than termination
resulting from a breach by LICENSEE of this Agreement, LICENSEE shall be
liable to LICENSOR only for actual royalties accrued prior to termination and
royalties on any goods manufactured after termination under Section 15.j.;
provided, however, that nothing in this Section shall affect LICENSOR'S
rights or remedies for any post-termination breach by LICENSEE.
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17. EQUITABLE RELIEF
The parties acknowledge that it will be impossible to measure in money
the damages that would be suffered by one if the other breaches or otherwise
fails to comply with the obligations imposed on it pursuant to this Agreement
and that, in the event of any such failure, the non-breaching party will be
irreparably damaged and will not have an adequate remedy at law. Therefore,
notwithstanding any other provision of this Agreement, the non-breaching
party shall be entitled to equitable relief, including, without limitation,
injunctive relief and/or specific performance to enforce such obligations
and, if any action should be brought in equity to enforce any provisions of
this Agreement, the breaching party shall not raise the defense that there is
an adequate remedy at law. Except as expressly provided in this Agreement,
all specific remedies provided for in this Agreement are cumulative and are
not exclusive of one another or of any other remedies available at law or in
equity.
18. LEGAL ACTION
a. LICENSEE agrees to reasonably cooperate with and assist (and to take
reasonable steps to require the Designated Manufacturer(s) to cooperate with
and assist) LICENSOR in protecting and defending the Marks, and shall
promptly notify LICENSOR in writing of any infringements, claims or actions
by others in derogation of the Marks in the Territory of which LICENSEE
becomes aware; provided, however, that LICENSOR shall have the sole right to
determine whether any action shall be taken on account of such infringements,
claims or actions. LICENSEE shall not take any action on account of any such
infringement, claim or action without the prior written consent of LICENSOR,
which consent shall not be unreasonably withheld. In the event LICENSOR
grants written permission to LICENSEE to take action on account of any such
infringement, claim or action, LICENSEE shall bear all costs and expenses
related thereto and shall not settle or otherwise compromise any claim
without LICENSOR's prior written approval, which shall not be unreasonably
withheld.
b. In the event LICENSOR initiates or defends any legal proceedings on
account of any infringements, claims or actions by others in derogation of
the Licensed Rights, LICENSEE agrees to cooperate with and assist LICENSOR to
the extent reasonably necessary to protect the Licensed Rights including, but
not limited to, being joined as a necessary party to such proceedings. Any
such legal proceedings which do not result from LICENSEE's breach of this
Agreement shall be initiated or defended by LICENSOR; provided, however, that
each party shall bear its own costs and expenses in any such legal
proceedings.
c. In the event LICENSOR determines, in its sole discretion, that it is
not in the best interest of LICENSOR to initiate any legal proceedings on
account of any such infringements, claims or action, or in the event LICENSOR
settles or resolves any such proceedings which may be initiated, LICENSEE
shall have no claim against LICENSOR for damages or otherwise, nor shall the
same affect the validity or enforceability of this Agreement.
24
<PAGE>
19. NOTICES
All notices, requests or other communications required or permitted
hereunder shall be given or made in writing and shall be (i) delivered
personally (including commercial carrier), (ii) sent by registered or
certified airmail, return receipt requested, postage prepaid or (iii) sent by
telecopier, addressed to the party to whom they are directed at the following
addresses, or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 19:
If to LICENSOR, to:
Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attention: Graziano DeBoni
Telecopier: 212/940-0619
Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attention: General Counsel
Telecopier: 49-7123-942035
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20004
Attention: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
and
Howrey & Simon
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: Robert M. Bruskin, Esq.
Telecopier: 202/383-6610
25
<PAGE>
If to LICENSEE, to:
I. C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: President and Co-Chief Executive Officer
Telecopier: 410/558-2096
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and Co-Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1064
Any notice, request or other communications shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any
party may change its address for notices hereunder, effective upon giving of
notice of such change hereunder to the other parties.
20. FOREIGN TAXES AND GOVERNMENT APPROVALS
a. LICENSEE agrees to obtain, all government approvals and
registrations which are required under the laws of the Territory as a result
of LICENSEE'S activities in connection with this Agreement and to pay any
taxes or fees required by any such foreign government as a result of
LICENSEE's activities under this Agreement other than any taxes payable by
LICENSOR or its affiliates as a result of its receipt of any payments
hereunder.
b. LICENSEE agrees to pay one-half (1/2) of the reasonable legal fees
necessary to have this Agreement reviewed by an attorney skilled in the laws
of any foreign country to which this Agreement relates and modified to
conform with local laws, if necessary. Wherever required, LICENSEE agrees to
pay one-half (1/2) of the reasonable legal fees necessary to have LICENSEE
registered as Registered User or a Permitted User of the Licensed Rights.
Prior to executing this Agreement LICENSOR has given LICENSEE an estimate of
all such anticipated legal fees, and LICENSEE has had at least ten (10)
business days following receipt of such estimate to determine whether it
wishes to forego entering into this Agreement as to any country or countries.
26
<PAGE>
c. LICENSEE shall not be required to pay fees or expenses which arise
out of LICENSOR's efforts to protect and defend LICENSOR's intellectual
property rights within the Territory which were not otherwise caused by
activities of LICENSEE in connection with Agreement.
21. GOVERNING LAW AND RESOLUTION OF DISPUTES
a. The validity, construction, operation and effect of any and all of
the terms and provisions of this Agreement shall be determined and enforced
in accordance with the laws of the State of New York without giving effect to
principles of conflicts of law thereunder except as to matters involving
issues of foreign trademark law, in which case the applicable foreign
trademark laws shall be applied. In the event any legal action becomes
necessary to enforce or interpret the terms of this Agreement, the parties
agree that such action will be brought in the U.S. District Court for the
Southern District of New York, and the parties hereby submit to the
jurisdiction of such court; provided, however, that any party may enforce an
arbitration award in any court of competent jurisdiction located in New York
City and the parties hereby submit to the jurisdiction of any such court.
b. Nothing in this Agreement is intended to or shall prevent LICENSOR
and/or HUGO BOSS AG from enforcing any of its rights in any jurisdiction
anywhere in the world to prevent the unauthorized manufacture, sale or
distribution of Licensed Products.
22. BINDING EFFECT
This Agreement shall be binding on the parties, their parents,
subsidiaries, successors and assigns (if any), and they each warrant that the
undersigned are authorized to execute this Agreement on behalf of the
respective parties.
23. CONFIDENTIALITY
a. This Agreement, its terms, conditions and provisions, and the trade
secrets, confidential information and property of the parties are strictly
confidential and except as provided herein, shall not be disclosed by either
party to any other person or entity without the prior written consent of the
other party, or as required by law, (i) except financial institutions,
(including, but not limited to, investment bankers and underwriters),
Designated Manufacturer(s), government officials, attorneys and accountants
with which the parties transact business; provided, however, that such third
parties agree in writing to abide by the terms of this provision, or (ii)
except as appropriate for LICENSOR to protect and/or enforce the Marks and
Property. LICENSOR and LICENSEE further agree that disclosure of this
Agreement within their organizations shall be limited to their respective
directors, officers and employees with a "need to know" and that except as
provided herein third parties will not be advised of the relationship between
the parties except as is necessary by law; to carry out the purposes of this
Agreement; or to protect the rights of either party. Nothing in this
provision is intended to prevent or substantially interfere with LICENSEE's,
its partners, affiliates or its stockholders'
27
<PAGE>
ability to make all disclosures required by law pursuant to offering and
selling stock to the public. Notwithstanding the provision of this Section
23.a, in the event of published reports regarding the Agreement or LICENSEE's
relationship with LICENSOR or HUGO BOSS AG, LICENSOR, HUGO BOSS AG and
LICENSEE agree to cooperate in good faith to provide appropriate public
responses and comments and the parties shall be free to trade accurate public
statements which are appropriate to correct or clarify the public record.
b. Notwithstanding the provisions of Section 23.a. of this Agreement,
LICENSEE may supply to its agents, Designated Manufacturers or appropriate
government officials a copy of Exhibit G or convey the information in Exhibit
G to such individuals orally. To the extent LICENSEE is unable to import or
export Licensed Products by the actions of any government and LICENSEE cannot
through due diligence and the use of Exhibit G overcome such actions because
of the requirements of Section 23.a., LICENSOR will cooperate with LICENSEE,
including submitting written materials from LICENSOR or its parent or
affiliates as necessary to appropriate government officials, so as to enable
LICENSEE to obtain all necessary clearances; provided, however, that the
failure of LICENSEE to obtain any such clearance shall not give rise to any
claim whatsoever against LICENSOR.
24. GENERAL PROVISIONS
a. No waiver or modification of any of the terms or provisions of this
Agreement shall be valid unless contained in a written document signed by
both parties. No course of conduct of dealing between the parties shall act
as a waiver of any provision of this Agreement.
b. This Agreement, including the entirety of Exhibits A through H1
attached hereto, contains the entire understanding of the parties as to the
subject matter herein, and there are no representations, warranties, promises
or undertakings other than those contained herein. This Agreement supersedes
and cancels all previous agreements between the parties hereto. This
Agreement shall be construed against both parties equally, regardless of the
party that drafted it. Notwithstanding the foregoing, nothing herein shall
affect the validity or enforceability of the Settlement Agreement and related
documents between the parties which terminated the litigation captioned Hugo
Boss Fashions, Inc. et al. v. Brookhurst, Inc., et al., Civil Action No. 93
Civ 0875 (LMM).
c. If any provision of this Agreement shall be held to be void or
unenforceable, such provision will be treated as severable, leaving valid the
remainder of this Agreement.
d. Wherever necessary to carry out the intent of the parties, certain
provisions of this Agreement including, without limitation, Sections 3, 8,
10, 14 and 16, shall survive the expiration or termination of this Agreement
and shall continue in full force and effect.
e. The parties agree to execute promptly any documents necessary to
effectuate the purpose and intent of this Agreement.
28
<PAGE>
f. Captions and paragraph headings used in this Agreement are for
convenience only and are not a part of this Agreement and shall not be used
in interpreting or construing it.
g. This Agreement may be executed in any number of duplicate
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
25. ARBITRATION
a. In order to expedite the resolution of legal disputes, the parties
agree to have disputes arising in connection with this Agreement finally
settled in accordance with the rules established in Exhibit H, which decision
shall be binding on the parties. The parties further agree that the first
such arbitration proceeding initiated by either party shall be conducted at a
location and under the auspices and arbitration rules (either the American
Arbitration Association Rules or the Rules of Conciliation and Arbitration of
the International Chamber of Commerce) selected by the non-complaining party;
provided that English shall be the official language of all arbitration
proceedings. For all subsequent arbitrations, the selection of location and
choice of rules shall alternate between the parties, i.e., if the LICENSOR is
the complaining party in the first arbitration under this Section, LICENSEE
shall select the location and choice of rules for that arbitration and for
the third, fifth, seventh, et seq. arbitrations, and LICENSOR shall select
the location and choice of rules for the second, fourth, sixth, et seq.
arbitrations. The parties further agree that notwithstanding this provision,
either party may, consistent with the provisions of Section 17 herein, seek
immediate injunctive relief in court prior to the initiation or pending
resolution, of any dispute in arbitration. If the non-prevailing party does
not comply with an arbitration decision, the prevailing party therein may
immediately enforce the arbitration decision in an equitable proceeding in
court with both parties' court costs and related attorney's fees paid by the
non-prevailing party in the arbitration, unless the arbitration decision is
modified, or not upheld or enforced, in which case each side shall bear its
own costs and attorney's fees. Notwithstanding anything in this Section
25.a., LICENSOR or HUGO BOSS AG may seek to enforce any of its rights to
prevent the unauthorized manufacture, sale or distribution of Licensed
Products against any entity in any tribunal anywhere in the world.
b. Notwithstanding anything in this Agreement, the parties agree that
disputes arising under Sections 4.a., 4.e., 4.f., 4.i., and 5.c. herein, may,
at the option of either party, be finally settled in accordance with the
expedited arbitration procedures set forth in Exhibit H1, which decision
shall be binding on the parties.
c. The parties agree that any decision required by this Agreement that
is committed to a party's "sole discretion" shall not be the subject of
arbitration; any decision required by this Agreement that is committed to a
party's "sole reasonable discretion" or "reasonable discretion" may be the
subject of arbitration.
d. The parties agree that in any arbitration proceeding brought under
this Section 25 where the interests of justice so require the arbitrator(s)
shall have the discretion to require one
29
<PAGE>
party to pay some or all of the costs and expenses, including legal fees,
incurred by the other party.
26. HUGO BOSS AG GUARANTY
HUGO BOSS AG hereby irrevocably and unconditionally guaranties to
LICENSEE the full and timely performance of LICENSOR's obligations to
LICENSEE under this Agreement.
IN WITNESS WHEREOF, the parties agree that this Agreement shall take
effect as of the date first written above.
AMBRA, INC., a Delaware corporation
By: /s/ Jorg-Viggo Muller
----------------------------------
Name: Jorg-Viggo Muller
Title: Chairman
By: /s/ Gert-Jurgen Frisch
----------------------------------
Name: Gert-Jurgen Frisch
Title: Vice President
HUGO BOSS AG, a corporation of the Federal
Republic of Germany
By: /s/ Jorg-Viggo Muller
----------------------------------
Name: Jorg-Viggo Muller
Title: Chief Financial Officer
By: /s/ Gert-Jurgen Frisch
----------------------------------
Name: Gert-Jurgen Frisch
Title: Attorney-in-Fact
30
<PAGE>
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: I.G. DESIGN, INC., a Delaware
corporation, its general partner
By: /s/ Robert J. Arnot
----------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
----------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
31
<PAGE>
FOREIGN MANUFACTURING RIGHTS AGREEMENT
LIST OF EXHIBITS
Exhibit A: Specifications and limitations on LICENSEE's use of the Marks
Exhibit B: List of products on which LICENSEE is permitted to use the Marks
Exhibit C: List of countries
Exhibit C1: List of pending/not filed countries
Exhibit C2: List of special circumstances
Exhibit D: List of LICENSOR Agreements
Exhibit E: Prohibited stitching designs
Exhibit F: Royalty payment schedule
Exhibit F1: Minimum Territory Net Sale schedule
Exhibit F2: Royalty calculation sheet
Exhibit G: Customs letter
Exhibit H: Non-expedited arbitration provision
Exhibit H1: Expedited arbitration provisions
<PAGE>
EXHIBIT A
THE MARKS
BOSS
("The Microgramma Typestyle")
[LOGO]
<PAGE>
In using these Marks on Licensed Products, LICENSEE will comply with the
following:
1. LICENSEE shall use the phrase "BOSS by I G Design" (or such other
name as approved by LICENSOR) on all interior labels, tags and other interior
identifiers, and on all temporary or removable exterior labels, tags,
flashers, jokers, hang tags, and similar items, consistent with the rules in
section 4 below. In addition, the phrase "by I G Design" shall be prominently
visible; this requirement is satisfied when the prominence, use, and format
of the phrase "BOSS by I G Design" are similar to the exemplars shown in
Attachment 1 to this Exhibit A or as to tops satisfies the criteria set forth
in Section 9.a.(iii) below. Notwithstanding the exemplars shown in Attachment
1 to this Exhibit A, for all purposes under this Agreement where the word
"BOSS" is smaller than one inch, the ratio of the word "BOSS" to the phrase
"by I G Design" shall be no less than 4:1; in all other uses the ratio shall
be no less than 5:1.
2. On all Licensed Products other than Bottoms (Bottoms being defined
as jeans, casual pants, slacks, trousers, shorts, and overalls and shortalls)
LICENSEE shall use the phrase "BOSS by I G Design" (or such other name as
LICENSOR approves) as a permanent exterior means of identification similar to
the exemplars shown in Attachment 1 to this Exhibit A.
3. In addition to the use of the phrase "BOSS by I G Design" (or such
other name as approved by LICENSOR) as required by Section 1 of Exhibit A,
LICENSEE may also use the word "BOSS" without the phrase "by I G Design"
permanently affixed to the exterior of any Licensed Product.
4. On all Bottoms:
a. All Bottoms will bear either (i) a pocket flasher, (ii) a waist
band ticket, or (iii) some other form of temporary, removable exterior
identification bearing the phrase "BOSS by I G Design" (or such other name as
LICENSOR approves) or a permanently affixed "BOSS by I G Design" (or such
other name as LICENSOR approves) exterior marking, as illustrated by the
exemplars shown in Attachment 1 to this Exhibit A; provided, however, that
all temporary removable exterior identification must use the phrase "BOSS by
I G Design" as illustrated by the exemplar shown in Attachment 1 to this
Exhibit A.
b. If the word "BOSS" whether used alone or with any other word,
is used on fly labels on Bottoms, the letters of the word "BOSS" must be
slanted no less than nineteen (19) degrees as shown in Attachment 6B to this
Exhibit A.
c. If the word "BOSS" is used on a signature leather patch on a
rear jeans pocket, (i) the word BOSS whether used alone or with any other
word except I G Design (or such other name as LICENSOR approves) will be
slanted no less than twenty-four (24) degrees, as illustrated by the examples
shown in Attachment 4 to this Exhibit A; or (ii) the phrase "BOSS/I G Design"
(or such other name as LICENSOR approves) will be used in a non-justified 4:1
ratio on the leather patch consistent with the terms of Section 5.d. below;
or (iii) the phrase
<PAGE>
"Boss/I G Design" (or such other name as LICENSOR approves) will be otherwise
permanently affixed to the garment, similar to the exemplar shown in
Attachment 1 of this Exhibit A.
5. Where the word "BOSS" does not appear immediately adjacent to the
phrase "I G Design" (or such other name as LICENSOR approves), the word
"BOSS" may appear either in capital letters of equal size, or, if the
individual letters comprising B-0-S-S are of different sizes, within
seventy-five percent (75%) of any other letter; provided, however, that one
or more of the following rules are met:
a. The word "BOSS" is incorporated into a graphic environment as
illustrated by the acceptable exemplars shown in Attachment 2 to
this Exhibit A; not all graphic environments are acceptable as
illustrated by the unacceptable exemplars shown in Attachment 2 to
this Exhibit A; or
b. All of the letters of "BOSS" are distorted as illustrated by the
acceptable exemplars shown in Attachment 3 to this Exhibit A; not
all distortions are acceptable as illustrated by the unacceptable
exemplars shown in Attachment 3 to this Exhibit A; or
c. The word "BOSS" appears other than in the Microgramma typestyle,
the non-Microgramma typestyle having first been approved in
accordance with the provisions of Section 10 of this Exhibit A; or
d. All of the letters of "BOSS" are slanted as follows:
(i) If used with no vertical or angled lines, then no less than
twenty-two (22) degrees, as illustrated by the exemplar shown
in Attachment 5 to this Exhibit A; or
(ii) If used with vertical or angled lines as shown in Attachment
6A, then no less than nineteen (19) degrees, as illustrated by
the exemplar shown in Attachment 6B of this Exhibit A.
e. The requirements of this Section 5. a.-d. do not apply if the word
"BOSS" is used with the letters appearing in a vertical (up and
down) manner generally consistent with the acceptable exemplars
shown in Attachment 7A to this Exhibit A. Not all vertical uses of
the word "BOSS" are acceptable as illustrated by the unacceptable
exemplar shown in Attachment 7B to this Exhibit A in which case the
requirements of this Section 5. a.-d. apply.
f. All of the foregoing rules except 5.d. shall apply to headwear.
g. In the case of belts, LICENSEE may use the word "BOSS" alone,
without the phrase "I G Design", (or such other name as approved by
LICENSOR) where the Mark appears only on the belt buckle; where the
<PAGE>
mark appears elsewhere on the exterior of the belt, it shall
incorporate the phrase "I G Design."
6. Any two-line logo or design using the word "BOSS" shall not have
justified margins or substantially justified margins.
7. LICENSEE shall not use words which indicate that its product is the
only or first BOSS product, e.g., "authentic," "genuine" or "original,"
except that LICENSEE may use such words to directly modify the phrase "I G
Design" (or such other name as LICENSOR approves).
8. LICENSEE shall not use the terms BOSS AMERICA, BOSS GOLF, GOLF, HUGO
BOSS, HUGO, BALDESSARINI, WORLDWIDE, EUROPEAN, TENNIS, SKI, FORMULA 1,
MOTORSPORT, WINDSURFING, SAIL, GERMAN or any other words that are similar in
sound, sight or meaning, as exemplified in Attachment 8 to this Exhibit A.
The parties agree that LICENSEE may use the phrases "U.S.A." and "United
States" on Licensed Products, including in graphic depictions with or near
the Marks; provided, however, that such words are not incorporated into a
corporate identity, brand, or product extension logo with the word "BOSS."
In addition, LICENSOR, by itself or on behalf of HUGO BOSS AG or LICENSEE
may, from time to time, submit to each other exemplars of logos, designs or
decorative motifs which they are using or plan to use in the next selling
season, provided that such logos, designs, or decorative motifs shall not
have been used by the other party. The party so notified shall not use any
such logos, designs or decorative motifs, or anything similar to them in the
following selling season, without the other party's written permission;
provided, however, that either party may use logos, designs or decorative
motifs that are standard in the industry. Notwithstanding the foregoing,
LICENSEE shall not use any design or decorative motif similar to the BOSS
SPORT patch shown in Attachment 9 to Exhibit A.
9. For purposes of this Agreement, "Polo shirt" shall mean a pullover
shirt for sportswear that is made of knitted fabric and has short or long
sleeves and a turnover collar or a round banded collar and placket. In
addition to all other rules herein applicable to tops, LICENSEE may use the
word "BOSS" by itself on the exterior of polo shirts only in accordance with
the following:
a. Traditional Button Placket Knit Collar Style. To the extent
LICENSEE uses the word "BOSS" by itself on the exterior left breast
area of polo shirts with button through plackets, knit turnover
collars and traditional coloration and designs, the following rules
shall apply:
(i) on the exterior of men's shirts, the size of the word "BOSS"
shall be no smaller than three (3) inches long by five eighths
(5/8) inches tall; on the exterior of boys' and women's
shirts, the size of the word "BOSS" shall be no smaller than
two and three-eighths (2 3/8) inches long by seven sixteenths
(7/16) inches tall;
(ii) The word "BOSS" shall be slanted no less than 24';
<PAGE>
(iii) The phrase "I G Design" shall be prominently visible.
This requirement shall be satisfied by the following:
the phrase shall appear and be visible on the outside
crease of one sleeve; the typestyle shall be Microgramma;
and the size of the letters shall be no less than one
fourth the size of the letters used for the word "BOSS"
on the exterior left breast.
(iv) The color of the stitching on the shirt bearing the word
"BOSS" on the left breast area and the phrase "I G Design" on
the sleeve must be the same and clearly contrast with the
color of the shirt fabric, e.g., black on white; red, blue or
green on yellow; but not combinations like dark blue on light
blue; dark gray on black; dark green on dark blue. Acceptable
and unacceptable exemplars are shown in Attachment 10 to this
Exhibit A.
b. All Other Traditional Styles. To the extent LICENSEE uses the
word "BOSS" by itself on the exterior left breast area of polo shirts with
non-button through plackets and traditional coloration and designs, the
phrase "BOSS by I G DESIGN" required by Section 2 of this Exhibit A shall be
located on the top half of the garment and shall be prominently visible.
This latter requirement is satisfied when the prominence, use and format of
the phrase "BOSS by I G Design" are similar to the exemplars shown in
Attachment 1 to this Exhibit A or satisfies the criteria set forth in Section
9.a.(iii) above.
c. Non-traditional Styles. To the extent LICENSEE uses the word
"BOSS" by itself on polo shirts other than those described in Sections 9-a.
and 9.b. of this Exhibit A, no additional rules shall apply.
d. Exemplars of acceptable shirts for each category described in
this Section 9.a., 9.b. and 9.c. are depicted in Attachment 11 hereto.
10. Prior to use, LICENSEE may submit to LICENSOR for approval
typestyles other than Microgramma for the word "BOSS", provided those
typestyles are less similar to the typestyles used by LICENSOR than the
Microgramma typestyle used by LICENSEE. LICENSEE shall not use any such
typestyle unless LICENSOR, in its sole reasonable discretion, has approved
such use in writing.
<PAGE>
ATTACHMENT 1
TO EXHIBIT A
o Exemplars of interior and exterior permanent/temporary labels, tags, etc.
with acceptable "BOSS by I G Design."
<PAGE>
BMA-1368 -- info tag [Graphic Logo]
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
BMA-1241R -- [Graphic Logo]
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
Jr. Hang Tag/BJ-537W
FRONT
[Graphic Logo]
22 DEG. ANGLE
6 TO 1 RATIO
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
BMA-458 -- [Graphic Logo]
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
Jr. Hang Tag/BJ-537
BACK
[Graphic Logo]
22 DEG. ANGLE
6 TO 1 RATIO
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
[Graphic Logo]
BMA-1242
22 DEG. ANGLE
6 TO 1 RATIO
THESE EXEMPLARS DO NOT SUPERSEDE
THE RATIO REQUIREMENTS AS OTHERWISE
PROVIDED BY THIS EXHIBIT A
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 2
TO EXHIBIT A
o Exemplars of acceptable graphic environments.
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 3
TO EXHIBIT A
o Exemplars of acceptable distorted letters.
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 4
TO EXHIBIT A
o Exemplars of 24(degree) slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 5
TO EXHIBIT A
o Exemplars of 22(degree) slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 6A
TO EXHIBIT A
o Exemplars of vertical alignment.
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] -- Jeans
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 6B
TO EXHIBIT A
o Exemplars of 19(degree) slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 7A
TO EXHIBIT A
o Exemplars of acceptable vertical BOSS logos.
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 7B
TO EXHIBIT A
o Exemplars of unacceptable vertical BOSS logos.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 8
TO EXHIBIT A
o Exemplars of forbidden words.
AMERICAN BOSS
BOSS AMERICAN
BOSS OF AMERICA
BOSS AMERIKA
BOSS AMERICAS
BOSS GOAL
YUGO
HUGE
BALDISSARENE
GLOBAL
CONTINENTAL
EUROPE
BAVARIAN
BAVARIA
GERMANY
INTERNATIONAL
<PAGE>
ATTACHMENT 9
TO EXHIBIT A
o The BOSS Sport Patch
<PAGE>
[Graphic Logo]--Shirt
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 10
TO EXHIBIT A
o Exemplars of acceptable coloration for "BOSS by I G Design" on polo
shirts.
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
[Graphic Logo] -- Shirt
<PAGE>
o Exemplar of unacceptable coloration for "BOSS by I G Design" on polo
shirts.
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 11
TO EXHIBIT A
o Exemplar of acceptable shirts under Exhibit A, Section 9.a.
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
o Exemplar of acceptable shirts under Exhibit A, Section 9.b.
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
o Exemplar of acceptable shirts under Exhibit A, Section 9.c.
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic shirts]
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
[Graphic Logo] -- Shirts
<PAGE>
EXHIBIT B
I. LICENSED PRODUCTS
A. Men's Apparel
1. Sportswear and Activewear. All sportswear and activewear clothing
other than the exclusions listed below. All fabrications may be used.
2. Outerwear. All jackets, coats, vests, capes and ponchos other than the
exclusions listed below. Such outerwear garments may be reversible,
lined, unlined, filled and/or fabric treated (waterproofed, coated,
etc.) and may have detachable sleeves, hoods and/or interlinings.
Lengths of such garments shall be 22" to 60". All fabrications may be
used except fur (except as trim) and leather (except as trim).
3. Headwear. All sports hats, visors and caps.
4. Swimwear. All types of swimwear.
5. Jogging Suits. All types of warm-ups and jogging suits of any
fabrication.
6. Belts. Belts bearing the Mark provided that such belts shall be sold
only as part of a Bottom and shall not be made out of leather.
B. Women's Apparel
1. Sportswear and Activewear. All sportswear and activewear clothing for
juniors, contemporary, misses and large sizes other than the
exclusions listed below. All fabrications may be used.
2. Outerwear. All jackets, coats, vests, capes and ponchos other than the
exclusions listed below. Such outerwear garments may be reversible,
lined, unlined, filled and/or fabric treated (waterproofed, coated,
etc.) and may have detachable sleeves, hoods and/or interlinings.
Lengths of such garments shall be 22" to 60". All fabrications may be
used except fur (except as trim) and leather (except as trim).
3. Headwear. All sports hats, visors and caps.
4. Swimwear. All types of swimwear.
5. Jogging Suits. All types of warm-ups and jogging suits of any
fabrication.
<PAGE>
6. Belts. All belts bearing the Mark provided that such belts shall be
sold only as part of a Bottom and shall not be made out of leather.
7. Other. Women's knit garments to be worn on the upper torso that are
either snapped or fixed through the crotch and the top portion of
which may be a halter, shoulder strap, short sleeve or long sleeve.
C. Children's Apparel
1. Children's Sportswear and Activewear. All sportswear and activewear
clothing other than the exclusions listed below. All fabrications may
be used.
2. Outerwear. All jackets, coats, vests, capes and ponchos other than the
exclusions listed below. Such outerwear garments may be reversible,
lined, unlined, filled and/or fabric treated (waterproofed, coated,
etc.) and may have detachable sleeves, hoods and/or interlinings. All
fabrications may be used except fur (except as trim) and leather
(except as trim).
3. Headwear. All sports hats, visors and caps.
4. Swimwear. All types of swimwear.
5 Jogging Suits. All types of warm-ups and jogging suits of any
fabrication.
6. Belts. All belts bearing the Mark provided that such belts shall be
sold only as part of a Bottom and shall not be made out of leather.
D. Other
All apparel, including uniforms and work clothes, which is intended to
be worn solely and exclusively while persons are performing the normal
duties of their employment.
II. PRODUCTS BEARING A BOSS MARK THAT LICENSEE SHALL NOT MANUFACTURE
A. Notwithstanding the foregoing, the parties agree that Licensed Products
do not include any of the following men's, women's or children's apparel:
1. All styles of tailored clothing, furnishings and accessories,
including but not limited to tuxedos, gowns and evening wear, sportcoats,
blazers, jackets, suits, dress pants, career apparel including blouses,
skirts and dresses, raincoats, top coats, dress shirts, ties, dress vests,
hosiery (including but not limited to socks, stockings and hose), and
leather belts.
<PAGE>
2. All types of leather clothing (although leather trim may be used on
all products listed in Section 1);
3. All styles of shoes and other footwear.
4. Clothing designed and sold for the primary purpose of engaging in
golf, tennis, skiing, motor sports, windsurfing or sailing.
5. Except as described in Exhibit B Section I.B.7. above, bodywear,
including but not limited to underwear (including tee shirts intended to be
worn as underwear); loungewear and intimate apparel; and sleepwear and
robes.
B. Unless otherwise agreed to by the parties, Licensed Products shall not
include any non-apparel products of any kind.
<PAGE>
EXHIBIT C
OVERSEAS MANUFACTURING RIGHTS GRANTED
BAHRAIN OMAN
BANGLADESH PEOPLES REPUBLIC OF CHINA
BRAZIL PAKISTAN
CANADA PERU
COSTA RICA PHILIPPINES
DOMINICAN REPUBLIC QATAR
EGYPT REPUBLIC OF SOUTH KOREA
ECUADOR SAIPAN
HONG KONG SAUDI ARABIA
INDIA SINGAPORE
INDONESIA TAIWAN
MACAO THAILAND
MAURITIUS TURKEY
MEXICO VIETNAM
MONGOLIA
<PAGE>
EXHIBIT C1
APPLICATIONS PENDING* OR NOT FILED**
BOTSWANA* MADAGASCAR**
EL SALVADOR* NEPAL* *
GUATEMALA* REPUBLIC OF MALDIVES**
HONDURAS* SEYCHELLES*
JAMAICA* SRI LANKA*
LESOTHO** UNITED ARAB EMIRATES*
<PAGE>
EXHIBIT C2
SPECIAL CIRCUMSTANCES
COLOMBIA
MALAYSIA
SOUTH AFRICA
<PAGE>
EXHIBIT D
List of LICENSOR Agreements pursuant to Paragraph 2.h.
Concurrent Use Agreement between Hugo Boss and Reebok, dated April 1, 1997
Agreement between Hugo Boss and Levi Strauss, dated September 1, 1995
Concurrent Use Agreement between Hugo Boss and Phillips-Van Husen Corporation,
dated January 10, 1995
<PAGE>
EXHIBIT E
o Prohibited stitching designs.
<PAGE>
[PHOTOGRAPH OF JEANS]
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT A
Int. Cl.: 25
Prior U.S. Cl.: 39
Reg. No. 1,139,254
United States Patent and Trademark Office Registered Sep. 2, 1980
- --------------------------------------------------------------------------------
TRADEMARK
Principal Register
[GRAPHIC OMITTED]
Levi Strauss & Co. (Delaware corporation) For: PANTS, JACKETS, DRESSES AND
Two Embarcadero Cir. SHORTS, in CLASS 25 (U.S. CL. 39).
San Francisco, Calif. 94106 First use 1873: in commerce 1873
Owner of U.S. Reg. No. 404 248
Reg. No. 169,399
Filed May 8, 1972
M.I. LEAHY, Primary Examiner
<PAGE>
EXHIBIT F
ROYALTY PAYMENTS
LICENSEE shall pay to LICENSOR a royalty as follows:
A. For years 1-4:
1. Base Royalty: For years 1-4 of this Agreement on the first $32,000,000
of Territory Net Sales: Twelve and One Half Percent (12.5%), provided, however,
that should LICENSEE prepay the Secured Limited Recourse Promissory Note between
the parties, base royalties on the remaining portion of the first $32,000,000
Territory Net Sales made after such prepayment shall be at *.(1)
2. Additional Royalty: For all Territory Net Sales above $83,999,999, a
royalty based on the following percentages:
Territory Net Sales Level achieved by LICENSEE Additional Royalty Percentage
---------------------------------------------- -----------------------------
YEARS 1-4(2)
------------
$84,000,000-105,249,999 5%
$105,250,000-157,999,999 0%
$ 158,000,000 and up 4%
- ----------
(1) If the Effective Date of this Agreement is prior to January 1, 1998,
LICENSEE shall also pay a base royalty in accordance with this Exhibit prorated
by the number of days in 1997 this Agreement is in effect, such royalty payment
due on January 31, 1998.
(2) The additional royalty payment to LICENSOR for 1998 shall be
calculated by applying the royalty payment schedule to the sum of LICENSEE's
Territory Net Sales for the last quarter of calendar year 1997 and the full
calendar year 1998.
- ------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
B. For year 5:
1. Base Royalty: For year 5 of this Agreement on the first $20,000,000
of Territory Net Sales: Twelve and One Half Percent (12.5%); provided,
however, that should LICENSEE prepay the Secured Limited Recourse Promissory
Note between the parties, base royalties on the remaining portion of the * of
Territory Net Sales made after such prepayment shall be at *.
2. Additional Royalty: For all Territory Net Sales above *, a royalty
based on the following percentages:
Territory Net Sales Level achieved by LICENSEE Additional Royalty Percentage
---------------------------------------------- -----------------------------
YEAR 5
------
* *
* *
* *
- ------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
C. For year 6:
1. Base Royalty: For year 6 of this Agreement on the first $16,000,000 of
Territory Net Sales: Twelve and One Half Percent (12.5%); provided, however,
that should LICENSEE prepay the Secured Limited Recourse Promissory Note between
the parties, base royalties on the remaining portion of the *
Territory Net Sales made after such prepayment shall be at *.
2. Additional Royalty: For all Territory Net Sales above *, a
royalty based on the following percentages:
Territory Net Sales Level achieved by LICENSEE Additional Royalty Percentage
---------------------------------------------- -----------------------------
YEAR 6
------
* *
* *
* *
- ------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
D. For years 7-10:
1. Base Royalty: For years 7-10 of this Agreement on the first $l6,000,000
of Territory Net Sales: Twelve and One Half Percent (12.5%); provided, however,
that should LICENSEE prepay the Secured Limited Recourse Promissory Note between
the parties, base royalties on the remaining portion of the * of
Territory Net Sales made after such prepayment shall be at *.
2. Additional Royalty: For all Territory Net Sales above *, a
royalty based on the following percentages:
Territory Net Sales Level achieved by LICENSEE Additional Royalty
---------------------------------------------- ------------------
YEARS 7-10
----------
* *
* *
* *
- ------------
* Text omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
<PAGE>
EXHIBIT F1
Minimum Territory Net Sales
Contract Year Minimum Territory Net Sales
1998 $ 32,000,000
1999 $ 32,000,000
2000 $ 32,000,000
2001 $ 32,000,000
Optional Term (1st Extension)
2002 $ 20,000,000
2003 $ 16,000,000
2004 $ 16,000,000
Optional Term (2nd Extension)
2005 $ 16,000,000
2006 $ 16,000,000
2007 $ 16,000,000
<PAGE>
EXHIBIT F2
CALCULATION OF ANNUAL ROYALTY PAYMENT
CONTRACT YEAR
Territory Net Sales Total Net Sales
TRADEMARKED PRODUCTS
1. Number of Orders Booked
(see attached breakdown)
2. Invoiced Amounts
Less:
3. Sales taxes, cash discounts,
returns and allowances
4. Shipping
5. Bad debts (up to 0.5% of the amount
shown on line 2)
6. Net Sales
ROYALTY PAYMENT DUE
Remittance Enclosed:
Check No. ___________________
THE UNDERSIGNED, being the ____________________ of I.C. Isaacs & Company
L.P., hereby certifies pursuant to Section _____ of the Agreement dated
__________, 1997, by and between ___________ and I.C. Isaacs & Company L.P.,
that the information continued in the attached Verification of Licensed Products
Sold is true and correct in all material respects as of the date hereof.
SIGNED:
-------------------------
NAME:
-------------------------
Title:
-------------------------
Date:
-------------------------
<PAGE>
For the period: January 1 to December 31.
- --------------------------------------------------------------------------------
ANNUAL
ITEM QUANTITY SOLD SALES FIGURE (#)
- --------------------------------------------------------------------------------
Pants, including Men _____________________ _____________________
slacks & trousers Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Jeans without belts Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Jeans with belts Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Shorts, including Men _____________________ _____________________
shortalls Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Jean Shorts Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Sweatpants Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Overalls Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
T-Shirts Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Polo Shirts Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Tanktops Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Sweatshirts Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
All other shirts, Men _____________________ _____________________
including knit and Women _____________________ _____________________
woven sportshirts, Children _____________________ _____________________
tunics, smocks,
beach cover-ups and
pullover style shirts
- --------------------------------------------------------------------------------
Sweaters, including Men _____________________ _____________________
pullover style Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Warm-up sets and Men _____________________ _____________________
Jogging Suits Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Jumpsuits Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Jackets, including Men _____________________ _____________________
blousons and parkas Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Denim Jackets Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Vests Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Coats, including Men _____________________ _____________________
short coats Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Rainwear Men _____________________ _____________________
Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Swimwear, Men _____________________ _____________________
including swimtanks Women _____________________ _____________________
and bathing suits Children _____________________ _____________________
- --------------------------------------------------------------------------------
Sports hats, Men _____________________ _____________________
including caps Women _____________________ _____________________
Children _____________________ _____________________
- --------------------------------------------------------------------------------
Sports visors, Men _____________________ _____________________
including sports Women _____________________ _____________________
headbands Children _____________________ _____________________
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT G
Customs Letter
TO WHOM IT MAY CONCERN:
I.C. Isaacs & Company L.P. trading as "Boss by I G Design," markets and
distributes "BOSS" branded clothing in the United States of America pursuant to
its trademark rights in the USA. Ambra Inc., a wholly-owned subsidiary of Hugo
Boss AG, has authorized I.C. Isaacs & Company L.P. pursuant to a Manufacturing
Rights Agreement dated as of ____________ to manufacture "BOSS" branded
sportswear in ________________ for export to the USA only. Therefore, shipments
of such "BOSS" branded clothing from ________________ co-signed to I.C. Isaacs &
Company L.P. for ultimate shipment to the USA are under authority from Ambra
and Hugo Boss AG.
If you wish confirmation of this information, please contact Gert Juergen
Frisch, General Counsel, at Hugo Boss AG, (phone) 49-7123-942598/(fax)
49-7123-942018, or __________________, agent for Hugo Boss AG, in
__________________.
By:
-----------------------------
-----------------------------
Officer of General Partner
ATTENTION: ONLY THE ORIGINAL; EXECUTED VERSION OF THIS LETTER IS VALID, NO
COPIES ARE ACCEPTABLE, AND THE ORIGINAL IS VALID FOR ONLY ONE YEAR FROM THE DATE
OF THIS LETTER.
<PAGE>
EXHIBIT H
NON-EXPEDITED ADR PROCEDURES
In the event a dispute arises requiring non-expedited NDR procedures, the
following procedures shall be followed:
1. The parties shall attempt to resolve disputes arising under this
Agreement informally and in the normal course of business, by means of
negotiations between employees of the companies responsible for the parties'
day-to-day relationship.
2. In the event that either party believes that normal business
negotiations have not or are not likely to lead to a timely resolution, either
party may at any time without regard to Section 1 above initiate ADR proceedings
by notifying the other in writing via facsimile of a demand for ADR proceedings,
with a succinct statement of the matters at issue. Notice shall comply with the
requirements of Section 19 of this Agreement.
3. Upon receipt of such notification, both parties shall make arrangements
for an executive to confer, either in person or, if both agree, by telephone, in
an effort to negotiate a resolution of the dispute.
a. The executives will confer within five (5) business days of the
notification, and will work for at least ten (10) additional days to
try to reach a negotiated settlement.
b. By written agreement of both parties, the time period for
negotiation may be extended. The time period for negotiation will
automatically be extended until one party declares an impasse.
4. If the executive negotiations described in Section 3 of this Exhibit F
fail to resolve the matter, then either party may thereafter notify the other
party in writing via facsimile that if agreement is not reached, mediation or
arbitration will be required. The notifying party shall state whether it elects
mediation or arbitration. If mediation is elected, the notified party may within
two (2) business days elect instead to proceed directly to arbitration, and will
so notify the notifying party. If the notified party takes no action, the matter
will proceed to mediation. If arbitration is elected by either party, the matter
will proceed directly to arbitration. In the case of arbitration, the party
selecting the location and choice of rules of the arbitration as specified under
Section 26.a. of this Agreement shall, within ten (10) business days of the
election to arbitrate, notify the other party of the selections of location and
choice of rules made.
5. In the event of mediation, the parties agree that Jonathan Marks of
J.A.M.S./ENDISPUTE or his designee shall select a mediator within five (5)
business days. If Mr.
<PAGE>
Marks or his designee is unable to select a mediator, the parties shall within
ten (10) business days select a mediator based on candidates provided by the
Washington, D.C. office of J.A.M.S./ENDISPUTE or if J.A.M.S./ENDISPUTE is
unavailable, the American Arbitration Association.
a. Within two (2) business days of the mediator's selection, the
mediator will confer in a joint conference call with representatives
of the parties to discuss the issues in dispute and any further
preparation needed prior to holding a mediation session. The parties
shall defer to the mediator's recommendation about appropriate
procedures.
b. The parties shall attempt to resolve the dispute through mediation
for at least twenty (20) business days from the date of the
mediator's initial joint telephone conference.
c. The time period for mediation shall be extended automatically past
the initial twenty (20) business days until one party declares in
writing an impasse and demands arbitration. If an impasse is
declared by either party, the matter shall proceed to arbitration.
<PAGE>
EXHIBIT H1
EXPEDITED ADR PROCEDURES
In the event a dispute arises requiring expedited ADR Procedures, the
following procedures will be followed:
1. The parties will attempt to resolve disputes arising under this
Agreement informally and in the normal course of business, by means of
negotiations between employees of the companies responsible for the parties'
day-to-day relationship.
2. Either party may at any time request that the parties make arrangements
for an executive from each side not directly involved in the underlying dispute
to confer, either by telephone or in person, in an effort to negotiate a
resolution of the dispute.
3. Although the parties recognize that resolution of disputes through
direct negotiation under Sections 1 and 2 of this Exhibit F1 are to be
preferred, in the event that either party believes that normal business
negotiations are not likely to lead to a timely resolution, either party may at
any time without regard to Sections 1 and 2 of this Exhibit h1 initiate
expedited ADR proceedings by notifying the other party in writing via facsimile
of a demand for expedited ADR proceedings, with a succinct statement of the
matters at issue, and by sending the notification and statement to the
Washington, D.C. office of J.A.M.S./ENDISPUTE. Notice will comply with the
requirements of Section 19 of this Agreement.
4. The expedited ADR proceedings will consist of an expedited arbitration
unless both parties agree in writing that they wish to pursue mediation, either
as a preliminary to arbitration or in parallel to the arbitration proceedings.
If the parties agree to pursue mediation, Jonathan Marks or another mediator
agreed to by the parties will serve as mediator, and follow such procedures as
the mediator and the parties agree to.
5. Unless the parties agree in writing to an alternative approach (as to
accommodate mediation or to fit the specifics of a particular dispute), the
parties will proceed as follows:
a. Within one (1) business day (a business day consists of a day,
excluding Saturdays, Sundays and all holidays generally recognized in either the
United States or the Federal Republic of Germany) of receipt of the demand for
expedited ADR proceedings, J.A.M.S./ENDISPUTE will inform the parties by
facsimile of the name of the arbitrator who will handle the case.
<PAGE>
b. The matter will be heard and decided by one of the following
members of the J.A.M.S./ENDISPUTE panel of neutrals: The Honorable Kathleen
Roberts; The Honorable Robert Tarleton; The Honorable Curtis Emery Von Kann. In
the event that one of the three pre-identified neutrals ceases to be a member of
the J.A.M.S./ENDISPUTE panel of neutrals, J.A.M.S./ENDISPUTE will provide
additional names of potential arbitrators and the parties will agree on a
replacement; if the parties cannot agree, J.A.M.S./ENDISPUTE may appoint a
replacement.
c. On the fifth (5th) business day after J.A.M.S./ENDISPUTE has
notified the parties of the arbitrator, the arbitrator will hold a preliminary
telephone conference during which the parties will describe the dispute and
discuss the procedure for resolving the dispute, including, for example, the
need for and content of pre-hearing submissions. To the extent that the parties
cannot agree on procedures, the arbitrator will orally inform the parties at the
close of the telephone hearing of his procedural decisions. He will confirm
those decisions in writing no later than the following business day.
d. On the sixth (6th) business day after the preliminary telephone
conference, unless both parties agree to shorten the time or to extend the time,
the arbitrator will hold an in-person hearing to receive evidence and consider
arguments relating to the matter; provided, however, that if the parties cannot
agree to extend the time and the arbitrator concludes that in the interest of
justice the time should be extended, the arbitrator may do so.
(1) The hearing will be conducted at a time decided by the
arbitrator, in either New York City or Washington, the
location to be decided by the arbitrator.
(2) The arbitrator will not be bound by the rules of evidence.
(3) The arbitrator will allow each side to present written and
oral evidence as they deem appropriate, except that the
arbitrator may set time limits to ensure that the hearing is
completed within one (1) working day.
(4) The arbitrator will declare the record closed at the end of
the hearing, except that the arbitrator may defer the closing
of the record for up to two (2) business days in order to
allow the parties to make post-hearing submissions.
(5) The arbitrator will hand down a binding award within one (1)
business day of the close of the record. The award will be
accompanied by a statement of reasons. "Statements of reasons"
from prior expedited arbitrations may be used by parties to
later arbitrations to support their positions.
e. Except as specifically set out herein, the arbitrator will have sole
discretion to determine procedures for the arbitration.
<PAGE>
Exhibit 10.11(f)
OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into as of this 5th day of November, l997
by and between AMBRA INC., a corporation organized and existing under the laws
of Delaware ("Buyer") and I.C. ISAACS & COMPANY L.P., a limited partnership
organized and existing under the laws of the State of Delaware ("Seller").
WHEREAS, simultaneously with the execution of this Option Agreement, Buyer
is lending to Seller funds in the amount of Eleven Million Two Hundred and Fifty
Thousand Dollars ($11,250,000), which indebtedness of Seller to Buyer is
evidenced in a Secured Limited Recourse Promissory Note of Seller of even date
herewith (the "Note"), which funds are to be used by Seller to purchase certain
trademark rights and related assets from Brookhurst, Inc. ("Brookhurst")
referred to as the "Trademark Assets" in that certain Worldwide Rights
Acquisition Agreement dated September 30, l997 by and among Seller, Brookhurst
and William Ott (the "Acquisition Agreement");
WHEREAS, simultaneously herewith, Buyer has purchased from Seller all of
Seller's right, title and interest outside of the United States of America and
its territories and possessions in and to all "BOSS" trademarks and other
proprietary interests, if any, related thereto, together with the good will
related thereto;
WHEREAS, Buyer wishes to acquire an option to purchase from Seller all of
the remaining Trademark Assets of Seller and all rights of Seller under the
Acquisition Agreement and the Escrow Agreement referred to therein, subject to
all obligations of Seller thereunder,
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and Seller is willing to grant such option on the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
ARTICLE I
GRANT OF OPTION
1.1 Grant of Option. Upon the terms and subject to the conditions
hereinafter set forth, Seller hereby grants to Buyer the right and option (the
"Option") to purchase (i) all of the Trademark Assets and all rights relating
to, or derived from, the Trademark Assets not already acquired by Buyer, and
(ii) all rights of Seller under the Acquisition Agreement, including, without
limitation, all rights of Seller under the Escrow Agreement referred to therein,
(the "Option Assets"). In the event the Option is exercised, the Option Assets
shall be sold free and clear of all pledges, security interests, mortgages and
liens (other than the lien of Buyer established pursuant to the Note and any
liens on the Option Assets which existed prior to the acquisition of the
Trademark Assets by Seller from Brookhurst) (collectively, "Encumbrances")
subject to the obligations of Seller arising from and after the Closing (as
hereinafter defined) under the Assumed Agreements (as defined in the Acquisition
Agreement) solely insofar as they relate to the use of the Option Assets after
Closing.
1.2 Timing and Exercise Procedure. (a) The Option may be exercised:
(i) At any time during the period commencing on the ninth anniversary
of the date hereof and ending on December 31, 2007; or
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(ii) Prior to the ninth anniversary of the date hereof on or
after such date as (x) Seller shall have been in substantial material
breach of any of Section 2.a, 2.b, 3.b., or 7.a. of the Concurrent Use
Agreement by and between Seller and Hugo Boss AG, which breach has not
been is not cured within thirty (30) days after the date of written
notice by Buyer to Seller of such breach; (y) an "Event of Default"
shall have occurred under the Note, or (z) the Foreign Manufacturing
Rights Agreement of even date herewith by and between Buyer and Seller
(the "Manufacturing Rights Agreement") shall terminate for any reason;
(in either case, the "Exercise Period"). The Option may be exercised by written
notice given by Buyer to Seller (an "Option Notice") at any time during the
Exercise Period, which written notice shall be given in accordance with the
notice provision of this Option Agreement.
(b) Notwithstanding the foregoing, as referred to in the Note, Seller
shall have a Put Option (the "Put Option") to cause Buyer to purchase the Option
Assets, as though the Option of Buyer had been exercised if the Manufacturing
Rights Agreement shall have terminated for any reason. Seller shall exercise
such Put Option by written notice to Buyer given in accordance with the notice
provision of this Option Agreement.
(c) The date on which the Option Notice or Put Notice is given is
hereinafter referred to as the "Exercise Date".
1.3 Exercise Price. In consideration for the sale of the Option Assets,
Buyer agrees to pay to Seller the amount of Eleven Million Two Hundred and Fifty
Thousand Dollars ($11,250,000), less any proceeds collected by Seller (and not
paid over to Buyer) as a result of
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claims against Brookhurst pursuant to the Acquisition Agreement and/or Escrow
Agreement which do not represent Actual Costs of Seller as defined in the Note,
on the Closing Date by wire transfer to a bank account designated in writing by
Seller on at least two (2) business days' notice.
1.4 Closing. The closing of the purchase of the Option Assets (the
"Closing") shall take place, in the event the Option is exercised pursuant to
Section 1.2(a)(i), on December 31, 2007 or, in the event of exercise pursuant to
Section 1.2(ii) or the exercise of the Put Option pursuant to Section 1.2 (b) on
the date thirty (30) days after the Exercise Date (the "Closing Date") at the
offices of Coudert Brothers, 1114 Avenue of the Americas, New York, New York at
10:00 a.m. local time or at such other time and place mutually agreed to by the
parties. At the Closing the parties shall exchange the various closing
documents referred to in Article II of this Option Agreement.
ARTICLE II
CLOSING DELIVERIES
2.1 Deliveries to be Made by Seller. On the Closing Date, Seller shall
have executed and delivered to Buyer the following:
(a) executed trademark assignments in forms reasonably acceptable to
Buyer and Seller transferring all trademarks (and other proprietary interests
related thereto, if any,) including the good will related thereto, constituting
or relating to Option Assets (the "Trademarks") to Buyer;
(b) possession of (i) an original of each of Seller's trademark
registrations then currently in effect and constituting Option Assets (except
that a copy of Seller's California state
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registration may be delivered) and (ii) Seller's original trademark application
and registration files relating to the Option Assets including, for example,
letters or other materials from each of Seller's domestic trademark counsel
showing deadlines for trademark office actions to the extent in Seller's
possession, custody or control;
(c) appropriate original instruments of consent or waiver executed by
third parties whose consent or waiver is required to consummate the transactions
contemplated hereby;
(d) an executed agreement of assignment and assumption of Assumed
Agreements (the "Assumption Agreement") in a form reasonably acceptable to Buyer
and Seller; and
(e) such other instruments and documents as may be elsewhere herein
required.
2.2 Deliveries To Be Made by Buyer. On the Closing Date, Buyer shall have
executed and delivered to Seller the following:
(a) the payment provided for in Section 1.3(a), which payment may be
satisfied by offset against principal amounts owing to Buyer under the Note; and
(b) the Assumption Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows:
3.1 Organization and Good Standing of the Seller. Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.
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3.2 Authority; Execution. Seller has all the requisite power and
authority, corporate and otherwise, to execute, deliver and perform its
obligations under this Option Agreement. The execution and delivery of this
Option Agreement, and each of the other instruments of transfer, conveyance and
assignment to be delivered hereunder, have been duly and validly authorized by
all necessary corporate and other action on the part of Seller, and this Option
Agreement has been and each of such other instruments to be delivered hereunder
will be duly executed by Seller. This Option Agreement constitutes the valid
and binding agreement of Seller, enforceable against Seller in accordance with
its respective terms.
3.3 Breach of Statute or Contract.
(a) The execution, delivery and performance of this Option Agreement
by Seller and the consummation of the transactions contemplated hereby will
not: (i) violate or conflict with any provision of the charter documents
or by-laws of Seller; (ii) violate or conflict with, result in the breach
or termination of or otherwise give any other contracting party the right
to terminate, or constitute a default (or an event which, with the lapse of
time, or the giving of notice, or both, will constitute a default) under,
any contract or other instrument to which Seller is a party and which
relate to the Option Assets or by which Seller is bound, or result in the
creation of any Encumbrance upon any of the Option Assets pursuant to the
terms of any such contract or instrument, or (iii) violate or conflict with
any judgment, order, writ, injunction or decree of any court or
governmental body of any jurisdiction applicable to Seller (excluding any
judgments, orders, writs, injunctions or decrees in any actions or
proceedings involving Hugo Boss A.G. or its affiliates) or, to the
knowledge of Seller, any law or regulation materially adversely affecting
Buyer's ability to exploit the Option Assets.
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(b) There are no notices, licenses, consents, permissions or approvals
of any nature whatsoever which are required to be obtained by Seller from any
Federal, state or local governmental or regulatory body or other third party or,
to Seller's knowledge, from any foreign governmental or regulatory body for the
consummation of the transactions contemplated by this Option Agreement, or as a
condition to the sale, assignment and transfer of the Option Assets to be
effected hereunder.
3.4 No Alienation of Rights. Seller has not transferred, assigned,
licensed or otherwise encumbered with Encumbrances any of its rights in any
Option Asset.
3.5 Ownership of Option Assets. As between Seller and all
affiliates and other persons or entities who have an ownership interest in
Seller (or any affiliate thereof) or who may have been expressly authorized by
Seller to use the Option Assets, Seller owns all rights in and to the Option
Assets.
3.6 Knowledge. Whenever a statement regarding the existence or
absence of facts in this Option Agreement is qualified by a phrase such as to
Seller's knowledge or words to similar effect, it is intended by the parties
that the information attributed to Seller be actually known, or information
which should have been known based on reasonable inquiry by the President, the
Chairman, any Chief Executive Officer or the Chief Financial Officer of Seller.
3.7 Materiality. The phrase "materially adversely affecting Buyer's
ability to exploit the Option Assets" shall be deemed to mean (i) the existence
or occurrence at any time from and after the date hereof of any actual harm, or
the existence of any reasonably anticipated actual harm, to Buyer's ability to
exploit the Option Assets or (ii) either (x) the failure of Seller to remedy the
breach in question assuming the breach is remediable or (y) the inability of
Seller
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to remedy the breach in question without prejudice to Buyer's ability to exploit
the Option Assets. For purposes of this Section 3.7, no "actual harm" shall be
deemed to exist as to any of the first three claims of harm unless any such
claim of harm reasonably involves at least the following amounts in damage or
loss:
First Claim $35,000
Second Claim $25,000
Third Claim $25,000
it being agreed that, without prejudice to, or limitation of, Seller's ability
to claim that any subsequent claim involves no "actual harm", no such monetary
threshold applies to any subsequent claims.
3.8 No Representations and Warranties as to Trademark Assets. Seller
makes no representations and warranties of any kind, and shall have no
responsibility, liability or obligations whatsoever to Buyer or any affiliate
thereof (including, without limitation, for any claims for indemnity) with
respect to any matter relating to the Trademark Assets prior to the time Seller
acquired them, including, without limitation, the quality of title, the
condition or use of the Trademark Assets or the conduct of the business
thereunder prior to the time Seller acquired the Trademark Assets or with
respect to any actions taken at the direction of Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Good Standing of Buyer. Buyer is a corporation
duly organized and validly existing under the laws of Delaware.
4.2 Authority; Execution. Buyer has all requisite power and
authority, corporate and otherwise, to execute, deliver and perform its
obligations under this Option Agreement. The
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execution and delivery of this Option Agreement, and each of the other
instruments of transfer, conveyance and assignment delivered hereunder, by Buyer
have been duly and validly authorized by all necessary corporate and other
action on the part of Buyer, and this Option Agreement and each of such other
instruments has been duly executed by Buyer, as applicable. This Option
Agreement constitutes the valid and binding agreement of Buyer, enforceable
against Buyer in accordance with its terms.
4.3 Breach of Statute or Contract.
(a) The execution, delivery and performance of this Option Agreement
by Buyer and the consummation of the transactions contemplated hereby will not:
(i) violate or conflict with any provision of the Certificate of Incorporation
or by-laws of Buyer; (ii) violate or conflict with, result in the breach or
termination of or otherwise give any other contracting party the right to
terminate, or constitute a default (or an event which, with the lapse of time,
or the giving of notice, or both, will constitute a default) under, any contract
or other instrument to which Buyer is a party; or (iii) violate or conflict with
any judgment, order, writ, injunction or decree of any court or governmental
body of any jurisdiction applicable to Buyer (excluding any judgments, orders,
injunctions, decrees or awards in any actions or proceedings involving Seller or
its affiliates) or, to the knowledge of Buyer, any law or regulation materially
adversely affecting Buyer's ability to consummate the transactions contemplated
by this Option Agreement.
(b) There are no notices, licenses, consents, permissions or
approvals of any nature whatsoever which are required to be obtained by Buyer
from any Federal, state or local governmental or regulatory body or other third
party or, to Buyer's knowledge, from any
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foreign governmental or regulatory body for the consummation of the transactions
contemplated by this Option Agreement, or as a condition to the sale, assignment
and transfer of the Trademark Assets to be effected hereunder.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER
5.1 Conditions Precedent to Obligations of Buyer. The obligations of Buyer
to consummate the transactions contemplated under this Option Agreement are
subject to the fulfillment, as of the Closing Date, of each of the following
conditions (any or all of which may be waived by Buyer):
(a) the representations and warranties of Seller contained in Article
III of this Option Agreement shall be true and correct in all material respects
as of the Closing Date;
(b) Seller shall have performed and complied in all material
respects with all obligations, covenants and undertakings required by this
Option Agreement to be performed or complied with by Seller on or prior to the
Closing Date;
(c) there has been no material adverse change within the control of
Seller in the Option Assets; provided that in no event shall a decrease in sales
of products sold under the Option Assets or a change in the market for such
products be deemed such a material adverse change;
(d) Buyer shall have been furnished with a certificate, dated the
Closing Date and executed by an officer of Seller, certifying to the fulfillment
of the conditions specified in Sections 5.1(a), (b) and (c); and
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(e) no judgment, order or decree shall have been rendered which has
the effect of enjoining the consummation of the transactions contemplated by
this Option Agreement.
5.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated under this Option Agreement
are subject to the fulfillment, as of the Closing Date, of each of the following
conditions (any or all of which may be waived by Seller):
(a) the representations and warranties of Buyer set forth in Article
IV of this Option Agreement shall be true and correct in all material respects
as of the Closing Date;
(b) Buyer shall have performed and complied in all material respects
with all obligations, covenants and undertakings required by this Option
Agreement to be performed or complied with by Buyer on or prior to the Closing
Date;
(c) Seller shall have been furnished with a certificate, dated the
Closing Date and executed by an officer of Buyer, to certifying the fulfillment
of the conditions specified in Sections 5.2(a) and (b); and
(d) no judgment, order or decree shall have been rendered which has
the effect of enjoining the consummation of the transactions contemplated by
this Option Agreement.
5.3 Effect of Closing. The parties acknowledge and agree that proceeding
with the Closing shall not prejudice any rights or remedies of either party for
breach of any covenant, representation or warranty of the other party existing
at or prior to Closing.
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ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
6.1 All representations and warranties contained in or made pursuant to
this Option Agreement shall be continuing and shall survive and remain in full
force and effect after the date hereof and for a period of five (5) years
following Closing notwithstanding any investigation conducted by any party
hereto. All claims for indemnification under this Option Agreement shall be
brought by the parties exclusively pursuant to, and shall be disposed of
exclusively in accordance with the terms of, this Article VI.
6.2 Indemnity Obligations of Seller. Seller agrees to indemnify and hold
Buyer and its parent corporations, subsidiaries, shareholders, affiliates,
directors, officers, employees, agents, successors and assigns (collectively,
"Buyer Affiliates") harmless from, and to reimburse Buyer and each Buyer
Affiliate for, any Buyer Indemnity Claims (as that term is hereinafter defined)
arising under this Option Agreement. For purposes of this Option Agreement,
the term "Buyer Indemnity Claim" shall mean any loss, damage, deficiency, claim,
liability, obligation, suit, action, fee, cost or expense of any nature
whatsoever arising out of, based upon or resulting from (i) the breach of any
representations and warranties of Seller which are contained in or made pursuant
to this Option Agreement; (ii) any breach or nonfulfillment of, or any failure
to perform, any of the covenants, agreements, obligations or undertakings made
by Seller in or pursuant to this Option Agreement; (iii) any liabilities or
obligations arising out of any and all actions, claims, suits, proceedings,
demands, assessments, judgments, recoveries, damages, costs and expenses or
deficiencies incident to the disposal of any matter which is the subject of
indemnification under this Section 6.2; and (iv) all interest, penalties, costs
and
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expenses (including, without limitation, all out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants and
counsel) arising out of any matter which is the subject of indemnification under
this Section 6.2 and in which and to the proportionate extent Buyer Affiliates
prevail.
6.3 Indemnity Obligations of Buyer. Buyer hereby agrees to indemnify and
hold Seller, and its respective subsidiaries, partners, shareholders,
affiliates, directors, officers, employees, agents, successors and permitted
assigns (collectively, "Seller Affiliates"), harmless from, and to reimburse
Seller and each Seller Affiliate for, any Seller Indemnity Claims (as that term,
is hereinafter defined) arising under this Option Agreement. For purposes of
this Option Agreement, the term "Seller Indemnity Claims" shall mean any loss,
damage, deficiency, claim, liability, suit, action, fee, cost or expense of any
nature whatsoever arising out of, based upon or resulting from (i) the breach of
any representations and warranties of Buyer which are contained in or made
pursuant to this Option Agreement; (ii) any breach or nonfulfillment of, or
failure to perform, any of the covenants, agreements, obligations or
undertakings made by Buyer in or pursuant to this Option Agreement; (iii) any
liabilities or obligations assumed by Buyer pursuant to the terms hereof; (iv)
any obligations or liabilities arising out of any and all actions, claims,
suits, proceedings, demands, assessments, judgments, recoveries, damages, costs
and expenses or deficiencies incident to the disposal of any matter which is the
subject of indemnification under this Section 6.3; and (v) all interest,
penalties, costs and expenses (including, without limitation, all out-of-pocket
expenses, reasonable investigation expenses and reasonable fees and
disbursements of counsel and accountants) arising out of any matter which
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is the subject of indemnification under this Section 6.3 and in which and to the
proportionate extent Seller Affiliates prevail.
6.4 Notification of Claims. In the event of the occurrence of any event
which any party asserts constitutes a Buyer Indemnity Claim or Seller Indemnity
Claim, as applicable, the indemnified party shall provide the indemnifying party
with prompt notice of such event, including, without limitation, any facts and
circumstances which give rise to such claim, and shall otherwise make available
to the indemnifying party all relevant information which is material to the
claim and which is in the possession of the indemnified party. If such event
involves the claim of any third party (a "Third-Party Claim"), the indemnifying
party shall have the right to elect to join in the defense, settlement,
adjustment or compromise of any such Third-Party Claim, and to employ counsel to
assist such indemnifying party in connection with the handling of such claim, at
the sole expense of the indemnifying party, and no such claim shall be settled,
adjusted or compromised, or the defense thereof terminated, without the prior
consent of the indemnifying party unless and until the indemnifying party shall
have failed, after the lapse of a reasonable period of time, but in no event
more than 30 days after written notice to it of the Third-Party Claim, to join
in the defense, settlement, adjustment or compromise of the same. An
indemnified party's failure within a reasonable time to give notice or to
furnish the indemnifying party with any relevant data and documents in its
possession in connection with any Third-Party Claim shall not constitute a
defense (in part or in whole) to any claim for indemnification by such party,
except and only to the extent that such failure shall result in any material
prejudice to the indemnifying party. If so desired by any indemnifying party,
such party may elect, at such party's sole expense, to assume control of the
defense, settlement,
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adjustment or compromise of any Third-Party Claim, insofar as the claim relates
to the liability of the indemnifying party, provided that such indemnifying
party shall obtain the consent of all indemnified parties before entering into
any settlement, adjustment and compromise of such claim, or ceasing to defend
against such claim, if as a result thereof, or pursuant thereto, there would be
imposed on an indemnified party any liability or obligation not covered by the
indemnification obligations of the indemnifying party under this Option
Agreement (including, without limitation, any injunctive relief or other
remedy).
ARTICLE VII
COVENANTS
7.1 Pre-Closing Rights.
Seller covenants and agrees that from the date hereof until the Closing:
(a) It will not, without the prior consent of Buyer, sell, assign,
transfer, license, pledge, encumber, or otherwise dispose of, any of the Option
Assets or enter into any merger or dissolve or liquidate except in a manner
consistent with Section 8.8 hereof.
(b) It will not take or permit any action as would cause its
representations and warranties set forth in Article III to not be true and
correct at Closing in any materially adverse respect.
7.2 Post-Closing Rights.
(a) From and after the Closing, all rights of Seller to use the
Option Assets shall forthwith cease and Seller shall immediately:
(i) cease the manufacture, sale, promotion and distribution of
products bearing the Trademarks except in accordance with this Section 7.2;
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(ii) within thirty (30) days after Closing, delete and henceforth
cease from making any reference to the Option Assets, including, without
limitation, all Trademarks, in, on or in connection with any advertising,
promotional or directory materials and cease all use by Seller of the name and
mark "BOSS", all variations thereon and all other names and marks which
incorporate the term "BOSS" in the future, except to the limited extent
presented in Section 7.2(e) hereof;
(b) Buyer shall have the option to purchase all or any portion of the
Seller's inventory of products bearing the Trademarks at sixty-two and one-half
percent (62.5%) of the average net sale price, but in any event at no less
favorable terms than the net sales price made available to any third party
within the prior six (6) months.
(c) Should Buyer not purchase all of the inventory of such products
from Seller, Seller (or its secured inventory lender) shall be entitled to sell
and distribute in the United States of America, its territories, possessions and
commonwealths, except Saipan and American Samoa, any remaining inventory bearing
the trademarks constituting Option Assets on a non-exclusive basis for a period
of nine (9) months from the Closing hereunder. After the expiration of such
nine (9) month period, Seller or Seller's secured inventory lender shall
completely remove the Trademarks (as defined in the Acquisition Agreement) from,
or if complete removal is not possible, destroy any products not sold and
distributed before the expiration of such nine (9) month period.
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7.3 Further Assurances.
(a) From time to time until the expiration of six (6) years from the
Closing Date, upon the request and at the expense of Buyer but without further
consideration, Seller shall:
(i) do, execute, acknowledge, deliver and file, or shall cause
to be done, executed, acknowledged, delivered and filed, all such further
acts, deeds, transfers, conveyances, assignments or assurances (including,
without limitation, for purposes of transferring record ownership of the
Option Assets to Buyer) as may be reasonably requested by Buyer for
transferring, conveying, assigning and reducing to Buyer's possession,
ownership and use of the Option Assets from and after Closing, including,
without limitation, executing on the Closing Date any assignments of
Trademarks in recordable form requested by Buyer; and
(ii) deliver to Buyer such other records, documentation and
information in Seller's possession or control as may be reasonably
requested by Buyer to assist Buyer in the use and protection of the Option
Assets from and after Closing.
(b) Seller shall keep and preserve any and all invoices, letters of
credit, bills of lading, and purchase orders which relate to the Option Assets
for three (3) years from and after Closing except as otherwise provided herein.
Seller may dispose of or destroy any such records, documentation and information
at any time, provided that Seller first shall notify Buyer so that Buyer may, at
its expense and within a reasonable time after receipt of such notice, obtain
from Seller any or all of said records, documentation and information. Seller
shall not
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be responsible for (i) destruction of records caused by an Act of God or other
"Force Majeure" event, or (ii) any immaterial non-intentional destruction of
records.
(c) Seller shall promptly remit or refer to Buyer any mail or other
communications, including without limitation, any written inquiries, relating to
the Option Assets which are received by Seller from and after the Closing for a
period of six (6) years from the date of the Closing.
ARTICLE VIII
GENERAL
8.1 Waiver. Any failure of Buyer, on the one hand, or Seller, on the
other, to comply with any of the obligations or agreements set forth in this
Option Agreement or to fulfill any condition set forth in this Option Agreement
may be waived only by written instrument signed by the other party. No failure
by any party to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver of such right, nor shall any single or partial exercise of
any right hereunder by any party preclude any other or future exercise of that
right or any other right hereunder by that party.
8.2 Notices. All notices, requests or other communications required or
permitted hereunder (excluding, however, mail and/or communications covered
under paragraph 7.3(c) hereof) shall be given or made in writing and shall be
(i) delivered personally (including commercial carrier), (ii) sent by registered
or certified airmail, return receipt requested, postage prepaid or (iii) sent by
telecopier, addressed to the party to whom they are directed at the following
addresses, or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 8.2:
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If to Seller, to:
I. C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: President and Co-Chief Executive Officer
Telecopier: 410/558-2096
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and Co-Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1604
If to Buyer, to:
Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attention: Graziano DeBoni
Telecopier: 212/940-0619
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attention: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
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and
Howrey & Simon
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Robert M. Bruskin, Esq.
Telecopier: 202/383-6610
Any notice, request or other communications shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any party
may change its address for notices hereunder, effective upon giving of notice of
such change hereunder to the other parties.
8.3 No Third Party Beneficiaries. Neither this Option Agreement nor any
provision hereof, nor any document or instrument executed or delivered pursuant
hereto, shall be deemed to create any right in favor of or impose any obligation
upon any person or entity other than Buyer and Seller and their respective
successors and assigns.
8.4 Equitable Remedies. Seller, on the one hand, and Buyer, on the other
hand, each acknowledge that it will be impossible to measure in money the
damages that would be suffered by Buyer and Seller, respectively, if the other
party fails to comply with the obligations imposed on it pursuant to paragraphs
1.1, 1.2, 2.1, 2.2, 7.1, 7.2 and 7.3 of this Option Agreement and that, in the
event of any such failure, the claiming party will be irreparably damaged and
will not have an adequate remedy at law. Each party shall, therefore, be
entitled to equitable relief, including, without limitation, injunctive relief
and/or specific performance to enforce such obligations of the other party and,
if any action should be brought in equity to enforce any provisions of this
Option Agreement, neither party shall raise the defense that there is an
adequate remedy at law. The parties further agree that notwithstanding the
provisions of Section 8.12 hereof, either party may, in accordance with the
provisions of this Section 8.4 seek
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immediate injunctive relief in court prior to the initiation of or pending
resolution of any dispute in arbitration. Except as expressly provided in this
Option Agreement, all specific remedies provided for in this Option Agreement
are cumulative and are not exclusive of one another or of any other remedies
available at law or in equity. Notwithstanding anything to the contrary set
forth herein, nothing contained elsewhere in this Option Agreement, including,
without limitation, the monetary thresholds set forth in Section 3.7 with
respect to the definition of "actual harm", shall be deemed to limit in any way
the availability of equitable relief for any breach of this Option Agreement.
8.5 Captions and Paragraph Headings. Captions and paragraph headings used
in this Option Agreement are for convenience only and are not a part of this
Option Agreement and shall not be used in interpreting or construing it.
8.6 Entire Agreement. The making, execution and delivery of this Option
Agreement by the parties has been induced by no representations, statements,
warranties or agreements other than those herein expressed. This Option
Agreement embodies the entire understanding of the parties with respect to the
subject matter hereof. Notwithstanding the foregoing, the parties acknowledge
that a number of different agreements and instruments of which the parties are
signatory are all being executed simultaneously with this Option Agreement.
This Option Agreement may be amended or modified only by an instrument of equal
formality signed by the parties or their duly authorized representatives. The
parties have made no representations or warranties not expressly set forth in
this Option Agreement. This Option Agreement supersedes and terminates all
prior discussions, negotiations, understandings, arrangements and agreements
among the parties relating to the subject matter hereof, except as expressly set
forth herein.
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8.7 Counterparts. This Option Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
8.8 Assignability. Neither party hereto may assign any of its interests,
rights or obligations under this Option Agreement without the prior written
consent of the other party. Notwithstanding the foregoing, Buyer may assign its
rights, but not its obligations, under this Option Agreement to any entity under
common ownership and control with Buyer or to any successor-in-interest of Buyer
to the Option Assets without the consent of Seller. Any impermissible attempted
assignment of this Option Agreement without such prior written consent shall be
void as to the other parties to this Option Agreement. Notwithstanding anything
to the contrary set forth in this Agreement, Seller shall be permitted to assign
and transfer Seller's rights under this Agreement to any parent, subsidiary or
other affiliate of Seller if Seller or its successor in interest remains fully
liable for the performance of this Agreement by such assignee or transferee and
indemnifies Buyer with respect to any costs and damages Buyer may incur because
of such assignment or transfer.
8.9 Expenses. The parties shall each bear their own expenses in
connection with the negotiation, execution and delivery of this Option Agreement
and the performance of their respective obligations hereunder.
8.10 Successors and Assigns. This Option Agreement and the provisions
thereof shall be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto.
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<PAGE>
8.11 Governing Law. The validity, construction, operation and effect of
any and all of the terms and provisions of this Option Agreement shall be
determined and enforced in accordance with the laws of the State of New York
without giving effect to principles of conflicts of law thereunder. In the
event any legal action becomes necessary to enforce or interpret the terms of
this Agreement, the parties agree that such action will be brought in the U.S.
District Court for the Southern District of New York, and the parties hereby
submit to the jurisdiction of such court; provided, however, that any party may
enforce an arbitration award in any court of competent jurisdiction located in
New York City and the parties hereby submit to the jurisdiction of any such
court.
8.12 Arbitration. (a) Except as provided for in paragraph 8.4 above, all
disputes arising from or in any way in connection with this Option Agreement
shall be finally settled through binding arbitration conducted pursuant to the
Rules of Conciliation and Arbitration of the International Chamber of Commerce
in effect as of the date of the initiation of any dispute submitted to
arbitration under this section ("ICC Rules") by three arbitrators appointed in
accordance with the ICC Rules. Except as provided in this Section, no
modification or amendment of the ICC Rules applicable to any such arbitration
shall be binding upon the parties unless agreed to in writing by the parties.
In each such arbitration, each party to the dispute shall appoint one
arbitrators within 30 days of receipt by the defendant of the request for
arbitration, and the arbitrators so appointed by the parties shall appoint the
third arbitrator (who shall be the Chairman), within 30 days of the confirmation
of the later of the two arbitrators appointed by the parties. If any such
arbitration involves multiple claimants or multiple defendants, nomination of
arbitrators shall be governed by the applicable ICC rules.
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Notwithstanding anything to the contrary contained in the ICC rules: (i) the
arbitration proceedings shall be conducted in the City of New York, State of New
York; (ii) the arbitration proceedings shall be conducted in the English
language; and (iii) the arbitrators shall apply New York law without regard to
such state's choice of law rules. If the non-prevailing party does not comply
with an arbitration decision, the prevailing parties may immediately enforce the
arbitration decision in an equitable proceeding in court with both parties'
court costs and related attorneys' fees paid by the non-prevailing party in the
arbitration, unless the arbitration decision is modified, or not upheld or
enforced, in which case, each side shall bear its own costs and attorneys' fees.
8.13 Confidentiality. This Option Agreement, its terms, conditions and
provisions, and the trade secrets and confidential information of the parties
are strictly confidential and shall not be disclosed by either party to any
other person or entity without the prior written consent of the other party, or
as required by law, (i) except financial institutions (including but not limited
to investment bankers and underwriters), attorneys and accountants with which
the parties transact business, provided, however, that such third parties agree
in writing to abide by the terms of this provision; or (ii) except as
appropriate for the parties to protect and/or enforce their respective trademark
rights. Buyer and Seller further agree that disclosure of this Option Agreement
within their organizations shall be limited to their respective directors,
officers and employees with a "need to know," to carry out the purposes of this
Option Agreement, or to protect the rights of either party. Nothing in this
provision is intended to prevent or substantially interfere with Seller's or its
partners' affiliates', or its stockholders' ability to make all disclosures
required by law pursuant to offering and selling stock to the public.
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<PAGE>
Notwithstanding the provisions of this Section, in the event of published
reports regarding this Option Agreement or Seller's relationship with Buyer or
Hugo Boss AG ("Hugo Boss"), Buyer, Hugo Boss and Seller agree to cooperate in
good faith to provide appropriate public responses and comments and the parties
shall be free to make accurate public statements which are appropriate to
correct or clarify the public record.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Option Agreement the
day and year first written above.
I.C. ISAACS & COMPANY L.P., a Delaware limited
partnership
By: /s/ Robert J. Arnot
---------------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief Executive
Officer
By: /s/ Gerald W. Lear
---------------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief Executive
Officer
AMBRA INC.
By: /s/ Jorg-Viggo Muller
---------------------------------------
Name: Jorg-Viggo Muller
Title: Chairman
By: /s/ Gert-Jurgen Frisch
---------------------------------------
Name: Gert-Jurgen Frisch
Title: Vice President
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<PAGE>
Exhibit 10.11(g)
SECURED LIMITED RECOURSE PROMISSORY NOTE
November 5, 1997
FOR VALUE RECEIVED I.C. ISAACS & COMPANY L.P., a limited partnership
organized and existing under the laws of the State of Delaware with its
principal place of business located at 3840 Bank Street, Baltimore, MD 21224
("Maker"), hereby promises to pay to Ambra Inc., a corporation organized and
existing under the laws of Delaware with its principal place of business
located at c/o The Corporation Trust Company, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801 ("Lender"), the principal sum of U.S.
$11,250,000 (Eleven Million Two Hundred Fifty Thousand Dollars), on December
31, 2007. This Promissory Note is hereinafter referred to as the "Note".
1. Interest. The outstanding principal sum of this Note shall bear
simple interest at the per annum rate of ten percent (10%) (computed on the
basis of a 365-day year and the number of actual days elapsed). Interest
shall accrue as of the date of this Note, and shall be payable quarterly on
each January 31, April 30, July 31 and October 31 following the date hereof
commencing on January 31, 1998.
2. Prepayment. This Note may be prepaid at any time by Maker upon
payment of the total amount of principal (or, at the option of Maker, upon
termination of the Manufacturing Rights Agreement (as hereinafter defined)
for any reason, by the tender to Lender of the Option Assets pursuant to the
exercise by Maker of the "Put Option" pursuant to the Option Agreement
between Maker and Lender of even date herewith (the "Option Agreement") and
all interest and late fees accrued but unpaid as of the date of prepayment
(or the closing date of the transfer of the Option Assets pursuant to the
exercise of the Put Option, as the case may be), or upon such other terms as
the parties may agree.
3. General Payment Provisions. (a) All payments of principal and
interest and other sums due pursuant to this Note shall be made by wire
transfer of immediately available funds to Lender at Acct. No. 150/1014471/00
USD, Commerzbank AG, New York branch, Corporate Banking - European Desk, 2
World Financial Center, New York, New York 10281-1050, SWIFT-Code:
COBAA053xxxx, Contact: Andreas D. Schwung, or to such other account as Lender
shall have previously designated to Maker in writing not later than fifteen
(15) Business Days (as defined below) prior to the date on which such payment
becomes due.
(b) If the due date of any payment under this Note would otherwise
fall on a day which is not a Business Day, such date will be extended to the
immediately succeeding Business Day. The term "Business Day" or " Business
Days" shall mean any day other than Saturday, Sunday, or a banking holiday of
the United States, State of New York, or the Federal Republic of Germany.
<PAGE>
(c) A late payment fee of one and one-half percent (1-1/2%) per
month of any principal or interest payment made after the due date hereunder
shall be due with any such late payment, notwithstanding any right of cure by
Maker.
(d) Payment of principal under this Note will constitute a
nonrecourse obligation of Maker payable solely from the Collateral (as
hereinafter defined). It is understood that the preceding sentence shall not
(A) prevent recourse to the Collateral for any sums due or to become due or
(B) constitute a waiver, release or discharge of any indebtedness or
obligation evidenced by or secured by this Note, but the same shall continue
until paid or discharged; provided, that the foregoing provisions of this
paragraph 3(d) shall not limit the right of Lender to name Maker as a party
defendant in any action, suit or in the exercise of any other remedy under
this Note, so long as no judgment in the nature of a deficiency judgment or
seeking personal liability of Maker with regard to the principal amount shall
be asked for or (if obtained) enforced against Maker.
4. Events of Default. An "Event of Default" shall occur upon one or
more of the following events:
(a) Maker shall default in the payment when due of any principal or
interest under this Note and such default shall continue unremedied for a
period of thirty (30) days after written notice from Lender; or
(b) Maker shall default in any material respect in the observance
or performance of its Obligations (as hereinafter defined) other than the
obligation to pay principal or interest hereunder, which default is not cured
within thirty (30) days after written notice from Lender; provided, that with
respect to the Foreign Manufacturing Rights Agreement between Lender and
Maker of even date herewith ("Manufacturing Rights Agreement"), an Event of
Default under this Note shall be deemed to have occurred only in the event of
an "Accelerating Act" as defined in the Manufacturing Rights Agreement and
with respect to the Concurrent Use Agreement between Hugo Boss AG ("Hugo
Boss") and Maker of even date herewith (the "Concurrent Use Agreement"), an
Event of Default under the Note shall be deemed to have occurred only in the
event of a substantial material breach of Sections 2.a., 2.b., 3.b. or 7.a.
of the Concurrent Use Agreement; or
(c) Maker shall admit in writing its inability to, or be generally
unable to, pay its debts as such debts generally become due; or
(d) Maker shall (i) apply for or consent in writing to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidation of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under Title II of the United States Code (as
now or hereafter in effect) (the "Bankruptcy Code"), or such other such
similar law in any jurisdiction, (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts, (v)
acquiesce in writing
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<PAGE>
to any petition filed against it in an involuntary case under the Bankruptcy
Code, or (vi) take any corporate action for the purpose of effecting any of
the foregoing; or
(e) a proceeding or case shall be commenced, without the
application or consent of Maker in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of such entity or of all
or any substantial part of its assets, or (iii) similar relief in respect of
such entity, under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect in any such event, for a period of 120 days;
or an order for relief against any such entity shall be entered in an
involuntary case under the Bankruptcy Code or such other similar law in any
jurisdiction.
Upon and during the continuance of an Event of Default: (i) Lender may,
by written notice to Maker, declare the principal amount then outstanding of,
and the total interest on, this Note to be forthwith due and payable,
whereupon such amount shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which
are hereby expressly waived by maker; (ii) Maker shall pay all of the
expenses of Lender incurred for the collection of this Note, including
reasonable attorneys' fees and legal expenses; and (iii) Lender may exercise
from time to time any other rights and remedies available to it by law,
including, without limitation, those available under any agreement or other
instrument relating to the amounts owed under this Note. No delay on the
part of Lender in the exercise of any right or remedy shall operate as a
waiver thereof, and no single or partial exercise by Lender of any right or
remedy shall preclude other or further exercise thereof or the exercise of
any other right or remedy.
5. Security.
(a) Definitions. For purposes of this Note, the following terms
have the meanings set forth below:
"Collateral" means all right, title and interest of Maker in and to the
Trademark Assets as defined in that certain Worldwide Rights Acquisition
Agreement dated September 30, l997 (the "Acquisition Agreement"), except to
the extent such interests have been transferred to Lender pursuant to the
Foreign Acquisition Agreement (as hereinafter defined), together with the
goodwill related thereto, all rights of Maker under the Acquisition Agreement
and the Escrow Agreement referred to therein and all proceeds therefrom, and
all intellectual property rights uniquely associated with the Trademark
Assets including, but not limited to, titles, trademarks, names, as well as
any of the following used in connection with or as identifiers of the
trademarks constituting Trademark Assets: fabrics, styles, designs, and
colors other than those which are standard or traditional in the industry,
logos, symbols, copyrights, art work, inventions, (patented or unpatentable),
confidential information, trade secrets, patents and
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pending patent applications. Notwithstanding the foregoing, "Collateral"
shall not include any intent-to-use trademark applications.
"Lien" means a pledge, assignment, lien, charge, mortgage, encumbrance or
other security interest in the Collateral securing the payment of
indebtedness and any other obligations of Maker to Lender or Hugo Boss as
provided under this Note.
"Obligations" means the obligations of Maker (i) to make all payments of
principal, interest and other amounts due under this Note (ii) under the
Option Agreement and the Concurrent Use Agreement, and (iii) under the
Manufacturing Rights Agreement.
"Trademarks" means the trademarks constituting Trademark Assets.
(b) Grant of Security Interest. Maker hereby pledges, assigns and
grants to Lender a Lien in all of its respective right, title and interest in
and to the Collateral as security for the Obligations. All property and
rights constituting Collateral are assigned hereunder by Maker to Lender as
security for the payment or other satisfaction, as applicable, of the
Obligations. Upon the occurrence and during the continuance of an Event of
Default, Lender shall have all rights and remedies of a secured party under
the Uniform Commercial Code. All rights of Lender and all Liens hereunder
and all obligations of Maker hereunder shall be absolute and unconditional
irrespective of any lack of validity or enforceability of this Note, any
release or nonperfection of any portion of the Collateral, or any other
circumstance which might otherwise constitute a defense available to, or a
discharge of Maker in respect of the Obligations or this Agreement.
(c) Performance under Contract. Maker shall remain liable to
perform all of its duties and obligations under any contracts which have been
pledged or assigned hereunder to Lender (including, without limitation, the
Acquisition Agreement and the Escrow Agreement), except to the extent said
obligations have been assumed by Lender pursuant to the Foreign Boss Rights
Acquisition Agreement between Lender and Maker dated September 30, 1997 (the
"Foreign Acquisition Agreement"), to the same extent as if this Note had not
been executed, and the exercise by Lender of any of its rights hereunder
shall not release Maker from any of its respective duties or obligations
under such agreements.
(d) Delivery and Perfection. Maker shall, promptly upon Lender's
written request, execute and file financing or continuation statements and
amendments thereto and collateral assignments of trademarks with the
appropriate state and local authorities and the U.S. Patent & Trademark
Office ("USPTO") relating to all or any part of the Collateral where
permitted by applicable law and take all such other actions and to execute,
deliver and file, or cause to be filed, financing and continuation statements
or such other instruments or documents or amendments thereto, and perform
such acts as Lender may reasonably require in order to create, perfect,
establish, preserve and maintain a perfected, valid and continuing security
interest of Lender in the Collateral. To the extent permitted by law, Maker
hereby grants to Lender a Power of Attorney to execute and file any and all
of the foregoing documents and
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<PAGE>
instruments and to take all such actions and perform all such acts in the
name of Maker as Lender shall deem appropriate or necessary in its sole
discretion in order to create, perfect, establish, preserve and maintain a
perfected, valid and continuing security interest of Lender in the Collateral
Copies of all documents executed by Lender on Maker's behalf under such
power of attorney shall be delivered by Lender to Maker.
(e) Use of Collateral. Except upon the occurrence and during the
continuation of any Event of Default, Maker may in the ordinary course of
its business use the Collateral in accordance with the Concurrent Use
Agreement.
(f) Covenants. During the term of this Agreement, Maker shall:
(i) perform or observe any contract constituting the Collateral
(including, without limitation, the Acquisition Agreement and Escrow
Agreement), except to the extent the obligations thereunder have been assumed
by Lender pursuant to the Foreign Acquisition Agreement, and enforce all such
contracts. Without limiting the generality of the foregoing, Lender shall
have the right to direct Maker to enforce the rights of Maker against
Brookhurst and the "Escrow Agent" under the terms of the Acquisition
Agreement and Escrow Agreement, as applicable, provided that Lender pays all
costs incurred by Maker thereby. In that connection, Maker shall promptly
provide to Lender copies of all notices received under such contracts. Maker
shall not give any notice under any such contract without the prior written
consent of Lender, which shall not be unreasonably withheld or delayed.
Unless otherwise agreed by the parties hereto, with respect to any amounts
which Maker is entitled to receive pursuant to a Buyer Indemnity Claim under
the Acquisition Agreement, whether pursuant to the Escrow Agreement as a
result of a Settled Claim as defined therein, or otherwise, the parties agree
that Maker shall have the right to receive payments of all Actual Costs, as
defined below, from the proceeds of such claim. For purposes of this Section
5, Actual Costs means (a) Maker's actual incurred costs with respect to the
prosecution, litigation and settlement of a Buyer Indemnity Claim of Maker,
and any proceedings brought in connection therewith (including reasonable
attorneys' fees), and (b) any damages awarded Maker or settlement amounts
paid or payable to Maker in connection with the matters described in clause
(a) to the extent they represent recovery of out-of-pocket costs or expenses
of Maker. Any proceeds of any Buyer Indemnity Claim of Maker in excess of
Actual Costs shall be remitted directly to Lender, and Maker shall direct to
the Escrow Agent that they be remitted directly to Lender and, to the extent
any such funds come into the possession of Maker, they shall be held in trust
by Maker for the benefit of Lender until remitted to Lender.
(ii) maintain all Collateral in full force and effect to the extent
so directed by Lender under paragraph (g)(i) and at Lender's cost, including,
without limitation, by using all reasonable efforts to prosecute all
applications for registration of trademarks constituting the Trademark
Assets, using all Trademarks in accordance with the Concurrent Use Agreement
and otherwise as Lender shall direct in such manner as to preserve the
continued existence and registration of such Trademarks on all products for
which they are registered or applied for in the USPTO and policing the U.S.
markets for infringers and counterfeiters.
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<PAGE>
(iii) not without the prior written consent or direction of
Lender sell, assign or otherwise dispose of or cause to be disposed of, any
Collateral either directly or indirectly or by operation of law, or create or
suffer to exist any lien, other than the Lien in favor of Lender, or take any
action that might reasonably be expected to materially impair the value of
the Collateral or the security interest granted herein.
(g) Legal Actions.
(i) Lender shall have the right to direct the protection and
enforcement of the Trademarks Assets; provided, however, that Lender shall
determine solely at its own discretion and not subject to dispute by Maker or
review in any arbitration or litigation, Lender's conduct of such protection
and enforcement, provided that such conduct is reasonable and undertaken in
good faith, and Maker shall have no claim for damages or other relief against
Lender based thereon. Nothing herein shall prevent Maker from asserting any
claims under the Acquisition Agreement.
(ii) Maker agrees to reasonably cooperate with and assist Lender in
protecting and defending the Trademark Assets, and shall promptly notify
Lender in writing of any infringements, claims or actions by others in
derogation of Trademark Assets of which Maker becomes aware; provided,
however, that Lender shall have the right to initially determine whether any
action shall be taken on account of such infringements, claims or actions.
In the event Lender concludes that it does not wish to initiate or defend any
action, which Maker believes would impair its ability to enjoy the benefits
conferred or comply with the obligations imposed on it by the Acquisition
Agreement, Maker may, at its discretion, notify Lender and request that
Lender initiate or defend said action. Lender shall promptly do so provided
that Maker shall first agree in writing to pay all costs and expenses,
including attorneys' fees, associated with the prosecution or defense of said
action. Maker shall not take any action on account of any such infringement,
claim or action without the prior written consent of Lender, which consent
shall not be unreasonably withheld or delayed. In the event of any such
infringement, claim or action, if Maker determines to take action and
receives Lender's consent therefor, Maker shall bear all costs and expenses
related thereto unless otherwise agreed upon by the parties and shall not
settle or otherwise compromise any claim without Lender's prior written
approval which shall not be unreasonably withheld or delayed. Nothing herein
shall be interpreted to require Maker to bring enforcement proceedings at its
own cost if Lender has refused to undertake the action at its own cost.
(iii) In the event Lender initiates or defends any legal
proceedings on account of any infringements, claims or actions by others in
derogation of Trademark Assets (including, without limitation, unfair
competition or other actions which inhibit the ability of Lender or Maker to
advertise, promote or sell the products under the Trademark Assets), Maker
agrees to cooperate with and assist Lender to the extent reasonably necessary
to protect the Trademark Assets including, but not limited to, being joined
as a necessary or desirable party to such proceedings; provided that Lender
does not request Maker to take any position inconsistent with Maker's
interest in the Trademark Assets. Any such legal proceedings which do not
result from
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Maker's breach of this Section 5 shall be initiated or defended by Lender;
provided, however, that Maker shall bear its own costs and expenses in any
such legal proceedings in which Maker elects to be represented by its own
counsel.
(iv) In the event Lender determines, in its sole discretion, that it
is not in the best interest of Lender to initiate any legal proceedings on
account of any such infringements, claims or actions and Lender is not
obligated to initiate any such proceedings pursuant to the provisions of
Subsection 5(g)(ii) above (or in the event Lender settles or resolves any
such proceedings which may be initiated in accordance with the terms of this
Section 5), Maker shall have no claim against Lender for damages or
otherwise, nor shall the same affect the validity or enforceability of this
Note. In the event Maker determines in its sole discretion to settle or
resolve any proceedings regarding the Trademark Assets, and Lender has not
breached Lender's obligations under Subsection 5(g)(ii) above, Maker shall
have no claim against Lender for damages, nor shall the same affect the
validity or enforceability of this Note. Neither Lender nor any affiliate
thereof shall have any claim against Maker for damages or otherwise for any
conduct of Maker in accordance with these Sections 5(f) and (g).
(h) Duties of Lender. The powers conferred on Lender hereunder are
to protect Lender's interest in the Collateral and, except as otherwise
provided herein, shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral or any portion thereof
in its possession, Lender shall have no duty as to the Collateral or as to
the taking of any necessary steps to preserve rights against other parties.
(i) Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, Lender may (a) enforce collection of any
of the Collateral by suit or any other lawful means available to Lender, (b)
assert all other rights of a secured party under the Uniform Commercial Code
or other applicable law, including, without limitation, the right to take
possession of, hold, collect, sell, lease or otherwise retain, liquidate or
dispose of all or any portion of the Collateral, and (c) take possession of
all records or files of Maker pertaining to the Collateral and enter upon any
real property or improvements thereon in order to seize such files or any
Collateral located thereon and remove the same therefrom without liability.
The proceeds of any collection, liquidation or other disposition of the
Collateral shall be applied by Lender first to the payment of all expenses
(including, without limitation, all fees, taxes, reasonable attorney's fees
and legal expenses) incurred by Lender in connection with retaking, holding,
collecting, or liquidating the Collateral. The balance of such proceeds, if
any, shall, to the extent permitted by law, be applied to the payment of the
Obligations secured by this Note; provided that Maker shall not be liable for
any deficiency. If notice prior to disposition of the Collateral or any
portion thereof is necessary under applicable law, written notice delivered
to the Maker at its respective addresses as specified in Paragraph 9 hereof
seven (7) Business Days prior to the date of such disposition shall
constitute reasonable notice, but notice given in any other reasonable manner
shall be sufficient.
(j) Excluded Property. Promptly upon Maker's written request from
time to time, Lender shall execute and deliver to Maker (or such other
persons as Maker may designate)
-7-
<PAGE>
such documents as Maker may reasonably request to confirm to Maker (and any
such designee) that under this Note Lender holds no lien or security interest
in or upon any Excluded Property. As used in this Note, the term "Excluded
Property" means any property or assets of Maker other than the Collateral and
includes specifically Maker's inventory and products in progress bearing the
Trademarks, which inventory and products in progress are subject to the
sell-off and related rights contained in Section 7.2(c) of the Option
Agreement and in Section 15.j. of the Manufacturing Rights Agreement.
6. No Assignment. The rights and obligations under this Note may not
be assigned by Maker without the prior written consent of Lender. Lender may
assign this Note to any third party. Notwithstanding anything to the
contrary set forth in this Note, Maker shall be permitted to assign and
transfer Maker's rights under this Note to any parent, subsidiary or other
affiliate of Maker if Maker or its successor in interest remains fully liable
for the performance of this Note by such assignee or transferee and
indemnifies Lender with respect to any costs and damages Lender may incur
because of such assignment or transfer.
7. Entire Agreement. The terms of this Note evidence the entire
agreement between Maker and Lender regarding the indebtedness evidenced by
this Note.
8. Governing Law. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
made and to be performed entirely in the State of New York without regard to
such state's choice of law rules. In the event any legal action becomes
necessary to enforce or interpret the terms of this Agreement, the parties
agree that such action will be brought in the U.S. District Court for the
Southern District of New York, and the parties hereby submit to the
jurisdiction of such court.
9. Notices. All notices, requests or other communications required or
permitted hereunder shall be given or made in writing and shall be (i)
delivered personally (including commercial carrier), (ii) sent by registered
or certified airmail, return receipt requested, postage prepaid or (iii) sent
by telecopier, addressed to the party to whom they are directed at the
following addresses, or at such other address as may from time to time be
designated by such party in accordance with this Section 9:
If to Maker, to:
I. C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: President and Co-Chief Executive Officer
Telecopier: 410/558-2096
-8-
<PAGE>
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10018
Attention: Chairman and Co-Chief Executive Officer
Telecopier: 212/695-7579
With a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attention: Robert J. Mathias, Esq.
Telecopier: 410/576-1064
If to Lender, to:
Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attention: Graziano DeBoni
Telecopier: 212/940-0619
Ambra Inc.
c/o Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attention: General Counsel
Telecopier: 49-7123-942035
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attn.: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
-9-
<PAGE>
and
Howrey & Simon
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Robert M. Bruskin, Esq.
Telecopier: 202/383-6610
Any notice, request, demand or other communications shall be deemed to
have been given and to be effective upon receipt or refusal by the addressee.
Any party may change its address for notices hereunder, effective upon
giving notice of such change hereunder to the other parties.
10. Adjustment of Interest Rate or Fees. No provision of this Note
shall require the payment of interest to the extent that receipt of any such
payment by Lender would be contrary to the provisions of United States law,
if any, limiting the maximum amount of interest or fees that may be charged
to or collected from Maker, and if any sum in excess of such maximum rate of
interest or fees is paid or charged, the excess will be returned to Maker,
without premium or penalty, and all payments made thereafter will be
appropriately applied to interest and principal to give effect to such
maximum rate, and after such application any amount paid in excess of
principal due Lender shall be immediately refunded to Maker.
If the maximum rate of interest, if any, now permitted by law to be
charged for this transaction is increased, then for so long as the increase
is in effect, the applicable maximum rate permitted to be charged as referred
to in the paragraph immediately preceding will be deemed to be such increased
rate. If the maximum rate of interest, if any, now permitted by law to be
charged for this transaction should be eliminated so that there would be no
maximum rate, then interest on this Note shall thereafter be paid at the rate
provided in this Note.
11. Waiver. Maker hereby waives diligence, presentment, protest, demand
for payment and notice of default, dishonor or nonpayment to or upon Maker
with respect to this Note, except as otherwise provided herein. No delay on
the part of Lender in exercising any right hereunder shall operate as a
waiver of such right under this Note.
12. Modifications in Writing. This Note may not be changed orally, but
only by an agreement in writing, signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought.
13. Execution by Lender. Notwithstanding anything in this Note to the
contrary, this Note shall not be effective and enforceable against Maker
unless and until it has been signed below by Lender. Lender signs below to
further evidence Lender's agreement to be bound by the terms of this Note.
-10-
<PAGE>
14. Limitation on Liability. Notwithstanding anything in this Note to
the contrary, Maker's obligations under this Note are expressly conditioned
on Lender's agreements as follows and Lender does hereby covenant and agree
as follows:
(a) Neither Maker nor any of Maker's partners, nor (i) any
individual, partnership, joint venture, organization, association, company or
trust which may have any legal or beneficial interest in Maker or its
partners, as the case may be, (ii) any of Maker's customers or licensees, and
(iii) any officers, directors, managers, employees, agents, advisors,
successors or assigns of any thereof (Maker, its partners, and such entities
and natural persons are referred to herein as "Exculpated Persons"), shall be
personally liable for the repayment of the principal amount due under this
Note (the "Nonrecourse Indebtedness"), or for any deficiency thereof.
(b) Lender shall not seek, pursue, obtain or enforce any claim or
judgment against any of the Exculpated Persons, or against any of their
Excluded Property, for the Nonrecourse Indebtedness.
(c) In the event of any nonpayment of the Nonrecourse Indebtedness,
Lender's sole and exclusive remedy for such nonpayment shall be to exercise
such rights as Lender may have to the Collateral and/or any and all rights of
Lender under the Option Agreement.
(d) The foregoing clauses of this Section shall not apply to Maker
with regard to Collateral-Related Proceedings brought by Lender against
Maker. As used in this Note, "Collateral-Related Proceedings" means any
suit, action or proceeding that is legally necessary, customary or
appropriate to the enforcement of Lender's rights to the Collateral as a
secured party, including, if necessary to such suit, action or proceeding,
the naming of Maker as a party defendant in such suit, action or proceeding,
or in the exercise of any remedy that Lender may have against the Collateral,
so long as no deficiency judgment, and no judgment in the nature of a
deficiency judgment or seeking personal liability of Maker or any other
Exculpated Person with regard to the Nonrecourse Indebtedness, shall be
sought or, if obtained, shall not include the imposition or enforcement of
any judgment for the Nonrecourse Indebtedness against Maker or any other
Exculpated Person or against any Excluded Property. In the event that Lender
obtains any judgment against Maker or any other Exculpated Person or against
any Excluded Property, for the Nonrecourse Indebtedness, Lender immediately
shall cause such judgment to be released and terminated without payment of
any kind from Maker or any other Exculpated Person.
15. Release of Collateral; Return of Note. Upon payment to Lender of
all principal and accrued and unpaid interest thereon, and any late charge
due under this Note, and subject to the rights of Lender under the Option
Agreement, Lender's Lien on the Collateral shall immediately cease, terminate
and be released and Lender shall execute and deliver to Maker such releases,
re-assignments and termination statements as may be legally necessary or
customary to further effect such release and termination, and Lender shall
promptly return the original of this Note to Lender marked "Satisfied and
Cancelled."
-11-
<PAGE>
16. No Representation and Warranty as to Trademark Assets. Maker makes
no representations or warranties of any kind, and shall have no
responsibility or obligations whatsoever to Lender with respect to any matter
relating to the Trademark Assets prior to the time Maker acquired the
Trademark Assets, including, without limitation, the quality of title, the
condition or use of the Trademark Assets or the conduct of the business
thereunder prior to the time Maker acquired the Trademark Assets.
-12-
<PAGE>
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: /s/ Robert J. Arnot
-------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
-------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
AMBRA INC.
By: /s/ Jorg-Viggo Muller
---------------------------
Name: Jorg-Viggo Muller
Title: Chairman
By: /s/ Gert-Jurgen Frisch
--------------------------
Name: Gert-Jurgen Frisch
Title: Vice President
-13-
<PAGE>
EXHIBIT 10.11(h)
EXHIBIT G/FRA
NOTE ASSUMPTION AGREEMENT
THIS NOTE ASSUMPTION AGREEMENT is made and entered into this 5th day of
November 1997, by and between I.C. Isaacs & Company L.P., a Delaware limited
partnership ("Isaacs") and Ambra Inc., a Delaware corporation ("Ambra").
W I T N E S S E T H:
WHEREAS, Isaacs has agreed to sell, transfer and assign to Ambra, and
Ambra has agreed to purchase and accept from Isaacs certain assets of Isaacs
pursuant to a Foreign Boss Rights Acquisition Agreement entered into on
September 30, 1997 between Isaacs and Ambra (the "Acquisition Agreement");
WHEREAS, Ambra has agreed to assume, pay and fully discharge all
obligations of Isaacs under that certain Promissory Note of even date hereof of
Isaacs issued to Brookhurst, Inc. (the "Note");
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, it is agreed as follows:
1. Capitalized terms used herein and not defined herein shall have the
meanings given such terms in the Acquisition Agreement.
2. Ambra hereby fully, unconditionally and irrevocably assumes and
covenants to fully pay and fully discharge all obligations of Isaacs under the
Note.
3. Isaacs hereby assigns to Ambra all its rights under the Note free and
clear of all Encumbrances made, created or caused by Isaacs.
4. Ambra shall indemnify and hold harmless Isaacs against any and all
costs, expenses and damages incurred by Isaacs and resulting from Ambra's
failure to fully pay and fully discharge all obligations under the Note.
5. Ambra hereby covenants to execute and deliver to Isaacs such further
assurances of this Assumption Agreement as Isaacs may require from time to time.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
the day, month and year first above written.
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: I.G. Design, Inc.,
a Delaware corporation, its
general partner
By: /s/ Robert J. Arnot
--------------------------------------
Name: Robert J. Arnot
Title: Chairman and Chief
Co-Executive Officer
By: /s/ Gerald W. Lear
--------------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
AMBRA INC.
By: /s/ Jorg-Viggo Muller
--------------------------------------
Name: Jorg-Viggo Muller
Title: Chairman
By: /s/ Gert-Jurgen Frisch
--------------------------------------
Name: Gert-Jurgen Frisch
Title: Vice President
<PAGE>
EXHIBIT 10.11(i)
GUARANTY OF PROMISSORY NOTE
For valuable consideration, the undersigned, HUGO BOSS, A.G., a
German corporation ("Guarantor"), hereby unconditionally guarantees the due,
prompt and complete performance (including payment) at stated maturity, by
acceleration or otherwise by I.C. Isaacs & Company L.P., a Delaware limited
partnership ("Buyer"), of each and every obligation and liability now or
hereafter existing of Buyer under that certain Promissory Note, dated
November 5, 1997 ("Note") to Brookhurst, Inc. ("Seller") whether for principal,
interest, fees, expenses, attorneys' fees, court costs and collection charges
incurred by Seller in enforcing this Guaranty ("the "Obligations") or otherwise.
The obligations of Guarantor under this Guaranty are independent of
the obligations of Buyer, and a separate action or actions may be brought
against Guarantor, whether action is brought against Buyer or whether Buyer is
joined in any such action or actions; provided, however, Seller shall be
required to first comply with any procedures specified in the Note or any
agreement ancillary thereto with respect to demands to be made against Buyer or
actions to be taken in order to quantify an amount due or identify an issue in
dispute.
If any provision of this Guaranty is held invalid or unenforceable,
the remainder of this Guaranty shall not be affected thereby, the provisions of
this Guaranty being severable in any such instance.
Guarantor guarantees that the Obligations will he paid strictly in
accordance with the terms of the Note, regardless of any law, regulation or
order, except an order with respect to the liability of Buyer or Guarantor under
this Note now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of Seller with respect thereto. The liability of Guarantor
under this Guaranty shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of Buyer's obligations
under the Note or any other agreement or instrument relating
or ancillary thereto;
(ii) any change in the time, manner, place and/or terms of payment
of, or in any other term of, all or any of the Obligations, or
any other amendment or waiver of, any consent to or departure
from the Note;
(iii) any action or inaction, taken under or in respect of the Note
and/or any other agreement executed concurrently herewith in
the exercise of any remedy, power or privilege therein
contained (including, without limitation, the acceleration of
the maturity of the Note) or otherwise with respect thereto
except the exercise of the right of set-off set forth in
<PAGE>
Section 6 of the Note and Section 9.12 of the Worldwide Rights
Acquisition Agreement ("Acquisition Agreement");
(iv) the extension of time for Buyer's performance of or compliance
with any terms, covenants or agreements on its part to be
performed or observed under the Note, or the waiver of such
performance or compliance with or consent to the failure in or
departure from such performance or compliance;
(v) the settlement or compromise of the liability of Buyer to pay
any and all of the Obligations, or the subordination of the
payment of any and all of the Obligations to the prior payment
of any other debts or claims of Buyer; or
(vi) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of,
Buyer in respect of the obligations or a surety or guarantor
in respect of this Guaranty (it being agreed that the
obligations of the Guarantor hereunder shall not be discharged
except by payment as herein provided) subject to the right of
set-off set forth in Section 6 of the Note and Section 9.12 of
the Acquisition Agreement.
Any action, inaction, change, extension, waiver, or consent referred to above
may be in such manner and upon such terms Seller and Buyer may deem proper, and
without notice to or further assent from the Guarantor, and all without
affecting this Guaranty or the obligations of the Guarantor hereunder, which
shall continue in full force and effect until all of the Obligations and all
obligations of the Guarantor hereunder shall be fully paid and performed.
Guarantor hereby waives promptness, diligence, presentment, demand,
protest, notice of acceptance or of the occurrence of an Event of Default and
any other notice with respect to any of the Obligations and this Guaranty and
any requirement that Seller exhaust any right or take any action against Buyer
or other person or entity.
Guarantor hereby represents and warrants as follows:
(i) The execution, delivery and performance by Guarantor of this
Guaranty do not contravene any law or contractual restriction
binding on or affecting Guarantor.
(ii) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and
performance by Guarantor of this Guaranty.
2
<PAGE>
(iii) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable in accordance with its terms.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by Guarantor therefrom shall in any event be effective unless
the same shall be in writing and signed by Seller.
No failure on the part of Seller to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
This Guaranty is a continuing guaranty and shall (i) remain in full
force and effect until payment in full of the Obligations and all other amounts
payable under this Guaranty, (ii) he binding upon Guarantor, its successors and
assigns, and (iii) inure to the benefit of and be enforceable by Seller and its
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), Seller may assign or otherwise transfer the Note held by
it to any other person or entity, and such other person or entity shall
thereupon become vested with all the rights in respect thereof granted to Seller
herein or otherwise.
Seller, in its sole discretion, may proceed to exercise any right or
remedy which it may have under this Guaranty without pursuing or exhausting any
right or remedy which it may have against Buyer or any other person or entity,
for any or all of the Obligations; and Seller may proceed to exercise any right
or remedy which it may have under this Guaranty without regard to any actions or
omissions of Buyer or any other person or entity subject to the right of set-off
set forth in Section 6 of the Note and Section 9.12 of the Acquisition
Agreement.
This Guaranty shall be governed by, and construed in accordance
with, the laws of the State of New York without reference to its choice of law
rules. All disputes hereunder shall be resolved pursuant to the procedures set
forth in Section 9.12(a) of the Acquisition Agreement.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written. This Guaranty shall terminate immediately upon satisfaction
of the Note.
Dated: November 5, 1997 HUGO BOSS A.G.
By: /s/ Jorg-Viggo Muller
------------------------------
Name: Jorg-Viggo Muller
Title: Chief Financial Officer
By: /s/ Gert-Jurgen Frisch
------------------------------
Name: Gert-Jurgen Frisch
Title: Attorney-in-fact
3
<PAGE>
WITNESSES:
/s/ Illegible
---------------------------------
/s/ Illegible
---------------------------------
<PAGE>
EXHIBIT 10.11(j)
AGREEMENT REGARDING CONSENT TO RELEASE
AND WAIVER OF BROOKHURST NOTE CLAIMS
THIS AGREEMENT made as of the 5th day of November, 1997, by and among
HUGO BOSS A.G., a corporation organized and existing under the laws of the
Federal Republic of Germany ("Hugo Boss") and I.C. ISAACS & COMPANY L.P., a
limited partnership organized and existing under the laws of the State of
Delaware ("Isaacs").
Recitals; Certain Defined Terms
A. Isaacs has agreed to execute and deliver to Brookhurst, Inc., a
corporation organized and existing under the laws of the State of California
("Brookhurst") a Promissory Note in the principal amount of $11,000,000
("Brookhurst Note"), as part of the purchase price under that certain Worldwide
Rights Acquisition Agreement between Isaacs and Brookhurst ("Worldwide
Acquisition Agreement") dated September 30, 1997.
B. Ambra, Inc., a corporation organized and existing under the laws of the
State of Delaware ("Ambra") has agreed to assume all of Isaacs obligations under
the Brookhurst Note pursuant to the terms of a Note Assumption Agreement dated
on or about the same date as this Agreement.
C. Hugo Boss has agreed to execute and deliver to Brookhurst a Guaranty of
the Brookhurst Note ("Hugo Boss Guaranty").
D. Brookhurst has agreed to release Isaacs from all obligations under the
Brookhurst Note at such time as Ambra assumes the obligations of Isaacs under
the Brookhurst Note, and Hugo Boss provides the Hugo Boss Guaranty to
Brookhurst.
NOW, THEREFORE, in consideration of the foregoing, and the receipt of One
Dollar ($1.00) and other good and valuable consideration, the receipt of which
is hereby acknowledged, Hugo Boss hereby agrees as follows for the benefit of
Isaacs.
1. Hugo Boss hereby irrevocably consents to the full release of Isaacs
from all liability under the Brookhurst Note and agrees to be bound by that
release in accordance with the provisions of the Brookhurst Note.
2. Hugo Boss shall not have any recourse whatsoever to Isaacs or Isaacs'
assets at any time for any obligations under the Brookhurst Note, and hereby
irrevocably waives any claims that Hugo Boss may have against Isaacs and Isaacs'
assets in respect of the Brookhurst Note. Without limiting the generality of the
foregoing, if Hugo Boss shall pay or perform its obligations under the Hugo Boss
Guaranty or under the Brookhurst Note, Hugo Boss shall not have, and hereby
irrevocably waives, any claim, including without limitation any claim for
reimbursement, contribution or indemnity from Isaacs or its partners to which
Hugo Boss may be entitled at any time under applicable law relating to the Hugo
Boss Guaranty or the Brookhurst Note, whether in Hugo Boss' capacity as a
guarantor, endorser,
-1-
<PAGE>
surety, or co-obligor or in any other capacity. Nothing set forth herein shall
be deemed to affect the indemnification obligations of Isaacs to Ambra under the
Foreign Boss Rights Acquisition Agreement between Ambra and Isaacs.
3. This Agreement shall be binding upon Hugo Boss and its successors and
assigns.
In Witness Whereof, and intending to be legally bound hereby, Hugo Boss
and Isaacs execute this Agreement as of the date first above written.
HUGO BOSS A.G.
By: /s/ Jorg-Viggo Muller
------------------------------
Name:
Title:
By: /s/ Gert J. Frisch
------------------------------
Name:
Title:
I.C. ISAACS & COMPANY L.P.
By: I.G. Design, Inc., its general partner
By: /s/ Robert J. Arnot
---------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
---------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
-2-
<PAGE>
EXHIBIT 10.11(k)
EXHIBIT J
1. Brookhurst may retain copies of records and documents containing the
name and mark "BOSS" for archival purposes and may make (i) oral references,
(ii) the written references set forth in the Attachment hereto, and (iii) with
the prior written approval of Hugo Boss, which shall not be unreasonably
withheld, other written references to the name and mark "BOSS", in each such
case in connection with its uniform business solely for purposes of describing
the history of Brookhurst but shall not be used for sales or promotional
purposes. In addition, Brookhurst may make reference to its past use of the name
and mark BOSS in its financial statements and, to the extent required, in any
public filing. In addition, posters bearing the Trademarks may be retained and
displayed in the private offices of Brookhurst's executives but may not, under
any circumstances, be displayed in any public areas of Brookhurst's business
premises such as reception areas and showrooms.
2. Isaacs Samples. Brookhurst owns approximately 4000 finished sportswear
garments manufactured by Isaacs with a label that bears a BOSS logo in its
possession, including but not limited to denim jeans, shorts, jackets, coats,
skirts, crew neck shirts, sweat shirts, collar and placket shirts, blouses and
hats (such garments referred to in this paragraph 2 being hereinafter referred
to as the "Isaacs Samples"). Brookhurst shall permit Hugo Boss and/or its
attorneys to (i) review; (ii) obtain two dozen Isaacs Samples at no cost to Hugo
Boss; and (iii) purchase, at wholesale cost, any additional Isaacs Samples.
Thereafter, Brookhurst may, only for a period of six months after the Closing
Date, sell and distribute the Isaacs Samples in its possession; provided,
however, that Brookhurst shall not sell or offer any Isaacs Samples for sale or
resale (i) outside of the United States, its territories, possessions or
commonwealths or (ii) to athletic stores whose primary product line is composed
of products intended to be used in connection with golf, tennis, skiing,
sailing, windsurfing, motor sports or any combination thereof, or at golf,
tennis, skiing, sailing, windsurfing, or motor sports athletic events.
3. Old Logo Samples. Brookhurst owns approximately 119 finished sportswear
garments manufactured by or on behalf of Boss Sportswear (USA), Inc. and/or Boss
Golf Company, Inc. with a label, logo and/or graphic image that bears a BOSS or
BOSS AMERICA logo and/or label in a typestyle depicted on Exhibit A to the
Court's June 13, 1993 order in Hugo Boss Fashions, Inc. v. Brookhurst, Inc., et
al., 93 Civ. 0875 (S.D.N.Y.), including but not limited to crew neck shirts,
sweat shirts, collar and placket shirts, hats, and jackets (such garments
referred to in this paragraph 3 being hereinafter referred to as the "Old Logo
Samples"). Brookhurst shall not sell or otherwise distribute the Old Logo
Samples in its possession except in accordance with this paragraph 3. Brookhurst
may retain and distribute to its executives and attorneys no more than
twenty-four (24) Old Logo Samples. Brookhurst shall tender, at no cost to Hugo
Boss, the remaining Old Logo Samples, and Hugo Boss within 60 days shall either
donate the Old Logo Samples to charity, or otherwise dispose of the Old Logo
Samples, in Hugo Boss' sole discretion. If Hugo Boss donates the Old Logo
Samples to charity, Hugo Boss shall make reasonable efforts to obtain a receipt
on behalf of Brookhurst evidencing
3
<PAGE>
such donation. If Hugo Boss fails to donate the Old Logo Samples to charity or
dispose of them within 60 days, Brookhurst may donate such samples to the
charity or charities of its choice.
4. New Logo Samples. Brookhurst owns approximately _____ finished
sportswear garments manufactured by or on behalf of Boss Sportswear (USA), Inc.
and/or Boss Golf Company, Inc. with a label, logo and/or graphic image that
bears a BOSS or BOSS AMERICA logo and/or label in a typestyle depicted in the
Court's August 19, 1993 order, as amended, in Hugo Boss Fashions, Inc. v.
Brookhurst, Inc., et al., 93 Civ. 0875 (S.D.N.Y.), including but not limited to
crew neck shirts, sweat shirts, collar and placket shirts, hats, and jackets
(such garments referred to in this paragraph 4 being hereinafter referred to as
the "New Logo Samples"). Brookhurst shall permit Hugo Boss and/or its attorneys
to (i) review; (ii) obtain two dozen New Logo Samples at no cost to Hugo Boss
and (iii) purchase, at wholesale cost, any additional New Logo Samples.
Thereafter, Brookhurst may, only for a period of six (6) months after the
Closing Date, sell and distribute the New Logo Samples in its possession,
provided; however, that neither Brookhurst nor any affiliate thereof shall sell,
or offer any New Logo Samples for sale or resale (i) outside of the United
States, its territories, possessions or commonwealths or (ii) to athletic stores
whose primary product line is composed of products intended to be used in
connection with golf, tennis, skiing, sailing, windsurfing, motor sports or any
combination thereof or at golf, tennis, skiing, sailing, windsurfing, or motor
sports athletic events.
4
<PAGE>
ATTACHMENT TO EXHIBIT J
From 1889 to 1997, Brookhurst and its predecessor companies manufactured and
sold clothing under the Brookhurst BOSS label.
<PAGE>
EXHIBIT 10.11(l)
INDEMNIFICATION AGREEMENT
HUGO BOSS AG ("HUGO BOSS"), a corporation organized and existing under the
laws of the Federal Republic of Germany, and I.C. Isaacs & Company L.P.
("ISAACS"), a Delaware limited partnership, in consideration of the mutual
agreements and consideration set forth herein, do hereby agree as follows:
RECITALS
A. HUGO BOSS and ISAACS are resolving and terminating the litigation
captioned Hugo Boss Fashions, Inc., et al. v. Brookhurst, Inc., et al., Civil
Action No. 93 Civ. 0875 (LMM) ("SDNY Litigation"). In connection with the
resolution and termination of the SDNY Litigation, HUGO BOSS and ISAACS are
making certain agreements relating to the use of the trademarks "BOSS" and "HUGO
BOSS". HUGO BOSS and ISAACS desire to proceed with these agreements without
violating the rights of any third parties, including any rights of Boss
Manufacturing Company ("BMC"), particularly those arising out of or relating to
a January 4, 1990 Agreement between HUGO BOSS and BMC ("BMC/HUGO BOSS
Agreement").
B. HUGO BOSS and ISAACS do not believe that the current provisions of
their agreements relating to the termination and resolution of the litigation
and to the use of the trademarks "BOSS" and "HUGO BOSS" violate any rights of
BMC. However, the parties also acknowledge that the possibility of groundless
litigation cannot be foreclosed and that it is not always possible for the
triers of facts to hear all relevant evidence.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, HUGO BOSS and ISAACS agree as follows:
1. HUGO BOSS shall indemnify, defend and hold harmless ISAACS and its
partners and affiliates from and against (a) any legal fees and related
litigation costs relating to any claim or claims brought by BMC or its
successors, assigns, licensees or affiliates against ISAACS, its partners or
affiliates and/or HUGO BOSS arising out of or related to the BMC/HUGO BOSS
Agreement, regardless of whether such claims sound in contract, tort or
otherwise, and (b) any monetary damages award or settlement amounts of any
nature awarded to or paid over to BMC (or its successors, assigns, licensees or
affiliates) as a result of any such claims.
2. HUGO Boss may elect, in its sole discretion, to assume control of the
defense, settlement, adjustment or compromise of any litigation with BMC (or its
successors, assigns, licensees or affiliates) in which HUGO BOSS has an
indemnity obligation to ISAACS; provided, that HUGO BOSS shall not, without the
prior written consent of ISAACS, which consent shall not be unreasonably
withheld, settle, adjust or compromise such litigation if such action would
result in a material adverse impact on Isaacs' BOSS business. If the same
counsel can represent both HUGO BOSS and ISAACS in any litigation with BMC (or
its successors, assigns, licensees
<PAGE>
or affiliates), HUGO BOSS need not provide separate counsel for ISAACS, although
ISAACS will still be entitled to retain its own separate counsel at ISAACS' own
expense. If the same counsel cannot represent both HUGO BOSS and ISAACS, ISAACS
will be entitled to retain its own separate counsel and HUGO BOSS shall be
responsible for all reasonable and necessary legal fees relating to ISAACS'
separate counsel.
3. HUGO BOSS' liability to ISAACS under this Agreement shall be limited as
set forth above and, except as specifically provided herein, HUGO BOSS shall
have no liability to ISAACS under this Agreement for losses, lost profits,
damages or costs incurred by ISAACS in connection with the BMC/HUGO BOSS
Agreement.
4. Each party hereto (the "indemnifying party") shall indemnify, defend
and hold harmless the other party and its affiliates (the "indemnified party")
for costs actually incurred by the indemnified party arising out of any matter
involving both (i) the offering or trading of stock or other securities of the
indemnifying party on a stock exchange or in any other market and (ii) the
disclosure of the agreements referred to in Recital A hereto and the
transactions contemplated thereby and hereby.
5. Notwithstanding anything to the contrary set forth in the Foreign Boss
Rights Acquisition Agreement by and between ISAACS and Ambra dated September 30,
1997, ISAACS shall indemnify, defend and hold harmless HUGO BOSS and its
affiliates for costs actually incurred relating solely to the conduct of Isaacs'
BOSS business prior to the date hereof, excluding any matters involving the SDNY
Litigation or claims made by any party therein which are independently addressed
in the Settlement Agreement as defined in the Foreign Boss Rights Acquisition
Agreement. Notwithstanding anything to the contrary set forth in the Foreign
Boss Rights Acquisition Agreement, HUGO BOSS shall indemnify, defend and hold
harmless ISAACS and its affiliates for costs actually incurred relating solely
to the conduct of HUGO BOSS' HUGO BOSS business prior to the date hereof
excluding any matters involving the SDNY Litigation or claims made by any party
therein which are independently addressed in the Settlement Agreement.
6. Any failure of HUGO BOSS, on the one hand, or of ISAACS, on the other,
to comply with any of the obligations or agreements set forth in this Agreement
or to fulfill any condition set forth in this Agreement may be waived only by
written instrument signed by the other party. No failure by any party to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver of such right, nor shall any single or partial exercise of any right
hereunder by any party preclude any other or future exercise of that right or
any other right hereunder by that party.
7. All notices, requests or other communications required or permitted
hereunder shall be given or made in writing and shall be (i) delivered
personally (including commercial carrier), (ii) sent by registered or certified
airmail, return receipt requested, postage prepaid or (iii) sent by telecopier,
addressed to the party to whom they are directed at the following
-2-
<PAGE>
addresses, or at such other address as may from time to time be designated by
such party to the others in accordance with this Section 7:
If to HUGO BOSS, to:
HUGO Boss AG
Dieselstrasse 12
72555 Metzingen
Federal Republic of Germany
Attention: Gert Jurgen Frisch, Esq.
With a copy to:
COUDERT BROTHERS
1627 I Street, N.W.
Washington, D.C. 20006
Attention: Wendy L. Addiss, Esq.
and
HOWREY & SIMON
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Robert M. Bruskin, Esq.
If to ISAACS, to:
I.C. ISAACS & COMPANY L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attention: Gerald W. Lear, President and Co-CEO
I.C. ISAACS & COMPANY, L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Robert J. Arnot, Chairman and Co-CEO
-3-
<PAGE>
With a copy to:
PIPER & MARBURY L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Attention: Robert J. Mathias, Esq.
Any notice, request or other communications shall be deemed to have been
given and to be effective upon receipt or refusal by the addressee. Any party
may change its address for notices hereunder, effective upon giving of notice of
such change hereunder to the other party.
8. This Agreement embodies the entire understanding of the parties with
respect to the subject matter hereof. Notwithstanding the foregoing, the parties
acknowledge that a number of different agreements and instruments of which the
parties are signatory are all being executed simultaneously with this Agreement.
The parties acknowledge that this Agreement or instrument is to be interpreted
and enforced separately and independently of any other such agreement or
instrument, and the breach of any such agreement by a party shall not affect the
rights of such party under this Agreement. This Agreement may be amended or
modified only by an instrument of equal formality signed by the parties or their
duly authorized representatives. The parties have made no representations or
warranties not expressly set forth in this Agreement. This Agreement supersedes
and terminates all prior discussions, negotiations, understandings, arrangements
and agreements among the parties relating to the subject matter hereof, except
as expressly set forth herein.
9. This Agreement may be executed in any number of duplicate counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
10. No party hereto may assign any of its interests, rights or obligations
under this Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Hugo Boss may assign its rights, but not its
obligations, under this Agreement to any entity under common control with Hugo
Boss or to any successor in interest without the consent of Isaacs, and Isaacs
may assign its rights hereunder to any parent, subsidiary or other affiliate of
Isaacs if Isaacs or its successor in interest remains fully liable for the
performance of this Agreement by such assignee or transferee.
11. This Agreement and the provisions thereof shall be binding upon and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto.
12. The validity, construction, operation and effect of any and all of the
terms and provisions of this Agreement shall be determined and enforced in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of law.
-4-
<PAGE>
13. All disputes arising from or in any way in connection with this
Agreement shall be finally settled through binding arbitration conducted
pursuant to the Rules of Conciliation and Arbitration of the International
Chamber of Commerce in effect as of the date of the initiation of any dispute
submitted to arbitration under this section ("ICC Rules") by three arbitrators
appointed in accordance with the ICC Rules. Except as provided in this Section
12, no modification or amendment of the ICC Rules applicable to any such
arbitration shall be binding upon the parties unless agreed to in writing by the
parties. In each such arbitration, each party to the dispute shall appoint one
arbitrator within 30 days of receipt by the defendant of the request for
arbitration, and the arbitrators so appointed by the parties shall appoint the
third arbitrator (who shall be the Chairman), within 30 days of the confirmation
of the later of the two arbitrators appointed by the parties. If any such
arbitration involves multiple claimants or multiple defendants, nomination of
arbitrators shall be governed by the applicable ICC rules. Notwithstanding
anything to the contrary contained in the ICC rules: (i) the arbitration
proceedings shall be conducted in the City of New York, State of New York; (ii)
the arbitration proceedings shall be conducted in the English language; and
(iii) the arbitrators shall apply New York law without regard to such state's
choice of law rules. If the non-prevailing party does not comply with an
arbitration decision, the prevailing party may immediately enforce the
arbitration decision in an equitable proceeding in court with both parties'
court costs and related attorneys' fees paid by the non-prevailing party in the
arbitration, unless the arbitration decision is modified, or not upheld or
enforced, in which case, each side shall bear its own costs and attorneys' fees.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
November 5, 1997.
HUGO BOSS AG
By: /s/ Jorg-Viggo Muller
---------------------------
Name: Jorg-Viggo Muller
Title: Chief Financial Officer
By: /s/ Gert J. Frisch
----------------------------
Name: Gert J. Frisch
Title: Attorney-in-fact
-5-
<PAGE>
I.C. ISAACS & COMPANY L.P., a Delaware
Limited Partnership
By: I.G. DESIGN, INC., a Delaware corporation,
its General Partner
By: /s/ Robert J. Arnot
---------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
---------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
-6-
<PAGE>
EXHIBIT 10.12
UNIFORMS LICENSE AGREEMENT
THIS LICENSE AGREEMENT is entered into and is effective as of the 5th
day of November, 1997 (the "Effective Date"), by and between I.C. Isaacs &
Company L.P. ("Licensor") and Brookhurst, Inc. ("Licensee") (each a "Party"
and collectively the "Parties").
R E C I T A L S
WHEREAS, Licensor is the successor in interest of Brookhurst, Inc. to
certain trademark rights in the United States of America relating to the
trademark BOSS; and
WHEREAS, Licensee desires to obtain a limited license to sell to United
Airlines and others its remaining inventory of career apparel bearing the
trademark BOSS in the form of a BOSS logo as depicted in Exhibit A hereto
(hereinafter the "Licensed BOSS Logo");
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. RIGHTS GRANTED
Without limiting Licensee's covenants under the Worldwide Rights
Acquisition Agreement between Licensor, Licensee and William Ott dated
September 30, 1997 (the "Rights Agreement"), Licensor hereby grants to
Licensee the non-exclusive right and license to continue to sell and
distribute throughout the Term (as hereinafter defined) all career apparel
garments bearing the Licensed BOSS Logo, which were in Licensee's inventory
as of the date hereof ("Career Apparel Garments"). This Agreement does not
include any right to sublicense or subcontract any of Licensee's right and
obligations hereunder. Licensee agrees that except as specifically provided
herein nothing set forth in this Agreement or by virtue of any activity or
conduct of Licensee hereunder shall give rise to any claim of right, title or
interest of Licensee in and to the Licensed BOSS Logo.
2. OBLIGATIONS OF THE PARTIES
2.1 Licensee hereby acknowledges Licensor's sole and exclusive right,
title and interest in and to the Licensed BOSS Logo and undertakes that it
will not take any action which may impair Licensor's rights therein,
including, without limitation, by challenging or opposing, or raising any
questions concerning, the validity or ownership of the Licensed BOSS Logo or
by seeking registration therefor or any confusingly similar name. Licensee
shall at Licensor's expense cooperate with and assist Licensor in protecting
and defending the Licensed BOSS Logo, and shall promptly notify Licensor in
writing of any written claims of infringement or actions by others in
derogation of, or claiming rights to, the Licensed BOSS Logo which it
receives.
<PAGE>
2.2 Licensee shall permit reasonable inspection by Licensor on prior
written notice of the Licensed Products held in inventory and sold by
Licensee.
2.3 Simultaneously herewith, Licensee has paid to Licensor the annual
license fee of $3,500 (the "Fee") for the first one-year period. An
additional fee shall be payable for each subsequent annual period on or
before the commencement of each such period.
2.4 Within thirty (30) days after termination of this Agreement as set
forth in Section 4 hereof, Licensee will, in Licensee's sole discretion,
either (a) deliver any remaining inventory of Career Apparel Garments bearing
the Licensed BOSS Logo in its possession to Licensor together with an
affidavit of any officer of Licensee that all remaining inventory has been so
delivered, (b) destroy such inventory and provide to Licensor written proof
thereof in the form of an affidavit of an officer to Licensee, or (c) remove
the Licensed BOSS Logo from the Career Apparel Garments and from any labels,
tags and the like and provide to Licensor written proof thereof in the form
of an affidavit of an officer of Licensee.
2.5 Licensee agrees that it shall at all times conduct its activities
under this Agreement in a lawful manner.
3. REPRESENTATIONS AND WARRANTIES
3.1 Licensor represents and warrants that it has full corporate right,
power and authority to enter into this Agreement and to perform all of its
obligations hereunder. NOTHING IN THIS AGREEMENT IS INTENDED TO CREATE ANY
WARRANTY OR REPRESENTATION FOR THE BENEFIT OF LICENSEE OR ANY THIRD PARTY
WITH RESPECT TO THE LICENSED BOSS LOGO OR ANY SIMILAR MARK, AND LICENSOR
EXPRESSLY DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED WITH RESPECT THERETO,
INCLUDING THE WARRANTIES OF TITLE AND NON-INFRINGEMENT.
3.2 Licensee represents and warrants that it has full right, power and
authority to enter into this Agreement and to perform all of its obligations
hereunder.
3.3 Licensee represents that it has inventories as set forth in
Paragraph 6.6 of the Worldwide Rights Acquisition Agreement.
3.4 Nothing herein contained shall be construed to constitute the
Parties as partners or as joint ventures or either as agent of the other,
and Licensee shall have no power to obligate or bind Licensor, and Licensor
shall have no power to obligate or bind Licensee.
4. TERM AND TERMINATION
4.1 This Agreement shall continue in effect for three (3) years from
the Effective Date of this Agreement, unless terminated earlier pursuant to
Paragraph 4.2 below (the "Term").
-2-
<PAGE>
4.2 In the event of a material breach of this Agreement, the
non-breaching party may terminate this Agreement upon ninety (90) days
written notice to the breaching party, specifying the material breach, with
the breaching party having that period in which to cure its breach. In the
event such cure is effected within such time period, this Agreement shall not
terminate as a result of such breach.
5. INDEMNIFICATION AND LIABILITY
5.1 Licensee hereby agrees and acknowledges that Buyer Indemnity
Claims under Section 8.2 of the Worldwide Rights Acquisition Agreement
between the parties of even date shall include any loss, damage, deficiency,
claim, liability, obligation, suit, action, fee, cost or expense of any
nature whatsoever caused to Licensor or any Buyer Affiliates (as defined in
said Agreement) arising out of, based upon or resulting from (i) any product
liability or similar claims arising with respect to products manufactured,
sold or distributed by Licensee, its affiliates or any of their sublicensees
or William Ott (the "Licensee Parties"), (ii) claims by third parties (other
than Hugo Boss AG or its affiliates, successors or assigns) arising with
respect to any products manufactured, sold or distributed by any Licensee
Party, and (iii) any breach of or action by any Licensee Party inconsistent
with the terms of this Agreement.
5.2 Notwithstanding any other provision of this Agreement, Licensor
makes no representations or warranties of any kind, and shall have no
responsibility, liability or obligations whatsoever to Licensee or any
Licensee Party as a result of this Agreement (including, without limitation,
for any claims of indemnity), with respect to any matter relating to the
Trademark Assets purchased by Licensor from Licensee under the Rights
Agreement relating to the quality of title, condition or use of the
Trademarks Assets, or the conduct of the business thereunder prior to the
time Licensor acquired the Trademark Assets.
6. GENERAL
Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12,
9.13 and 9.14 of the Worldwide Rights Acquisition Agreement are hereby
incorporated herein by this reference, except that references to "Seller" or
"the Selling Parties" shall be deemed replaced by "Licensee" and references
to "Buyer" shall be deemed replaced by "Licensor," and references to
"paragraphs 1.1, 3.2, 3.3, 6.1, 6.2, 6.3, 6.4 and 6.5" in Section 9.4 shall
be deemed replaced by "Sections 2.1, 2.2, 2.3, 2.4 and 2.5" hereof.
-3-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement.
I.C. ISAACS & COMPANY L.P., a Delaware
Limited Partnership
By: I.G. DESIGN, INC., a Delaware corporation,
its General Partner
By: /s/ Robert J. Arnot
------------------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
------------------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
BROOKHURST, INC.
By: /s/ William Ott
------------------------------------------
Name: William Ott
Title: President
Hugo Boss AG signs below to evidence its consent to the making of the
foregoing license agreement by I.C. Isaacs & Company L.P.
HUGO BOSS AG
By: /s/ Jorg-Viggo Muller
------------------------------------------
Name: Jorg-Viggo Muller
Title: Chief Financial Officer
By: /s/ Gert-Jurgen Frisch
------------------------------------------
Name: Gert-Jurgen Frisch
Title: Attorney-in-Fact
-4-
<PAGE>
EXHIBIT A
Licensed BOSS Logo
<PAGE>
[BOSS
by
BROOKHURST
FOR
UNITED AIRLINES
LOGO]
[BOSS
by
BROOKHURST
LOGO]
<PAGE>
Exhibit 10.13
TRADEMARK LICENSE AGREEMENT
RELATING TO BOSS GOLF AND OTHER MARKS
THIS LICENSE AGREEMENT is entered into and is effective as of the 5th
day of November, 1997, by and between I.C. Isaacs & Company L.P. ("Licensor")
and Ambra Inc. ("Licensee") (each a "Party" and collectively the "Parties").
R E C I T A L S
WHEREAS, Licensor is the successor in interest of Brookhurst, Inc. to
certain trademark rights in the United States of America, including the
trademarks listed on Exhibit A hereto (each individually a "Licensed
Trademark" and collectively the "Licensed Trademarks"); and
WHEREAS, Licensee desires to obtain a license to manufacture, cause to
be manufactured, market, distribute and sell products bearing the Licensed
Trademarks throughout the world (the "Territory");
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1. RIGHTS GRANTED
1.1 Licensor hereby grants to Licensee, and Licensee accepts, upon the
terms and conditions hereinafter set forth, a royalty-free exclusive license
to use, and to cause and permit sublicensees to use (but without any
obligation to use), the Licensed Trademarks in connection with the
manufacture, marketing, distribution and sale of products identified in the
trademark applications for the Licensed Trademarks in connection with each
respective Licensed Trademark (the "Licensed Products") and on labels,
displays and other materials used in connection with the Licensed Products.
1.2 Licensee shall have the exclusive right (but not the obligation) in
the name of Licensor, but at Licensee's sole expense, to direct the
protection and enforcement of the Licensed Marks, including, without
limitation, the prosecution with the United States Patent and Trademark
Office ("USPTO") of those applications for registration which are identified
in Exhibit A. Licensee shall do so solely at its own discretion, with
complete freedom to abandon or withdraw any such application as it deems fit,
and not subject to any dispute by Licensor or review in any arbitration or
litigation. Licensor shall cooperate with and assist Licensee in protecting
and defending the Licensed Marks and in all proceedings with the USPTO,
including, without limitation, by providing any documentation or specimens
required to prosecute such applications and executing any documents required
to fulfill the terms of this paragraph 1.2, including execution of Powers of
Attorney to counsel of Licensee's choice. Without limiting the generality of
the foregoing, within 30 days of the date hereof, Licensor agrees that it will
<PAGE>
divide Application No. 74/323,654 to create two new applications therefrom,
one each for Class 12 and Class 16 and the goods listed in those Classes
respectively, including without limitation by filing a Request to Divide with
the PTO. Licensee shall provide Licensor with copies of all documents
executed or filed by Licensee on Licensor's behalf prior to effecting any
filing or otherwise using the document, and, in the event there is an urgent
need to make a filing on behalf of Licensor for which there is reasonably no
time to provide an advance copy to Licensor, then Licensee shall effect the
filing and immediately provide a copy to Licensor. Licensor shall promptly
notify Licensee in writing of any infringements, claims, or actions by others
in derogation of the Licensed Marks of which Licensor becomes aware; provided
that Licensor shall have the right to determine whether any action should be
taken on account of such infringements, claims or actions. Licensor shall not
take any action on account of any such infringement, claim or action without
the prior written consent of Licensee. In the event Licensee initiates or
defends any legal proceedings on account of any infringements, claims or
actions by others in derogation of the Licensed Marks, Licensor agrees to
cooperate with and assist Licensee to the extent reasonably necessary to
protect the Licensed Marks, including, but not limited to, being joined as a
necessary or desirable party to such proceedings. All actions required by
Licensee of Licensor pursuant to this paragraph shall be at Licensee's cost,
and Licensee shall bear all risks and liabilities associated with the efforts
it has taken or failed to take with respect to the protection or maintenance
of the Licensed Marks, including with respect to the abandonment of any
application for a Licensed Mark. Licensor will have no claim for damages or
other relief nor shall seek damages or any other relief against Licensee for
any actions (or inaction) undertaken in accordance with this paragraph.
1.3 As and when each application for a Licensed Trademark matures to
registration, Licensor agrees to assign to Licensee any and all right, title
and interest of Licensor in and to said Licensed Trademark, together with the
goodwill associated therewith. Licensor shall execute and deliver to
Licensee an executed trademark assignment in the form attached hereto as
Exhibit B within thirty (30) days after Licensee has provided Licensor with a
copy of the registration certificate for said Licensed Trademark.
1.4 The Parties acknowledge and agree that, in any event, to the extent
any Licensed Trademark is not assigned to Licensee pursuant to Section 1.3
above, such Licensed Trademarks remain the subject of an Option Agreement by
and between Licensor and Licensee of even date herewith.
1.5 Notwithstanding any other provision of this Agreement, Licensee,
and Licensor agree and acknowledge that nothing in this Agreement is
intended to prejudice, limit, curtail, or modify in any way any rights
granted to Licensor and Licensee, respectively, under the Foreign Boss Rights
Acquisition Agreement between the parties dated September 30, 1997 or the
Concurrent Use Agreement, the Secured Limited Recourse Promissory Note and
Option Agreement between the parties (or related parties) of even date
herewith. All use by Licensee, a related party or any party taking under
Licensee of any Licensed Trademark shall be subject to the restrictions
imposed on Licensee and/or any related party under the Concurrent Use
-2-
<PAGE>
Agreement, and the Licensed Trademarks shall be considered "Hugo Boss Marks"
under the Concurrent Use Agreement.
2. OBLIGATIONS OF THE PARTIES
2.1 Licensee agrees that all Licensed Products manufactured hereunder
shall be at least equivalent in terms of quality to products previously
manufactured by or for Licensee. Licensee shall permit reasonable inspection
by Licensor of the Licensed Products manufactured, marketed, distributed
and/or sold by Licensee.
2.2 Licensee agrees that it shall comply with all applicable labeling
and other laws affecting the manufacture, storage, shipment, labeling and
sale of the Licensed Products pursuant to the terms of this Agreement, and at
all times to conduct its activities under this Agreement in a lawful manner.
3. REPRESENTATIONS AND WARRANTIES
3.1 Licensor represents and warrants that it has full corporate right,
power and authority to enter into this Agreement and to perform all of its
obligations hereunder. Licensor further represents and warrants that it has
granted no other existing license for the use of the Licensed Trademarks on
Licensed Products in the Territory and that it shall grant no such other
license.
3.2 Licensee represents and warrants that it has full right, power and
authority to enter into this Agreement and to perform all of its obligations
hereunder.
3.3 Nothing herein contained shall be construed to constitute the
Parties as partners or as joint venturers or either as agent of the other,
and Licensee shall have no power to obligate or bind Licensor (except as set
forth in Section 1.2), and Licensor shall have no power to obligate or bind
Licensee.
4. TERM AND TERMINATION
4.1 This Agreement shall continue in effect unless terminated earlier
pursuant to Paragraph 4.2 below.
4.2 In the event of a material breach of this Agreement, the
non-breaching party may terminate this Agreement upon ninety (90) days
written notice to the breaching party, specifying the material breach, with
the breaching party having that period in which to cure its breach. The
rights and obligations under this Agreement (except for the indemnification
obligations hereunder which shall survive for three (3) years after
termination) shall automatically terminate upon the earlier to occur of (i)
the assignment to Licensee pursuant to Section 1.3 above and/or the
withdrawal or abandonment of applications for all of the Licensed Trademarks
or (ii) the
-3-
<PAGE>
termination of the Foreign Manufacturing Rights Agreement or the Concurrent
Use Agreement referred to above.
5. INDEMNIFICATION
5.1 Licensee hereby agrees to indemnify, defend and hold harmless
Licensor and any of its affiliates from and against any and all out-of-pocket
expenses and costs (including reasonable attorney's fees, disbursement and
other charges but excluding lost profits) (collectively referred to as
"Expenses") actually incurred by Licensor and any of its affiliates arising
out of (i) any claims brought by any third party relating to any products
manufactured, sold or distributed by Licensee, its affiliates or any
licensee thereof ("Licensee Party"), and (ii) any breach of the terms of this
Agreement by any License Party.
5.2 Notwithstanding any other provision of this Agreement, Licensor
makes no representations or warranties of any kind, and shall have no
responsibility, liability or obligations whatsoever to Licensee or any
Licensee Party as a result of this Agreement (including, without limitation,
for any claims of indemnity), with respect to any matter relating to the
Trademark Assets purchased by Licensor under the Worldwide Rights Acquisition
Agreement (as such term is therein defined) relating to the quality of title,
condition our use of the Licensed Trademarks, or the conduct of the business
thereunder prior to the time Licensor acquired the Licensed Trademarks.
5.3 Licensee agrees that either it or a related party shall procure and
maintain in full force and effect during the term of this Agreement at its
sole cost and expense a policy of insurance insuring against those risks
customarily insured under comprehensive general liability policies,
including, without limitation, "product liability" and "completed
operations", with such limits of coverage as shall be reasonable in light of
the activities of Licensee hereunder.
6. GENERAL
Sections 9.1, 9.2, 9.3, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 9.11 and 9.12 of
the Foreign Boss Rights Acquisition referred to above are hereby incorporated
herein by this reference. Section 9.4 of such agreement is also incorporated
herein by reference, except that the references to "paragraphs 1.1, 3.2, 3.3,
6.1 and 6.2" shall be deemed replaced by Sections 1.2 and 1.3 hereof. To the
extent that there is any express or direct conflict or inconsistency between
the Foreign Boss Rights Acquisition Agreement and this Agreement, this
Agreement controls.
-4-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement.
I.C. ISAACS & COMPANY L.P.,
a Delaware limited partnership
By: I.G. DESIGN, INC., a Delaware
corporation, its general partner
By: /s/ Robert J. Arnot
--------------------------------
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: /s/ Gerald W. Lear
--------------------------------
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
AMBRA INC.
By: /s/ Jorg-Viggo Muller
--------------------------------
Name: Jorg-Viggo Muller
Title: Chairman
By: /s/ Gert-Jurgen Frisch
--------------------------------
Name: Gert-Jurgen Frisch
Title: Vice President
-5-
<PAGE>
EXHIBIT A
ISAAC'S U.S. TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Trademark Serial Number
----------- ---------------
<S> <C>
BABY BOSS 74/346,231
BABY BOSS 74/801,565
BOSS 75/013,293
BOSS 74/323,654
(international classes
12 and 16 only)
BOSS 74/801,552
BOSS 74/263,623
BOSS 74/269,769
BOSS AMERICA 74/346,232
BOSS AMERICA 74/801,551
BOSS BUSINESS 74/355,226
BOSS BUSINESS 74/801,657
BOSS GOLF 74/346,233
BOSS GOLF 74/801,554
LADY BOSS 74/346,230
LADY BOSS 74/801,550
LITTLE BOSS 74/346,234
LITTLE BOSS 74/801,545
</TABLE>
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EXHIBIT B
TRADEMARK ASSIGNMENT
This Assignment is effective as of the ___ day of _____________, 199__,
by and between I.C. Isaacs & Company L.P., a Delaware Limited Partnership
with its principal place of business at 3840 Bank Street, Baltimore, Maryland
21224 ("Assignor") and Ambra Inc., a Delaware corporation with its
principal place of business at _____________________ ("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor is the owner of the United States registered trademark
__________ , subject of U.S. Reg. No. _________ , and the common law rights
in said registered trademark, together with the goodwill of the business
associated therewith (the "Trademark");
WHEREAS, Assignee desires to acquire all right, title and interest of
Assignor in and to the Trademark;
NOW, THEREFORE, to All Whom It May Concern, be it known that for good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Assignor does hereby sell, assign, transfer and set over to
Assignee, its successors and assigns forever, its entire right, title and
interest in and to the Trademark, and all rights of action at law and in
equity, including the right to sue and collect damages, for the past, present
or future infringement thereof, the same to be held and enjoyed by Assignee
for its own use and enjoyment, and for the use and enjoyment of its
successors, assigns or other legal representatives forever, as fully and
entirely as the same would have been held and enjoyed by Assignor had the
assignment and sale set forth herein not been made.
Assignor, for itself, its successors and assigns, hereby covenants and
agrees that at any time and from time to time upon the request of Assignee,
Assignor will execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, all such other and further instruments, transfers
and assurances as may be reasonably requested by Assignee in order for
Assignee, its successors and assigns to enjoy the benefits of this Assignment.
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<PAGE>
IN TESTIMONY WHEREOF, Assignor has caused these presents to be signed by
its officer thereunto duly authorized, and its corporate seal to be hereto
affixed.
I.C. ISAACS & COMPANY L.P.,
a Delaware limited partnership
By: I.G. DESIGN, INC., a Delaware
corporation, its general partner
By: _____________________________
Name: Robert J. Arnot
Title: Chairman and Co-Chief
Executive Officer
By: _____________________________
Name: Gerald W. Lear
Title: President and Co-Chief
Executive Officer
COUNTY OF NEW YORK :
: ss:
STATE OF NEW YORK :
On this ____ day of November, 1997, before me personally appeared Robert
J. Arnot and Gerald W. Lear, to me personally known, who, being duly sworn,
did say that they are the Chairman and Co-Chief Executive Officer and
President and Co-Chief Executive Officer, respectively, of I.G. Design, Inc.,
a Delaware corporation and the general partner of I.C. Isaacs & Company L.P.,
a Delaware limited partnership, and that the foregoing instrument was signed
and sealed on behalf of the corporation by authority of its Board of
Directors and on behalf of the limited partnership by authority of its
general partner, and that they acknowledge such instrument to be the free
deed and act of said limited partnership for the purposes therein set forth
and intending that this instrument be recorded.
________________________________
Notary Public
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<PAGE>
Exhibit 10.14
EXCLUSIVE DOMESTIC LICENSE AGREEMENT
THIS AGREEMENT is made and entered into this 14th day of December, 1995 by
and between BHPC Marketing, Inc., a corporation duly organized and existing
under the laws of California, having its principal place of business at 620
West 135th Street, Gardena, California 90248 (hereinafter referred to as
"LICENSOR"), and I. C. Isaacs & Co., L.P., a Delaware Limited Partnership,
having its principal place of business at 3840 Bank Street, Baltimore,
Maryland, 21224 (hereinafter referred to as "LICENSEE").
WHEREAS, LICENSOR is the owner with the right to grant licenses of the
Trademarks illustrated in Exhibit "A" attached hereto (the "Trademarks"); and
WHEREAS, LICENSEE is desirous of obtaining the exclusive right to use
the aforesaid Trademarks in connection with the import or manufacture and
sale of certain licensed products defined herein.
NOW, THEREFORE, it is agreed by the parties as follows:
1. DEFINITIONS
The following terms shall have meanings as set forth below:
a. "Trademarks" shall mean the Trademarks set forth in Exhibit "A", and
any such variations as LICENSEE develops with LICENSOR's prior written
approval.
b. "Territory" shall mean that geographical area defined in item 1 of the
attached License Agreement Detail Schedule.
c. "Licensed Product" shall be defined as set forth in item 2 of the
attached License Agreement Detail Schedule.
d. "Net Shipments" shall mean the aggregate total of the gross dollar
amount invoiced its purchasers by LICENSEE for all the Licensed Product
sold under the Trademarks reduced by the amount of shipping costs,
taxes, insurance, any customary trade allowances and, subject to the
provisions of Paragraph 8f., returns actually credited. No deduction
shall be made for commissions nor for any costs incurred in the
manufacture, sale, distribution or exploitation of the Licensed Product.
2. RIGHTS GRANTED
LICENSOR hereby grants to LICENSEE, upon the terms and conditions set
forth herein, an exclusive, personal, non-transferable, non- assignable
license, without the right to grant sublicenses, to use the Trademarks
solely on or in conjunction with the design, manufacture, import,
distribution, advertising, promotion, shipment, and sale of the
Licensed Product in the Territory. This license is extended to and
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BHPC.12
includes wholesale sales only and does not include retail sales.
3. OWNERSHIP OF ARTWORK AND DESIGNS
LICENSEE acknowledges and agrees that LICENSOR is the owner of all
artwork and designs involving the Licensed Product and/or Trademarks,
or any reproductions thereof, notwithstanding their invention or use by
LICENSEE and that such artwork and designs will remain the property of
LICENSOR who shall be entitled to use and license others to use same,
subject to the provisions of this Agreement. This Paragraph 3 does not
extend to artwork and designs developed for LICENSEE by third parties
and not owned by LICENSEE if they do not involve the Trademarks, and
generic artwork and designs which are not developed specifically for
the Licensed Products and which LICENSEE uses or intends to use, devoid
of the Trademarks, with LICENSEE's other product lines. Throughout the
term of this Agreement, LICENSOR will continue to provide LICENSEE
artwork, designs, and copy ready materials regarding the Trademarks as
LICENSOR provides to its licensees generally, and as reasonably
requested by LICENSEE.
4. GOOD WILL AND PROMOTIONAL VALUE
a. LICENSEE recognizes the value of the good will associated with the
Trademarks and acknowledges that the Trademarks, and all rights therein
and the good will pertaining thereto, belong exclusively to LICENSOR.
LICENSEE further recognizes and acknowledges that the Trademarks have
acquired secondary meaning in the mind of the public.
b. LICENSEE agrees that its use of the Trademarks shall inure to the
benefit of LICENSOR and that LICENSEE shall not, at any time, acquire
any rights in the Trademarks by virtue of any use it may make of the
Trademarks.
c. LICENSEE acknowledges that LICENSOR is entering into this Agreement not
only in consideration of the royalties paid hereunder but also for the
good will and promotional value to be secured by LICENSOR for the
Trademarks as a result of the manufacture, offering for sale, sale,
advertising, promotion, shipment and distribution of the Licensed
Product by LICENSEE.
5. QUALITY STANDARDS, PRODUCT APPROVALS, AND INSPECTION
a. The quality of the Licensed Product, as well as the quality of all
promotional, advertising and packaging material (see Paragraph 6) which
includes the Trademarks (the "Promotional and Packaging Material"),
shall
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<PAGE>
BHPC.12
be at least as high as the best quality of similar products and
promotional, advertising and packaging material presently shipped,
distributed, sold, used, manufactured or licensed by LICENSOR in the
Territory and shall be in full conformance with all applicable laws and
regulations. LICENSEE acknowledges that the maintenance of the high
quality of the Licensed Product, and the control by LICENSOR over the
nature, quality and manner of distribution of all Licensed Products, are
essential elements of this license. All elements of the Licensed
Product and use of the Trademarks shall be subject to the prior written
approval of LICENSOR. Except as specifically provided in Paragraph 8d,
below, LICENSEE shall not offer for sale, advertise, promote,
distribute, or use for any purpose any Licensed Product that is
damaged, defective, or are "seconds".
b. In order to maintain the high quality standard prescribed by LICENSOR,
LICENSEE may not manufacture, use, offer for sale, advertise, promote,
ship and/or distribute any Licensed Product or any Promotional and
Packaging Material relating to the Licensed Product until it has
received all written approvals of same from LICENSOR in the manner
provided herein. Such approval shall not be unreasonably withheld.
Should LICENSOR fail to approve in writing any of the submissions
furnished it by LICENSEE within fourteen (14) days from the date of
submission thereof, such failure shall be considered to be a
disapproval thereof. LICENSOR shall exercise reasonable efforts to
expressly communicate approval or disapproval to LICENSEE and to
provide adequate explanations to LICENSEE for any disapproval.
c. Before commencing, or authorizing third parties to commence, the design
or development of any Licensed Product or of any Promotional and
Packaging Material which have not been previously approved in writing
by LICENSOR:
(i) Prior to the production of the Licensed Product, there shall be a
pre-production showing of the Licensed Product at a time and date to be
mutually agreed upon by the parties. During this showing, LICENSEE
shall submit for LICENSOR's prior written approval all final designs,
specifications, fabrications, and color information.
(ii) Prior to the production of each collection (also known in the trade
as a "line" or a "season"), LICENSEE shall submit to LICENSOR a completed
"Sample Approval Form" (Exhibit "B-1") for each proposed item of the
Licensed Product along with: at least one (1) final sample of each style
in the collection; two (2) sets
3
<PAGE>
BHPC.12
of material which shows color and fabrication, to be attached to a
"Swatch Approval Form" (Exhibit "B-2"); and one (1) photograph or
rendering of each sample to be attached to the "Sample Approval Form"
(Exhibit "B-1"). Samples submitted for approval shall be of the same
quality as the Licensed Product that is produced and distributed. Once
a proposed item of the Licensed Product has been approved, LICENSEE
shall not deviate in any material respect from: (1) any information,
description or specification on the "Sample Approval Form" or "Swatch
Approval Form"; or (2) the quality of or material used on an approved
sample, without the prior written consent of LICENSOR. Each style,
color and fabrication must be approved for each season, regardless of
whether it was approved for a prior season, provided that previously
approved Licensed Products shall not be disapproved for a new
collection except for substantial reasons.
(iii) WIthin two (2) weeks following the commencement of each first
production run of the Licensed Product (or, if production of the various
styles of the Licensed Product commences at different times, within
two (2) weeks after commencement of each style's first production run),
LICENSEE shall deliver to LICENSOR, at least one (1), but no more than
two (2), finished production samples of each style. If the style,
appearance or quality of any production sample is materially different
from what was previously approved, LICENSEE shall make the necessary
changes so that it conforms to what was originally approved or shall
otherwise seek LICENSOR'S approval.
d. LICENSEE agrees that the Licensed Product and all Promotional and
Packaging Material shall contain only those proprietary legends,
markings and/or notices as reasonably required from time to time by
LICENSOR to give appropriate notice to the consuming public of
LICENSOR's right, title and interest thereto. The form of such legends,
markings and notices shall be as described in "Exhibit A" attached
hereto, unless the parties agree otherwise.
e. LICENSOR may, periodically and from time to time during the term of
this Agreement, at reasonable intervals, require that LICENSEE submit
to LICENSOR, at no cost to LICENSOR, or LICENSOR or its designees may
randomly select and retain during the inspection referred to in
Subparagraph 5f, below, one (1) additional set of Production Samples of
the Licensed Product and/or the Promotional and Packaging Material
relating to the Licensed Product for subsequent review and written
approval of trademark usage and notice on same. LICENSOR will promptly
advise LICENSEE of any concerns regarding trademark
4
<PAGE>
BHPC.12
usage and notice, and the parties will cooperate in good faith to
resolve the concerns.
f. To assure that the provisions of this Paragraph 5 are being observed,
LICENSEE agrees that it will allow LICENSOR or its designees,
periodically and from time to time at reasonable intervals during the
term of this Agreement, to enter LICENSEE's premises and/or the
premises where the Licensed Product is being manufactured or
inventoried during regular business hours and upon reasonable notice,
for the purposes of inspecting and confirming the Licensed Product and
the Promotional and Packaging Material relating to the Licensed Product
conform to the samples previously approved by LICENSOR. LICENSEE shall
provide to LICENSOR the addresses and telephone numbers of all
facilities, including third party manufacturers, at which the Licensed
Product is manufactured. LICENSEE's agreements with third party
manufacturers and warehousing facilities shall provide for the right of
LICENSOR to inspect such third party's facilities. Inspections, which
will be at LICENSOR's cost, may include any reasonable actions necessary
to assure LICENSOR that the Licensed Product is made and displayed in
accordance with this Agreement, including, but not limited to,
laboratory testing.
g. In the event that the quality standards and/or trademark and copyright
usage and notice requirements hereinabove referred to are not met,
then, upon receipt of written notice from LICENSOR the parties shall
cooperate in good faith to resolve LICENSOR's concerns and, absent
resolution, LICENSEE shall immediately discontinue any and all
activities with respect to the Licensed Product in connection with
which the said quality standards and/or trademark and copyright usage
and notice requirements have not been met. LICENSEE shall not be
required to discontinue any practice previously approved in writing by
LICENSOR.
6. ADVERTISING/USE OF THE TRADEMARK
a. LICENSEE will adopt and carry out its own marketing and advertising
program with respect to the Licensed Product. LICENSEE agrees that
LICENSEE's advertising, public relations and sales promotion activities
will be subject to prior consultation with, and written approval by,
LICENSOR as to the general form and content only with respect to the
use of the Trademarks and other notices.
b. Before publication of any advertisement or promotion, LICENSEE shall
submit every element of the advertisement or promotion to LICENSOR for
written approval hereunder using the "Advertising Approval Form"
(Exhibit "B-3").
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<PAGE>
c. Subject to Licensed Product availability at the time of the
request, LICENSEE agrees that upon request of LICENSOR, and at
LICENSOR's cost for shipping, delivery and insurance, it shall loan a
reasonable number of Licensed Products to LICENSOR and its other
licensees for advertising and promotional purposes. LICENSEE shall
receive the same benefit from other licensees of LICENSOR. Said
products shall be returned to LICENSEE in the original condition.
d. LICENSOR may purchase the Licensed Product from LICENSEE at the
cost of manufacture, plus shipping, delivery, taxes and insurance costs
to LICENSEE, provided no such Licensed Products may be used by LICENSOR
for resale. No royalty shall be payable to LICENSOR.
e. Advertising directed to the public may not feature the name of
LICENSEE. If approved, advertising directed to the trade may feature
the following: BHPC Marketing, Inc. under Trademark License to (Name of
LICENSEE).
f. LICENSEE agrees that the Trademark will appear on each Licensed
Product and its packaging, if any. LICENSEE shall use only those tags,
labels and packaging materials which have been previously approved in
writing. All tags, labels and packaging materials bearing the Trademark
must be submitted on the "Advertising Approval Form" (Exhibit "B-3").
g. LICENSEE shall affix such legends, markings and notices on all
License Product as are required by LICENSOR under Subparagraph 5.d. and
the law.
h. LICENSEE must submit for approval to LICENSOR a printer's proof of
each advertising and promotional item before final printing.
7. DURATION OF THE AGREEMENT
a. This Agreement shall continue for three (3) consecutive Contract
Years in respective durations as set forth in item 3 of the attached
License Agreement Detail Schedule (hereinafter collectively the
"Initial Term") and shall then expire unless sooner terminated in
accordance with the terms and conditions set forth herein.
b. If LICENSEE is not in breach of this Agreement at the time renewal
notice is given to LICENSOR, LICENSEE shall have three (3) consecutive
options to renew this Agreement for three (3) consecutive contract
periods, i.e. Contract Years, of one (1) year each (hereinafter
collectively the "Renewal Term"). In order to exercise each individual
option, LICENSEE must provide LICENSOR with written notice of its
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<PAGE>
intention to exercise each respective option and such written notice
must be received by LICENSOR no later than one hundred eighty (180)
days prior to the expiration of the Initial Term or immediately
preceding Contract Year of the Renewal Term. In the event that LICENSEE
fails to exercise any of the aforementioned options in a timely manner,
the license granted herein to LICENSEE will thereafter become
non-exclusive for the remaining term of this Agreement only for the
purposes of allowing LICENSOR to enter into such arrangements as it
deems appropriate with respect to the licensing of the Trademarks and
the Licensed Product, but no Licensed Products manufactured by another
party shall be sold prior to the expiration of this Agreement. Except
as specifically set forth herein to the contrary, LICENSEE's
performance in the Renewal Term shall be pursuant to the same terms and
conditions recited herein for the Initial Term.
8. ROYALTIES
a. "Royalty", as used in this Agreement, shall consist of the sum of
the following:
(i) LICENSEE agrees to pay LICENSOR, during the term of this
Agreement, a Royalty in an amount equal to five percent (5%) of the Net
Shipments by LICENSEE for Licensed Product sold under the Trademarks;
and
(ii) LICENSEE agrees to expend during the term of this Agreement,
an amount equal to one percent (1%) of the Net Shipments by LICENSEE
for Licensed Product sold under the Trademarks in advertising of the
Licensed Product and Trademarks. LICENSEE shall, on the day following
the last day of each respective Contract Year, submit to LICENSOR any
documentation as shall be reasonably requested by LICENSOR to evidence
the expenditure of the Advertising Royalty. In the event that LICENSEE
fails to spend the entire Advertising Royalty during the respective
Contract Year in which the Advertising Royalty was to be expended
hereunder, LICENSEE will, on the day following the last day of the
respective Contract Year, pay to LICENSOR the total sum of the
Advertising Royalty which was not expended hereunder. No Advertising
Royalty will be paid on the "Off Price" Merchandise.
b. LICENSEE shall pay to LICENSOR, concurrently with the execution of
this Agreement with respect to the First Contract Year, an Advance
Royalty Payment equal to the amount set forth in item 5 of the attached
License Agreement Detail Schedule, no part of which shall be
refundable. The Advance Royalty Payment
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<PAGE>
shall not reduce or offset the payment of any Guaranteed Annual Minimum
Royalty hereunder. However, the Advance Royalty Payment may be applied
to reduce and offset the payment of any royalty due hereunder in excess
of the Guaranteed Annual Minimum Royalty due in the first two (2)
Contract Years.
c. Promotional Merchandise shall be defined as regular line Licensed
Product which is sold as an incentive at a discounted price. In the
event LICENSEE is desirous of increasing Promotional Merchandise
shipping beyond fifteen percent (15%) of total production of Licensed
Product in any Contract Year, LICENSEE must first receive LICENSOR's
prior written approval thereof on a case-by-case basis.
d. Off-priced Merchandise shall be defined as either close-out
Licensed Product or substandard Licensed Product. In the event LICENSEE
is desirous of increasing Off-priced Merchandise shipping beyond
fifteen percent (15%) of total production of Licensed Product in any
Contract Year, LICENSEE must receive LICENSOR's prior written approval
thereof on a case-by-case basis. In no event will LICENSEE offer for
sale, or distribute any substandard Licensed Product unless the
Licensed Product are clearly identified to the consuming public as
being "seconds".
e. LICENSEE shall keep complete, detailed and accurate records of all
Promotional and Off-priced Merchandise sales, which records shall be
available to LICENSOR for inspection at LICENSEE's premises during
regular business hours.
f. For the purposes of this Agreement, LICENSEE agrees that aggregate
returns of the Licensed Product credited during any Contract Year
hereunder shall not exceed five percent (5%) of the gross dollar amount
invoiced by LICENSEE for all the Licensed Product sold during the
respective Contract Year (the "Returns Limitation"). In the event that
aggregate returns of the Licensed Product exceed the Returns
Limitation, all returns of the Licensed Product in excess of the
Returns Limitation shall not be deducted from the gross dollar amount
of sales of the Licensed Product in determining Net Shipments hereunder.
9. PAYMENT
a. The payments provided for in Paragraph 8, above, shall be based
upon all Net Shipments in each calendar month (the "Royalty Period")
and shall be due and payable by LICENSEE to LICENSOR by the twentieth
(20th) day of the next following calendar month. All Guaranteed Monthly
Royalty Payments are due and payable in accordance with Subparagraph
10.e. below by LICENSEE to LICENSOR on the twentieth (20th)
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<PAGE>
day of each respective calendar month for that Contract Year. At the
time of each such payment, LICENSEE shall provide LICENSOR with a
complete, accurate, written statement of its Net Shipments of Licensed
Product for the Royalty Period. The written statement of Net Shipments
of Licensed Product (a copy of which is attached hereto as Exhibit
"B-4") must be certified as accurate by LICENSEE and will include, but
will not be limited to, information as to: each respective invoice
number (in sequential order inclusive of all "voided" invoices),
invoice date, customer name or number, gross dollar amount invoiced,
terms of any customary trade allowances (as a percentage and in
aggregate dollars), actually credited returns (in aggregate dollars),
and other deductions taken against the gross dollar amount invoiced,
and any such other further information as LICENSOR may from time to
time reasonably request, solely for purposes of verifying the accuracy
of the Royalty payment. Such statements shall be furnished to LICENSOR
whether or not any Licensed Product has been shipped, distributed
and/or sold during the preceding Royalty Period and whether or not any
monies are then due LICENSOR.
b. LICENSEE's statements and all amounts payable to LICENSOR by
LICENSEE shall be submitted to:
BHPC Marketing, Inc.
620 West 135th Street
Gardena, California 90248
Attn: Royalty Receivables Department
c. The receipt and/or acceptance by LICENSOR of any of the statements
or reports furnished or payments paid hereunder to LICENSOR (or the
cashing of any checks paid hereunder) shall not preclude LICENSOR from
questioning the correctness thereof at any reasonable time thereafter
and, in the event that any inconsistencies or mistakes are discovered
in such statements, reports, or payments, they shall immediately be
rectified by LICENSEE and the appropriate payment shall immediately be
made by LICENSEE, unless LICENSEE disputes in good faith LICENSOR's
evaluation of the payments, in which case the parties will have twenty
(20) days to resolve the dispute.
d. All payments made hereunder shall be in United States currency or
checks drawn on a United States bank.
e. Time is of the essence with respect to all payments to be made
hereunder by LICENSEE. In the event LICENSEE shall fail to pay any sum
required to be paid by this Agreement after the due date thereof, the
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<PAGE>
LICENSEE shall fail to pay any sum required to be paid by this
Agreement after the due date thereof, the amount owing shall thereupon
bear interest at the maximum annual percentage rate allowable by law
from the due date until paid.
10. GUARANTEES
a. Guaranteed Annual Royalty Payments - LICENSEE shall pay, for each
Contract Year during the term of this Agreement, beginning with the
First Contract Year, the respective Guaranteed Annual Royalty Payments
set forth in item 7 of the attached License Agreement Detail Schedule.
b. Guaranteed Target Net Shipments - If, in any Contract Year,
LICENSEE does not achieve the Guaranteed Target Net Shipment Volume
figure set forth in item 7 of the attached License Agreement Detail
Schedule LICENSOR may, at its option, immediately thereafter terminate
this Agreement in writing by giving LICENSEE written notice not later
than thirty (30) days after the end of the Contract Year.
c. Guaranteed Net Shipments - If, in any Contract Year, LICENSEE does
not achieve the Guaranteed Net Shipments figure set forth
in item 7 of the attached License Agreement Detail Schedule LICENSOR
may, at its option, immediately thereafter terminate this Agreement in
writing by giving LICENSEE written notice not later than thirty (30)
days after the end of the Contract Year.
d. Termination under Subparagraphs 10.b. and 10.c., above, shall be
without further recourse by LICENSOR under this Agreement, except for
past Royalties due.
e. Guaranteed Monthly Royalty Payments - In order to ensure that the
above guarantees are met, LICENSEE shall pay to LICENSOR each month
pursuant to Paragraphs 8 and 9, above, the respective Guaranteed
Monthly Royalty Payments set forth in item 7 of the attached License
Agreement Detail Schedule for each Contract Year during the Term of
this Agreement. In the event that any actual Monthly Royalty Payment
calculated in accordance with Paragraph 8, above, is less than the
applicable Guaranteed Monthly Royalty Payment, LICENSEE shall pay to
LICENSOR the Guaranteed Monthly Royalty Payment in accordance with
Paragraph 9. In the event that any actual Monthly Royalty Payment
calculated in accordance with Paragraph 9 exceeds the Guaranteed
Monthly Royalty Payment, the actual Royalty payment shall be paid to
LICENSOR in accordance with Paragraph 9.
f. In the event of the termination of this entire Agreement, LICENSEE
is obligated to pay the balance of the
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<PAGE>
Guaranteed Annual Royalty Payments due for the remainder of the Contract
Years in the then current term, and payment in full shall be due and
payable within thirty (30) days of said termination as LICENSOR's only
recourse in the event of termination.
11. EXPLOITATION BY LICENSEE
a. LICENSEE agrees to commence, and diligently continue thereafter, the
distribution, shipment and sale of each category of the Licensed Product in
commercially reasonable quantities in the Territory on or before the
respective distribution date set forth next to each category of the
Licensed Product described in item 2 of the attached License Agreement
Detail Schedule.
b. LICENSEE agrees that the Licensed Product will be sold, shipped and
distributed outright, at a competitive price determined by LICENSEE, and
not on an approval, tie-in, consignment, or "sale or return" basis.
LICENSEE further agrees that the Licensed Product will only be knowingly
sold to retailers, jobbers, wholesalers and distributors for sale, shipment
and distribution to retail stores and merchants commonly considered and
referred to in the industry as moderate or better department stores and
specialty stores for sale, shipment and distribution direct to the public.
Notwithstanding the foregoing to the contrary, LICENSOR agrees that the
Licensed Product may also be sold to those retail stores commonly
considered and referred to in the industry as "Warehouse Clubs" (such as
Price Club, Sam's Warehouse, Pace, Costco, B.J.'s) so long as the total Net
Shipment volume of Licensed Product sold to such "Warehouse Clubs" does not
exceed twenty five percent (25%) of LICENSEE's annual Net Shipment volume.
Any sale of Licensed Product exceeding twenty five percent (25%) of
LICENSEE's Net Shipment volume will be deemed a material breach of this
Agreement and LICENSOR will have the right thereafter to terminate this
Agreement. The manner and scope of the distribution of the Licensed
Product, availability, variety, fabrication, colors and sizes are critical
to the promotion, enhancement and protection of the Trademarks and their
associated goodwill. LICENSEE acknowledges that it has no right to and
shall not sell or distribute the Licensed Product to any diverter or to
anyone whose sales or distribution are or will be made for publicity,
promotional or tie-in purposes, combination sales, premiums, giveaways,
direct mail, electronic shopping, vending machines or similar methods of
merchandising, or whose business methods are or reported to be
questionable.
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c. LICENSEE further agrees to sell to LICENSOR, if requested to do so by
LICENSOR, any product manufactured or sold by LICENSEE, from LICENSEE's
regular production at LICENSEE's customary net selling price.
12. BOOKS, RECORDS, AND RIGHTS TO AUDIT
a. LICENSEE agrees that it shall keep complete and accurate written books of
accounts and records, maintained in accordance with generally accepted
accounting principles consistently applied, at its principal place of
business, covering all Licensed Product manufactured, distributed, and sold
under the Trademarks. LICENSEE shall provide LICENSOR with the following:
(i) an audited, set of financial statements (i.e., balance sheet, income
statement, and sources and uses of funds) to be delivered to LICENSOR
within one hundred twenty (120) days after the end of each fiscal year of
LICENSEE; and
(ii) an interim set of financial statements to be delivered to LICENSOR
within sixty (60) days following the end of the first six (6) months of
each fiscal year of LICENSEE. All such financial information must be
prepared by an independent certified public accountant, approved in writing
by LICENSOR. LICENSOR hereby approves Seidman & Seidman as the accountant.
b. LICENSOR and its duly authorized representatives shall have the right, at
LICENSOR'S expense, at all reasonable business hours of the day, with
reasonable notice to audit LICENSEE's books of account and records and all
other documents and material in the possession or under the control of
LICENSEE with respect to the subject matter and the terms of this Agreement
and to make copies and extracts thereof. Within ten (10) days following
any written request by LICENSOR, LICENSEE will deliver copies and extracts
of any books of account, records, documents, materials, and information
as are requested by LICENSOR inclusive of, but not limited to: financial
statements, general ledger detail and supporting journals, documents, sales
and credit memo registers, financial projections and wholesale price
listings. All books of account and records of LICENSEE covering all
transactions relating to this Agreement shall be retained by LICENSEE for
at least three (3) years after the expiration or termination of this
Agreement for inspection by LICENSOR. In the event that any such audit
reveals an underpayment by LICENSEE, LICENSEE shall immediately remit
payment to LICENSOR in the amount of such underpayment plus
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interest calculated at the maximum annual percentage rate allowable by law,
compounded daily, calculated from the date such payment was actually due
until the date when such payment is, in fact, actually made. In the event
that any material underpayment is revealed by any such audit, LICENSEE
shall pay all reasonable costs and expenses of the examination and audit,
including any reasonable travel expenses incurred by LICENSOR in making
such examination, and costs and expenses of any accountants or other
persons retained by LICENSOR to examine, audit, or analyze LICENSEE's
records. A "material underpayment" is hereby defined as an underpayment of
five percent (5%) or more.
13. INSURANCE
LICENSEE shall, throughout the term of this Agreement, obtain and maintain
at its own cost and expense from a qualified insurance company acceptable
to LICENSOR, a policy or policies of insurance, insuring against those
risks customarily insured against under broad form comprehensive general
liability policies arising out of any defects or failure to perform,
alleged or otherwise, of the Licensed Product or any use thereof, including
"product liability", "completed operations", "advertisers' liability
insurance", etc and any liability of LICENSEE arising out of Paragraph 20,
below. All such policies of insurance shall have endorsements or coverage
with combined single limits of not less than $1,000,000 with deductibles
reasonably acceptable to LICENSOR and shall name LICENSOR, and those
designated by LICENSOR, with LICENSEE's approval, as additional insureds
thereunder. Such policies of insurance shall contain:
a. severability of interest;
b. cross liability; and
c. endorsement stating: "Such insurance as is afforded by this policy
for the benefit of BHPC Marketing, Inc. shall be primary as respects
any liability of claims arising out of (LICENSEE's) operation, and
any insurance carried by BHPC Marketing, Inc. shall be excess and
non-contributory."
The policies shall provide for ten (10) days notice to LICENSOR from the
insurer by Registered or Certified Mail, return receipt requested, in the
event of any modification, cancellation or termination. LICENSEE agrees to
furnish LICENSOR a certificate of insurance or copy of the policies
evidencing same within thirty (30) days after execution of this Agreement
and from time to time as requested by LICENSOR within ten
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<PAGE>
(10) days of LICENSOR's request; in no event, shall LICENSEE manufacture,
offer for sale, sell, advertise, promote, ship and/or distribute the
Licensed Product prior to receipt by LICENSOR of such evidence of
insurance. If LICENSEE fails to procure, maintain and/or pay for at the
times and for the durations specified in this Agreement, the insurance
required hereunder, or fails to carry insurance required by any
governmental requirement, LICENSOR may (but without obligation to do so),
and without notice to LICENSEE, perform such obligations on behalf of
LICENSEE, and the cost thereof, together with interest thereon at the
maximum rate allowed by law, shall immediately become due and payable to
LICENSOR.
14. USE, DISPLAY, AND SALE INVOLVING THE TRADEMARKS AND COPYRIGHT
a. In order to protect the Trademarks and LICENSOR's reputation, LICENSEE will
manufacture, distribute and sell the Licensed Product in compliance with
all applicable laws. During the term of this Agreement, in no event shall
LICENSEE, or any affiliated entity, manufacture or import, distribute or
sell any products using any trademark or other designation containing the
words "BEVERLY HILLS", or "POLO", or depicting any equestrian figure,
without the written consent of LICENSOR.
b. It is specifically understood and agreed that LICENSEE may engage in the
manufacture and distribution of products similar to or competitive with the
Licensed Product for its own account or pursuant to license agreements with
others, provided, however, neither LICENSEE nor any employee, shareholder,
officer, director, parent, subsidiary or affiliate of LICENSEE shall
manufacture or import, distribute or sell merchandise, the brand name of
which has a closely resembling similarity to the Trademarks. LICENSEE
further agrees not to use a closely resembling similarity of any graphic,
style or design supplied by LICENSOR to LICENSEE except for such items as
are generic or standard styles and designs and those items which LICENSEE
has already been using on the date of this Agreement for its other product
lines.
c. LICENSEE shall exercise reasonable efforts, within the limits allowed by
the laws and governmental regulations in effect in the Territory, to ensure
that its merchandising and sale of the Licensed Product shall conform to
policies and methods suitable for goods of high quality sold under a
prestigious label of worldwide repute.
15. OWNERSHIP OF THE TRADEMARKS
a. LICENSEE agrees that nothing in this Agreement shall give LICENSEE any
right, title, or interest in the
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<PAGE>
Trademarks other that the license to use the Trademarks on the Licensed
Product; that such marks are the sole property of LICENSOR; that all such
uses by LICENSEE of such marks shall inure only to the benefit of LICENSOR;
and it being understood that all right, title and interest relating thereto
are expressly reserved by the LICENSOR except for the rights being licensed
hereunder.
b. LICENSEE recognizes that LICENSOR may already have entered into license
agreements with respect to the Trademarks for products which fall into the
same general product category as the Licensed Product, but which are not
sold to the same retail store departments as the Licensed Product, and
which may be similar to, but not the same as, the Licensed Product in terms
of function, or otherwise. LICENSOR will advise LICENSEE of the specifics
of each such agreement. LICENSEE hereby expressly concedes that the
existence of said licenses does not and shall not constitute a breach of
this Agreement by the LICENSOR. Nothing herein shall permit LICENSOR to
license a retail outlet directly to make Licensed Products or products
substantially similar thereto, it being understood that any such products
to be sold by the retail outlet must be purchased from LICENSEE.
c. LICENSEE agrees and acknowledges that if it has obtained or obtains in the
future, in any country, any right, title, or interest in any marks which
are confusingly similar to the Trademark, (including the filing of any
application for trademarks or service mark registration or the obtaining of
any issued registration), that LICENSEE has acted or will act as an agent
and for the benefit of LICENSOR. LICENSEE further agrees to execute any
and all instruments deemed by LICENSOR, its attorneys or representatives,
to be necessary to transfer such right, title, or interest to LICENSOR to
protect LICENSOR's right, title and interest in such marks.
d. LICENSEE agrees not to raise or cause to be raised to third parties, either
during the term of this Agreement or after its expiration or termination,
on any grounds whatsoever, any questions concerning the validity of the
Trademarks or LICENSOR's rights therein.
16. COMPLIANCE WITH LIMITATIONS ON USE OF TRADEMARKS
LICENSEE agrees that the Licensed Product, and all labels, hang tags,
packaging and other trade dress, used in connection with such Licensed
Products, shall not violate any restrictions on use or display of the marks
as provided in that Settlement Agreement and Consent Judgement with Polo
Fashions, Inc., a copy of which
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BHPC.12
is attached hereto as Exhibit "D". Nothing contained in this
Agreement makes Polo Fashions, Inc., or any related company,
a third party beneficiary of this Agreement. In the event
LICENSEE is subject to loss or liability under said Settlement
Agreement and/or Consent Judgment for any actions not in
breach of this Agreement or actions of LICENSEE approved by
LICENSOR pursuant to this Agreement, LICENSOR shall indemnify
and hold harmless the LICENSEE and its directors, officers,
and related companies, including in the event LICENSEE's
rights under this Agreement are materially and adversely
impaired through no breach by LICENSEE.
17. THIRD PARTY INFRINGEMENT
LICENSOR warrants that it owns the Trademarks and has all
necessary rights and authority to enter into this Agreement,
that it will exercise best efforts to keep the Trademarks
valid and subsisting and unimpaired by its actions, and that
it has no knowledge of any infringement of the Trademarks in
connection with products similar to the Licensed Products.
LICENSEE agrees to notify LICENSOR in writing of any
infringements or imitations by third parties of the
Trademarks, the Licensed Product and/or the Promotional and
Packaging Material which may come to LICENSEE's attention. In
the event that a third party should infringe any of the
Trademark rights or any other rights under this Agreement in
the Territory, LICENSOR shall have the sole right to determine
whether any action shall be taken on the account of such
infringement, and LICENSEE shall not take any action on
account of any infringement without first obtaining written
consent of LICENSOR, such consent not to be unreasonably
withheld.
18. ASSIGNABILITY AND MANUFACTURING
a. The license granted hereunder is, and shall remain, personal
to LICENSEE and shall not be granted, assigned, or otherwise
conveyed by any act of LICENSEE or by operation of law. For
the purposes of this Paragraph 18, any sale or transfer of any
ownership interest in LICENSEE shall constitute a prohibited
assignment of the license granted hereunder. LICENSEE shall
have no right to grant any sublicenses without LICENSOR'S prior
express written approval. Any attempt on the part of LICENSEE
to arrange to sublicense or assign to third parties its right
under this Agreement, shall constitute a material breach of
this Agreement. Nothing herein precludes LICENSEE from
pledging this Agreement as collateral or security for
financing to its primary lenders or hiring third parties to
manufacture, assemble or sell the Licensed
16
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BHPC.12
Products.
b. LICENSOR shall have the right to assign its rights and
obligations under this Agreement without the approval of
LICENSEE.
19. NO AGENCY, JOINT VENTURE, PARTNERSHIP
The parties hereby agree that no agency, joint venture, or
partnership is created by this Agreement, and that neither
party shall incur any obligation in the name of the other
without the other's prior written consent.
20. INDEMNIFICATION
a. Except for claims of trademark infringement, unfair
competition or similar claims, LICENSEE will indemnify, defend
and hold LICENSOR harmless from any and all third party
liabilities, claims, obligations, suits, judgments and
expenses whatsoever, including court costs and reasonable
attorney's fees, which LICENSOR may incur or which may be
asserted against LICENSOR and which arise or occur with
respect to the operation of LICENSEE's business as it relates
to the design, import, manufacture, distribution, promotion,
advertisement, and sale of the Licensed Product under the
Trademarks or with respect to this Agreement and LICENSEE's
performance hereunder; and further provided that with respect
to any matter for which LICENSEE has an obligation to
indemnify LICENSOR, LICENSEE shall have the right to undertake
and conduct the defense of any cause of action so brought and
handle any such claim or demand, provided that LICENSEE shall
consult with LICENSOR in good faith regarding the handling of
the claim and obtain LICENSOR's consent for any settlement or
compromise that adversely affects LICENSOR's business.
b. LICENSOR will indemnify, defend and hold LICENSEE harmless
from any and all third party liabilities, claims, obligations,
suits, judgments and expenses whatsoever, including court
costs and reasonable attorney's fees, which LICENSEE may incur
or which may be asserted against LICENSEE and which arise or
occur with respect to the operation of LICENSOR's business or
the conduct of LICENSOR's other licensees of the Trademarks,
or any claim of infringement, unfair competition, and the like
with respect to LICENSEE's use of the Trademarks in compliance
with the terms of this Agreement; and further provided that
with respect to any matter for which LICENSOR has an
obligation to indemnify LICENSEE, LICENSOR shall have the
right to undertake and conduct the defense of any cause of
action so brought and
17
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BHPC.12
handle any such claim or demand, provided that LICENSOR shall
consult with LICENSEE in good faith regarding the handling of
the claim and obtain LICENSEE's consent for any settlement or
compromise that adversely affects LICENSEE's business. Such
indemnity shall extend to liabilities and claims incurred after
the expiration or termination of this Agreement but which are
based on acts or events whose proximate cause arose during
this Agreement.
21. TERMINATION
a. In addition to the termination rights provided elsewhere in
this Agreement, each party will have the right to terminate
this Agreement in the event that:
(i) the other party violates or fails to perform any agreement,
obligation, term, or condition of this Agreement and that violation
or failure to perform is not cured within thirty (30) days
following written notice thereof; or (ii)the other party becomes
insolvent, files a voluntary petition in bankruptcy, a petition is
filed against that party to have that party adjudicated as bankrupt
and same is not dismissed in sixty (60) days, that party enters
into any composition with its creditors, but not including
reorganization under the Bankruptcy Code. Provided, however, such
termination by LICENSEE shall not relieve LICENSEE of the
obligation to pay any Royalty earned by LICENSOR up to the
effective date of termination, nor prejudice any cause of action or
claim of the terminating party accrued, or to accrue, on account of
the breach or default of the other party.
b. Notwithstanding the provisions of sub-paragraph 21a.(i) to the
contrary, in the event that LICENSEE violates this Agreement
or fails to perform any material agreement, obligation, term,
or condition of this Agreement for the third (3rd) time, for
any reason except force majeure, LICENSEE shall forfeit the
right to cure such violation or failure to perform, and this
Agreement will terminate upon the giving of the written notice
thereof.
22. EFFECT OF EXPIRATIONS OR TERMINATION
a. Except for the limited purposes indicated below, upon
expiration or termination of this Agreement, all rights and
licenses granted to LICENSEE hereunder shall immediately
expire, shall forthwith revert to LICENSOR, and LICENSEE shall
immediately cease and desist from using the Trademarks and any
technical information supplied by LICENSOR to LICENSEE
hereunder. To this end, LICENSEE will be
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BHPC.12
deemed to have automatically assigned to LICENSOR, pursuant to
the express provisions of this Agreement, upon such expiration
or termination, the Trademarks, equities, good will, titles,
and other rights in or to the Licensed Product and all
adaptations, compilations, modifications, translations and
versions thereof, and all other trademarks used in connection
therewith (not including any of LICENSEE's trademarks and
logos) which have been or may be obtained by LICENSEE or which
may vest in LICENSEE and which have not already been assigned
to LICENSOR but not including any generic or standard styles,
labels, tags, designs, graphics and the like. LICENSOR may
thereafter, it its sole discretion enter into such
arrangements as it deems desirable, with any other party, for
the manufacture, promotion and sale of the Licensed Product in
the Territory.
b. Any Licensed Products, finished or in progress, shall be
disposed of as follows:
(A) Upon expiration of this Agreement or termination for breach
by LICENSOR, any finished Licensed Product in LICENSEE's
possession or in progress unsold or sold but not delivered on
the date of the expiration of this Agreement may, subject to
payment of the Royalty payable to LICENSOR, be sold by
LICENSEE, pursuant to a plan to be approved by LICENSOR, or to
the customers to whom LICENSEE is committed or have bought
said product, for a period of one hundred twenty (120) days
after expiration hereof. Any Royalty paid by LICENSEE to
LICENSOR during the aforementioned one hundred twenty (120) day
period is separate and apart from the Royalty generated during
the term of the Agreement and such Royalty is not to be
applied to the Guaranteed Annual Royalty Payments as outlined
in Subparagraph 10b. and column (C) of item 7 of the attached
License Agreement Detail Schedule. All inventory remaining
after such one hundred twenty (120) day period shall be
destroyed or stripped of all imprints, lettering, mentions or
other reproductions of or references to the Trademarks and
related logos; and all molds, patterns, transfers, and other
property bearing the Trademarks of relating thereto shall be
destroyed; all under the supervision of LICENSOR, at
LICENSOR's cost if any travel involved. Except for goods
already committed or sold to LICENSEE's customers, LICENSOR
shall have the first right to purchase said Licensed Product
at the direct cost price (comprised of material and direct
labor expenses as set forth in LICENSEE's books and records,
plus five percent (5%) for overhead) upon expiration or
termination of this Agreement.
19
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BHPC.12
(B) Any finished Licensed Product in LICENSEE's possession
unsold on the date of termination of this Agreement (other
than for breach by LICENSOR), and all molds, patterns,
transfers and other property bearing the Trademarks or
relating thereto shall be destroyed or defaced to remove the
Trademarks by LICENSEE within (30) days following the
termination of this Agreement; further, LICENSEE agrees, on or
before the last day of the one hundred day (120) period, to
provide LICENSOR with a certificate signed by LICENSEE's Chief
Executive Officer certifying under penalty of perjury that
such unsold inventory, molds, patterns, transfers, and other
property have been destroyed or defaced so as not to include
the Trademarks and logo of LICENSOR. Sold product may be
delivered to the customers. LICENSEE shall, within sixty (60)
days after expiration or termination of this Agreement as the
case may be, furnish LICENSOR with a full and detailed written
statement of the Licensed Product in its inventory or the
Licensed Product in progress as stated in Subparagraph 22.c.
below. LICENSOR shall have the option of conducting a
physical inventory at the time of expiration or termination
and/or at a later date (within thirty (30) days of termination
or expiration) in order to ascertain or verify such statement.
In the event that the LICENSEE refuses to permit LICENSOR to
conduct such physical inventory, LICENSEE shall forfeit its
rights hereunder to dispose of such unsold inventory. In
addition to such forfeiture, LICENSOR shall have recourse to
all other remedies available to it.
c. Upon the termination of this Agreement, LICENSEE shall, within
ten (10) days following termination, give written notice to
LICENSOR of the:
(i)Licensed Product, by style, in its possession or under its
control;
(ii)location of the inventory of the Licensed Product;
(iii)amount of the work in process;
(iv)Licensed Product in transit; and
(v)name, address, and telephone number of each contractor,
shipper and/or sales representative
d. Except for the inventory phase-out rights as stated above,
LICENSEE shall accept no order, or undertake any new
production, that would be delivered after the date of
expiration of this Agreement. Three (3) months prior to the
expiration of this Agreement, and monthly thereafter until
expiration, LICENSEE shall provide to LICENSOR an inventory,
by style, of all the Licensed Product in its possession or
under its
20
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BHPC.12
control, and all work in process. Three (3) months prior to the expiration
of this Agreement, and monthly until expiration, LICENSEE shall provide
LICENSOR with copies of all orders, invoices, bills of lading, credit
memoranda, and statements provided to LICENSEE's factor (if any).
e. LICENSEE shall deliver to LICENSOR, upon termination of this Agreement or
thirty (30) days prior to the expiration of this Agreement the names,
addresses, and telephone numbers of each supplier of any item having the
Trademarks. LICENSEE shall be responsible to LICENSOR for any damages
caused by the unauthorized use by LICENSEE or by others only if caused by
the reckless conduct of LICENSEE of such reproduction materials which are
not turned over to LICENSOR.
23. MODIFICATION; WAIVER
No modification of any of the terms or provisions of this Agreement shall
be valid unless contained in a writing signed by the parties. No waiver by
either party of a breach or a default hereunder shall be deemed a waiver by
such party of a subsequent breach or default of a like or similar nature.
Except as otherwise stated in this Agreement, resort by LICENSOR or
LICENSEE to any remedies referred to in this Agreement or arising by reason
of a breach of this Agreement by LICENSEE or LICENSOR shall not be
construed as a waiver by LICENSOR of its right to resort to any and all
other legal and equitable remedies available to LICENSOR or LICENSEE.
24. FORCE MAJEURE
Neither LICENSOR nor LICENSEE shall be liable to each other or be deemed in
breach or default of any obligations contained in this Agreement, for any
delay or failure to perform due to causes beyond its reasonable control,
including but not limited to delay due to the elements, acts of the United
States Government, acts of a foreign government, acts of God, fires,
floods, epidemics, embargoes, riots, strikes, any of the foregoing events
being referred to as a "Force Majeure" condition. In such event, dates for
performance shall be extended for the period of delay resulting from the
Force Majeure condition. The party affected by a Force Majeure condition
shall, as soon as practicable, notify the other party of the nature and
extent of such condition.
25. NOTICE
All notices, approvals, consents, requests, demands, or other
communications to be given to either party in
21
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BHPC.12
writing may be effected by personal delivery or by depositing the same in
the United States mail, certified and return receipt requested, postage
prepaid. Such communication shall be addressed to LICENSEE and LICENSOR at
their respective addresses as set forth in the preamble above.
26. CONSTRUCTION; VENUE
This Agreement shall be construed in accordance with the laws of the State
of California, U.S.A., and the parties agree that it is executed and
delivered in that state, and any claims arising hereunder shall, at
LICENSOR's election, be prosecuted in the appropriate Court of the State of
California in Los Angeles County or any Federal District Court therein.
27. ENTIRE AGREEMENT
This Agreement, contains the entire understanding of the parties and there
are no representations, warranties, promises, or undertakings other than
those contained herein. This Agreement supersedes and cancels all previous
agreements between the parties hereto.
28. CONFIDENTIAL INFORMATION
LICENSOR and LICENSEE agree (and shall instruct their partners, officers,
directors, designers, and other persons to whom disclosure is made) to keep
strictly confidential all designs, manufacturing instructions, and other
information relating to the Licensed Product or the customers and business
operations of the other party that are not otherwise available to the
public, whether furnished by one to the other or in any way acquired by
either party; and the same shall be used by either party solely under this
Agreement and for the purpose of marketing of the Licensed Product. This
provision, as well as all indemnifications provided in this Agreement,
survive termination or expiration.
29. EQUITABLE RELIEF
LICENSEE acknowledges and agrees that:
(i) LICENSEE's failure to meet the quality standards herein;
(ii) LICENSEE's failure: (a) to use the Trademarks, or (b) to manufacture,
offer for sale, sell, advertise, promote, ship or distribute the Licensed
Product, both in accordance with the provisions of this Agreement;
or
(iii) any unauthorized use or disclosure of confidential information of
LICENSOR or LICENSEE, cannot
22
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BHPC.12
be compensated adequately with a remedy at law and will cause irreparable
damage to LICENSOR or LICENSEE. Accordingly, the parties agree that
LICENSOR or LICENSEE may seek from any court having jurisdiction, such
equitable relief by way of temporary restraining orders, permanent
injunctions or otherwise as is available to compel the discontinuance of
such conduct. LICENSEE agrees that any court of general jurisdiction in
Los Angeles County or any Federal District Court therein shall have
jurisdiction of such claim.
30. ATTORNEYS' FEES
In the event any legal action becomes necessary to enforce or interpret the
terms of this Agreement, the prevailing party shall be entitled, in
addition to its court costs, to such reasonable attorneys' fees as shall be
fixed by a court of competent jurisdiction.
31. BINDING EFFECT
This Agreement shall be binding on the parties, and their successors and
assigns.
32. SURVIVAL OF THE RIGHTS
Notwithstanding anything to the contrary contained herein, such obligations
which remain executory after expiration of the term or termination of this
Agreement shall remain in full force and effect until discharged by
performance and such rights as pertain thereto shall remain in force until
their expiration.
33. SEVERABILITY
In the event that any term or provision of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other term or provision
and this Agreement shall be interpreted and construed as if such term or
provision, to the extent the same shall have been held to be invalid,
illegal or unenforceable, had never been contained herein.
34. CAPTIONS
The captions used in connection with the paragraphs and subparagraphs of
this Agreement are inserted only for purpose of reference. Such captions
shall not be deemed to govern, limit, modify or in any other manner affect
the scope, meaning or intent of the provisions of this Agreement or any
part thereof nor shall such captions otherwise be given any legal effect.
23
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BHPC.12
35. INCORPORATION OF EXHIBITS
LICENSOR and LICENSEE acknowledge and agree that the provisions of Exhibits
"A" through "D" attached hereto (the "Exhibits") are integral to this
Agreement and that the provisions of the Exhibits are all hereby
incorporated herein and made a part hereof as if set out in full in this
Agreement.
36. RIGHT OF FIRST REFUSAL
LICENSOR will offer to LICENSEE the Right of First Refusal to license the
product category of men's warm up suits in all fabrications, excluding
silk, men's basic pique and jersey polo shirts, men's beachwear, i.e.
swimwear, crew neck fleece tops in solid colors, embroidery, screen prints
and color block, matching basic t-shirts and tank tops, and basic fleece
pants. LICENSOR will submit in writing to LICENSEE the terms and
conditions of any good faith offer to license any of said product
categories in the United States. LICENSEE will have fifteen (15) days from
receipt of said notice to notify LICENSOR in writing that it is willing to
accept a License Agreement under the same terms and conditions as the
offer. IF LICENSOR is not notified within said time period, LICENSOR will
deem that LICENSEE has refused the offer and will pursue the license with
the offering party on the same terms and conditions presented to LICENSEE.
If the terms and conditions change, LICENSOR shall offer the right of first
refusal to LICENSEE once again. These rights of first refusal shall
continue through the term of this Agreement whenever the rights for said
product categories are offered to a third party for licensing.
37. APPROVALS
All approvals or consents required to be given by one party to the other
under this Agreement shall not be unreasonably withheld or delayed
notwithstanding anything in the Agreement to the contrary.
24
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BHPC.12
IN WITNESS WHEREOF, the parties hereto agree that this Agreement shall take
effect as of the date and year first above written above.
LICENSOR: LICENSEE:
BHPC MARKETING, INC., I.C. ISAACS & CO., L.P.
a California Corporation a Delaware Limited Partnership
BY: /s/ Don Garrison BY: /s/ Gerald W. Lear
-------------------------------- ------------------------------------
Don Garrison Jerry Lear
Licensing Director President, C.E.O.
Date: 12/18/95 Date: 12/20/95
---------- ----------
25
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BHPC.12
LICENSE AGREEMENT DETAIL SCHEDULE
1. DEFINITION OF TERRITORY: United States, all its territories and
possessions
2. DEFINITION OF LICENSED PRODUCT: DISTRIBUTION DATE:
------------------------------- ------------------
Men's denim sportswear January 1, 1996
Men's outerwear
Men's woven shirts, excluding dress shirts
Men's knit and woven casual pants and shorts
Men's sweaters
Men's basic and fashion fleece tops and bottoms
Men's overalls and shortalls
Men's knit tops, including t-shirts and polo shirts
Men's swimwear
Men's warm ups
All silk products are excluded from this Definition of
Licensed Product
3. INITIAL TERM: FROM TO
------------- ---- --
First Contract Year: January 1, 1996 December 31, 1996
Second Contract Year: January 1, 1997 December 31, 1997
Third Contract Year: January 1, 1998 December 31, 1998
4. RENEWAL TERM:
-------------
Fourth Contract Year (if any): January 1, 1999 December 31, 1999**
Fifth Contract Year (if any): January 1, 2000 December 31, 2000
Sixth Contract Year (if any): January 1, 2001 December 31, 2001
5. ADVANCE ROYALTY PAYMENT:
First Contract Year: None ($00)
6. ROYALTY RATE:
5% of Net Shipments, plus 1% Advertising Royalty, to be spent by Licensee in
Advertising the Licensed Product in the Territory
<PAGE>
Exhibit 10.15
AMENDMENT TO EXCLUSIVE DOMESTIC LICENSE AGREEMENT
This Amendment is made and entered into by and between BHPC Marketing, Inc.
("LICENSOR") and I.C. Isaacs Co., L.P. ("LICENSEE") and is dated as of June
3, 1997. This Amendment amends and modifies that certain Exclusive Domestic
License Agreement between LICENSOR and LICENSEE dated December 14, 1995.
(I)
The promises, covenants, agreements and declarations made and set forth
herein are intended to and shall have the same force and effect as if set
forth at length in the body of the Agreement. To the extent that the
provisions of this Amendment are inconsistent with the terms and conditions
of the AGREEMENT, the terms set forth herein shall control.
(II)
1. Effective as of May 1, 1997, the License Agreement Detail Schedule
(Men's) is hereby amended by replacing it with the License Agreement
Detail Schedule attached hereto.
2. Paragraph 7(b) of the Agreement is hereby amended by deleting all
references to one-year renewal periods and referring in their place to
the three-year-renewal terms provided for in the License Agreement Detail
Schedule attached hereto.
3. The Amendment to the Agreement dated April 28, 1997, is no longer in effect.
(III)
LICENSOR and LICENSEE acknowledge and agree that the Agreement, as amended by
this Amendment, remains in full force and effect and represents the entire
Agreement of the parties with respect to the matters contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Amendment shall take
effect as of the date and year first written above.
LICENSOR: LICENSEE:
BHPC MARKETING, INC. I.C. ISAACS & CO., L.P.
BY: Don Garrison BY: Robert Arnot
-------------------------- --------------------------
Don Garrison Robert Arnot
Director of Licensing Chairman of the Board
DATE: 6/16/97 DATE: 6/12/97
-------------------------- -------------------------
BY: Gerald Lear
--------------------------
Gerald Lear
President, C.E.O.
DATE: 6/12/97
-------------------------
<PAGE>
LICENSE AGREEMENT DETAIL SCHEDULE
1. DEFINITION OF TERRITORY: The United States, its territories and possessions
2. DEFINITION OF LICENSED PRODUCT (BY CATEGORY):
Men's denim sportswear, outwear, woven shirts (excluding
dress shirts), knit and woven casual pants and shorts,
sweaters, basic and fashion fleece tops and bottoms,
overalls and shortalls, knit tops (including t-shirts and polo
shirts), swimwear, warm-ups.
3. INITIAL TERM: FROM TO
---- --
First Contract Year: January 1, 1996 December 31, 1996
Second Contract Year: January 1, 1997 December 31, 1997
Third Contract Year: January 1, 1998 December 31, 1998
4. RENEWAL TERM:
First Renewal Period (if any): January 1, 1999 December 31, 2001
Second Renewal Period (if any): January 1, 2002 December 31, 2004
5. ROYALTY RATE:
Five percent (5%) of Net Shipments
6. ADVERTISING:
One percent (1%) of net Sales to be spent in the Territory by LICENSEE.
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7. GUARANTEES:
(A) (B) (C) (D)
Guaranteed Guaranteed Guaranteed
Target Guaranteed Annual Monthly
Net Net Royalty Royalty
Shipments Shipments Payments Payments
(in United States Dollars)
_____________________________
First Contract Year $6,000,000 $6,000,000 $300,000 $25,000.00
Second Contract Year $7,000,000 $7,000,000 $350,000 $29,166.66
Third Contract Year $8,000,000 $8,000,000 $400,000 $33,333.33
* Guaranteed Net Shipments for the First Renewal Period and Second Renewal
Period (if any) shall be calculated based on a volume equal to eighty percent
(80%) of the immediately preceding Contract Year's actual Net Shipments, but
not less than the previous year's Guaranteed Net Shipments. Guaranteed Annual
Royalty Payments for the First Renewal Period and Second Renewal Period (if
any) shall be calculated based on a volume equal to eighty percent (80%) of
the immediately preceding Contract Year's actual Annual Royalty Payment, but
not less than the previous year's Guaranteed Annual Royalty Payment.
INITIALS DATE
-------- ----
LICENSOR, BHPC: /s/ DG 6/2/97
-------------- ------
LICENSEE, I.C.ISAACS: /s/ RJA 6/3/97
--------------- ------
<PAGE>
Exhibit 10.16
EXCLUSIVE DOMESTIC LICENSE AGREEMENT BHPC.12
THIS AGREEMENT is made and entered into this 1st day of June, 1993 by and
between BHPC Marketing, Inc., a corporation duly organized and existing under
the laws of California, having its principal place of business at 620 West
135th Street, Gardena, California 90248 (hereinafter referred to as
"LICENSOR"), and Heather-Paige II Industries, Inc., a California corporation,
having its principal place of business at 7929 Ruffner Avenue, Van Nuys,
California, 91406 (hereinafter referred to as "LICENSEE").
WHEREAS, LICENSOR is the owner with the right to grant licenses of the
Trademarks illustrated in Exhibit "A" attached hereto (the "Trademarks"); and
WHEREAS, LICENSEE is desirous of obtaining the exclusive right to use the
aforesaid Trademarks in connection with the import or manufacture and sale of
certain licensed products defined herein.
NOW, THEREFORE, it is agreed by the parties as follows:
1. DEFINITIONS
The following terms shall have meanings as set forth below:
a. "Trademarks" shall mean the Trademarks set forth in Exhibit "A",
b. "Territory" shall mean that geographical area defined in item 1 of
the attached License Agreement Detail Schedule.
c. "Licensed Product" shall be defined as set forth in item 2 of the
attached License Agreement Detail Schedule.
d. "Net Shipments" shall mean the aggregate total of the gross dollar
amount invoiced its purchasers by LICENSEE for all the Licensed Product
sold under the Trademarks reduced by the amount of any customary trade
allowances and, subject to the returns actually credited. No deduction
shall be made for commissions nor for any costs incurred in the
manufacture, sale, distribution or exploitation of the Licensed
Product.
2. RIGHTS GRANTED
LICENSOR here grants to LICENSEE, upon the terms and conditions set forth
herein, an exclusive, personal, non-transferable, non-assignable license,
without the right to grant sublicenses, to use the Trademarks solely on
or in conjunction with the design, manufacture, import, distribution,
advertising, promotion, shipment, and sale of the Licensed Product in the
Territory. This license is extended to and includes
<PAGE>
wholesale sales only and does not include retail sales.
3. OWNERSHIP OR ARTWORK AND DESIGNS
LICENSEE acknowledges and agrees that LICENSOR is the owner of all
artwork and designs involving the Licensed Product and/or Trademarks, or
any reproductions thereof, notwithstanding their invention or use by
LICENSEE and that such artwork and designs will remain the property of
LICENSOR who shall be entitled to use and license others to use same,
subject to the provisions of this Agreement.
4. GOOD WILL AND PROMOTIONAL VALUE
a. LICENSEE recognizes the value of the good will associated with the
Trademarks and acknowledges that the Trademarks, and all rights
therein and the good will pertaining thereto, belong exclusively to
LICENSOR. LICENSEE further recognizes and acknowledges that the
Trademarks have acquired secondary meaning in the mind of the public.
b. LICENSEE agrees that its use of the Trademarks shall inure to the
benefit of LICENSOR and that LICENSEE shall not, at any time, acquire
any rights in the Trademarks by virtue of any use it may make of the
Trademarks.
c. LICENSEE acknowledges that LICENSOR is entering into this Agreement
not only in consideration of the royalties paid hereunder but also
for the good will and promotional value to be secured by LICENSOR for
the Trademarks as a result of the manufacture, offering for sale,
sale, advertising, promotion, shipment and distribution of the Licensed
Product by LICENSEE.
5. QUALITY STANDARDS, PRODUCT APPROVALS, AND INSPECTION
a. The quality of the Licensed Product, as well as the quality of all
promotional, advertising and packaging material (see Paragraph 6)
which includes the Trademarks (the "Promotional and Packaging
Material"), shall be at least as high as the best quality of similar
products and promotional, advertising and packaging material presently
shipped, distributed, sold, used, manufactured or licensed by LICENSOR
in the Territory and shall be in full conformance with all applicable
laws and regulations. LICENSEE acknowledges that the maintenance of the
high
2
<PAGE>
quality of the Licensed Product, and the control by LICENSOR over the nature,
quality and manner of distribution of all Licensed Products, are essential
elements of this license. All elements of the Licensed Product and use of the
Trademarks shall be subject to the prior written approval of LICENSOR. Except
as specifically provided in Paragraph 8d, below, LICENSEE shall not offer for
sale, advertise, promote, distribute, or use for any purpose any Licensed
Product that is damaged, defective, or are "seconds".
b. In order to maintain the high quality standard prescribed by LICENSOR,
LICENSEE may not manufacture, use, offer for sale, advertise, promote,
ship and/or distribute any Licensed Product or any Promotional and
Packaging Material relating to the Licensed Product until it has
received all written approvals of same from LICENSOR in the manner
provided herein. Such approval shall not be unreasonably withheld.
Should LICENSOR fail to approve in writing any of the submissions
furnished it by LICENSEE within five (5) days from the date of
submission thereof, such failure shall be considered to be a
disapproval thereof.
c. Before commencing, or authorizing third parties to commence, the
design or development of any Licensed Product or of any Promotional and
Packaging Material which have not been previously approved in writing by
LICENSOR:
(i) Prior to the production of the Licensed Product, LICENSEE shall
submit to LICENSOR line drawings ("Spec Sheets"), pictures or artist's
renderings, along with a "Sample Approval Form" (Exhibit "B-1") for each
style, showing fabric color and use of the Trademark.
(ii) Each style, color and fabrication must be approved for each
season, regardless of whether it was approved for a prior season. Express
written approval may not be unreasonably withheld.
(iii) LICENSEE further agrees to provide LICENSOR with at least six
(6) finished production samples per season.
d. LICENSEE agrees that the Licensed Product and all Promotional and
Packaging Material shall contain only those legends, markings and/or
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<PAGE>
notices as required from time to time by LICENSOR to give appropriate notice
to the consuming public of LICENSOR's right, title and interest thereto.
e. LICENSOR may, periodically and from time to time during the term of
this Agreement, require that LICENSEE submit to LICENSOR, at no cost to
LICENSOR, or LICENSOR or its designees may randomly select and retain during
the inspection referred to in Subparagraph 5f, below, one (1) additional set
of Production Samples of the Licensed Product and/or the Promotional and
Packaging Material relating to the Licensed Product for subsequent review and
written approval of the quality of, trademark usage and notice on same, and
for any other purpose that LICENSOR deems appropriate.
f. To assure that the provisions of this Paragraph 5 are being observed,
LICENSEE agrees that it will allow LICENSOR or its designees, periodically
and from time to time during the term of this Agreement, to enter LICENSEE's
premises and/or the premises where the Licensed Product is being manufactured
or inventoried during regular business hours and upon reasonable notice, for
the purposes of inspecting and approving the Licensed Product and the
Promotional and Packaging Material relating to the Licensed Product.
LICENSEE's agreements with third party manufacturers and warehousing
facilities shall provide for the right of LICENSOR to inspect any such third
party's facilities. Inspections may include any reasonable actions necessary
to assure LICENSOR that the Licensed Product is made and displayed in
accordance with this Agreement, including, but not limited to, laboratory
testing.
g. In the event that the quality standards and/or trademark and
copyright usage and notice requirements hereinabove referred to are not met,
then, upon receipt of written notice from LICENSOR, LICENSEE shall
immediately discontinue any and all activities with respect to the Licensed
Product in connection with which the said quality standards and/or trademark
and copyright usage and notice requirements have not been met.
6. ADVERTISING/USE OF THE TRADEMARK
a. LICENSEE will adopt and carry out its own marketing and advertising
4
<PAGE>
program with respect to the Licensed Product. LICENSEE agrees that
LICENSEE'S advertising, public relations and sales promotion activities
will be subject to prior consultation with, and written approval by,
LICENSOR as to the general form and content only with respect to the
use of the Trademarks and other notices.
b. Before publication of any advertisement or promotion, LICENSEE shall
submit every element of the advertisement or promotion to LICENSOR for
written approval hereunder using the "Advertising Approval Form"
(Exhibit "B-3").
c. LICENSEE agrees that upon request of LICENSOR, it shall loan a
reasonable number of products to LICENSOR and its other licensees for
advertising and promotional purposes.
d. LICENSOR may purchase the Licensed Product from LICENSEE at the cost of
manufacture. No royalty shall be payable to LICENSOR.
e. Advertising directed to the public may not feature the name of
LICENSEE. If approved, advertising directed to the trade may feature
the following: BHPC Marketing, Inc. under Trademark License to (Name of
LICENSEE). Advertising expenditures by LICENSEE are not credited
toward the Advertising Fund provision of Subparagraph 8a (ii).
f. LICENSEE agrees that the Trademark will appear on each Licensed Product
and its packaging, if any. LICENSEE shall use only those tags, labels
and packaging materials which have been previously approved in writing.
All tags, labels and packaging materials bearing the Trademark must be
submitted on the "Advertising Approval Form" (Exhibit "B-3").
g. LICENSEE shall affix such legends, markings and notices on all License
Product as are required by LICENSOR and the law.
h. LICENSEE must submit for approval to LICENSOR a printer's proof of each
item before final printing.
7. DURATION OF THE AGREEMENT
a. This Agreement shall continue for three (3) consecutive Contract Years
in respective durations as set forth in item 3 of the attached License
Agreement Detail Schedule (hereinafter collectively the "Initial Term")
and shall then expire unless sooner terminated in accordance with the
5
<PAGE>
terms and conditions set forth herein.
b. If LICENSEE fully performs according to all of the terms and conditions
hereof including, without limitation, the terms and conditions
specifically enumerated below, LICENSEE shall have three (3)
consecutive options to renew this Agreement for three (3) consecutive
contract periods, i.e. Contract Years, of one (1) year each
(hereinafter collectively the "Renewal Term"). In order to exercise
each individual option, LICENSEE must provide LICENSOR with written
notice of its intention to exercise each respective option and such
written notice must be received by LICENSOR no later than one hundred
eighty (180) days prior to the expiration of the Initial Term or
immediately preceding Contract Year of the Renewal Term. In the event
that LICENSEE fails to exercise any of the aforementioned options in a
timely manner, the license granted herein to LICENSEE will thereafter
become non-exclusive for the remaining term of this Agreement and
LICENSOR may enter into such arrangements as it deems appropriate with
respect to the licensing of the Trademarks and the Licensed Product.
Except as specifically set forth herein to the contrary, LICENSEE's
performance in the Renewal Term shall be pursuant to the same terms and
conditions recited herein for the Initial Term.
8. ROYALTIES
a. "Royalty", as used in this Agreement, shall consist of the sum of the
following:
(i) LICENSEE agrees to pay LICENSOR, during the term of this
Agreement, a Royalty in an amount equal to six percent (6%) of the Net
Shipments by LICENSEE for Licensed Product sold under the Trademarks;
and (ii) LICENSEE agrees to pay LICENSOR during the term of this
Agreement, an amount equal to two percent (2%) of the Net Shipments by
LICENSEE for Licensed Product sold under the Trademarks to an
Advertising Fund to be expended by, and at the sole discretion of,
LICENSOR for advertising expenditures, public relations, and
institutional brand name promotion. LICENSOR will provide LICENSEE
with a description of its advertising plan as available.
6
<PAGE>
b. LICENSEE shall pay to LICENSOR, concurrently with the execution of this
Agreement with respect to the First Contract Year, an Advance Royalty
Payment equal to the amount set forth in item 5 of the attached License
Agreement Detail Schedule, no part of which shall be refundable. The
Advance Royalty Payment shall not reduce or offset the payment of any
Guaranteed Annual Minimum Royalty hereunder. However, the Advance
Royalty Payment may be applied to reduce and offset the payment of any
royalty due hereunder in excess of the Guaranteed Annual Minimum
Royalty.
c. Promotional Merchandise shall be defined as regular line Licensed
Product which is sold as an incentive at a discounted price. In the
event LICENSEE is desirous of increasing Promotional Merchandise
shipping beyond fifteen percent (15%) of total production of Licensed
Product in any Contract Year, LICENSEE must first receive LICENSOR's
prior written approval thereof on a case-by-case basis.
d. Off-priced Merchandise shall be defined as either close-out Licensed
Product or substandard Licensed Product. In the event LICENSEE is
desirous of increasing Off-priced Merchandise shipping beyond fifteen
percent (15%) of total production of Licensed Product in any Contract
Year, LICENSEE must receive LICENSOR's prior written approval thereof on
a case-by-case basis. In no event will LICENSEE offer for sale, or
distribute any substandard Licensed Product unless the Licensed Product
are clearly identified to the consuming public as being "seconds".
e. LICENSEE shall keep complete, detailed and accurate records of all
Promotional and Off-priced Merchandise sales, which records shall be
available to LICENSOR for inspection during regular business hours.
f. For the purposes of this Agreement, LICENSEE agrees that aggregate
returns of the Licensed Product credited during any Contract Year
hereunder shall not exceed three percent (3%) of the gross dollar
amount invoiced by LICENSEE for all the Licensed Product sold during
the respective Contract Year (the "Returns Limitation"). In the event
that aggregate returns of the Licensed Product exceed the Returns
Limitation, all returns of the Licensed Product in excess of the
7
<PAGE>
Returns Limitation shall not be deducted from the gross dollar amount
of sales of the Licensed Product in determining Net Shipments hereunder.
9. PAYMENT
a. The payments provided for in Paragraph 8, above, shall be based upon
all Net Shipments in each calendar month (the "Royalty Period") and
shall be due and payable by LICENSEE to LICENSOR by the twentieth
(20th) day of the next following calendar month. At the time of each
such payment, LICENSEE shall provide LICENSOR with a complete,
accurate, written statement of its Net Shipments of Licensed Product
for the Royalty Period. The written statement of Net Shipments of
Licensed Product (a copy of which is attached hereto as Exhibit "B-4")
must be certified as accurate by LICENSEE and will include, but will
not be limited to, information as to: each respective invoice number
(in sequential order inclusive of all "voided" invoices), invoice date,
customer name or number, gross dollar amount invoiced, terms of any
customary trade allowances (as a percentage and in aggregate dollars),
actually credited returns (in aggregate dollars), and other deductions
taken against the gross dollar amount invoiced, and any such other
further information as LICENSOR may from time to time request. Such
statements shall be furnished to LICENSOR whether or not any Licensed
Product has been shipped, distributed and/or sold during the preceding
Royalty Period and whether or not any monies are then due LICENSOR.
b. LICENSEE's statements and all amounts payable to LICENSOR by LICENSEE
shall be submitted to:
BHPC Marketing, Inc.
620 West 135th Street
Gardena, California 90248
Attn: Royalty Receivables Department
c. The receipt and/or acceptance by LICENSOR of any of the statements or
reports furnished or payments paid hereunder to LICENSOR (or the cashing
of any checks paid hereunder) shall not preclude LICENSOR from
questioning the correctness thereof at any time and, in the event that
any inconsistencies or mistakes are discovered in such statements,
8
<PAGE>
reports, or payments, they shall immediately be rectified by LICENSEE
and the appropriate payment shall immediately be made by LICENSEE.
d. All payments made hereunder shall be in the United States currency or
checks drawn on a United States bank.
e. Time is of the essence with respect to all payments to be made
hereunder by LICENSEE. In the event LICENSEE shall fail to pay any sum
required to be paid by this Agreement after the due date thereof, the
amount owing shall thereupon bear interest at the maximum annual
percentage rate allowable by law from the due date until paid.
10. GUARANTEES
a. Guaranteed Annual Royalty Payments - LICENSEE shall pay, for each
Contract Year during the term of this Agreement, beginning with the
First Contract Year, the respective Guaranteed Annual Royalty Payments
set forth in item 7 of the attached License Agreement Detail Schedule.
b. Guaranteed Target Net Shipments - If, in any Contract Year, LICENSEE
does not achieve the Guaranteed Target Net Shipment Volume figure set
forth in item 7 of the attached License Agreement Detail Schedule
LICENSOR may, at its option, immediately thereafter terminate this
Agreement in writing.
c. Guaranteed Net Shipments - If, in any Contract Year, LICENSEE does not
achieve the Guaranteed Net Shipments figure set forth in item 7 of the
attached License Agreement Detail Schedule LICENSOR may, at its option,
immediately thereafter terminate this Agreement in writing.
d. Guaranteed Monthly Royalty Payments - In order to ensure that the above
guarantees are met, LICENSEE shall pay to LICENSOR each month pursuant
to Paragraphs 8 and 9, above, the respective Guaranteed Monthly Royalty
Payments set forth in item 7 of the attached License Agreement Detail
Schedule for each Contract Year during the Term of this Agreement. In
the event that any actual Monthly Royalty Payment calculated in
accordance with Paragraph 8, above, is less than the applicable
Guaranteed Monthly Royalty Payment, LICENSEE shall pay to LICENSOR the
Guaranteed Monthly Royalty Payment in accordance with Paragraph 9. In
the event that any actual Monthly Royalty Payment calculated in
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<PAGE>
accordance with Paragraph 9 exceeds the Guaranteed Monthly Royalty
payment, the actual Royalty payment shall be paid to LICENSOR in
accordance with paragraph 9.
e. In the event of the termination of this entire Agreement, LICENSEE is
obligated to pay the balance of the Guaranteed Annual Royalty Payments
due for the remainder of the Contract Years, and payment in full shall
be due and payable within thirty (30) days of said termination.
11. EXPLOITATION BY LICENSEE
a. LICENSEE agrees to commence, and diligently continue thereafter, the
distribution, shipment and sale of each category of the Licensed
Product in commercially reasonable quantities in the Territory on or
before the respective distribution date set forth next to each category
of the Licensed Product described in item 2 of the attached License
Agreement Detail Schedule.
b. LICENSEE agrees that the Licensed Product will be sold, shipped and
distributed outright, at a competitive price that does not exceed the
price generally and customarily charged the trade by LICENSEE, and not
on an approval, tie-in, consignment, or "sale or return" basis.
LICENSEE further agrees that the Licensed Product will only be sold to
retailers, jobbers, wholesalers and distributors for sale, shipment and
distribution to retail stores and merchants commonly considered and
referred to in the industry as fine department stores and better
specialty stores and/or to fine department stores and better specialty
stores for sale, shipment and distribution direct to the public.
Notwithstanding the foregoing to the contrary, LICENSOR agrees that the
Licensed Product may also be sold to those retail stores commonly
considered and referred to in the industry as "Warehouse Clubs" (such
as Price Club, Sam's Warehouse, Pace, Costco, B.J.'s) so long as the
total Net Shipment volume of Licensed Product sold to such "Warehouse
Clubs" does not exceed twenty five percent (25%) of LICENSEE's annual
Net Shipment volume. Any sale of Licensed Product exceeding twenty
five percent (25%) of LICENSEE's Net Shipment volume will be deemed a
material breach of this Agreement and LICENSOR will have the right
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<PAGE>
thereafter to terminate this Agreement. The manner and scope of the
distribution of the Licensed Product, availability, variety, fabrication,
colors and sizes are critical to the promotion, enhancement and
protection of the Trademarks and their associated goodwill. LICENSEE
acknowledges that it has no right to and shall not sell or distribute the
Licensed Product to any diverter or to anyone whose sales or distribution
are or will be made for publicity, promotional or tie-in purposes,
combination sales, premiums, giveaways, direct mail, electronic shopping,
vending machines or similar methods of merchandising, or whose business
methods are or are reported to be questionable.
c. LICENSEE further agrees to sell to LICENSOR, if requested to do so by
LICENSOR, any product manufactured or sold by LICENSEE, from LICENSEE's
regular production at LICENSEE's customary net selling price.
12. BOOKS, RECORDS, AND RIGHTS TO AUDIT
a. LICENSEE agrees that it shall keep complete and accurate written books of
accounts and records, maintained in accordance with generally accepted
accounting principles consistently applied, at its principal place of
business, covering all Licensed Product manufactured, distributed, and
sold under the Trademarks. LICENSEE shall provide LICENSOR with the
following:
(i) an audited, set of financial statements (i.e., balance sheet, income
statement, and sources and uses of funds) to be delivered to LICENSOR
within ninety (90) days after the end of each fiscal year of LICENSEE;
and
(ii) an interim set of financial statements to be delivered to LICENSOR
within thirty (30) days following the end of the first six (6) months of
each fiscal year of LICENSEE. All such financial information must be
prepared by an independent certified public accountant, approved in
writing by LICENSOR, having no interest whatsoever in LICENSEE's business
other than that of an independent certified public accountant.
b. LICENSOR and its duly authorized representatives shall have the right, at
all reasonable hours of the day, with reasonable notice to
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<PAGE>
audit LICENSEE's books of account and records and all other documents
and material in the possession or under the control of LICENSEE with
respect to the subject matter and terms of this Agreement and to make
copies and extracts thereof. Within ten (10) days following any written
request by LICENSOR, LICENSEE will deliver copies and extracts of any
books of account, records, documents, materials, and information as are
requested by LICENSOR inclusive of, but not limited to: financial
statements, general ledger detail and supporting journals, documents,
sales and credit memo registers, financial projections and wholesale
price listings. All books of account and records of LICENSEE covering
all transactions relating to this Agreement shall be retained by
LICENSEE for at least three (3) years after the expiration or
termination of this Agreement for inspection by LICENSOR. In the event
that any such audit reveals an underpayment by LICENSEE, LICENSEE shall
immediately remit payment to LICENSOR in the amount of such underpayment
plus interest calculated at the maximum annual percentage rate allowable
by law, compounded daily, calculated from the date such payment was
actually due until the date when such payment is, in fact, actually
made. In the event that any material underpayment is revealed by any
such audit, LICENSEE shall pay all reasonable costs and expenses of the
examination and audit, including any reasonable travel expenses incurred
by LICENSOR in making such examination, and costs and expenses of any
accountants or other persons retained by LICENSOR to examine, audit, or
analyze LICENSEE's records. A "material underpayment" is hereby defined
as an underpayment of five percent (5%) or more.
13. INSURANCE
LICENSEE shall, throughout the term of this Agreement, obtain and
maintain at its own cost and expense from a qualified insurance company
acceptable to LICENSOR, a policy or policies of insurance, insuring
against those risks customarily insured against under broad form
comprehensive general liability policies arising out of any defects or
failure to perform, alleged or otherwise, of the Licensed Product or any
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<PAGE>
use thereof, including "product liability", "completed operations",
"advertisers' liability insurance", etc and any liability of LICENSEE
arising out of Paragraph 20, below. All such policies of insurance
shall have endorsements or coverage with combined single limits of not
less than $1,000,000 with deductibles reasonably acceptable to LICENSOR
and shall name LICENSOR, and those designated by LICENSOR, as additional
insureds thereunder. Such policies of insurance shall contain:
a. severability of interest;
b. cross liability; and
c. endorsement stating: "Such insurance as is afforded by this policy for
the benefit of BHPC Marketing, Inc. shall be primary as respects any
liability of claims arising out of (LICENSEE's) operation, and any
insurance carried by BHPC Marketing, Inc. shall be excess and
non-contributory."
The policies shall provide for ten (10) days notice to LICENSOR from the
insurer by Registered or Certified Mail, return receipt requested, in the
event of any modification, cancellation or termination. LICENSEE agrees
to furnish LICENSOR a certificate of insurance or copy of the policies
evidencing same within thirty (30) days after execution of this Agreement
and from time to time as requested by LICENSOR within ten (10) days of
LICENSOR's request; in no event, shall LICENSEE manufacture, offer for
sale, sell, advertise, promote, ship and/or distribute the Licensed
Product prior to receipt by LICENSOR of such evidence of insurance. If
LICENSEE fails to procure, maintain and/or pay for at the times and for
the durations specified in this Agreement, the insurance required
hereunder, or fails to carry insurance required by any governmental
requirement, LICENSOR may (but without obligation to do so), and without
notice to LICENSEE, perform such obligations on behalf of LICENSEE, and
the cost thereof, together with interest thereon at the maximum rate
allowed by law, shall immediately become due and payable to LICENSOR.
14. USE, DISPLAY, AND SALE INVOLVING THE TRADEMARKS AND COPYRIGHT
A. In order to protect the Trademarks and LICENSOR's reputation, LICENSEE
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will manufacture, distribute and sell the Licensed Product in compliance
with all applicable laws. In no event shall LICENSEE, or any affiliated
entity, manufacture or import, distribute or sell any products using any
trademark or other designation containing the words "BEVERLY HILLS", or
"POLO", or depicting any equestrian figure, without the written consent
of LICENSOR.
b. It is specifically understood and agreed that LICENSEE may engage in the
manufacture and distribution similar to or competitive with the Licensed
Product for its own account or pursuant to license agreements with
others, provided, however, neither LICENSEE nor any employee,
shareholder, officer, director, parent, subsidiary or affiliate of
LICENSEE shall manufacture or import, distribute or sell merchandise
which has a closely resembling similarity to the Licensed Product.
LICENSEE further agrees not to use a closely resembling similarity of any
fabric, graphic, style or design supplied by LICENSOR.
c. LICENSEE shall exercise all reasonable efforts, within the limits
allowed by the laws and governmental regulations in effect in the
Territory, to ensure that its merchandising and sale of the Licensed
Product shall conform to policies and methods suitable for goods of high
quality sold under a prestigious label of worldwide repute.
15. OWNERSHIP OF THE TRADEMARKS
a. LICENSEE agrees that nothing in this Agreement shall give LICENSEE any
right, title or interest in the Trademarks other than the license to use
the Trademarks on the Licensed Product; that such marks are the sole
property of LICENSOR; that all such uses by LICENSEE of such marks shall
inure only to the benefit of LICENSOR; and it being understood that all
right, title and interest relating thereto are expressly reserved by the
LICENSOR except for the rights being licensed hereunder.
b. LICENSEE recognizes that LICENSOR may already have entered into, and may
in the future enter into, license agreements with respect to the
Trademarks for products which fall into the same general product category
as the Licensed Product, but which are not sold to the same retail store
departments as the Licensed Product, and which may be
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similar to, but not the same as, the Licensed Product in terms of
function, or otherwise. LICENSEE hereby expressly concedes that the
existence of said licenses does not and shall not constitute a breach of
this Agreement by the LICENSOR.
c. LICENSEE agrees and acknowledges that if it has obtained or obtains in the
future, in any country, any right, title, or interest in any marks which
are confusingly similar to the Trademark, (including the filing of any
application for trademarks or service mark registration or the obtaining
of any issued registration), that LICENSEE has acted or will act as an
agent and for the benefit of LICENSOR. LICENSEE further agrees to execute
any and all instruments deemed by LICENSOR, its attorneys or
representatives, to be necessary to transfer such right, title, or
interest to LICENSOR to protect LICENSOR's right, title and interest in
such marks.
d. LICENSEE agrees not to raise or cause to be raised to third parties,
either during the term of this Agreement or after its expiration or
termination, on any grounds whatsoever, any questions concerning the
validity of the Trademarks or LICENSOR's rights therein, or any other
trademark or service mark owned by LICENSOR.
16. COMPLIANCE WITH LIMITATIONS ON USE OF TRADEMARKS
LICENSEE agrees that the Licensed Product, and all labels, hang tags,
packaging and other trade dress, used in connection with such Licensed
Products, shall not violate any restrictions on use or display of the
marks as provided in that Settlement Agreement and Consent Judgement with
Polo Fashions, Inc., a copy of which is attached hereto as Exhibit "C".
Nothing contained in this Agreement makes Polo Fashions, Inc., or any
related company, a third party beneficiary of this Agreement.
17. THIRD PARTY INFRINGEMENT
LICENSEE agrees to notify LICENSOR in writing of any infringements or
limitations by third parties of the Trademarks, the Licensed Product
and/or the Promotional and Packaging Material which may come to
LICENSEE's attention. In the event that a third party should infringe any
of the Trademark rights or any other rights under this Agreement in
15
<PAGE>
the Territory, LICENSOR shall have the sole right to determine whether
any action shall be taken on the account of such infringement, and
LICENSEE shall not take any action on account of any infringement without
first obtaining written consent of LICENSOR, such consent not to be
unreasonably withheld.
18. ASSIGNABILITY AND MANUFACTURING
a. The license granted hereunder is, and shall remain, personal to LICENSEE
and shall not be granted, assigned, or otherwise conveyed by any act of
LICENSEE or by operation of law. For the purposes of this Paragraph 18,
any sale or transfer of any ownership interest in LICENSEE shall
constitute a prohibited assignment of the license granted hereunder.
LICENSEE shall have no right to grant any sublicenses without LICENSOR's
prior express written approval. Any attempt on the part of LICENSEE to
arrange to sublicense or assign to third parties its rights under this
Agreement, shall constitute a material breach of this Agreement.
b. LICENSOR shall have the right to assign its rights and obligations under
this Agreement without the approval of LICENSEE.
19. NO AGENCY, JOINT VENTURE, PARTNERSHIP
The parties hereby agree that no agency, joint venture, or partnership is
created by this Agreement, and that neither party shall incur any
obligation in the name of the other without the other's prior written
consent.
20. INDEMNIFICATION
Except for claims of trademark infringement or similar claims, LICENSEE
will indemnify, defend and hold LICENSOR harmless from any and all
liabilities, claims, obligations, suits, judgments and expenses
whatsoever, including court costs and attorney's fees, which LICENSOR may
incur or which may be asserted against LICENSOR and which arise or occur
with respect to the operation of LICENSEE's business as it relates to the
design, import, manufacture, distribution, promotion, advertisement, and
sale of the Licensed Product under the Trademarks or with respect to this
Agreement and LICENSEE's performance hereunder; and
16
<PAGE>
further provided that LICENSOR shall have the right to undertake and conduct
the defense of any cause of action so brought and handle any such claim or
demand. Such indemnity shall extend to liabilities and claims incurred after
the expiration or termination of this Agreement but which are based on acts
or events whose proximate cause arose during this Agreement.
21. TERMINATION
a. In addition to the termination rights provided elsewhere in this
Agreement, LICENSOR will have the right to terminate this Agreement in the
event that:
(i) LICENSEE violates or fails to perform any agreement, obligation,
term, or condition of this Agreement and that violation or failure to perform
is not cured within ten (10) days following written notice thereof; or
(ii) LICENSEE becomes insolvent, files a voluntary petition in
bankruptcy, a petition is filed against LICENSEE to have LICENSEE adjudicated
as bankrupt and same is not dismissed in sixty (60) days, LICENSEE enters
into any composition with the creditors of LICENSEE or becomes subject to
reorganization under the Bankruptcy Code. Provided, however, such
termination shall not relieve LICENSEE of the obligation to pay any Royalty
accrued up to the effective date of termination, nor prejudice any cause of
action or claim of LICENSOR accrued, or to accrue, on account of the breach
or default of LICENSEE.
b. Notwithstanding the provisions of sub-paragraph 21a.(i) to the
contrary, in the event that LICENSEE violates this Agreement or fails to
perform any agreement, obligation, term, or condition of this Agreement for
the third (3rd) time, for any reason, LICENSEE shall forfeit the right to
cure such violation or failure to perform, and this Agreement will terminate
upon the giving of the written notice thereof.
22. EFFECT OF EXPIRATION OR TERMINATION
a. Upon expiration or termination of this Agreement, all rights and
licenses granted to LICENSEE hereunder shall immediately expire, shall
forthwith revert to LICENSOR, and LICENSEE shall immediately cease and desist
<PAGE>
from using the Trademarks and any technical information supplied by LICENSOR
to LICENSEE hereunder. To this end, LICENSEE will be deemed to have
automatically assigned to LICENSOR, upon such expiration or termination, the
Trademarks, equities, good will, titles, and other rights in or to the
Licensed Product and all adaptations, compilations, modifications,
translations and versions thereof, and all other trademarks used in
connection therewith which have been or may be obtained by LICENSEE or which
may vest in LICENSEE and which have not already been assigned to LICENSOR.
LICENSOR may thereafter, in its sole discretion enter into such arrangements
as it deems desirable, with any other party, for the manufacture, promotion
and sale of the Licensed Product in the Territory. Any Licensed Product,
finished or in progress, shall be disposed of as follows: (A) Any finished
Licensed Product in LICENSEE's possession unsold on the date of the
expiration of this Agreement may, subject to payment of the Royalty payable
to LICENSOR, be sold by LICENSEE, pursuant to a plan to be approved by
LICENSOR, for a period of one hundred twenty (120) days after expiration
hereof. Any royalty paid by LICENSEE to LICENSOR during the aforementioned
one hundred twenty (120) day period is separate and apart from the Royalty
generated during the term of the Agreement and such Royalty is not to be
applied to the Guaranteed Annual Royalty Payments as outlined in Subparagraph
10b. and column (C) of item 7 of the attached License Agreement Detail
Schedule. All inventory remaining after such one hundred twenty (120) day
period shall be destroyed or stripped of all imprints, lettering, mentions or
other reproductions of or references to the Trademarks and related logos; and
all molds, patterns, transfers, and other property bearing the Trademarks of
relating thereto shall be destroyed; all under the supervision of LICENSOR.
LICENSOR shall have the first right to purchase said Licensed Product at the
direct cost price (comprised of material and direct labor expenses as set
forth in LICENSEE's books and records, plus five percent (5%) for overhead)
upon expiration or termination of this Agreement. (B) Any finished Licensed
Product in LICENSEE's possession unsold on
<PAGE>
the date of termination of this Agreement, and all molds, patterns,
transfers, and other property bearing the Trademarks or relating thereto,
shall be destroyed by LICENSEE within thirty (30) days following the
termination of this Agreement; further, LICENSEE agrees, on or before the
aforementioned date, to provide LICENSOR with a certificate signed by
LICENSEE's Chief Executive Officer certifying under penalty of perjury that
such inventory, molds, patterns, transfers, and other property have been
destroyed. LICENSEE shall, within thirty (30) days after expiration or
termination of this Agreement as the case may be, furnish LICENSOR with a
full and detailed written statement of the Licensed Product in its inventory
or the Licensed Product in progress. LICENSOR shall have the option of
conducting a physical inventory at the time of expiration or termination
and/or at a later date in order to ascertain or verify such statement. In the
event that the LICENSEE refuses to permit LICENSOR to conduct such physical
inventory, LICENSEE shall forfeit its rights hereunder to dispose of such
inventory. In addition to such forfeiture, LICENSOR shall have recourse to
all other remedies available to it.
b. Upon the termination of this Agreement, LICENSEE shall, within ten (10)
days following termination, give written notice to LICENSOR of the:
(i) Licensed Product, by style, in its possession or under its control;
(ii) location of the inventory of the Licensed Product;
(iii) amount of the work in process;
(iv) Licensed Product in transit; and
(v) name, address, and telephone number of each contractor, shipper and/or
sales representative.
c. LICENSEE shall accept no order, or undertake any new production, that
would be delivered after the date of expiration of this Agreement. Three (3)
months prior to the expiration of this Agreement, and monthly thereafter
until expiration, LICENSEE shall provide to LICENSOR an inventory, by style,
of all the Licensed Product in its possession or under its control, and all
work in process. Three (3) months prior to the expiration of this Agreement,
and weekly until expiration, LICENSEE
19
<PAGE>
shall provide LICENSOR with copies of all orders, invoices, bills of lading,
credit memoranda, and statements provided to LICENSEE's factor (if any).
LICENSEE shall be entitled to sell its inventory, of the Licensed Product
through and until the date of the expiration of this Agreement only if the
inventory, and all documents listed above, are delivered to LICENSOR in a
timely fashion.
d. LICENSEE shall deliver to LICENSOR, upon termination of this Agreement or
thirty (30) days prior to the expiration of this Agreement:
(i) the names, addresses, and telephone numbers of each supplier of any item
having the Trademarks and
(ii) all materials which reproduce the Trademarks on the Licensed Product
and/or Promotional and Packaging Material relating to the Licensed Product or
shall give LICENSOR satisfactory evidence of their destruction. LICENSEE
shall be responsible to LICENSOR for any damages caused by the unauthorized
use by LICENSEE or by others of such reproduction materials which are not
turned over to LICENSOR.
23. MODIFICATION; WAIVER
No modification of any of the terms or provisions of this Agreement shall be
valid unless contained in a writing signed by the parties. No waiver by
either party of a breach or a default hereunder shall be deemed a waiver by
such party of a subsequent breach or default of a like or similar nature.
Resort by LICENSOR to any remedies referred to in this Agreement or arising
by reason of a breach of this Agreement by LICENSEE shall not be construed as
a waiver by LICENSOR of its right to resort to any and all other legal and
equitable remedies available to LICENSOR.
24. FORCE MAJEURE
Neither LICENSOR nor LICENSEE shall be liable to each other or be deemed in
breach or default of any obligations contained in this Agreement, for any
delay or failure to perform due to causes beyond its reasonable control,
including but not limited to delay due to the elements, acts of the United
States Government, acts of a foreign government, acts of God, fires,
floods, epidemics, embargoes, riots,
20
<PAGE>
strikes, any of the foregoing events being referred to as a "Force
Majeure" condition. In such event, dates for performance shall be
extended for the period of delay resulting from the Force Majeure
condition. The party affected by a Force Majeure condition shall, as
soon as practicable, notify the other party of the nature and extent of
such condition.
25. NOTICE
All notices, approvals, consents, requests, demands, or other
communications to be given to either party in writing may be effected by
personal delivery or by depositing the same in the United States mail,
certified and return receipt requested, postage prepaid. Such
communication shall be addressed to LICENSEE and LICENSOR at their
respective addresses as set forth in the preamble above.
26. CONSTRUCTION; VENUE
This Agreement shall be construed in accordance with the laws of the
State of California, U.S.A., and the parties agree that it is executed
and delivered in that state, and any claims arising hereunder shall, at
LICENSOR's election, be prosecuted in the appropriate Court of the State
of California in Los Angeles County or any Federal District Court
therein.
27. ENTIRE AGREEMENT
This Agreement, contains the entire understanding of the parties and
there are no representations, warranties, promises, or undertakings
other than those contained herein. This Agreement supersedes and cancels
all previous agreements between the parties hereto.
28. CONFIDENTIAL INFORMATION
LICENSOR and LICENSEE agree (and shall instruct their partners,
officers, directors, designers, and other persons to whom disclosure is
made) to keep strictly confidential all designs, manufacturing
instructions, and other information relating to the Licensed Product
that are not otherwise available to the public, whether furnished by one
to the other or in any way acquired by either party; and the same shall
be used by either party solely under this Agreement and for the purpose
21
<PAGE>
of marketing of the Licensed Product.
29. EQUITABLE RELIEF
LICENSEE acknowledges and agrees that:
(i) LICENSEE'S failure to meet the quality standards herein;
(ii) LICENSEE'S failure: (a) to use the Trademarks, or (b) to
manufacture, offer for sale, sell, advertise, promote, ship or
distribute the Licensed Product, both in accordance with the provisions
of this Agreement; or
(iii) any unauthorized use or disclosure of confidential information of
LICENSOR, cannot be compensated adequately with a remedy at law and will
cause irreparable damage to LICENSOR. Accordingly, the parties agree
that LICENSOR may seek from any court having jurisdiction, such
equitable relief by way of temporary restraining orders, permanent
injunctions or otherwise as is available to compel the discontinuance of
such conduct. LICENSEE agrees that any court of general jurisdiction in
Los Angeles County or any Federal District Court therein shall have
jurisdiction of such claim.
30. ATTORNEYS' FEES
In the event any legal action becomes necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled, in
addition to its court costs, to such reasonable attorneys' fees as shall
be fixed by a court of competent jurisdiction.
31. BINDING EFFECT
This Agreement shall be binding on the parties, and their successors and
assigns.
32. SURVIVAL OF THE RIGHTS
Notwithstanding anything to the contrary contained herein, such
obligations which remain executory after expiration of the term or
termination of this Agreement shall remain in full force and effect
until discharged by performance and such rights as pertain thereto shall
remain in force until their expiration.
33. SEVERABILITY
In the event that any term or provision of this Agreement shall for any
22
<PAGE>
reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other term or
provision and this Agreement shall be interpreted and construed as if
such term or provision, to the extent the same shall have been held to
be invalid, illegal or unenforceable, had never been contained herein.
34. CAPTIONS
The captions used in connection with the paragraphs and subparagraphs of
this Agreement are inserted only for purpose of reference. Such
captions shall not be deemed to govern, limit, modify or in any other
manner affect the scope, meaning or intent of the provisions of this
Agreement or any part thereof nor shall such captions otherwise be given
any legal effect.
35. INCORPORATION OF EXHIBITS
LICENSOR and LICENSEE acknowledge and agree that the provisions of
Exhibits "A" through "C" attached hereto (the "Exhibits") are integral
to this Agreement and that the provisions of the Exhibits are all hereby
incorporated herein and made a part hereof as if set out in full in this
Agreement.
IN WITNESS WHEREOF, the parties hereto agree that this Agreement shall
take effect as of the date and year first above written above.
LICENSOR: LICENSEE:
BHPC MARKETING, INC., PAIGE II INDUSTRIES, INC.
a California Corporation a California Corporation
BY: /s/ Don Garrison BY: /s/ Howard W. Regen
-------------------------- --------------------------
Don Garrison Howard W. Regen
Licensing Director President
Date: 3/18/93 Date: 3/13/93
------------------------ ------------------------
23
<PAGE>
LICENSE AGREEMENT DETAIL SCHEDULE
1. Definition of Territory: The United States, its territories and
possessions
2. Definition of Licensed Product (by category): DISTRIBUTION DATE:
Missy, large size and petite coordinated August 1, 1993
sportswear
<TABLE>
<CAPTION>
3. Initial Term: FROM TO
<S> <C> <C>
First Contract Year: June 1, 1993 November 30, 1994
Second Contract Year: December 1, 1994 November 30, 1995
Third Contract Year: December 1, 1994 November 30, 1996
</TABLE>
4. Renewal Term:
<TABLE>
<CAPTION>
<S> <C> <C>
Fourth Contract Year (if any): December 1, 1996 November 30, 1997
Fifth Contract Year (if any): December 1, 1997 November 30, 1998
Sixth Contract Year (if any): December 1, 1998 November 30, 1999
</TABLE>
5. Advance Royalty Payment:
First Contract Year: None ($00)
6. Royalty Rate:
6%
Plus 2% of Net Sales for Advertising Royalty
7. Guarantees:
<TABLE>
<CAPTION>
(A) (B) (C) (D)
<S> <C> <C> <C> <C>
Guaranteed Guaranteed Guaranteed
Target Guaranteed Annual Monthly
Net Net Royalty Royalty
Shipments Shipments Payments Payments
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
First Contract Year $1,000,000 $1,000,000 $ 80,000 $ 4,444.44
Second Contract Year $1,500,000 $1,500,000 $120,000 $10,000
Third Contract Year $2,000,000 $2,000,000 $160,000 $13,333.33
</TABLE>
INITIALS
LICENSOR: ----------
LICENSEE: ----------
<PAGE>
SECTION (I)
NET SHIPMENT STATEMENT
----------------------
The written statement of Net Shipments of Licensed Product (a copy of which
is attached hereto as Exhibit "F") referred to in Paragraph 9a must be
certified as accurate by LICENSEE and will include, but will not be limited
to, information as to: each respective invoice number (in sequential order
inclusive of all "voided" invoices), invoice date, customer name or number,
gross dollar amount invoiced, terms of any customary trade allowances (as a
percentage and in aggregate dollars), actually credited returns (in aggregate
dollars), and other deductions taken against the gross dollar amount
invoiced, and any such other further information as LICENSOR may from time to
time request. Such statements shall be furnished to LICENSOR whether or not
any Licensed Product has been shipped, distributed and/or sold during the
preceding Royalty Period and whether or not any monies are then due LICENSOR.
SECTION (II)
BOOKS, RECORDS, AND RIGHTS TO AUDIT
-----------------------------------
Within ten (10) days following any written request by LICENSOR, LICENSEE will
deliver copies and extracts of any books of account, records, documents,
materials, and information as are requested by LICENSOR inclusive of, but not
limited to: financial statements, general ledger detail and supporting
journals, documents, sales and credit memo registers, financial projections
and wholesale price listings. All books of account and records of LICENSEE
covering all transactions relating to this Agreement shall be retained by
LICENSEE for at least three (3) years after the expiration or termination of
this Agreement for inspection by LICENSOR.
EXHIBIT "C"
Page 1 of 3
<PAGE>
SECTION (III)
INSURANCE REQUIREMENTS
----------------------
All such policies of insurance shall have endorsements or coverage with
combined single limits of not less than $1,000,000 with deductibles
reasonably acceptable to LICENSOR and shall name LICENSOR, and those
designated by LICENSOR, as additional insureds thereunder. Such policies of
insurance shall contain:
a. severability of interest;
b. cross liability; and
c. endorsement stating: "Such insurance as if afforded by this policy for
the benefit of BHPC Marketing, Inc. shall be primary as respects any
liability of claims arising out of (LICENSEE's) operation, and any insurance
carried by BHPC Marketing, Inc. shall be excess and non-contributory."
The policies shall provide for ten (10) days notice to LICENSOR from the
insurer by Registered or Certified Mail, return receipt requested, in the
event of any modification, cancellation or termination. LICENSEE agrees to
furnish LICENSOR a certificate of insurance or copy of the policies
evidencing same within thirty (30) days after execution of this Agreement and
from time to time as requested by LICENSOR within ten (10) days of LICENSOR'S
request; in no event, shall LICENSEE manufacture, offer for sale, sell,
advertise, promote, ship and/or distribute the Licensed Product prior to
receipt by LICENSOR of such evidence of insurance.
SECTION (IV)
DISPOSAL OF INVENTORY ON EXPIRATION OR TERMINATION
--------------------------------------------------
(A) Any finished Licensed Product in LICENSEE's possession unsold on the
date of the expiration of this Agreement may, subject to payment of the
Royalty payable to LICENSOR, be sold by LICENSEE, pursuant to a plan to be
approved by LICENSOR, for a period of one hundred twenty (120) days after
expiration hereof. Any Royalty paid by LICENSEE to LICENSOR during the
aforementioned one hundred twenty (120) day period is separate and apart
from the Royalty generated during the term of the Agreement and such Royalty
is not to be applied to the Guaranteed Annual Royalty Payments as outlined in
Subparagraph 10b. and column (C) of item 7 of the attached License Agreement
Detail Schedule. All inventory remaining after such one hundred twenty (120)
day period shall be destroyed or stripped of all imprints, lettering,
mentions or other reproductions of or references to the Trademarks and
related logos; and all molds, patterns, transfers, and other property bearing
the Trademarks of relating thereto shall be destroyed; all under the
supervision of LICENSOR.
EXHIBIT "C"
Page 2 of 3
<PAGE>
LICENSOR shall have the first right to purchase said Licensed Product at the
direct cost price (comprised of material and direct labor expenses as set
forth in LICENSEE's books and records, plus five percent (5%) for overhead)
upon expiration or termination of this Agreement.
(B) Any finished Licensed Product in LICENSEE'S possession unsold on the
date of termination of this Agreement, and all molds, patterns, transfers,
and other property bearing the Trademarks or relating thereto, shall be
destroyed by LICENSEE within thirty (30) days following the termination of
this agreement; further, LICENSEE agrees, on or before the aforementioned
date, to provide LICENSOR with a certificate signed by LICENSEE's Chief
Executive Officer certifying under penalty of perjury that such inventory,
molds, patterns, transfers, and other property have been destroyed.
EXHIBIT "C"
Page 3 of 3
<PAGE>
Int. Ch: 25
Prior U.S. Ch: 39
Reg. No. 1,429,311
United States Patent and Trademark Office Registered Feb. 17, 1997
- --------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
[LOGO]
EXHIBIT A
<PAGE>
PAGE ______ OF ____
DATE ______________
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
SAMPLE APPROVAL FORM
(FOR STYLE ONLY! SEE SWATCH APPROVAL FORM FOR FABRIC)
NAME OF LICENSEE ______________________________________________________________
LICENSED PRODUCT ______________________________________________________________
LICENSEE'S ADDRESS ____________________________________________________________
PLEASE PICTURE BELOW
SEASON ____________________
STYLE # ___________________
FABRICATION _______________
WHOLESALE PRICE ___________
COLORS ____________________
___________________________
SIZES _____________________
START TAKING ORDERS _________________________
END TAKING ORDERS ___________________________
START SHIP __________________________________
END SHIP ____________________________________
_____________________________ ___________________________
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
APPROVED ______________ DISAPPROVED __________
COMMENTS ______________________________________________________________________
_______________________________________________________________________________
DATE RETURNED TO LICENSEE ___________________________
BHPC MARKETING, INC., 620 West 135th Street, Gardena, CA 90248
EXHIBIT "B-1"
<PAGE>
PAGE ______ OF ____
DATE ______________
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
SWATCH AND/OR COLOR APPROVAL FORM
(FABRIC AND COLOR ONLY! SEE SAMPLE APPROVAL FORM FOR STYLE)
NAME OF LICENSEE ______________________________________________________________
LICENSED PRODUCT ______________________________________________________________
LICENSEE'S ADDRESS ____________________________________________________________
SEASON ________________________________________________________________________
LIST STYLE NUMBERS OF GARMENTS TO BE MANUFACTURED IN THIS FABRIC ______________
_______________________________________________________________________________
FABRIC # AND NAME OF SUPPLIER _________________________________________________
_______________________________________________________________________________
FABRIC CONTENT AND WEIGHT _____________________________________________________
PLEASE ATTACH 1 SET OF SWATCHES BELOW
APPROVED ______________ DISAPPROVED __________
COMMENTS ______________________________________________________________________
_______________________________________________________________________________
_____________________________ ___________________________
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
DATE RETURNED TO LICENSEE ___________________________
BHPC MARKETING, INC., 620 West 135th Street, Gardena, CA 90248
EXHIBIT "B-2"
<PAGE>
PAGE ______ OF ____
DATE ______________
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
ADVERTISING APPROVAL FORM
NAME OF LICENSEE ______________________________________________________________
LICENSED PRODUCT ______________________________________________________________
LICENSEE'S ADDRESS ____________________________________________________________
CIRCLE THE FORM OF ADVERTISING WHICH IS BEING SUBMITTED: LABEL, HANGTAG,
BUSINESS CARDS, BUSINESS FORMS, RADIO SPOT, TV, FULL PAGE AD, 1/2 PAGE AD,
PACKAGING, DISPLAY, OTHER.
PLACE ADVERTISING TO BE SUBMITTED HERE OF AFFIX
TO THIS PAGE
1) USE PERIOD From _________________________________ To _____________________
2) IF SUBMISSION IS LABELS OR HANGTAG, PLEASE GIVE NAME & ADDRESS OF
SUPPLIER ___________________________________________________________________
3) IF AD IS TO RUN IN A PUBLICATION: NAME OF PUBLICATION ______________________
APPROVED ______________ DISAPPROVED __________
COMMENTS ______________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_____________________________ ___________________________
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
DATE RETURNED TO LICENSEE ___________________________
BHPC MARKETING, INC., 620 West 135th Street, Gardena, CA 90248
EXHIBIT "B-3"
<PAGE>
[LOGO] STATEMENT OF ROYALTIES (DOM
FOR ____________________________TO _______________
(Month)
LICENSEE NAME
---------------------------
LICENSEE ADDRESS
------------------------
- -----------------------------------------
LICENSEE PRODUCT(S)
---------------------
<TABLE>
<CAPTION>
ITEM/ NUMBER OF NUMBER OF UNIT WHOLESALE GROSS LESS
STYLE NO UNITS SOLD UNITS RETURNED PRICE SALES ALLOWANCES*
-------- ---------- -------------- -------------- ----- -----------
<S> <C> <C> <C> <C> <C>
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
------- ---------- ----------- ---------- ----- ----------
TOTALS
---------- ----------- ---------- ----- ----------
</TABLE>
SEND STATEMENT TO: BHPC MARKETING, INC.
620 West 135th Street I CERTIFY THAT THE
Gardena, CA 90248
-------------------
* PLEASE SEE THE LICENSE AGREEMENT -------------------
FOR THE AMOUNT OF PERMISSIBLE DEDUCTIONS.
<PAGE>
SETTLEMENT AGREEMENT
This Settlement Agreement is made, in multiple originals, by and among
Polo Fashions, Inc., a corporation organized and existing under the laws of
the State of New York, having an office and place of business at 40 West 55th
Street, New York, New York ("PFI"); Beverly Hills Polo Club, Inc., a
corporation organized and existing under the laws of the State of California,
having an office and place of business at 1940 Lovelace Avenue, Los Angeles,
California ("BHPC"); Stephen Wessler, an individual residing at 19500 Valdez
Drive, Tarzana, California ("Wessler"); and Gregory Lang, Inc., a corporation
organized and existing under the laws of the State of California, having an
office and place of business at 1940 Lovelace Avenue, Los Angeles, California
("Lang"). BHPC, Wessler and Lang will hereinafter be collectively referred
to as the "Beverly Hills Polo Club Parties."
WITNESSETH:
WHEREAS, there are presently pending before the United States District
Court for the Central District of California two civil actions entitled
"Beverly Hills Polo Club, Inc. and Gregory Lang, Inc. v. Polo Fashions, Inc.,
Civil Action No. 83-3342 LTL(JRx)" (the "BHPC Action") and "Polo Fashions,
Inc. v. Action Industries, Inc., et al., Civil Action No. 84-162 LTL(JRx)"
(the "PFI Action"), which involve claims
EXHIBIT "C"
<PAGE>
of trademark infringement, false designation of origin and unfair competition
by PFI against the Beverly Hills Polo Club Parties and others and claims of
unfair competition, antitrust violations and declaratory relief of trademark
non-infringement by various of the Beverly Hills Polo Club Parties against
PFI; and
WHEREAS, the parties hereto have vigorously contested the BHPC Action and
the PFI Action (collectively the "Civil Actions"), and have expended
considerable time and effort, and have incurred considerable expense, in
doing so; and
WHEREAS, in order to avoid the additional expense which would be
necessary for the continued prosecution of the Civil Actions, the parties are
willing to resolve the controversy among them and to settle the Civil Actions
under the terms and conditions set forth herein;
NOW, THEREFORE, in mutual consideration of the convenants and premises
contained herein, the parties agree as follows:
1. Except as provided in paragraph 3 hereunder, as of February 15, 1985,
the Beverly Hills Polo Club Parties, their affiliates, officers, agents and
employees and any person or entity under their direction or control, or in
active concert or participation with them, shall cease and desist from
anywhere in the world:
(a) Using as a design or decoration on or in
connection with wearing apparel, home furnishings,
- 2 -
<PAGE>
personal care and fragrance products, and related items, accessories and
services (collectively the "Subject Products and Services"), including but
not limited to related packaging, labels, tags and other trade dress, or as a
trademark, service mark or trade name the word "polo" alone, or the words
"polo club" alone, apart from the composite "Beverly Hills Polo Club," except
as may be permitted by paragraph 18 herein;
(b) Using as a design or decoration on or in connection with the Subject
Products and Services, including but not limited to related packaging,
labels, tags and other trade dress, or as a trademark, service mark or trade
name the composite "Beverly Hills Polo Club" in any configuration in which
(i) the words "Beverly Hills" are not of equal prominence with the words
"Polo Club" or not in close proximity to such words or (ii) a different type
face or color is used for the words "Polo Club" than for the words "Beverly
Hills" or (iii) the word "Polo" is surrounded by a rectangle, or (iv) the
word "Polo" is in any way emphasized;
(c) Using as a design or decoration on or in connection with the Subject
Products and Services, including but not limited to related packaging,
labels, tags and other trade dress, or as a trademark or service mark, the
design of a polo player astride a horse
- 3 -
<PAGE>
which is shown in Exhibit A (the "Polo Player Symbol"), or any design which
is a colorable imitation or simulation thereof;
(d) Using as a design or decoration on or in connection with the Subject
Products and Services, including but not limited to related packaging,
labels, tags and other trade dress, or as a trademark, service mark or trade
name the design of a polo player astride a horse which is shown in Exhibit B
(the "BHPC Symbol"), or any design which is a colorable imitation or
simulation thereof or is substantially similar thereto, in an overall size
smaller than five and a half inches by five and a half inches (5-1/2" x 5-1/2")
(measured from mallet head to hoof and from nose to tail), except as may be
permitted by paragraph 2 hereof;
(e) Using either of the typefaces shown in Exhibit C (identified
hereinafter as the "Subject Typefaces") for the name "Beverly Hills Polo
Club";
(f) Placing or causing to be placed any advertisements or using any
materials of any type making reference, either directly or indirectly to Polo
Fashions, Inc. or to Ralph Lauren or their licensees and affiliates; and
(g) Using dark blue as the background color of any packaging, label, tag
or trade dress containing the words "Beverly Hills Polo Club", and/or the
BHPC Symbol.
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<PAGE>
2. Notwithstanding the size limitations imposed by paragraph 1(d)
hereof, the Beverly Hills Polo Club Parties may use the BHPC Symbol in an
overall size smaller than the five and a half inches by five and a half
inches (5 1/2" x 5 1/2") set forth in paragraph 1(d) hereof but only if
(a) the same is used in combination with and in close proximity to the
words "Beverly Hills Polo Club" in the configuration shown in Exhibit D
annexed hereto (the "Composite BHPC Logo") or the label shown in Exhibit E
annexed hereto (the "BHPC Label"); or
(b) the BHPC Symbol is used in a repetitive pattern covering
substantially all of the front or back of any of the Subject Products,
provided that the initials "BHPC" shall appear in close proximity to the
BHPC Symbol, and that somewhere on each of the Subject Products the words
"Beverly Hills Polo Club" shall be prominently displayed.
3. The Beverly Hills Polo Club Parties may sell or otherwise dispose of
any and all articles of clothing and accessories which are represented by
them to be in their possession or under their control as of February 15,
1985, as set forth in Exhibit F, to be added hereto not later than March 1,
1985, which would otherwise come within the prohibitions of paragraph 1 of
this Agreement, and may fill orders accepted on or before such date for any
clothing or accessories coming within such prohibitions so long as such
orders are filled within ninety (90) days of such date. Notwithstanding the
foregoing,
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<PAGE>
BHPC may have until June 15, 1985 to dispose of garments in the process of
manufacture in the Orient as of February 15, 1985. PFI or its attorneys or
such attorneys' agents, on reasonable notice, which notice shall not be
required to exceed ten (10) days, may review purchase orders, bills of
lading, or inventory records at the place of business of any Beverly Hills
Polo Club Parties sufficient to verify compliance with this paragraph. Such
information is to be used solely to verify and enforce compliance, and shall
be held in confidence by PFI's attorneys or their agents.
4. Simultaneously with its execution of this settlement agreement,
(a) BHPC shall promptly withdraw with prejudice Opposition No. 68,754 to
PFI's United States Trademark Application Serial No. 333,206, filed October 19,
1981 for the trademark POLO, and (b) Lang shall promptly withdraw with
prejudice the federal, state and foreign trademark applications listed in
Exhibit G annexed hereto, and take the appropriate steps to cancel or delete
or withdraw registrations issued pursuant to such applications; and none of
BHPC, Lang or Wessler, nor any one affiliated with each of them shall file
any trademark application with the United States Patent and Trademark Office
or with any state in the United States or in any foreign country for any mark
incorporating the words "Polo Club" and/or "Beverly Hills Polo Club" and/or
any horse and rider design, where the use of which such mark would be
prohibited hereunder, provided that in no event shall any of them file any
such application for any design of a horse and rider alone.
-6-
<PAGE>
5. Neither PFI nor any person or entity under its direction or control,
may oppose the registration by the Beverly Hills Polo Club Parties of any
trademark which the Beverly Hills Polo Club Parties are entitled to register
under this Agreement, nor shall they petition to cancel, either directly or
through court action the registration of any such trademark unless said mark
or registration is the basis for legal action by BHPC, Lang or any affiliated
entity against PFI or its licensees. If PFI learns that any of its licensees
objects to the registration by any of the Beverly Hills Polo Club Parties of
the words "Beverly Hills Polo Club," and/or the Composite BHPC Logo and/or
the BHPC Label, then PFI will inform such objecting licensee in writing of
the terms of this Agreement, and provide written confirmation thereof to BHPC.
6. The parties agree to entry in the Civil Actions of Final Judgment
Upon Consent in the form annexed hereto as Exhibit H, or in such other form
as the Court may require consistent with the terms and conditions of this
Settlement Agreement.
7. None of the Beverly Hills Polo Club Parties or any person or entity
under their direction or control shall oppose any registration by PFI or any
affiliated entity of any of the trademarks or service marks POLO, POLO BY
RALPH LAUREN or the Polo Player Symbol, alone or in combination (collectively
"the PFI Marks"), nor shall they petition to cancel, either directly or
through court action, any registration owned by PFI or any affiliated entity
for any of the PFI Marks unless said
-7-
<PAGE>
trademark, service mark or registration is the basis for legal or
administrative action by PFI or any such affiliated entity against such a
party or its licensees.
8. The parties will not initiate any publicity concerning the terms and
conditions of this Agreement and such terms and conditions shall be held in
confidence except as otherwise provided herein. The Beverly Hills Polo Club
Parties may provide a copy of this Settlement Agreement or portions or
summaries thereof to any person or entity licensed or otherwise permitted to
use the name "Beverly Hills Polo Club," the BHPC Symbol or the Composite BHPC
Logo, to potential licensees, to sales representatives or, upon inquiry being
made, to customers. Either party may refer to the terms and conditions of
this Agreement in conjunction with its registration, or judicial or
administrative protection or enforcement of its trademarks, trade names and
service marks.
9. This Settlement Agreement represents no concession by any party as
to the validity or merit of any of the claims raised in the Civil Actions by
any other party, except as may be set forth in the Final Judgment of Exhibit
H.
10. PFI and its officers, agents, employees and sales representatives
shall not make, directly or indirectly, any claim that the purchase of
products complying with the terms of this Agreement from BHPC or Lang or
their distributors or sublicensees constitutes trademark infringement, unfair
competition or trademark dilution, nor threaten sanctions with respect
thereto. This undertaking does not in any way admit or imply
-8-
<PAGE>
that PFI, or anyone acting on its behalf, has in the past made any such
claims or threatened any such sanctions.
11. In consideration of the warranties, representations and promises made
by the Beverly Hills Polo Club Parties herein, PFI does hereby fully release
and forever discharge BHPC, Stefan, Inc., Richard Enterprises, Inc., Lang and
Wessler and all of their respective officers, directors, agents, employees
and representatives and all those in active concert or participation with any
of them, and their customers, both immediate and remote, from and against any
and all claims, causes of action, demands, damages or charges for trademark
infringement and unfair competition made against them by PFI in the Civil
Actions or which could have been made in such Civil Actions, up to and
including the date of the execution of this Settlement Agreement.
12. In consideration of the warranties, representations and promises made
by PFI herein, BHPC, Lang and Wessler do hereby fully release and forever
discharge PFI, its officers, directors, agents, employees and
representatives, and all those in active concert or participation with any of
them, from and against any and all claims, causes of action, demands, damages
or charges made against PFI in the Civil Actions or which could have been
made in such Civil Actions, up to and including the date of the execution of
this Settlement Agreement.
13. This Settlement Agreement represents the entire understanding between
the parties with respect to the subject matter hereof; shall not be varied or
amended except by a
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<PAGE>
writing signed by all parties; shall be binding upon the parties, their
successors and assigns; and shall, as respects contractual construction, be
governed by and construed in accordance with the laws of the State of New
York. Neither party hereby waives any claim as to the propriety of venue or
as to the existence of personal jurisdiction, in any lawsuit or other
proceeding that may arise concerning the subject matter of this Settlement
Agreement.
14. PFI warrants and represents that it has full right and power to enter
into this Settlement Agreement.
15. Lang warrants and represents that it has full right and power to enter
into this Settlement Agreement.
16. BHPC warrants and represents that it has full right and power to enter
into this Settlement Agreement.
17. Wessler warrants and represents as follows:
(a) He is the president and sole shareholder of BHPC and Lang; and
(b) He has the full right, power and authority to enter into this
Settlement Agreement.
18. Nothing contained herein shall be deemed to preclude the Beverly Hills
Polo Club Parties, their affiliates, officers, agents and employees and any
person or entity under their direction or control, or in active concert or
participation with them, from making any use, otherwise than as a trade or
service mark, of the words "polo" or "polo club" alone, descriptively, fairly
and in good faith only to describe the sport of polo, clubs at which the
sport of polo is played (i.e.
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<PAGE>
"polo clubs") or items of wearing apparel which have come to be described by
the word polo (e.g. "polo shirts" or "polo coats"), provided, however, that
any such use will not violate any of the terms and conditions of this
Agreement.
19. The Beverly Hills Polo Club Parties shall take all steps reasonably
necessary to ensure that any person or entity which is licensed or otherwise
permitted to use the term "Beverly Hills Polo Club", the BHPC Symbol or the
Composite BHPC Logo, complies fully with the restrictions set forth in
paragraph 1 hereof.
20. PFI acknowledges that the rights of any person or entity which it
licenses or otherwise permits to use the PFI Marks are subject to the terms
and conditions of this Agreement and that such rights cannot be used in
contravention of the provisions of paragraphs 5 and 10 hereof. PFI agrees to
inform any of its licensees whom it learns object to the use by the Beverly
Hills Polo Club Parties of any of the names or marks which they are permitted
to use hereunder of the foregoing acknowledgements.
21. In the event that a dispute arises between the parties as to the
subject matter of this Agreement, then the parties shall attempt to amicably
resolve the same prior to seeking judicial intervention. If the parties are
unable to resolve such dispute within thirty (30) days after it arises,
11
<PAGE>
then either party may take such action as it deems appropriate to protect its
rights.
IN WITNESS WHEREOF, the parties have executed this Settlement on the days
indicated adjacent to their respective signatures below.
POLO FASHIONS, INC.
Dated: 2/15/85 By: /s/ Peter Strom
------------- --------------------------------
Peter Strom
BEVERLY HILLS POLO CLUB, INC.
Dated: 2/20/85 By: /s/ Stephen Wessler, President
------------- --------------------------------
Stephen Wessler, President
STEPHEN WESSLER
Dated: 2/20/85 By: /s/ Stephen Wessler
------------- --------------------------------
GREGORY LANG, INC.
Dated: 2/20/85 By: /s/ Stephen Wessler, President
------------- --------------------------------
Stephen Wessler, President
12
<PAGE>
[GRAPHIC]
EXHIBIT A
---------
<PAGE>
[GRAPHIC]
EXHIBIT B
---------
<PAGE>
[GRAPHIC]
EXHIBIT C
---------
<PAGE>
[GRAPHIC]
Note: Typeface to be changed per Paragraph 1(e).
EXHIBIT D
---------
<PAGE>
[GRAPHIC]
Note: Typeface to be changed per Paragraph 1(e).
EXHIBIT E
---------
<PAGE>
Exhibit 10.17
ASSIGNMENT OF LICENSES
This Assignment is made and entered into this 31 day of August, 1993, by
and between Heather Paige II Industries, Inc., a California corporation
("ASSIGNOR"), and I.C. Isaacs & Co., L.P., a Delaware limited partnership
("ASSIGNEE").
WHEREAS, ASSIGNOR is the licensee under two Exclusive Domestic License
Agreements (the "License Agreements") dated, respectively, June 1, 1993 and
December 1, 1993, between BHPC Marketing, Inc., a California corporation
("Licensor"), and ASSIGNOR concerning the license of rights to use Licensor's
marks and designs relating to the name "Beverly Hills Polo Club" (the
"Marks") in connection with the design, manufacture, import, distribution,
advertising, promotion, shipment and sale of certain women's apparel products
throughout the United States and all of its territories and possessions; and
WHEREAS, ASSIGNOR desires to assign the Licenses Agreements, and all of
its right, title and interest thereunder, to ASSIGNEE, and ASSIGNEE desires
to obtain such an assignment.
NOW, THEREFORE, it is agreed by the parties as follows:
1. ASSIGNMENT
For valuable consideration received, ASSIGNOR hereby grants and
assigns to ASSIGNEE the License Agreements and all of ASSIGNOR's right, title
and interest arising thereunder. ASSIGNOR further agrees, without further
consideration, to take such acts and execute such documents and instruments
as ASSIGNEE may reasonably request to effectuate fully this Assignment. In
furtherance of the transfer of such license rights, ASSIGNOR shall promptly
deliver to ASSIGNEE certain patterns, designs, samples and the like as have
been mutually agreed upon by the parties. Further, ASSIGNEE shall receive all
right, title and interest which ASSIGNOR has or may acquire with respect to
use of the Marks in China, and ASSIGNOR shall take all acts and execute all
documents or instruments which ASSIGNEE may reasonably request in furtherance
of ASSIGNEE's receiving such right, title and interest.
2. PAYMENT FOR ASSIGNMENT
As consideration for the Assignment effected hereby, ASSIGNEE agrees
to pay ASSIGNOR a total sum of three hundred thousand dollars ($300,000) in
cash, of which fifty thousand dollars ($50,000) has already been delivered to
ASSIGNOR pursuant to Paragraph 2(a) of that certain letter of intent dated
August 19,
1
<PAGE>
1993 and the balance of two hundred fifty thousand dollars ($250,000) shall
be paid upon execution and delivery of this Assignment. In addition to the
foregoing sums, if, at any time within three years from the date of this
Assignment, ASSIGNEE acquires the right, either under a direct license from
the Licensor or a sub-license from any licensee, in either case on terms
acceptable to ASSIGNEE in its sole discretion, to use the Marks in China,
ASSIGNEE shall pay a further sum of three hundred thousand dollars ($300,000)
to ASSIGNOR. The parties hereby acknowledge and agree that, as of the date
hereof, neither ASSIGNOR nor ASSIGNEE has been granted any rights with
respect to the use of the Marks in China.
3. MISCELLANEOUS
3.1 ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties and may not be modified except by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification,
extension or discharge is sought.
3.2 SUCCESSORS AND ASSIGNS. This Assignment shall inure to the benefit
of and shall be binding upon the parties hereto and their respective
successors and assigns.
3.3 COUNTERPARTS. This Assignment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ASSIGNEE: ASSIGNOR:
I.C. ISAACS & CO., L.P. HEATHER PAIGE II
INDUSTRIES, INC.
By /s/ Robert Arnot By /s/ Howard Regen
-------------------------- ---------------------------
Robert Arnot Howard Regen
Chairman of the Board President
By /s/ Gerald Lear
--------------------------
Gerald Lear
President and Chief Executive Officer
CONSENT OF LICENSOR
The undersigned hereby consents to the above-described Assignment of the
"License Agreements" (as defined in the first
2
<PAGE>
recital above), and all of Heather Paige II Industries, Inc.'s right, title
and interest arising thereunder, to I.C. Isaacs & Co., L.P. The undersigned
hereby acknowledges and affirms that ASSIGNEE does not assume and shall have
no responsibility or liability with respect to any obligations arising under
the License Agreements prior to the effectiveness of the Assignment, except
that ASSIGNEE shall be obligated to make the minimum royalty payments
(aggregating $7,111.11) due under the License Agreements for August, 1993.
LICENSOR:
Dated: 9/1, 1993 BHPC MARKETING, INC.
By /s/ Don Garrison
---------------------------------
Don Garrison
Licensing Director
3
<PAGE>
Exhibit 10.18
AMENDMENT
Simultaneously with the execution by I.C. Isaacs & Co., L.P.
("Isaacs") of an "Assignment of Licenses" attached hereto as Exhibit A
with respect to the assignment to Isaacs of certain "Exclusive Domestic
License Agreements" identified therein (the "Women's License Agreements"),
Isaacs and BHPC Marketing, Inc., the Licensor in said Women's License
Agreements, hereby agree to amend the Women's Licenser Agreements as follows:
1. The royalty rate identified in the "License Agreement Detail
Schedule" and in Paragraph 8 (a) (i) that is a part of each Women's License
Agreement is deleted and amended to be Five Percent (5%) for the term and any
renewal of each Women's License Agreement.
2. Paragraph 8 (a) (ii) of each Women's License Agreement is deleted in
its entirety and amended to read the same as Paragraph 8 (a) (ii) of the
"Exclusive Domestic License Agreement" for men's wear executed by Licensor
and Isaacs simultaneously herewith (the "Men's Agreement"). A conforming
change shall be made in Item 6 of the "License Agreement Detail Schedule"
attached to each Women's License Agreement.
3. The changes noted in highlighted or handwritten fashion on the
attached copy (as exhibit B) of the Men's Agreement (which do not include any
changes in the "License Agreement Detail Schedule" of the Women's License
Agreements except as stated above) are hereby made a part of each Women's
License Agreement. For purposes of clarity, the parties may choose to restate
each Women's License Agreement to reflect these amendments.
4. Licensor has granted to Isaacs a right of first refusal with respect
to women's wear on the same terms as Paragraph 36 of the Men's License, for
women's active wear including, but not limited to, basic T-shirts and basic
sweat shirts.
Executed as of September 1, 1993, intending this document to be binding.
/s/ Robert J. Arnot /s/ Don Garrison
- ------------------------------------- --------------------------------
I.C. Isaacs & Co., L.P. BHPC Marketing, Inc.
Title: Chairman Title: Director of Licensing
------------------------------ --------------------------
<PAGE>
EXHIBIT A
ASSIGNMENT
<PAGE>
EXHIBIT B
CONFORMING CHANGES TO WOMEN'S LICENSE AGREEMENTS
------------------------------------------------
<PAGE>
EXCLUSIVE DOMESTIC LICENSE AGREEMENT BHPC.12
THIS AGREEMENT is made and entered into this 1st day of September, 1993
by and between BHPC Marketing, Inc., a corporation duly organized and
existing under the laws of California, having its principal place of business
at 620 West 135th Street, Gardena, California 90248 (hereinafter referred to
as "LICENSOR"), and I.C. Isaacs & Co., L.P., a Delaware Limited Partnership,
having its principal place of business at 3840 Bank Street, Baltimore,
Maryland, 21224 (hereinafter referred to as "LICENSEE").
WHEREAS, LICENSOR is the owner with the right to grant licenses of the
Trademarks illustrated in Exhibit "A" attached hereto (the "Trademarks"); and
WHEREAS, LICENSEE is desirous of obtaining the exclusive right to use
the aforesaid Trademarks in connection with the import or manufacture and
sale of certain licensed products defined herein.
NOW, THEREFORE, it is agreed by the parties as follows:
1. DEFINITIONS
The following terms shall have meanings as set forth below:
a. "Trademarks" shall mean the Trademarks set forth in Exhibit "A", AND
ANY SUCH VARIATIONS AS LICENSEE DEVELOPS WITH LICENSOR'S PRIOR WRITTEN
APPROVAL;
b. "Territory" shall mean that geographical area defined in item 1 of the
attached License Agreement Detail Schedule.
c. "Licensed Product" shall be defined as set forth in item 2 of the
attached License Agreement Detail Schedule.
d. "Net Shipments" shall mean the aggregate total of the gross dollar
amount invoiced its purchasers by LICENSEE for all the Licensed Product
sold under the Trademarks reduced by the amount OF SHIPPING COSTS,
TAXES, INSURANCE, any customary trade allowances and, subject to the
provisions of Paragraph 8f.,k returns actually credited. No deduction
shall be made for commissions nor for any costs incurred in the
manufacture, sale, distribution or exploitation of the Licensed Product.
2. RIGHTS GRANTED
LICENSOR hereby grants to LICENSEE, upon the terms and conditions set
forth herein, an exclusive, personal, non-transferable, non-assignable
license, without the right to grant sublicenses, to use the Trademarks
solely on or in conjunction with the design, manufacture, import,
<PAGE>
distribution, advertising, promotion, shipment, and sale of the
Licensed Product in the Territory. This license is extended to and
includes wholesale sales only and does not include retail sales.
3. OWNERSHIP OF ARTWORK AND DESIGNS
LICENSEE acknowledges and agrees that LICENSOR is the owner of all
artwork and designs involving the Licensed Product and/or Trademarks,
or any reproductions thereof, notwithstanding their invention or use by
LICENSEE and that such artwork and designs will remain the property of
LICENSOR who shall be entitled to use and license others to use same,
subject to the provisions of this Agreement. THIS PARAGRAPH 3 DOES NOT
EXTEND TO ARTWORK AND DESIGNS DEVELOPED FOR LICENSEE BY THIRD PARTIES
AND NOT OWNED BY LICENSEE IF THEY DO NOT INVOLVE THE TRADEMARKS, AND
GENERIC ARTWORK AND DESIGNS WHICH ARE NOT DEVELOPED SPECIFICALLY FOR
THE LICENSED PRODUCTS AND WHICH LICENSEE USES OR INTENDS TO USE, DEVOID
OF THE TRADEMARKS, WITH LICENSEE'S OTHER PRODUCT LINES. THROUGHOUT THE
TERM OF THIS AGREEMENT, LICENSOR WILL CONTINUE TO PROVIDE LICENSEE
ARTWORK, DESIGNS, AND COPY READY MATERIALS REGARDING THE TRADEMARKS AS
LICENSOR PROVIDES TO ITS LICENSEES GENERALLY, AND AS REASONABLY
REQUESTED BY LICENSEE.
4. GOOD WILL AND PROMOTIONAL VALUE
a. LICENSEE recognizes the value of the good will associated with the
Trademarks and acknowledges that the Trademarks, and all rights therein
and the good will pertaining thereto, belong exclusively to LICENSOR.
LICENSEE further recognizes and acknowledges that the Trademarks have
acquired secondary meaning in the mind of the public.
b. LICENSEE agrees that its use of the Trademarks shall inure to the
benefit of LICENSOR and that LICENSEE shall not, at any time, acquire
any rights in the Trademarks by virtue of any use it may make of the
Trademarks.
c. LICENSEE acknowledges that LICENSOR is entering into this Agreement not
only in consideration of the royalties paid hereunder but also for the
good will and promotional value to be secured by LICENSOR for the
Trademarks as a result of the manufacture, offering for sale, sale,
advertising, promotion, shipment and distribution of the Licensed
Product by LICENSEE.
2
<PAGE>
BHPC.12
5. QUALITY STANDARDS, PRODUCT APPROVALS, AND INSPECTION
a. The quality of the Licensed Product, as well as the quality of all
promotional, advertising and packaging material (see Paragraph 6) which
includes the Trademarks (the "promotional and Packaging Material"),
shall be at least as high as the best quality of similar products and
promotional, advertising and packaging material presently shipped,
distributed, sold, used, manufactured or licensed by LICENSOR in the
Territory and shall be in full conformance with all applicable laws and
regulations. LICENSEE acknowledges that the maintenance of the high
quality of the Licensed Product, and the control by LICENSOR over the
nature, quality and manner of distribution of all Licensed Products,
are essential elements of this license. All elements of the Licensed
Product and use of the Trademarks shall be subject to the prior written
approval of LICENSOR. Except as specifically provided in Paragraph 8d,
below, LICENSEE shall not offer for sale, advertise, promote,
distribute, or use for any purpose any Licensed Product that is damaged,
defective, or are "seconds".
b. In order to maintain the high quality standard prescribed by LICENSOR,
LICENSEE may not manufacture, use, offer for sale, advertise, promote,
ship and/or distribute any Licensed Product or any Promotional
Packaging Material relating to the Licensed Product until it has
received all written approvals of same from LICENSOR in the manner
provided herein. Such approval shall not be unreasonably withheld.
Should LICENSOR fail to approve in writing any of the submissions
furnished it by LICENSEE within fourteen (14) days from the date of
submission thereof, such failure shall be considered to be a
disapproval thereof. LICENSOR SHALL EXERCISE REASONABLE EFFORTS TO
EXPRESSLY COMMUNICATE APPROVAL OR DISAPPROVAL TO LICENSEE AND TO
PROVIDE ADEQUATE EXPLANATIONS TO LICENSEE FOR ANY DISAPPROVAL.
c. Before commencing, or authorizing third parties to commence, the design
or development of any Licensed Product or of any Promotional and
Packaging Material which have not been previously approved in writing
by LICENSOR:
3
<PAGE>
BHPC.12
(i) Prior to the production of the Licensed Product, there shall be a
pre-production showing of the Licensed Product at a time and date to be
mutually agreed upon by the parties. DURING THIS SHOWING, LICENSEE
shall submit for LICENSOR's prior written approval all final designs,
specifications, fabrications, and color information.
(ii) Prior to the production of each collection (also known in the
trade as a "line" or a "season"), LICENSEE shall submit to LICENSOR a
completed "Sample Approval Form" (Exhibit "B-1") for each proposed
item of the Licensed Product along with: at least one (1) final sample
of each style in the collection; two (2) sets of material which shows
color and fabrication, to be attached to a "Swatch Approval Form"
(Exhibit "B-2"), and one (1) photograph or rendering of each sample to
be attached to the "Sample Approval Form" (Exhibit "B-1"). Samples
submitted for approval shall be of the same quality as the Licensed
Product that is produced and distributed. Once a proposed item of the
Licensed Product has been approved, LICENSEE shall not deviate in any
material respect from: (1) any information, description or
specification on the "Sample-Approval-Form" or "Swatch Approval Form";
or (2) the quality of or material used on an approved sample, without
the prior written consent of LICENSOR. Each style, color and
fabrication must be approved for each season, regardless of whether it
was approved for a prior season, PROVIDED THAT PREVIOUSLY APPROVED
LICENSED PRODUCTS SHALL NOT BE DISAPPROVED FOR A NEW COLLECTION EXCEPT
FOR SUBSTANTIAL REASONS.
(iii) Within two (2) weeks following the commencement of each first
production run of the Licensed Product (or, if production of the
various styles of the Licensed Product commences at different times,
within two (2) weeks after commencement of each style's first
production run), LICENSEE shall deliver to LICENSOR, at least one (1),
but no more than two (2), finished production samples of each style. If
the style, appearance or quality of any production sample is MATERIALLY
different from what was previously approved, LICENSEE shall make the
necessary changes so that it conforms to what was originally approved
OR SHALL OTHERWISE SEEK LICENSOR'S APPROVAL.
4
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d. LICENSEE agrees that the Licensed Product and all Promotional and
Packaging Material shall contain only those PROPRIETARY legends,
markings and/or notices as REASONABLY required from time to time by
LICENSOR to give appropriate notice to the consuming public of
LICENSOR's right, title and interest thereto. THE FORM OF SUCH
LEGENDS, MARKINGS AND NOTICES SHALL BE AS DESCRIBED IN "EXHIBIT A"
ATTACHED HERETO, UNLESS THE PARTIES AGREE OTHERWISE.
e. LICENSOR may, periodically and from time to time during the term of
this Agreement, AT REASONABLE INTERVALS, require that LICENSEE
submit to LICENSOR, at no cost to LICENSOR, or LICENSOR or its
designees may randomly select and retain during the inspection
referred to in Subparagraph 5f, below, one (1) additional set of
Production Samples of the Licensed Product and/or the Promotional
and Packaging Material relating to the Licensed Product for
subsequent review and written approval of trademark usage and
notice on same. LICENSOR WILL PROMPTLY ADVISE LICENSEE OF ANY
CONCERNS REGARDING TRADEMARK USAGE AND NOTICE, AND THE PARTIES WILL
COOPERATE IN GOOD FAITH TO RESOLVE THE CONCERNS.
f. To assure that the provisions of this Paragraph 5 are being observed,
LICENSEE agrees that it will allow LICENSOR or its designees,
periodically and from time to time AT REASONABLE INTERVALS during
the term of this Agreement, to enter LICENSEE's premises and/or the
premises where the Licensed Product is being manufactured or
inventoried during regular business hours and upon reasonable
notice, for the purposes of inspecting and CONFIRMING the Licensed
Product and the Promotional and Packaging Material relating to the
Licensed Product CONFORM TO THE SAMPLES PREVIOUSLY APPROVED BY
LICENSOR. LICENSEE shall provide to LICENSOR the addresses and
telephone numbers of all facilities, including third party
manufacturers, at which the Licensed Product is manufactured.
LICENSEE's agreements with third party manufacturers and
warehousing facilities shall provide for the right of LICENSOR to
inspect such third party's facilities. Inspections, WHICH WILL BE
AT LICENSOR'S COST, may include any reasonable actions necessary to
assure LICENSOR that the Licensed Product is made and displayed in
accordance
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with this Agreement, including, but not limited to, laboratory testing.
g. In the event that the quality standards and/or trademark and copyright
usage and notice requirements hereinabove referred to are not met,
then, upon receipt of written notice from LICENSOR THE PARTIES
SHALL COOPERATE IN GOOD FAITH TO RESOLVE LICENSOR'S CONCERNS AND,
absent resolution, LICENSEE shall immediately discontinue any and
all activities with respect to the Licensed Product in connection
with which the said quality standards and/or trademark and
copyright usage and notice requirements have not been met. LICENSEE
SHALL NOT BE REQUIRED TO DISCONTINUE ANY PRACTICE PREVIOUSLY
APPROVED IN WRITING BY LICENSOR.
6. ADVERTISING/USE OF THE TRADEMARK
a. LICENSEE will adopt and carry out its own marketing and advertising
program with respect to the Licensed Product. LICENSEE agrees that
LICENSEE's advertising, public relations and sales promotion
activities will be subject to prior consultation with, and written
approval by, LICENSOR as to the general form and content only with
respect to the use of the Trademarks and other notices.
b. Before publication of any advertisement or promotion, LICENSEE shall
submit every element of the advertisement or promotion to LICENSOR for
written approval hereunder using the "Advertising Approval Form"
(Exhibit "B-3").
c. SUBJECT TO LICENSED PRODUCT AVAILABILITY AT THE TIME OF THE REQUEST,
LICENSEE agrees that upon request of LICENSOR, AND AT LICENSOR'S
COST FOR SHIPPING, DELIVERY AND INSURANCE, IT shall loan a reasonable
number of Licensed Products to LICENSOR and its other licensees for
advertising and promotional purposes. LICENSEE SHALL RECEIVE THE SAME
BENEFIT FROM OTHER LICENSEES OF LICENSOR. SAID PRODUCTS SHALL BE
RETURNED TO LICENSEE IN THE ORIGINAL CONDITION.
d. LICENSOR may purchase the Licensed Product from LICENSEE at the cost
of manufacture, PLUS SHIPPING, DELIVERY, TAXES AND INSURANCE COSTS TO
LICENSEE, PROVIDED NO SUCH LICENSED PRODUCTS MAY BE USED BY LICENSOR
FOR RESALE. No royalty shall be payable to LICENSOR.
e. Advertising directed to the public may not feature the name of
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LICENSEE. If approved, advertising directed to the trade may feature
the following: BHPC Marketing, Inc. under Trademark License to (Name
of LICENSEE).
f. LICENSEE agrees that the Trademark will appear on each Licensed
Product and its packaging, if any. LICENSEE shall use only those tags,
labels and packaging materials which have been previously approved in
writing. All tags, labels and packaging materials bearing the
Trademark must be submitted on the "Advertising Approval Form"
(Exhibit "B-3").
g. LICENSEE shall affix such legends, markings and notices on all License
Product as are required by LICENSOR UNDER SUBPARAGRAPH 5.D. AND the
law.
h. LICENSEE must submit for approval to LICENSOR a printer's proof of
each ADVERTISING AND PROMOTIONAL ITEM before final printing.
7. DURATION OF THE AGREEMENT
a. This Agreement shall continue for three (3) consecutive Contract Years
in respective durations as set forth in item 3 of the attached License
Agreement Detail Schedule (hereinafter collectively the "Initial
Term") and shall then expire unless sooner terminated in accordance
with the terms and conditions set forth herein.
b. If LICENSEE is not in breach of this Agreement at the time of renewal,
notice is given to LICENSOR, LICENSEE shall have three (3) consecutive
options to renew this Agreement for three (3) consecutive contract
periods, i.e. Contract Years, of one (1) year each (hereinafter
collectively the "Renewal Term"). In order to exercise each individual
option, LICENSEE must provide LICENSOR with written notice of its
intention to exercise each respective option and such written notice
must be received by LICENSOR no later than one hundred eighty (180)
days prior to the expiration of the Initial Term or immediately
preceding Contract Year of the Renewal Term. In the event that
LICENSEE fails to exercise any of the aforementioned options in a
timely manner, the license granted herein to LICENSEE will thereafter
become non-exclusive for the remaining term of this Agreement ONLY FOR
THE PURPOSES OF ALLOWING LICENSOR TO enter into such arrangements as
it deems appropriate with respect to the licensing of the Trademarks
and the
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Licensed Product, BUT NO LICENSED PRODUCTS MANUFACTURED BY ANOTHER
PARTY SHALL BE SOLD PRIOR TO THE EXPIRATION OF THIS AGREEMENT. Except
as specifically set forth herein to the contrary, LICENSEE's
performance in the Renewal Term shall be pursuant to the same terms
and conditions recited herein for the Initial Term.
8. ROYALTIES
a. "Royalty", as used in this Agreement, shall consist of the sum of the
following:
(i) LICENSEE agrees to pay LICENSOR, during the term of this
Agreement, a Royalty in an amount equal to five percent (5%) of the
Net Shipments by LICENSEE for Licensed Product sold under the
Trademarks; and
(ii) LICENSEE agrees to expend during the term of this Agreement, an
amount equal to one percent (1%) of the Net Shipments by LICENSEE for
Licensed Product sold under the Trademarks in advertising of the
Licensed Product and Trademarks. LICENSEE shall, on the day following
the last day of each respective Contract Year, submit to LICENSOR any
documentation as shall be reasonably requested by LICENSOR to evidence
the expenditure of the Advertising Royalty. In the event that LICENSEE
fails to spend the entire Advertising Royalty during the respective
Contract Year in which the Advertising Royalty was to be expended
hereunder, LICENSEE will, on the day following the last day of the
respective Contract Year, pay to LICENSOR the total sum of the
Advertising Royalty which was not expended hereunder. No Advertising
Royalty will be paid on "Off Price" Merchandise.
b. LICENSEE shall pay to LICENSOR, concurrently with the execution of
this Agreement with respect to the First Contract Year, an Advance
Royalty Payment equal to the amount set forth in item 5 of the
attached License Agreement Detail Schedule, no part of which shall be
refundable. The Advance Royalty Payment shall not reduce or offset the
payment of any Guaranteed Annual Minimum Royalty hereunder. However,
the Advance Royalty Payment may be applied to reduce and offset the
payment of any royalty due hereunder in excess of the Guaranteed
Annual Minimum Royalty DUE IN THE FIRST TWO (2) CONTRACT YEARS.
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BHPC.12
c. Promotional Merchandise shall be defined as regular line Licensed
Product which is sold as an incentive at a discounted price. In the event
LICENSEE is desirous of increasing Promotional Merchandise shipping
beyond fifteen percent (15%) of total production of Licensed Product
in any Contract Year, LICENSEE must first receive LICENSOR's prior
written approval thereof on a case-by-case basis.
d. Off-priced Merchandise shall be defined as either close-out Licensed
Product or substandard Licensed Product. In the event LICENSEE is
desirous of increasing Off-priced Merchandise shipping beyond fifteen
percent (15%) of total production of Licensed Product in any Contract
Year, LICENSEE must receive LICENSOR's prior written approval thereof
on a case-by-case basis. In no event will LICENSEE offer for sale, or
distribute any substandard Licensed Product unless the Licensed Product
are clearly identified to the consuming public as being "seconds".
e. LICENSEE shall keep complete, detailed and accurate records of all
Promotional and Off-priced Merchandise sales, which records shall be
available to LICENSOR for inspection AT LICENSEE'S PREMISES during
regular business hours.
f. For the purposes of this Agreement, LICENSEE agrees that aggregate
returns of the Licensed Product credited during any Contract Year
hereunder shall not exceed FIVE percent (5%) of the gross dollar
amount invoiced by LICENSEE for all the Licensed Product sold during
the respective Contract Year (the "Returns Limitation"). In the event
that aggregate returns of the Licensed Product exceed the Returns
Limitation, all returns of the Licensed Product in excess of the Returns
Limitation shall not be deducted from the gross dollar amount of
sales of the Licensed Product in determining Net Shipments hereunder.
9. PAYMENT
a. The payments provided for in Paragraph 8, above, shall be based upon
all Net Shipments in each calendar month (the "Royalty Period") and
shall be due and payable by LICENSEE to LICENSOR by the twentieth
(20th) day of the next following calendar month. All Guaranteed Monthly
Royalty Payments are due and payable IN ACCORDANCE WITH PARAGRAPH 1.0(E)
BELOW by LICENSEE to LICENSOR on the twentieth
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BHPC.12
(20th) day of each respective calendar month for that Contract Year.
At the time of each such payment, LICENSEE shall provide LICENSOR with a
complete, accurate, written statement of its Net Shipments of Licensed
Product for the Royalty Period. The written statement of Net Shipments
of Licensed Product (a copy of which is attached hereto as Exhibit "B-4")
must be certified as accurate by LICENSEE and will include, but will not
be limited to, information as to: each respective invoice number (in
sequential order inclusive of all "voided" invoices), invoice date,
customer name or number, gross dollar amount invoiced, terms of any
customary trade allowances (as a percentage and in aggregate dollars),
actually credited returns (in aggregate dollars), and other deductions
taken against the gross dollar amount invoiced, and any such other
further information as LICENSOR may from time to time REASONABLY
REQUEST, SOLELY FOR PURPOSES OF VERIFYING THE ACCURACY OF THE ROYALTY
PAYMENTS. Such statements shall be furnished to LICENSOR whether or not
any Licensed Product has been shipped, distributed and/or sold during the
preceding Royalty Period and whether or not any monies are then due
LICENSOR.
b. LICENSEE's statements and all amounts payable to LICENSOR by LICENSEE
shall be submitted to:
BHPC Marketing, Inc.
620 West 135th Street
Gardena, California 90240
Attn: Royalty Receivables Department
c. The receipt and/or acceptance by LICENSOR of any of the statements or
reports furnished or payments paid hereunder to LICENSOR (or the
cashing of any checks paid hereunder) shall not preclude LICENSOR from
questioning the correctness thereof at any REASONABLE time THEREAFTER
and, in the event that any inconsistencies or mistakes are discovered
in such statements, reports, or payments, they shall immediately be
rectified by LICENSEE and the appropriate payment shall immediately be
made by LICENSEE UNLESS LICENSEE DISPUTES IN GOOD FAITH LICENSOR'S
EVALUATION OF THE PAYMENTS IN WHICH CASE THE PARTIES WILL HAVE 20 DAYS
TO RESOLVE THE DISPUTE.
d. All payments made hereunder shall be in United States currency or
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BHPC.12
checks drawn on a United States bank.
e. Time is of the essence with respect to all payments to be made
hereunder by LICENSEE. In the event LICENSEE shall fail to pay any sum
required to be paid by this Agreement after the due date thereof, the
amount owing shall thereupon bear interest at the maximum annual
percentage rate allowable by law from the due date until paid.
10. GUARANTEES
a. Guaranteed Annual Royalty Payments - LICENSEE shall pay, for each
Contract Year during the term of this Agreement, beginning with the First
Contract Year, the respective Guaranteed Annual Royalty Payments set
forth in item 7 of the attached License Agreement Detail Schedule.
b. Guaranteed Target Net Shipments - If, in any Contract Year, LICENSEE
does not achieve the Guaranteed Target Net Shipment Volume figure set
forth in item 7 of the attached License Agreement Detail Schedule
LICENSOR may, at its option, immediately thereafter terminate this
Agreement in writing BY GIVING LICENSEE WRITTEN NOTICE NOT LATER THAN
THIRTY (30) DAYS AFTER THE END OF THE CONTRACT YEAR.
c. Guaranteed Net Shipments - If, in any Contract Year, LICENSEE does not
achieve the Guaranteed Net Shipments figure set forth in item 7 of the
attached License Agreement Detail Schedule LICENSOR may, at its option,
immediately thereafter terminate this Agreement in writing by giving
LICENSEE WRITTEN NOTICE NOT LATER THAN THIRTY (30) DAYS AFTER THE END
OF THE CONTRACT YEAR.
D. TERMINATION UNDER SUBPARAGRAPHS 10.B. AND 10.C. ABOVE SHALL BE WITHOUT
FURTHER RECOURSE BY LICENSOR UNDER THIS AGREEMENT; EXCEPT FOR PAST
ROYALTIES DUE.
E. Guaranteed Monthly Royalty Payments - In order to ensure that the
above guarantees are met, LICENSEE shall pay to LICENSOR each month
pursuant to Paragraphs 8 and 9, above, the respective Guaranteed Monthly
Royalty Payments set forth in item 7 of the attached License Agreement
Detail Schedule for each Contract Year during the term of this Agreement.
In the event that any actual Monthly Royalty Payment calculated in
accordance with Paragraph 8, above, is less than the applicable
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BHPC.12
Guaranteed Monthly Royalty Payment, LICENSEE shall pay to LICENSOR the
Guaranteed Monthly Royalty Payment in accordance with Paragraph 9. In
the event that any actual Monthly Royalty Payment calculated in
accordance with Paragraph 9 exceeds the Guaranteed Monthly Royalty
Payment, the actual Royalty payment shall be paid to LICENSOR in
accordance with Paragraph 9.
f. In the event of the termination of this entire Agreement, LICENSEE is
obligated to pay the balance of the Guaranteed Annual Royalty Payments
due for the remainder of the Contract Years IN THE THEN CURRENT TERM,
and payment in full shall be due and payable within thirty (30) days
of said termination AS LICENSOR'S ONLY RECOURSE IN THE EVENT OF
TERMINATION.
11. EXPLOITATION BY LICENSEE
a. LICENSEE agrees to commence, and diligently continue thereafter, the
distribution, shipment and sale of each category of the Licensed
Product in commercially reasonable quantities in the Territory on or
before the respective distribution date set forth next to each
category of the Licensed Product described in item 2 of the attached
License Agreement Detail Schedule.
b. LICENSEE agrees that the Licensed Product will be sold, shipped and
distributed outright, at a competitive price DETERMINED BY LICENSEE,
and not on an approval, tie-in, consignment, or "sale or return"
basis. LICENSEE further agrees that the Licensed Product will only be
KNOWINGLY sold to retailers, jobbers, wholesalers and distributors for
sale, shipment and distribution to retail stores and merchants
commonly considered and referred to in the industry as MODERATE OR
BETTER department stores and specialty stores for sale, shipment and
distribution direct to the public. Notwithstanding the foregoing to the
contrary, LICENSOR agrees that the Licensed Product may also be sold to
those retail stores commonly considered and referred to in the industry
as "Warehouse Clubs" (such as Price Club, Sam's Warehouse, Pace, Costco,
B.J.'s) so long as the total Net Shipment volume of Licensed Product
sold to such "Warehouse Clubs" does not exceed twenty five percent (25%)
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BHPC.12
of LICENSEE's annual Net Shipment volume. Any sale of Licensed Product
exceeding twenty five percent (25%) of LICENSEE's Net Shipment volume
will be deemed a material breach of this Agreement and LICENSOR will
have the right thereafter to terminate this Agreement. The manner and
scope of the distribution of the Licensed Product, availability,
variety, fabrication, colors and sizes are critical to the promotion,
enhancement and protection of the Trademarks and their associated
goodwill. LICENSEE acknowledges that it has no right to and shall not
sell or distribute the Licensed Product to any diverter or to anyone
whose sales or distribution are or will be made for publicity,
promotional or tie-in purposes, combination sales, premiums, giveaways,
direct mail, electronic shopping, vending machines or similar methods
of merchandising, or whose business methods are or are reported to be
questionable.
c. LICENSEE further agrees to sell to LICENSOR, if requested to do so
by LICENSOR, any product manufactured or sold by LICENSEE, from
LICENSEE's regular production at LICENSEE's customary net selling price.
12. BOOKS, RECORDS, AND RIGHTS TO AUDIT
a. LICENSEE agrees that it shall keep complete and accurate written
books of accounts and records, maintained in accordance with generally
accepted accounting principles consistently applied, at its principal
place of business, covering all Licensed Product manufactured,
distributed, and sold under the Trademarks. LICENSEE shall provide
LICENSOR with the following:
(i) an audited, set of financial statements (i.e., balance sheet,
income statement, and sources and uses of funds) to be delivered to
LICENSOR within ONE HUNDRED TWENTY (120) days after the end of each
fiscal year of LICENSEE; and
(ii) an interim set of financial statements to be delivered to
LICENSOR within SIXTY (60) days following the end of the first six (6)
months of each fiscal year of LICENSEE. All such financial information
must be prepared by an independent certified public accountant,
approved in writing by LICENSOR. LICENSOR HEREBY APPROVES SEIDMAN &
SEIDMAN AS THE
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BHPC.12
ACCOUNTANT.
b. LICENSOR and its duly authorized representatives shall have the
right, AT LICENSOR'S EXPENSE, at all reasonable BUSINESS hours of the
day, with reasonable notice to audit LICENSEE's books of account and
records and all other documents and material in the possession or under
the control of LICENSEE with respect to the subject matter and the
terms of this Agreement and to make copies and extracts thereof. Within
ten (10) days following any written request by LICENSOR, LICENSEE will
deliver copies and extracts of any books of account, records,
documents, materials, and information as are requested by LICENSOR
inclusive of, but not limited to: financial statements, general ledger
detail and supporting journals, documents, sales and credit memo
registers, financial projections and wholesale price listings. All
books of account and records of LICENSEE covering all transactions
relating to this Agreement shall be retained by LICENSEE for at least
three (3) years after the expiration or termination of this Agreement
for inspection by LICENSOR. In the event that any such audit reveals an
underpayment by LICENSEE, LICENSEE shall immediately remit payment to
LICENSOR in the amount of such underpayment plus interest calculated at
the maximum annual percentage rate allowable by law, compounded daily,
calculated from the date such payment was actually due until the date
when such payment is, in fact, actually made. In the event that any
material underpayment is revealed by any such audit, LICENSEE shall pay
all reasonable costs and expenses of the examination and audit,
including any reasonable travel expenses incurred by LICENSOR in making
such examination, and costs and expenses of any accountants or other
persons retained by LICENSOR to examine, audit, or analyze LICENSEE's
records. A "material underpayment" is hereby defined as an underpayment
of five percent (5%) or more.
13. INSURANCE
LICENSEE shall, throughout the term of this Agreement, obtain and
maintain at its own cost and expense from a qualified insurance company
acceptable to LICENSOR, a policy or policies of insurance, insuring
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BHPC.12
against those risks customarily insured against under broad form
comprehensive general liability policies arising out of any defects or
failure to perform, alleged or otherwise, of the Licensed Product or
any use thereof, including "product liability", "completed operations",
"advertisers' liability insurance", etc and any liability of LICENSEE
arising out of Paragraph 20, below. All such policies of insurance
shall have endorsements or coverage with combined single limits of not
less than $1,000,000 with deductibles reasonably acceptable to LICENSOR
and shall name LICENSOR, and those designated by LICENSOR, WITH
LICENSEE'S APPROVAL, as additional insureds thereunder. Such policies
of insurance shall contain:
a. severability of interest;
b. cross liability; and
c. endorsement stating: "Such insurance as is afforded by this policy
for the benefit of BHPC Marketing, Inc. shall be primary as respects
any liability of claims arising out of (LICENSEE's) operation, and any
insurance carried by BHPC Marketing, Inc. shall be excess and
non-contributory."
The policies shall provide for ten (10) days notice to LICENSOR from
the insurer by Registered or Certified Mail, return receipt requested,
in the event of any modification, cancellation or termination. LICENSEE
agrees to furnish LICENSOR a certificate of insurance or copy of the
policies evidencing same within thirty (30) days after execution of
this Agreement and from time to time as requested by LICENSOR within
ten (10) days of LICENSOR's request; in no event, shall LICENSEE
manufacture, offer for sale, sell, advertise, promote, ship and/or
distribute the Licensed Product prior to receipt by LICENSOR of such
evidence of insurance. If LICENSEE fails to procure, maintain and/or
pay for at the times and for the durations specified in this Agreement,
the insurance required hereunder, or fails to carry insurance required
by any governmental requirement, LICENSOR may (but without obligation
to do so), and without notice to LICENSEE, perform such obligations on
behalf of LICENSEE, and the cost thereof, together with interest
thereon at the
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BHPC.12
maximum rate allowed by law, shall immediately become due and payable
to LICENSOR.
14. USE, DISPLAY, AND SALE INVOLVING THE TRADEMARKS AND COPYRIGHT
a. In order to protect the Trademarks and LICENSOR's reputation,
LICENSEE will manufacture, distribute and sell the Licensed Product in
compliance with all applicable laws. DURING THE TERM OF THIS AGREEMENT,
in no event shall LICENSEE, or any affiliated entity, manufacture or
import, distribute or sell any products using trademark or other
designation containing the words "BEVERLY HILLS", or "POLO", or
depicting any equestrian figure, without the written consent of
LICENSOR.
b. It is specifically understood and agreed that LICENSEE may engage
in the manufacture and distribution of products similar to or
competitive with the Licensed Product for its own account or pursuant
to license agreements with others, provided, however, neither LICENSEE
nor any employee, shareholder, officer, director, parent, subsidiary or
affiliate of LICENSEE shall manufacture or import, distribute or sell
merchandise, THE BRAND NAME OF which has a closely resembling
similarity to the Trademarks. LICENSEE further agrees not to use a
closely resembling similarity of any graphic, style or design supplied
by LICENSOR TO LICENSEE EXCEPT FOR SUCH ITEMS AS ARE GENERIC OR
STANDARD STYLES AND DESIGNS AND THOSE ITEMS WHICH LICENSEE HAS ALREADY
BEEN USING ON THE DATE OF THIS AGREEMENT FOR ITS OTHER PRODUCT LINES.
c. LICENSEE shall exercise reasonable efforts, within the limits
allowed by the laws and governmental regulations in effect in the
Territory, to ensure that its merchandising and sale of the Licensed
Product shall conform to policies and methods suitable for goods of
high quality sold under a prestigious label of worldwide repute.
15. OWNERSHIP OF THE TRADEMARKS
a. LICENSEE agrees that nothing in this Agreement shall give LICENSEE
any right, title, or interest in the Trademarks other than the license
to use the Trademarks on the Licensed Product; that such marks are the
sole property of LICENSOR; that all such uses by LICENSEE of such marks
shall inure only to the benefit of LICENSOR; and it being understood
that all
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BHPC.12
right, title and interest relating thereto are expressly reserved by
the LICENSOR except for the rights being licensed hereunder.
b. LICENSEE recognizes that LICENSOR may already have entered into
license agreements with respect to the Trademarks for products which
fall into the same general product category as the Licensed Product,
but which are not sold to the same retail store departments as the
Licensed Product, and which may be similar to, but not the same as, the
Licensed Product in terms of function, or otherwise. LICENSOR WILL
ADVISE LICENSEE OF THE SPECIFICS OF EACH SUCH AGREEMENT. LICENSEE
hereby expressly concedes that the existence of said xxxxxxx xxxx xxx
and shall xxx xxxxxxx x breach of this Agreement by the LICENSOR.
NOTHING HEREIN SHALL PERMIT LICENSOR TO LICENSE A RETAIL OUTLET
DIRECTLY TO MAKE LICENSED PRODUCTS OR PRODUCTS SUBSTANTIALLY SIMILAR
THERETO, IT BEING UNDERSTOOD THAT ANY SUCH PRODUCTS TO BE SOLD BY THE
RETAIL OUTLET MUST BE PURCHASED FROM LICENSEE.
c. LICENSEE agrees and acknowledges that if it has obtained or obtains
in the future, in any country, any right, title, or interest in any
marks which are confusingly similar to the Trademark, (including the
filing of any application for trademarks or service mark registration or
the obtaining of any issued registration), that LICENSEE has acted or
will act as an agent and for the benefit of LICENSOR. LICENSEE further
agrees to execute any and all instruments deemed by LICENSOR, its
attorneys or representatives, to be necessary to transfer such right,
title, or interest to LICENSOR to protect LICENSOR's right, title and
interest in such marks.
d. LICENSEE agrees not to raise or cause to be raised to third
parties, either during the term of this Agreement or after its
expiration or termination, on any grounds whatsoever, any questions
concerning the validity of the Trademarks or LICENSOR's rights therein.
16. COMPLIANCE WITH LIMITATIONS ON USE OF TRADEMARKS
LICENSEE agrees that the Licensed Product, and all labels, hang
tags, packaging and other trade dress, used in connection with such
Licensed Products, shall not violate any restrictions on use or display
of the
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marks as provided in that Settlement Agreement and Consent Judgement
with Polo Fashions, Inc., a copy of which is attached hereto as Exhibit
"D". Nothing contained in this Agreement makes Polo Fashions, Inc., or
any related company, a third party beneficiary of this Agreement. IN THE
EVENT LICENSEE IS SUBJECT TO LOSS OR LIABILITY UNDER SAID SETTLEMENT
AGREEMENT AND/OR CONSENT JUDGMENT FOR ANY ACTIONS NOT IN BREACH OF THIS
AGREEMENT OR ACTIONS OF LICENSEE APPROVED BY LICENSOR PURSUANT TO THIS
AGREEMENT; LICENSOR SHALL INDEMNIFY AND HOLD HARMLESS THE LICENSEE AND
ITS DIRECTORS, OFFICERS AND RELATED COMPANIES, INCLUDING IN THE EVENT
LICENSEE'S RIGHTS UNDER THIS AGREEMENT ARE MATERIALLY AND ADVERSELY
IMPAIRED THROUGH NO BREACH BY LICENSEE.
17. THIRD PARTY INFRINGEMENT
LICENSOR WARRANTS THAT IT OWNS THE TRADEMARKS AND HAS ALL NECESSARY
RIGHTS AND AUTHORITY TO ENTER INTO THIS AGREEMENT, THAT IT WILL EXERCISE
BEST EFFORTS TO KEEP THE TRADEMARKS VALID AND SUBSISTING AND UNIMPAIRED
BY ITS ACTIONS, AND THAT IT HAS NO KNOWLEDGE OF ANY INFRINGEMENT OF THE
TRADEMARKS IN CONNECTION WITH PRODUCTS SIMILAR TO THE LICENSED PRODUCTS.
LICENSEE agrees to notify LICENSOR in writing of any infringements or
imitations by third parties of the Trademarks, the Licensed Product
and/or the Promotional and Packaging Material which may come to
LICENSEE's attention. In the event that a third party should infringe
any of the Trademark rights or any other rights under this Agreement in
the Territory, LICENSOR shall have the sole right to determine whether
any action shall be taken on the account of such infringement, and
LICENSEE shall not take any action on account of any infringement
without first obtaining written consent of LICENSOR, such consent not to
be unreasonably withheld.
18. ASSIGNABILITY AND MANUFACTURING
a. The license granted hereunder is, and shall remain, personal to LICENSEE
and shall not be granted, assigned, or otherwise conveyed by any act of
LICENSEE or by operation of law. For the purposes of this Paragraph 18,
any sale or transfer of any ownership interest in LICENSEE shall
constitute a prohibited assignment of the license granted hereunder.
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LICENSEE shall have not right to grant any sublicenses without LICENSOR's
prior to express written approval. Any attempt on the part of LICENSEE
to arrange to sublicense or assign to third parties its rights under
this Agreement, shall constitute a material breach of this Agreement.
NOTHING HEREIN PRECLUDES LICENSEE FROM PLEDGING THIS AGREEMENT AS
COLLATERAL OR SECURITY FOR FINANCING TO ITS PRIMARY LENDERS OR HIRING
THIRD PARTIES TO MANUFACTURE, ASSEMBLE OR SELL THE LICENSED PRODUCTS.
b. LICENSOR shall have the right to assign its rights and obligations under
this Agreement without the approval of LICENSEE.
19. NO AGENCY, JOINT VENTURE, PARTNERSHIP
The parties hereby agree that no agency, joint venture, or partnership
is created by this Agreement, and that neither party shall incur any
obligation in the name of the other without the other's prior written
consent.
20. INDEMNIFICATION
a. Except for claims of trademark infringement, UNFAIR COMPETITION or
similar claims, LICENSEE will indemnify, defend and hold LICENSOR
harmless from any and all THIRD PARTY liabilities, claims, obligations,
suits, judgments and expenses whatsoever, including court costs and
REASONABLE attorney's fees, which LICENSOR may incur or which may be
asserted against LICENSOR and which arise or occur with respect to the
operation of LICENSEE's business as it relates to the design, import,
manufacture, distribution, promotion, advertisement, and sale of the
Licensed Product under the Trademarks or with respect to this Agreement
and LICENSEE's performance hereunder; AND FURTHER PROVIDED THAT WITH
RESPECT TO ANY MATTER FOR WHICH LICENSEE HAS AN OBLIGATION TO INDEMNIFY
LICENSOR, LICENSEE SHALL HAVE THE RIGHT TO UNDERTAKE AND CONDUCT THE
DEFENSE OF ANY CAUSE OF ACTION SO BROUGHT AND HANDLE ANY SUCH CLAIM OR
DEMAND, PROVIDED THAT LICENSEE SHALL CONSULT WITH LICENSOR IN GOOD FAITH
REGARDING THE HANDLING OF THE CLAIM AND OBTAIN LICENSOR'S CONSENT FOR
ANY SETTLEMENT OR COMPROMISE THAT ADVERSELY AFFECTS LICENSOR'S BUSINESS.
B. LICENSOR WILL INDEMNIFY, DEFEND AND HOLD LICENSEE HARMLESS FROM ANY AND
ALL THIRD PARTY LIABILITIES, CLAIMS, OBLIGATIONS, SUITS, JUDGMENTS
19
<PAGE>
AND EXPENSES WHATSOEVER, INCLUDING COURT COSTS AND REASONABLE ATTORNEY'S
FEES, WHICH LICENSEE MAY INCUR OR WHICH MAY BE ASSERTED AGAINST LICENSEE
AND WHICH ARISE OR OCCUR WITH RESPECT TO THE OPERATION OF LICENSOR'S
BUSINESS OR THE CONDUCT OF LICENSOR'S OTHER LICENSEES OF THE TRADEMARKS,
OR ANY CLAIM OF INFRINGEMENT, UNFAIR COMPETITION, AND THE LIKE WITH
RESPECT TO LICENSEE'S USE OF THE TRADEMARKS IN COMPLIANCE WITH THE TERMS
OF THIS AGREEMENT; AND FURTHER PROVIDED THAT WITH RESPECT TO ANY MATTER
FOR WHICH LICENSOR HAS AN OBLIGATION TO INDEMNIFY LICENSEE, LICENSOR
SHALL HAVE THE RIGHT TO UNDERTAKE AND CONDUCT THE DEFENSE OF ANY CAUSE
OF ACTION SO BROUGHT AND HANDLE ANY SUCH CLAIM OR DEMAND, PROVIDED THAT
LICENSOR SHALL CONSULT WITH LICENSEE IN GOOD FAITH REGARDING THE
HANDLING OF THE CLAIM AND OBTAIN LICENSEE'S CONSENT FOR ANY SETTLEMENT
OR COMPROMISE THAT ADVERSELY AFFECTS LICENSEE'S BUSINESS. SUCH INDEMNITY
SHALL EXTEND TO LIABILITIES AND CLAIMS INCURRED AFTER THE EXPIRATION OR
TERMINATION OF THIS AGREEMENT BUT WHICH ARE BASED ON ACTS OR EVENTS
WHOSE PROXIMATE CAUSE AROSE DURING THIS AGREEMENT.
21. TERMINATION
a. In addition to the termination rights provided elsewhere in this
Agreement, EACH PARTY will have the right to terminate this Agreement in
the event that:
(i) THE OTHER PARTY violates or fails to perform any agreement,
obligation, term, or condition of this Agreement and that violation or
failure to perform is not cured within THIRTY (30) days following
written notice thereof; or
(ii) THE OTHER PARTY becomes insolvent, files a voluntary petition in
bankruptcy, a petition is filed against THAT PARTY to have THAT PARTY
adjudicated as bankrupt and same is not dismissed in sixty (60) days,
THAT PARTY enters into any composition with ITS creditors, BUT NOT
INCLUDING reorganization under the Bankruptcy Code. Provided, however,
such termination BY LICENSEE shall not relieve LICENSEE of the
obligation to pay any Royalty EARNED BY LICENSOR up to the effective
date of termination, nor prejudice any cause of action or claim of THE
TERMINATING PARTY accrued, or to accrue, on account of the breach or
20
<PAGE>
default of THE OTHER PARTY.
b. Notwithstanding the provisions of sub-paragraph 21a. (i) to the contrary,
in the event that LICENSEE violates this Agreement or fails to perform
any MATERIAL agreement, obligation, term, or condition of this Agreement
for the third (3rd) time, for any reason EXCEPT FORCE MAJEURE, LICENSEE
shall forfeit the right to cure such violation or failure to perform,
and this Agreement will terminate upon the giving of the written notice
thereof.
22. EFFECT OF EXPIRATION OR TERMINATION
a. EXCEPT FOR THE LIMITED PURPOSES INDICATED BELOW, upon expiration or
termination of this Agreement, all rights and licenses granted to
LICENSEE hereunder shall immediately expire, shall forthwith revert to
LICENSOR, and LICENSEE shall immediately cease and desist from using the
Trademarks and any technical information supplied by LICENSOR to
LICENSEE hereunder. To this end, LICENSEE will be deemed to have
automatically assigned to LICENSOR, PURSUANT TO THE EXPRESS PROVISIONS
OF THIS AGREEMENT, upon such expiration or termination, the Trademarks,
equities, good will, titles, and other rights in or to the Licensed
Product and all adaptations, compilations, modifications, translations
and versions thereof, and all other trademarks used in connection
therewith (NOT INCLUDING ANY OF LICENSEE'S TRADEMARKS AND LOGOS) which
have been or may be obtained by LICENSEE or which may vest in LICENSEE
and which have not already been assigned to LICENSOR BUT NOT INCLUDING
ANY GENERIC OR STANDARD STYLES, LABELS, TAGS, DESIGNS, GRAPHICS, AND THE
LIKE. LICENSOR may thereafter, in its sole discretion enter into such
arrangements as it deems desirable, with any other party, for the
manufacture, promotion and sale of the Licensed Product in the Territory.
b. Any Licensed Product, finished or in progress, shall be disposed of as
follows:
(A) UPON EXPIRATION OF THIS AGREEMENT OR TERMINATION FOR BREACH BY
LICENSOR; any finished Licensed Product in LICENSEE's possession OR IN
PROGRESS unsold OR SOLD BUT NOT DELIVERED on the date of the expiration
21
<PAGE>
of this Agreement may, subject to payment of the Royalty payable to
LICENSOR, be sold by LICENSEE, pursuant to a plan to be approved by
LICENSOR, OR TO THE CUSTOMERS TO WHOM LICENSEE IS COMMITTED OR HAVE
BOUGHT SAID PRODUCT; for a period of one hundred twenty (120) days after
expiration hereof. Any Royalty paid by LICENSEE to LICENSOR during the
aforementioned one hundred twenty (120) day period is separate and apart
from the Royalty generated during the term of the Agreement and such
Royalty is not to be applied to the Guaranteed Annual Royalty Payments
as outlined in Subparagraph 10b. and column (C) of item 7 of the
attached License Agreement Detail Schedule. All inventory remaining
after such one hundred twenty (120) day period shall be destroyed or
stripped of all imprints, lettering, mentions or other reproductions of
or references to the Trademarks and related logos; and all molds,
patterns, transfers, and other property bearing the Trademarks of
relating thereto shall be destroyed; all under the supervision of
LICENSOR, AT LICENSOR'S COST IF ANY TRAVEL INVOLVED. EXCEPT FOR GOODS
ALREADY COMMITTED OR SOLD TO LICENSEE'S CUSTOMERS, LICENSOR shall have
the first right to purchase said Licensed Product at the direct cost
price (comprised of material and direct labor expenses as set forth in
LICENSEE's books and records, plus five percent (5%) for overhead) upon
expiration or termination of this Agreement.
(B) Any finished Licensed Product in LICENSEE's possession unsold on the
date of termination of this Agreement (OTHER THAN FOR BREACH BY
LICENSOR), and all molds, patterns, transfers and other property bearing
the Trademarks or relating thereto shall be destroyed OR DEFACED TO
REMOVE THE TRADEMARKS by LICENSEE within thirty (30) days following the
termination of this Agreement; further, LICENSEE agrees, on or before
the LAST DAY OF THE ONE HUNDRED DAY (120) PERIOD, to provide LICENSOR
with a certificate signed by LICENSEE's Chief Executive Officer
certifying under penalty of perjury that such UNSOLD inventory, molds,
patterns, transfers, and other property have been destroyed OR DEFACED
SO AS TO INCLUDE THE TRADEMARKS AND LOGO OF LICENSOR. SOLD PRODUCT MAY
BE DELIVERED TO THE CUSTOMERS. LICENSEE shall, within SIXTY (60)
22
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BHPC.12
days after expiration or termination of this Agreement as the case may
be, furnish LICENSOR with a full and detailed written statement of the
Licensed Product in its inventory or the Licensed Product in progress as
STATED IN SUBPARAGRAPH 22.C. BELOW. LICENSOR shall have the option of
conducting a physical inventory at the time of expiration or termination
and/or at a later date (WITHIN THIRTY (30) DAYS OF TERMINATION OR
EXPIRATION) in order to ascertain or verify such statement. In the event
that the LICENSEE refuses to permit LICENSOR to conduct such physical
inventory, LICENSEE shall forfeit its rights hereunder to dispose of such
UNSOLD inventory. In addition to such forfeiture, LICENSOR shall have
recourse to all other remedies available to it.
c. Upon the termination of this Agreement, LICENSEE shall, within ten (10)
days following termination, give written notice to LICENSOR of the:
(i) Licensed Product, by style, in its possession or under its
control;
(ii) location of the inventory of the Licensed Product;
(iii) amount of the work in process;
(iv) Licensed Product in transit; and
(v) name, address, and telephone number of each contractor,
shipper and/or sales representative.
d. EXCEPT FOR THE INVENTORY PHASE-OUT RIGHTS AS STATED ABOVE, LICENSEE
shall accept no order, or undertake any new production, that would be
delivered after the date of expiration of this Agreement. Three (3)
months prior to the expiration of this Agreement, and monthly thereafter
until expiration, LICENSEE shall provide to LICENSOR an inventory, by
style, of all the Licensed Product in its possession or under its
control, and all work in process. Three (3) months prior to the
expiration of this Agreement, and MONTHLY until expiration, LICENSEE
shall provide LICENSOR with copies of all orders, invoices, bills of
lading, credit memoranda, and statements provided to LICENSEE's factor
(if any).
e. LICENSEE shall deliver to LICENSOR, upon termination of this Agreement
or thirty (30) days prior to the expiration of this Agreement the names,
addresses, and telephone numbers of each supplier of any item having the
23
<PAGE>
BHPC.12
Trademarks. LICENSEE shall be responsible to LICENSOR for any damages
caused by the unauthorized use by LICENSEE or by others ONLY IF CAUSED
BY THE RECKLESS CONDUCT OF LICENSEE of such reproduction materials which
are not turned over to LICENSOR.
23. MODIFICATION; WAIVER
No modification of any of the terms or provisions of this agreement
shall be valid unless contained in a writing signed by the parties. No
waiver by either party of a breach or a default hereunder shall be
deemed a waiver by such party of a subsequent breach or default of a
like or similar nature. EXCEPT AS OTHERWISE STATED IN THIS AGREEMENT,
resort by LICENSOR OR LICENSEE to any remedies referred to in this
Agreement or arising by reason of a breach of this Agreement by LICENSEE
OR LICENSOR shall not be construed as a waiver by LICENSOR of its right
to resort to any and all other legal and equitable remedies available to
LICENSOR OR LICENSEE.
24. FORCE MAJEURE
Neither LICENSOR nor LICENSEE shall be liable to each other or be
deemed in breach or default of any obligations contained in this
Agreement, for any delay or failure to perform due to causes beyond its
reasonable control, including but not limited to delay due to the
elements, acts of the United States Government, acts of a foreign
government, acts of God, fires, floods, epidemics, embargoes, riots,
strikes, any of the foregoing events being referred to as a "Force
Majeure" condition. In such event, dates for performance shall be
extended for the period of delay resulting from the Force Majeure
condition. The party affected by a Force Majeure condition shall, as
soon as practicable, notify the other party of the nature and extent of
such condition.
25. NOTICE
All notices, approvals, consents, requests, demands, or other
communications to be given to either party in writing may be effected by
personal delivery or by depositing the same in the United States mail,
certified and return receipt requested, postage prepaid. Such
24
<PAGE>
BHPC.12
communication shall be addressed to LICENSEE and LICENSOR at their
respective addresses as set forth in the preamble above.
26. CONSTRUCTION; VENUE
This Agreement shall be construed in accordance with the laws of the
State of California, U.S.A., and the parties agree that it is executed
and delivered in that state, and any claims arising hereunder shall, at
LICENSOR's election, be prosecuted in the appropriate Court of the State
of California in Los Angeles County or any Federal District Court
therein.
27. ENTIRE AGREEMENT
This Agreement, contains the entire understanding of the parties and
there are no representations, warranties, promises, or undertakings
other than those contained herein. This Agreement supersedes and
cancels all previous agreements between the parties hereto.
28. CONFIDENTIAL INFORMATION
LICENSOR and LICENSEE agree (and shall instruct their partners,
officers, directors, designers, and other persons to whom disclosure is
made) to keep strictly confidential all designs, manufacturing
instructions, and other information relating to the Licensed Product or
THE CUSTOMERS AND BUSINESS OPERATIONS OF THE OTHER PARTY that are not
otherwise available to the public, whether furnished by one to the other
or in any way acquired by either party; and the same shall be used by
either party solely under this Agreement and for the purpose of
marketing of the Licensed Product. THIS PROVISION, AS WELL AS ALL
INDEMNIFICATIONS PROVIDED IN THIS AGREEMENT, SURVIVE TERMINATION OF
EXPIRATION.
29. EQUITABLE RELIEF
LICENSEE acknowledges and agrees that:
(i) LICENSEE's failure to meet the quality standards herein;
(ii) LICENSEE's failure: (a) to use the Trademarks, or (b) to
manufacture, offer for sale, sell, advertise, promote, ship or
distribute the Licensed Product, both in accordance with the provisions
of this Agreement; or
25
<PAGE>
BHPC.12
(iii) any unauthorized use or disclosure of confidential information of
LICENSOR OR LICENSEE, cannot be compensated adequately with a remedy at
law and will cause irreparable damage to LICENSOR OR LICENSEE.
Accordingly, the parties agree that LICENSOR OR LICENSEE may seek from
any court having jurisdiction, such equitable relief by way of temporary
restraining orders, permanent injunctions or otherwise as is available
to compel the discontinuance of such conduct. LICENSEE agrees that any
court of general jurisdiction in Los Angeles County or any Federal
District Court therein shall have jurisdiction of such claim.
30. ATTORNEYS' FEES
In the event any legal action becomes necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled, in
addition to its court costs, to such reasonable attorneys' fees as shall
be fixed by a court of competent jurisdiction.
31. BINDING EFFECT
This Agreement shall be binding on the parties, and their successors and
assigns.
32. SURVIVAL OF THE RIGHTS
Notwithstanding anything to the contrary contained herein, such
obligations which remain executory after expiration of the term or
termination of this Agreement shall remain in full force and effect
until discharged by performance and such rights as pertain thereto shall
remain in force until their expiration.
33. SEVERABILITY
In the event that any term or provision of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other term or
provision and this Agreement shall be interpreted and construed as if
such term or provision, to the extent the same shall have been held to
be invalid, illegal or unenforceable, had never been contained herein.
34. CAPTIONS
The captions used in connection with the paragraphs and subparagraphs of
this Agreement are inserted only for purpose of reference. Such
26
<PAGE>
BHPC.12
captions shall not be deemed to govern, limit, modify or in any other
manner affect the scope, meaning or intent of the provisions of this
Agreement or any part thereof nor shall such captions otherwise be given
any legal effect.
35. INCORPORATION OF EXHIBITS
LICENSOR and LICENSEE acknowledge and agree that the provisions of
Exhibits "A" through "D" attached hereto (the "Exhibits") are integral
to this Agreement and that the provisions of the Exhibits are all hereby
incorporated herein and made a part hereof as if set out in full in this
Agreement.
36. RIGHT OF FIRST REFUSAL
LICENSOR will offer to LICENSEE the Right of First Refusal to license
the product category of men's warm up suits in all fabrications,
excluding silk, men's basic pique and jersey polo shirts, men's
beachwear, i.e. swimwear, crew neck fleece tops in solid colors,
embroidery, screen prints and color block, matching basic t-shirts and
tank tops, and basic fleece pants. LICENSOR will submit in writing to
LICENSEE the terms and conditions of ANY GOOD FAITH offer to license ANY
OF said product categories in the United States. LICENSEE will have
fifteen (15) days from receipt of said notice to notify LICENSOR in
writing that it is willing to accept a License Agreement under the same
terms and conditions as the offer. If LICENSOR is not notified within
said time period, LICENSOR will deem that LICENSEE has refused the offer
and will pursue the license with the offering party ON THE SAME TERMS
AND CONDITIONS PRESENTED TO LICENSEE. IF THE TERMS AND CONDITIONS
CHANGE, LICENSOR SHALL OFFER THE RIGHT OF FIRST REFUSAL TO LICENSEE ONCE
AGAIN. THESE RIGHTS OF FIRST REFUSAL SHALL CONTINUE THROUGH THE TERM OF
THIS AGREEMENT WHENEVER THE RIGHTS FOR SAID PRODUCT CATEGORIES ARE
OFFERED TO A THIRD PARTY FOR LICENSING.
37. APPROVALS
ALL APPROVALS OR CONSENTS REQUIRED TO BE GIVEN BY ONE PARTY TO THE OTHER
UNDER THIS AGREEMENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED
NOTWITHSTANDING ANYTHING IN THE AGREEMENT TO THE CONTRARY.
27
<PAGE>
BHPC.12
IN WITNESS WHEREOF, the parties hereto agree that this Agreement shall
take effect as of the date and year first above written above.
LICENSOR: LICENSEE:
BHPC MARKETING, INC., I. C. ISAACS & CO., L.P.
a California Corporation a Delaware Limited Partnership
BY: BY:
-------------------------------- ------------------------------
Don Garrison Jerry Lear
Licensing Director President, C.E.O.
Date: Date:
------------------------------ ----------------------------
28
<PAGE>
BHPC.12
SECTION (I)
NET SHIPMENT STATEMENT
The written statement of Net Shipments of Licensed Product (a copy of
which is attached hereto as Exhibit "F") referred to in Paragraph 9a must be
certified as accurate by LICENSEE and will include, but will not be limited
to, information as to: each respective invoice number (in sequential order
inclusive of all "voided" invoices), invoice date, customer name or number,
gross dollar amount invoiced, terms of any customary trade allowances (as a
percentage and in aggregate dollars), actually credited returns (in aggregate
dollars), and other deductions taken against the gross dollar amount
invoiced, and any such other further information as LICENSOR may from time to
time request. Such statements shall be furnished to LICENSOR whether or not
any Licensed Product has been shipped, distributed and/or sold during the
preceding Royalty Period and whether or not any monies are then due LICENSOR.
SECTION (II)
BOOKS, RECORDS, AND RIGHTS TO AUDIT
Within ten (10) days following any written request by LICENSOR, LICENSEE
will deliver copies and extracts of any books of account, records,
documents, materials, and information as are requested by LICENSOR
inclusive of, but not limited to: financial statements, general ledger
detail and supporting journals, documents, sales and credit memo
registers, financial projections and wholesale price listings. All books
of account and records of LICENSEE covering all transactions relating to
this Agreement shall be retained by LICENSEE for at least three (3)
years after the expiration or termination of this Agreement for
inspection by LICENSOR.
EXHIBIT "C"
Page 1 of 3
<PAGE>
BHPC.12
SECTION (III)
INSURANCE REQUIREMENTS
All such policies of insurance shall have endorsements or coverage with
combined single limits of not less than $1,000,000 with deductibles
reasonably acceptable to LICENSOR and shall name LICENSOR, and those
designated by LICENSOR, with LICENSEE's approval, as additional insureds
thereunder. Such policies of insurance shall contain:
a. severability of interest;
b. cross liability; and
c. endorsement stating: "Such insurance as is afforded by this policy
for the benefit of BHPC Marketing, Inc. shall be primary as respects any
liability of claims arising out of (LICENSEE's) operation, and any
insurance carried by BHPC Marketing, Inc. shall be excess and non-
contributory."
The policies shall provide for ten (10) days notice to LICENSOR from the
insurer by Registered or Certified Mail, return receipt requested, in the
event of any modification, cancellation or termination. LICENSEE agrees to
furnish LICENSOR a certificate of insurance or copy of the policies
evidencing same within thirty (30) days after execution of this Agreement and
from time to time as requested by LICENSOR within ten (10) days of LICENSOR's
request, in no event, shall LICENSEE manufacture, offer for sale, sell,
advertise, promote, ship and/or distribute the Licensed Product prior to
receipt by LICENSOR of such evidence of insurance.
SECTION (IV)
DISPOSAL OF INVENTORY ON EXPIRATION OR TERMINATION
(A) Upon expiration of the term of this Agreement, any finished Licensed
Product in LICENSEE's possession or in progress unsold or sold but not
delivered on the date of the expiration of this Agreement may, subject to
payment of the Royalty payable to LICENSOR, be sold by LICENSEE, pursuant to
a plan to be approved by LICENSOR, or to the customers to whom LICENSEE is
committed or have bought said product, for a period of one hundred twenty
(120) days after expiration hereof. Any Royalty paid by LICENSEE to LICENSOR
during the aforementioned one hundred twenty (120) day period is separate and
apart from the Royalty generated during the term of the Agreement and such
Royalty is not to be applied to the Guaranteed Annual Royalty Payments as
outlined in Subparagraph 10b, and column (C) of item 7 of the attached
License Agreement Detail Schedule. All inventory remaining after such one
hundred twenty (120) day period shall be destroyed or stripped of all
imprints, lettering, mentions or other reproductions of or references to the
Trademarks and related logos; and all molds, patterns, transfers, and other
property bearing the Trademarks of relating thereto shall be destroyed; all
under the supervision of LICENSOR, at LICENSOR's cost if travel involved.
EXHIBIT "C"
Page 2 of 3
<PAGE>
BHPC.12
Except for goods already committed or sold to LICENSEE's customers, LICENSOR
shall have the first right to purchase said Licensed Product at the direct
cost price (comprised of material and direct labor expenses as set forth in
LICENSEE's books and records, plus five percent (5%) for overhead) upon
expiration or termination of this Agreement.
(B) Any finished Licensed Product in LICENSEE's possession unsold on the date
of termination of this Agreement (other than for breach by LICENSOR), and all
molds, patterns, transfers, and other property bearing the Trademarks or
relating thereto, shall be destroyed or defaced to remove the Trademarks by
LICENSEE within thirty (30) days following the termination of this Agreement;
further, LICENSEE agrees, on or before the last day of the one hundred twenty
(120) day period, to provide LICENSOR with a certificate signed by LICENSEE's
Chief Executive Officer certifying under penalty of perjury that such unsold
inventory, molds, patterns, transfers, and other property have been destroyed
or defaced so as not to include the Trademarks and logo of LICENSOR.
EXHIBIT "C"
Page 3 of 3
<PAGE>
Exhibit 10.19
AMENDMENT TO EXCLUSIVE DOMESTIC LICENSE AGREEMENT
This Amendment is made and entered into by and between BHPC Marketing, Inc.
("LICENSOR") and I. C. Isaacs Co., L.P. ("LICENSEE") and is dated as of June
3, 1997. This Amendment amends and modifies that certain Exclusive Domestic
License Agreement between LICENSOR and LICENSEE dated June 1, 1993.
(I)
The promises, covenants, agreements and declarations made and set forth
herein are intended to and shall have the same force and effect as if set
forth at length in the body of the Agreement. To the extent that the
provisions of this Amendment are inconsistent with the terms and conditions
of the AGREEMENT, the terms set forth herein shall control.
(II)
1. Effective as of May 1, 1997, the License Agreement Detail Schedule
(Women's), as previously amended, is hereby further amended by replacing
it with the License Agreement Detail Schedule attached hereto.
2. Paragraph 7(b) of the Agreement is hereby amended by deleting all
references to one-year renewal periods and referring in their place to the
three-year renewal terms provided for in the License Agreement Detail
Schedule attached hereto, and by including in the references to the Initial
Term the Contract Years shown in the attached Schedule to be now a part of
the Initial Term.
3. The Amendment to the Agreement dated April 28, 1997, is no longer in
effect.
(III)
LICENSOR and LICENSEE acknowledge and agree that the Agreement, as amended by
this Amendment and the September 1, 1993 Amendment, remains in full force and
effect and represents the entire Agreement of the parties with respect to the
matters contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Amendment shall take
effect as of the date and year first written above.
LICENSOR: LICENSEE:
BHPC MARKETING,INC. I.C. ISAACS & CO., L.P.
BY: /s/ Don Garrison BY: /s/ Robert Arnot
---------------------------- ----------------------------
Don Garrison Robert Arnot
Director of Licensing Chairman of the Board
DATE: 6/16/97 DATE: 6/12/97
BY: /s/ Gerald Lear
----------------------------
Gerald Lear
President, C.E.O.
DATE: 6/12/97
<PAGE>
LICENSE AGREEMENT DETAIL SCHEDULE
1. DEFINITION OF TERRITORY: The United States, its territories and
possessions
2. DEFINITION OF LICENSED PRODUCT (BY CATEGORY):
Women's missy, junior, petite and large size coordinated
sportswear; sweaters, sweater dresses and sweater suits; basic
fleece tops and bottoms; basic t-shirts and basic polo shirts;
warm ups in knit and woven fabrics; women's tennis and
golf related short sets, skort sets and pant sets in knit and
woven fabrics
3. INITIAL TERM: FROM TO
---- --
First Contract Year: January 1, 1996 December 31, 1996
Second Contract Year: January 1, 1997 December 31, 1997
Third Contract Year: January 1, 1998 December 31, 1998
4. RENEWAL TERM:
First Renewal Period (if any): January 1, 1999 December 31, 2001
Second Renewal Period (if any): January 1, 2002 December 31, 2004
5. ROYALTY RATE:
Five percent (5%)
6. ADVERTISING: 1% of net Sales to be spent in the Territory by LICENSEE.
<PAGE>
7. GUARANTEES:
(A) (B) (C) (D)
Guaranteed Guaranteed Guaranteed
Target Guaranteed Annual Monthly
Net Net Royalty Royalty
Shipments Shipments Payments Payments
(in United States Dollars)
---------------------------------
First Contract Year $0.00 $0.00 $0.00 $0.00
Second Contract Year $2,000,000 $2,000,000 $100,000 $ 8,333.33
Third Contract Year $3,000,000 $3,000,000 $150,000 $12,500.00
* Guaranteed Net Shipments for the First Renewal Period and Second Renewal
Period (if any) shall be calculated based on a volume equal to eighty percent
(80%) of the immediately preceding Contract Year's actual Net Shipments, but
not less than the previous year's Guaranteed Net Shipments. Guaranteed Annual
Royalty Payments for the First Renewal Period and Second Renewal Period (if
any) shall be calculated based on a volume equal to eighty percent (80%) of
the immediately preceding Contract Year's Annual Royalty Payment, but not
less than the previous year's Guaranteed Annual Royalty Payment.
INITIALS DATE
-------- ----
LICENSOR, BHPC: /s/ DG 6/2/97
---------------------- --------
LICENSEE, I.C. ISAACS: /s/ RJA 6/3/97
------------------ --------
<PAGE>
Exhibit 10.20
AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
This Amendment is made and entered into by and between BHPC Marketing, Inc.
("LICENSOR") and I. C. Isaacs Co., L.P. ("LICENSEE") and is dated as of July
29, 1997. This Amendment amends and modifies that certain Exclusive License
Agreement between LICENSOR and LICENSEE, dated December 14, 1995 (the
"Agreement").
(I)
The promises, covenants, agreements and declarations made and set forth
herein are intended to and shall have the same force and effect as if set
forth at length in the body of the Agreement. To the extent that the
provisions of this Amendment are inconsistent with the terms and conditions
of the Agreement, the terms set forth herein shall control.
(II)
1. The following category has been added effective August 1, 1997 for
distribution January 1, 1998 to the Domestic License Agreement as
detailed above.
"Product:
---------
Men's dress shirts with neck sizes and sleeve lengths in assorted fabrics
to include natural and synthetic fibers."
Territory:
----------
The United States, its territories and possessions."
(III)
LICENSOR AND LICENSEE acknowledge and agree that the Agreement, as amended by
this Amendment, remains in full force and effect and represents the entire
agreement of the parties with respect to the matters contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Amendment shall take
effect as of the date and year first written above.
LICENSOR: LICENSEE:
BHPC MARKETING, INC. I. C. ISAACS & CO., L.P.
BY : /S/ Roger Tomlinson BY: /S/ Robert Arnot
----------------------- ------------------------
Robert Tomlinson Robert Arnot
Director of Marketing Chairman of the Board
DATE: 07/29/97 DATE: 8/7/97
--------------------- ------------------------
BY: /s/ Gerald W. Lear
------------------------
Gerald Lear
President, C.E.O.
DATE: 8/7/97
------------------------
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Exhibit 10.21
INTERNATIONAL
EXCLUSIVE LICENSE AGREEMENT BHPC.12I
---------------------------
THIS AGREEMENT is made and entered into this 15th day of August, 1996 by
and between BHPC Marketing, Inc., a corporation duly organized and existing
under the laws of California, having its principal place of business at 620
West 135th Street, Gardena, California 90248 (hereinafter referred to as
"LICENSOR"), and Zacari 2000, S.L., a Spanish Limited Corporation, having its
principal place of business at c/LLULL 88, B1, 08005, Barcelona, Spain
(hereinafter referred to as "LICENSEE").
WHEREAS, LICENSOR is the owner with the right to grant licenses of the
Trademarks illustrated in Exhibit "A" attached hereto (the "Trademarks"); and
WHEREAS, LICENSEE is desirous of obtaining the exclusive right to use
the aforesaid Trademarks in connection with the import or manufacture and
sale of certain licensed products defined herein.
NOW, THEREFORE, it is agreed by the parties as follows:
1. DEFINITIONS
-----------
The following terms shall have meanings as set forth below:
a. "Trademarks" shall mean the Trademarks set forth in Exhibit "A".
b. "Territory" shall mean that geographical area defined in item 1 of the
attached License Agreement Detail Schedule.
c. "Licensed Product" shall be defined as set forth in item 2 of the
attached License Agreement Detail Schedule.
d. "Net Shipments" shall mean the aggregate total of the gross amount
invoiced its purchasers by LICENSEE for all the Licensed Product sold under
the Trademarks reduced by the amount of any customary trade allowances and
returns actually credited. No deduction shall be made for commissions nor
for any costs incurred in the manufacture, sale, distribution or
exploitation of the Licensed Product.
2. RIGHTS GRANTED
--------------
LICENSOR hereby grants to LICENSEE, upon the terms and conditions set
forth herein, an exclusive, personal, non-transferable, non-assignable
license, without the right to grant sublicenses, to use the Trademarks
solely on or in conjunction with the design, manufacture, import,
distribution, advertising, promotion, shipment, and sale of the Licensed
Product in the Territory. This license is extended to and includes wholesale
sales only and does not include retail sales. LICENSEE is hereby authorized
to enter
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BHPC.12I
into distributorship agreements, with prior written approval of LICENSOR,
said approval not to be unreasonably withheld.
3. OWNERSHIP OF ARTWORK AND DESIGNS
--------------------------------
LICENSEE acknowledges and agrees that LICENSOR is the owner of all
artwork and designs involving the Licensed Product and/or Trademarks, or any
reproductions thereof, notwithstanding their invention or use by LICENSEE
and that such artwork and designs will remain the property of LICENSOR who
shall be entitled to use and license others to use same, subject to the
provisions of this Agreement.
4. GOOD WILL AND PROMOTIONAL VALUE
-------------------------------
a. LICENSEE recognizes the value of the good will associated with the
Trademarks and acknowledges that the Trademarks, and all rights therein and
the good will pertaining thereto, belong exclusively to LICENSOR.
LICENSEE further recognizes and acknowledges that the Trademarks have
acquired secondary meaning in the mind of the public.
b. LICENSEE agrees that its use of the Trademarks shall inure to the benefit
of LICENSOR and that LICENSEE shall not, at any time, acquire any rights in
the Trademarks by virtue of any use it may make of the Trademarks.
c. LICENSEE acknowledges that LICENSOR is entering into this Agreement not
only in consideration of the royalties paid hereunder but also for the good
will and promotional value to be secured by LICENSOR for the Trademarks as a
result of the manufacture, offering for sale, sale, advertising, promotion,
shipment and distribution of the Licensed Product by LICENSEE.
5. QUALITY STANDARDS, PRODUCT APPROVALS, AND INSPECTION
----------------------------------------------------
a. The quality of the Licensed Product, as well as the quality of all
promotional, advertising and packaging material (see Paragraph 6) which
includes the Trademarks (the "Promotional and Packaging Material"), shall
be at least as high as the best quality of similar products and promotional,
advertising and packaging material presently shipped, distributed, sold,
used, manufactured or licensed by LICENSOR in the Territory and shall be in
full conformance with all applicable laws and regulations. LICENSEE
acknowledges that the maintenance of the high quality of the Licensed
Product, and the control by LICENSOR over the nature, quality and manner of
distribution of all Licensed Products, are essential elements of this
license. Except
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BHPC.12I
as specifically provided in Paragraph 8d, below, LICENSEE shall not offer
for sale, advertise, promote, distribute, or use for any purpose any
Licensed Product that is damaged, defective, or are "seconds".
b. In order to maintain the high quality standard prescribed by LICENSOR,
LICENSEE may not manufacture, use, offer for sale, sell, advertise, promote,
ship and/or distribute any Licensed Product or any Promotional and Packaging
Material relating to the Licensed Product until it has received all written
approvals of same from LICENSOR in the manner provided herein. Such approval
shall not be unreasonably withheld. Should LICENSOR fail to approve in
writing any of the submissions furnished it by LICENSEE within fourteen (14)
days from the date of submission thereof, such failure shall be considered
to be a disapproval thereof.
c. Before commencing, or authorizing third parties to commence, the design
or development of any Licensed Product or of Promotional and Packaging
Material which have not been previously approved in writing by LICENSOR:
(i) Prior to the production of the Licensed Product, there shall be a
pre-production showing of the Licensed Product at a time and date to be
mutually agreed upon by the parties. LICENSEE shall submit for LICENSOR's
prior written approval all final designs, specifications, fabrications, and
color information.
(ii) Prior to the production of each collection (also known in the trade
as a "line" or a "season"), LICENSEE shall submit to LICENSOR a completed
"Sample Approval Form" (Exhibit "B-1") for each proposed item of the
Licensed Product along with: at least one (1) final sample of each style in
the collection; one (1) set of material which shows color and fabrication,
to be attached to a "Swatch Approval Form" (Exhibit "B-2"); and one (1)
photograph of each sample to be attached to the "Sample Approval Form"
(Exhibit "B-1"). Once a proposed item of the Licensed Product has been
approved, LICENSEE shall not deviate in any material respect from: (1) any
information, description or specification on the "Sample Approval Form" or
"Swatch Approval Form"; or (2) the quality of or material used on an
approval sample, without the prior written consent of LICENSOR. Each style,
color and fabrication must be approved for each season, regardless of
whether it was approved for a prior season.
(iii) Within two (2) weeks following the commencement of each first
production run of the Licensed Product (or, if production of the various
styles of the Licensed Product commences at different times, within two (2)
weeks after commencement of each style's first production run), LICENSEE
shall deliver to
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LICENSOR, at least one (1), finished production sample of each style. If
the style, appearance or quality of any production sample is different
from what was previously approved, LICENSEE shall make the necessary
changes so that it conforms to what was originally approved.
d. LICENSEE agrees that the Licensed Product and all Promotional and
Packaging Material shall contain only those legends, markings and/or
notices as required from time to time by LICENSOR to give appropriate
notice to the consuming public of LICENSOR's right, title and interest
thereto.
e. LICENSOR may, periodically and from time to time during the term of this
Agreement, require that LICENSEE submit to LICENSOR, at no cost to
LICENSOR, or LICENSOR or its designees may randomly select and retain
during the inspection referred to in Subparagraph 5f, below, one (1)
additional set of Production Samples of the Licensed Product and/or the
Promotional and Packaging Material relating to the Licensed Product for
subsequent review and written approval of the quality of, trademark usage
and notice on same, and for any other purpose that LICENSOR deems
appropriate.
f. To assure that the provisions of this Paragraph 5 are being observed,
LICENSEE agrees that it will allow LICENSOR or its designees,
periodically and from time to time during the term of this Agreement, to
enter LICENSEE's premises and/or the premises where the Licensed Product
is being manufactured or inventoried during regular business hours and
upon reasonable notice, for the purposes of inspecting and approving the
Licensed Product and the Promotional and Packaging Material relating to
the Licensed Product.
g. In the event that the quality standards and/or trademark and copyright
usage and notice requirements hereinabove referred to are not met, then,
upon receipt of written notice from LICENSOR, LICENSEE shall immediately
discontinue any and all activities with respect to the Licensed Product
in connection with which the said quality standards and/or trademark and
copyright usage and notice requirements have not been met.
6. ADVERTISING/USE OF THE TRADEMARK
--------------------------------
a. LICENSEE will adopt and carry out its own marketing and advertising
program with respect to the Licensed Product. LICENSEE agrees that
LICENSEE's advertising, public relations and sales promotion activities
will be subject to prior consultation with, and written approval by,
LICENSOR as to the general form and content only with respect to the use
of the Trademarks and other notices.
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BHPC.12I
b. Before publication of any advertisement or promotion, LICENSEE shall
submit every element of the advertisement or promotion to LICENSOR for
written approval hereunder using the "Advertising Approval Form" (Exhibit
"B-3".)
c. LICENSEE agrees that upon request of LICENSOR, it shall loan a reasonable
number of products to LICENSOR and its other licensees for advertising
and promotional purposes.
d. LICENSOR may purchase the Licensed Product from LICENSEE at the cost of
manufacture. No royalty shall be payable to LICENSOR.
e. Advertising directed to the public may not feature the name of LICENSEE.
If approved, advertising directed to the trade may feature the following:
BHPC Marketing, Inc. under Trademark License to (Name of LICENSEE).
f. LICENSEE agrees that the Trademark will appear on each Licensed Product
and its packaging, if any. LICENSEE shall use only those tags, labels and
packaging materials which have been previously approved in writing. All
tags, labels and packaging materials bearing the Trademark must be
submitted on the "Advertising Approval Form" (Exhibit "B-3").
g. LICENSEE shall affix such legends, markings and notices on all License
Product as are required by LICENSOR and the law.
h. LICENSEE must submit for approval to LICENSOR a printer's proof of each
item before final printing.
7. DURATION OF THE AGREEMENT
-------------------------
a. This Agreement shall continue for three (3) consecutive Contract Years
in respective durations as set forth in item 3 of the attached License
Agreement Detail Schedule (hereinafter collectively the "Initial Term")
and shall then expire unless sooner terminated in accordance with the
terms and conditions set forth herein.
b. If LICENSEE fully performs according to all of the terms and conditions
hereof including, without limitation, the terms and conditions
specifically enumerated below, LICENSEE shall have three (3) consecutive
options to renew this Agreement for three (3) consecutive contract
periods, i.e., Contract Years, of one (1) year each (hereinafter
collectively the "Renewal Term"). In order to exercise each individual
option, LICENSEE must provide LICENSOR with written notice of its
intention to exercise each respective option and such written notice
must be received by LICENSOR no later than one hundred eighty (180) days
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BHPC.12I
prior to the expiration of the Initial Term or immediately preceding
Contract Year of the Renewal Term. In the event that LICENSEE fails to
exercise any of the aforementioned options in a timely manner, the
license granted herein to LICENSEE will thereafter become non-exclusive
for the remaining term of this Agreement and LICENSOR may enter into such
arrangements as it deems appropriate with respect to the licensing of the
Trademarks and the Licensed Product. Except as specifically set forth
herein to the contrary, LICENSEE's performance in the Renewal Term shall
be pursuant to the same terms and conditions recited herein for the
Initial Term.
8. ROYALTIES
---------
a. "Royalty", as used in this Agreement, shall consist of:
(i) LICENSEE paying to LICENSOR, during the term of this Agreement, a
Royalty in an amount equal to six percent (6%) of the Net Shipments by
LICENSEE for Licensed Product sold under the Trademarks directly to
Authorized BHPC Distributors. Any sales of Licensed Product to
Distributors will be under approved Distributorship Agreements by
LICENSOR.
(ii) LICENSEE paying to LICENSOR, during the term of this Agreement, a
Royalty in an amount equal to six percent (6%) of the Net Shipments by
LICENSEE for Licensed Product sold under the Trademarks directly to
Retail Stores.
b. LICENSEE shall pay to LICENSOR, concurrently with the execution of this
Agreement with respect to the First Contract Year, an Advance Royalty
Payment equal to the amount set forth in item 5 of the attached License
Agreement Detail Schedule, no part of which shall be refundable. The
Advance Royalty Payment shall not reduce or offset the payment of any
Guaranteed Minimum Royalty hereunder. However, the Advance Royalty
Payment may be applied to reduce and offset the payment of any royalty
due hereunder in excess of the Guaranteed Annual Minimum Royalty.
c. Off-priced Merchandise shall be defined as either close-out Licensed
Product or substandard Licensed Product. In the event LICENSEE is desirous
of increasing Off-priced Merchandise shipping beyond fifteen percent
(15%) of total production of Licensed Product in any Contract Year,
LICENSEE must receive LICENSOR's prior written approval thereof on a
case-by-case basis. In no event will LICENSEE offer for sale, or
distribute any substandard Licensed Product unless the Licensed Product
are clearly identified to
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BHPC.12I
the consuming public as being "seconds".
9. PAYMENT
-------
a. The payments provided for in Paragraph 8, above, shall be based upon all
Net Shipments in each month (the "Royalty Period") and shall be due and
payable by LICENSEE to LICENSOR by the twentieth (20th) day following
each month. All Guaranteed Monthly Royalty Payments are due and payable
by LICENSEE to LICENSOR on the twentieth (20th) day of each respective
calendar month for that Contract Year. At the time of each such payment,
LICENSEE shall provide LICENSOR with a complete, accurate, written
statement of its Net Shipments of Licensed Product for the Royalty
Period. Such statement of Net Shipments of Licensed Product (a copy of
which is attached hereto as Exhibit "B-4") must be certified as
accurate by LICENSEE and will include, but will not be limited to,
information as to: customer name, gross amount invoiced, terms of any
customary trade allowances actually credited, returns and other
deductions taken against the gross amount invoiced, and any such other
further information as LICENSOR may from time to time request. All Net
Shipments shall be stated in the currency of the Country where they were
made, followed by the equivalent amount for such Net Shipments in United
States currency, followed by the exchange rate applied.
b. All taxes imposed as a result of the existence of this Agreement or the
performance by the parties of their obligations hereunder shall be borne
and paid by LICENSEE, excepting therefrom any withholding tax imposed on
LICENSEE, which shall be paid by LICENSOR. LICENSEE shall deduct such
withholding tax from the monthly Royalty Payments, and provide to
LICENSOR, on the twentieth (20th) day of the first month of the
following Contract Year, and accounting of said withholding taxes paid
by LICENSEE, and shall provide to LICENSOR the original tax withholding
certificate for each month.
c. LICENSEE's statements shall be submitted to:
BHPC Marketing, Inc.
620 West 135th Street
Gardena, California 90248
Attn: Royalty Receivables Department
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BHPC.12I
All amounts payable to LICENSOR by LICENSEE shall be wire transferred to:
Bank Name: First Interstate Bank
Bank ABA#: 122000218
Bank Address: 707 Wilshire Blvd.
Los Angeles, CA 90017
Account Name: BHPC Marketing, Inc.
Account Number: 149-6-38302
d. The receipt and/or acceptance by LICENSOR of any of the statements or
reports furnished or payments paid hereunder to LICENSOR (or the cashing
of any checks paid hereunder) shall not preclude LICENSOR from
questioning the correctness thereof at any time and, in the event that
any inconsistencies or mistakes are discovered in such statements,
reports, or payments, they shall immediately be rectified by LICENSEE
and the appropriate payment shall immediately be made by LICENSEE.
e. All payments made hereunder shall be in United States dollars in United
States currency; amounts shall be computed at the exchange rate existing
at noon on the last business day preceding the day payment is due to be
made hereunder. If payment is late, LICENSOR has the option to require
that payment be made at the exchange rate on the day preceding actual
payment.
f. Time is of the essence with respect to all payments to be made hereunder
by LICENSEE. In the event LICENSEE shall fail to pay any sum required to
be paid by this Agreement after the due date thereof, the amount owing
shall thereupon bear interest at the maximum annual percentage rate
allowable by law from the due date until paid.
10. GUARANTEES
----------
a. Guaranteed Annual Royalty Payments - LICENSEE shall pay, for each
Contract Year during the term of this Agreement, beginning with the First
Contract Year, the respective Guaranteed Annual Royalty Payments set
forth in item 7 of the attached License Agreement Detail Schedule.
b. Guaranteed Target Net Shipments - If, in any Contract Year, LICENSEE does
not achieve the Guaranteed Target Net Shipment Volume figure set forth in
item 7 of the attached License Agreement Detail Schedule LICENSOR may, at
its option, immediately thereafter terminate this Agreement in writing.
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c. Guaranteed Net Shipments - If, in any Contract Year, LICENSEE does not
achieve the Guaranteed Net Shipments figure for a particular country set
forth in item 7 of the attached Licensed Agreement Detail Schedule
LICENSOR may, at its option, immediately thereafter terminate this
Agreement in writing for that particular country only.
d. Guaranteed Monthly Royalty Payments - In order to ensure that the above
guarantees are met, LICENSEE shall pay to LICENSOR each month pursuant to
Paragraphs 8 and 9, above, the respective Guaranteed Monthly Royalty
Payments set forth in item 7 of the attached License Agreement Detail
Schedule for each Contract Year during the Term of this Agreement. In the
event that any actual Monthly Royalty Payment calculated in accordance
with Paragraph 8, above, is less than the applicable Guaranteed Monthly
Royalty Payment, LICENSEE shall pay to LICENSOR the Guaranteed Monthly
Royalty Payment in accordance with Paragraph 9. In the event that any
actual Monthly Royalty Payment calculated in accordance with Paragraph 8
exceeds the Guaranteed Monthly Royalty Payment, the actual Royalty
payment shall be paid to LICENSOR in accordance with Paragraph 9.
e. In the event of the termination of this entire Agreement, LICENSEE is
obligated to pay the balance of the Guaranteed Annual Royalty Payments
due for the remainder of the Contract Year in progress, and payment in
full shall be due and payable within 30 days of said termination.
11. EXPLOITATION BY LICENSEE
------------------------
a. LICENSEE agrees to commence, and diligently continue thereafter, the
distribution, shipment and sale of the Licensed Product in commercially
reasonable quantities in the Territory on or before the respective
distribution date set forth next to the Licensed Product described in
item 2 of the attached License Agreement Detail Schedule.
b. LICENSEE agrees that the Licensed Product will only be sold to retailers,
jobbers, wholesalers and BHPC Authorized Distributors for sale, shipment
and distribution to retail stores and merchants commonly considered and
referred to in the industry as fine department stores and better
specialty stores and/or to fine department stores and better specialty
stores for sale, shipment and distribution direct to the public. The
manner and scope of the distribution of the Licensed Product,
availability, variety, fabrication, colors and sizes are critical to the
promotion, enhancement and protection of the Trademarks and their
associated
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BHPC.12I
goodwill. LICENSEE acknowledges that it has no right to and shall not
sell or distribute the Licensed Product to any diverter or to anyone
outside of the Territory or to any Distributor who is not a BHPC
Authorized Distributor.
c. LICENSEE further agrees to sell to LICENSOR, if requested to do so by
LICENSOR, any product manufactured or sold by LICENSEE, from LICENSEE's
regular production at LICENSEE's customary net selling price.
12. BOOKS, RECORDS AND RIGHTS TO AUDIT
----------------------------------
a. LICENSEE agrees that it shall keep complete and accurate written books of
accounts and records, maintained in accordance with generally accepted
accounting principles consistently applied, at its principal place of
business, covering all Licensed Product manufactured, distributed, and
sold under the Trademarks. LICENSEE shall provide LICENSOR with the
following: (i) a certified, audited, set of financial statements (i.e.,
balance sheet, income statement, and sources and uses of funds) to be
delivered to LICENSOR within ninety (90) days after the end of each
fiscal year of LICENSEE. All such financial information must be
prepared by an independent certified public accountant, having no
interest whatsoever in LICENSEE's business other than that of an
independent certified public accountant.
b. LICENSOR and its duly authorized representatives shall have the right, at
all reasonable hours of the day, to audit LICENSEE's books of account and
records and all other documents and material in the possession or under
the control of LICENSEE with respect to the subject matter and the terms
of this Agreement. Within ten (10) days following any written request by
LICENSOR, LICENSEE will deliver copies and extracts of any books of
account, records, documents, materials, and information as are requested
by LICENSOR inclusive of, but not limited to: financial statements,
general ledger detail and supporting journals, documents, sales and
credit memo registers, financial projections and wholesale price
listings. All books of account and records of LICENSEE covering all
transactions relating to this Agreement shall be retained by LICENSEE for
at least three (3) years after the expiration or termination of this
Agreement for inspection by LICENSOR. In the event that any such audit
reveals an underpayment by LICENSEE, LICENSEE shall immediately remit
payment to LICENSOR in the amount of such underpayment plus interest
calculated at the maximum annual percentage rate allowable by law,
compounded daily, calculated
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BHPC.12I
from the date such payment was actually due until the date when such
payment is, in fact, actually made. In the event that any material
underpayment is revealed by any such audit, LICENSEE shall pay all
reasonable costs and expenses of the examination and audit, including
any reasonable travel expenses incurred by LICENSOR in making such
examination, and costs and expenses of any accountants or other persons
retained by LICENSOR to examine, audit, or analyze LICENSEE's records.
A "material underpayment" is hereby defined as an underpayment of five
percent (5%) or more.
13. USE, DISPLAY, AND SALE INVOLVING THE TRADEMARKS AND COPYRIGHT
-------------------------------------------------------------
a. In order to protect the Trademarks and LICENSOR's reputation, LICENSEE
will manufacture, distribute and sell the Licensed Product in compliance
with all applicable laws. In no event shall LICENSEE, or any affiliated
entity, manufacture, import, distribute or sell any products using any
trademark or other designation containing the words "BEVERLY HILLS", or
"POLO", or depicting any equestrian figure, without the written consent
of LICENSOR.
b. LICENSEE shall exercise all reasonable efforts, within the limits allowed
by the laws and governmental regulations in effect in the Territory, to
ensure that its merchandising and sales of the Licensed Product shall
conform to policies and methods suitable for goods of high quality sold
under a prestigious label of worldwide repute.
14. OWNERSHIP OF THE TRADEMARKS
---------------------------
a. LICENSEE agrees that nothing in this Agreement shall give LICENSEE any
right, title, or interest in the Trademarks, other than the license to
use the Trademarks on the Licensed Product; that such marks are the sole
property of Licensor; that all such uses by LICENSEE of such marks shall
inure only to the benefit of LICENSOR; and it being understood that all
right, title and interest relating thereto are expressly reserved by the
LICENSOR except for the rights being licensed hereunder.
b. LICENSEE agrees and acknowledges that if it has obtained or obtains in
the future, in any country, any right, title, or interest in any marks
which are confusingly similar to the Trademark, (including the filing of
any application for trademarks or service mark registration or the
obtaining of any issued registration), that LICENSEE has acted or will
act as an agent and for the benefit of LICENSOR. LICENSEE further agrees
to execute any and all instruments deemed by LICENSOR, its attorneys or
representatives, to be necessary
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to transfer such right, title, or interest to LICENSOR to protect
LICENSOR's right, title and interest in such marks.
c. LICENSEE agrees not to raise or cause to be raised to third parties,
either during the term of this Agreement or after its expiration or
termination, on any grounds whatsoever, any questions concerning the
validity of the Trademarks or LICENSOR's rights therein, or any other
trademark or service mark owned by LICENSOR.
15. COMPLIANCE WITH LIMITATIONS ON USE OF TRADEMARKS
------------------------------------------------
LICENSEE agrees that the Licensed Product, and all labels, hang tags,
packaging and other trade dress, used in connection with such Licensed
Products, shall not violate any restrictions on use or display of the
marks as provided in that Settlement Agreement and Consent Judgement with
Polo Fashions, Inc., a copy of which is attached hereto as Exhibit "D".
Nothing contained in this Agreement makes Polo Fashions, Inc., or any
related company, a third party beneficiary of this Agreement.
16. THIRD PARTY INFRINGEMENT
------------------------
LICENSEE agrees to notify LICENSOR in writing of any infringements or
imitations by third parties of the Trademarks, the Licensed Product
and/or the Promotional and Packaging Material which may come to
LICENSEE's attention. In the event that a third party should infringe
any of the Trademark rights or any other rights under this Agreement in
the Territory, LICENSOR shall have the sole right to determine whether
any action shall be taken on the account of such infringement, and
LICENSEE shall not take any action on account of any infringements
without first obtaining written consent of LICENSOR, such consent not to
be unreasonably withheld.
17. ASSIGNABILITY AND MANUFACTURING
-------------------------------
a. The license granted hereunder is, and shall remain, personal to LICENSEE
and shall not be granted, assigned, or otherwise conveyed by any act of
LICENSEE or by operation of law. For the purposes of this Paragraph 17,
any sale or transfer of any ownership interest in LICENSEE shall
constitute a prohibited assignment of the license granted hereunder.
LICENSEE shall have not right to grant any sublicenses without LICENSOR's
prior express written approval. Any attempt on the part of LICENSEE to
arrange to sublicense or assign to third parties its rights under this
Agreement, shall constitute a material breach of this
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Agreement.
b. LICENSOR shall have the right to assign its rights and obligations under
this Agreement without the approval of LICENSEE.
18. NO AGENCY, JOINT VENTURE, PARTNERSHIP
The parties hereby agree that no agency, joint venture, or partnership is
created by this Agreement, and that neither party shall incur any obligation
in the name of the other without the other's prior written consent.
19. INDEMNIFICATION
Except for claims of trademark infringement or similar claims, LICENSEE
will indemnify, defend and hold LICENSOR harmless from any and all
liabilities, claims, obligations, suits, judgments and expenses whatsoever,
including court costs and attorney's fees, which LICENSOR may incur or which
may be asserted against LICENSOR and which arise or occur with respect to
the operation of LICENSEE's business as it relates to the design, import,
manufacture, distribution, promotion, advertisement, and sale of the
Licensed Product under the Trademarks or with respect to this Agreement and
LICENSEE's performance hereunder; and further provided that LICENSOR shall
have the right to undertake and conduct the defense of any cause of action
so brought and handle any such claim or demand. Such indemnity shall extend
to liabilities and claims incurred after the expiration or termination of
this Agreement but which are based on acts or events whose proximate cause
arose during this Agreement.
20. TERMINATION
a. In addition to the termination rights provided elsewhere in this
Agreement, LICENSOR will have the right to terminate this Agreement in the
event that: (i) LICENSEE violates or fails to perform any agreement,
obligation, term, or condition of this Agreement and that violation or
failure to perform is not cured within ten (10) days following written
notice thereof; or (ii) LICENSEE becomes insolvent, files a voluntary
petition in bankruptcy, a petition is filed against LICENSEE to have
LICENSEE adjudicated as bankrupt and same is not dismissed in sixty (60)
days, LICENSEE enters into any composition with the creditors of LICENSEE
or becomes subject to reorganization under the United States Bankruptcy Code
or under any other bankruptcy law. Provided, however, such termination shall
not relieve LICENSEE of the obligation to pay any Royalty accrued up to the
effective date of termination, nor prejudice any cause of action or claim
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of LICENSOR accrued, or to accrue, on account of the breach or default of
LICENSEE.
b. Notwithstanding the provisions of sub-paragraph 20a(i) to the contrary,
in the event that LICENSEE violates this Agreement or fails to perform any
agreement, obligation, term, or condition of this Agreement for the third
(3rd) time, for any reason, LICENSEE shall forfeit the right to cure such
violation or failure to perform, and this Agreement will terminate upon the
giving of the written notice thereof.
21. EFFECT OF EXPIRATION OR TERMINATION
a. Upon expiration or termination of this Agreement, all rights and
licenses granted to LICENSEE hereunder shall immediately expire, shall
forthwith revert to LICENSOR, and LICENSEE shall immediately cease and
desist from using the Trademarks and any technical information supplied by
LICENSOR to LICENSEE hereunder. To this end, LICENSEE will be deemed to
have automatically assigned to LICENSOR, upon such expiration or
termination, the Trademarks, equities, good will, titles, and other rights
in or to the Licensed Product and all adaptations, compilations,
modifications, translations and versions thereof, and all other trademarks
used in connection therewith which have been or may be obtained by LICENSEE
or which may vest in LICENSEE and which have not already been assigned to
LICENSOR. LICENSOR may thereafter, in its sole discretion enter into such
arrangements as it deems desirable, with any other party, for the
manufacture, promotion and sale of the Licensed Product in the Territory.
LICENSEE shall, within thirty (30) days after expiration or termination of
this Agreement as the case may be, furnish LICENSOR with a full and detailed
written statement of the Licensed Product in its inventory or the Licensed
Product in progress. LICENSOR shall have the option of conducting a physical
inventory at the time of expiration or termination and/or at a later date in
order to ascertain or verify such statement. In the event that the LICENSEE
refuses to permit LICENSOR to conduct such physical inventory, LICENSEE
shall forfeit its rights hereunder to dispose of such inventory. In addition
to such forfeiture, LICENSOR shall have recourse to all other remedies
available to it.
b. Upon the termination of this Agreement, LICENSEE shall, within ten (10)
days following termination, give written notice to LICENSOR of the: (i)
Licensed Product, by style, in its possession or under its control; (ii)
location of the inventory of the Licensed Product; (iii) amount of the work
in process; (iv) Licensed Product in transit; and (v) name, address, and
telephone number of each contractor, shipper and/or sales
14
<PAGE>
representative.
c. LICENSEE shall accept no order, or undertake any new production, that
would be delivered after the date of expiration of this Agreement. Three
(3) months prior to the expiration of this Agreement, and monthly thereafter
until expiration, LICENSEE shall provide to LICENSOR an inventory, by style,
of all the Licensed Product in its possession or under its control, and all
work in process. Three (3) months prior to the expiration of this
Agreement, and weekly until expiration, LICENSEE shall provide LICENSOR with
copies of all orders, invoices, bills of lading, credit memoranda, and
statements provided to LICENSEE's factor (if any). LICENSEE shall be
entitled to sell its inventory, of the Licensed Product through and until
the date of the expiration of this Agreement only if the inventory, and
all documents listed above, are delivered to LICENSOR in a timely fashion.
d. LICENSEE shall deliver to LICENSOR, upon termination of this Agreement or
thirty (30) days prior to the expiration of this Agreement: (i) the names,
addresses, and telephone numbers of each supplier of any item having the
Trademarks and (ii) all materials which reproduce the Trademarks on the
Licensed Product and/or Promotional and Packaging Material relating to the
Licensed Product or shall give LICENSOR satisfactory evidence of their
destruction. LICENSEE shall be responsible to LICENSOR for any damages
caused by the unauthorized use by LICENSEE or by others of such
reproduction materials which are not turned over to LICENSOR.
e. Any finished Licensed Product in LICENSEE's possession unsold on the date
of the expiration of this Agreement may, subject to payment of the Royalty
payable to LICENSOR, be sold by LICENSEE, pursuant to a plan to be approved
by LICENSOR, for a period of one hundred twenty (120) days after expiration
hereof. Any Royalty paid by LICENSEE to LICENSOR during the aforementioned
one hundred twenty (120) day period is separate and apart from the Royalty
generated during the term of the Agreement and such Royalty is not to be
applied to the Guaranteed Annual Royalty Payments as outlined in
Subparagraph 10b and column C of item 7 of the attached License Agreement
Detail Schedule. All inventory remaining after such one hundred twenty (120)
day period shall be destroyed or stripped of all imprints, lettering,
mentions or other reproductions of or references to the Trademarks and
related logos; and all molds, patterns, transfers, and other property
bearing the Trademarks of relating thereto shall be destroyed; all under
the
15
<PAGE>
BHPC.12I
supervision of LICENSOR. LICENSOR shall have the first right to purchase
said Licensed Product at the direct cost Price (comprised of material and
direct labor expenses as set forth in LICENSEE's books and records, plus
five percent (5%) for overhead) upon expiration or termination of this
Agreement.
f. Any finished Licensed Product in LICENSEE's possession unsold on the date
of termination of this Agreement, and all molds, patterns, transfers, and
other property bearing the Trademarks or relating thereto, shall be
destroyed by LICENSEE within thirty (30) days following the termination
of this Agreement; further, LICENSEE agrees, on or before the
aforementioned date, to provide LICENSOR with a certificate signed by
LICENSEE's Chief Executive Officer certifying under penalty of perjury
that such inventory, molds, patterns, transfers, and other property have
been destroyed.
22. MODIFICATION; WAIVER
--------------------
No modification of any of the terms or provisions of this Agreement shall
be valid unless contained in a writing signed by the parties. No waiver
by either party of a breach or a default hereunder shall be deemed a
waiver by such party of a subsequent breach or default of a like or
similar nature. Resort by LICENSOR to any remedies referred to in this
Agreement or arising by reason of a breach of this Agreement by LICENSEE
shall not be construed as a waiver by LICENSOR of its right to resort to
any and all other legal and equitable remedies available to LICENSOR.
23. FORCE MAJEURE
-------------
Neither LICENSOR nor LICENSEE shall be liable to each other or be deemed
in breach or default of any obligations contained in this Agreement, for
any delay or failure to perform due to causes beyond its reasonable
control, including but not limited to delay due to the elements, acts of
the United States Government, acts of a foreign government, acts of God,
fires, floods, epidemics, embargoes, riots, strikes, any of the foregoing
events being referred to as a "Force Majeure" condition. In such event,
dates for performance shall be extended for the period of delay resulting
from the Force Majeure condition. The party affected by a Force Majeure
condition shall, as soon as practicable, notify the other party of the
nature and extent of such condition.
24. NOTICE
------
All notices, approvals, consents, requests, demands, or other
communications to be given to either party in
16
<PAGE>
BHPC.12I
writing may be effected by personal delivery or by depositing the same in
the mail, certified and return receipt requested, postage prepaid. Such
communication shall be addressed to LICENSEE and LICENSOR at their
respective addresses as set forth in the preamble above.
25. CONSTRUCTION; VENUE
-------------------
This Agreement shall be construed in accordance with the laws of the
State of California, U.S.A., and the parties agree that it is executed
and delivered in that state, and any claims arising hereunder shall, at
LICENSOR's election, be prosecuted in the appropriate Court of the State
of California in Los Angeles County or any Federal District Court
therein.
26. ENTIRE AGREEMENT
----------------
This Agreement, contains the entire understanding of the parties and
there are no representations, warranties, promises, or undertakings
other than those contained herein. This Agreement supersedes and cancels
all previous agreements between the parties hereto.
27. CONFIDENTIAL INFORMATION
------------------------
LICENSOR and LICENSEE agree (and shall instruct their partners, officers,
directors, designers, and other persons to whom disclosure is made) that
during the term of the Agreement and for a period of two (2) years
following the termination or expiration of this Agreement to keep
strictly confidential all designs, manufacturing instructions, and other
information relating to the Licensed Product that are not otherwise
available to the public, whether furnished by one to the other or in any
way acquired by either party; and the same shall be used by either party
solely under this Agreement and for the purpose of marketing of the
Licensed Product.
28. EQUITABLE RELIEF
----------------
LICENSEE acknowledges and agrees that: (i) LICENSEE's failure to meet
the quality standards herein; (ii) LICENSEE's failure: (a) to use the
Trademarks, or (b) to manufacture, offer for sale, sell, advertise,
promote, ship or distribute the Licensed Product, both in accordance with
the provisions of this Agreement; or (iii) any unauthorized use or
disclosure of confidential information of LICENSOR, cannot be compensated
adequately with a remedy at law and will cause irreparable damage to
LICENSOR. Accordingly, the parties agree that LICENSOR may seek from
any court having jurisdiction, such equitable relief by way of
17
<PAGE>
BHPC.12I
temporary restraining orders, permanent injunctions or otherwise as is
available to compel the discontinuance of such conduct. LICENSEE agrees
that any court of general jurisdiction in Los Angeles County or any
Federal District Court therein shall have jurisdiction of such claim.
29. ATTORNEY'S FEES
---------------
In the event any legal action becomes necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled, in
addition to its court costs, to such reasonable attorney's fees as shall
be fixed by a court of competent jurisdiction.
30. BINDING EFFECT
--------------
This Agreement shall be finding on the parties, and their successors and
assigns.
31. SURVIVAL OF THE RIGHTS
----------------------
Notwithstanding anything to the contrary contained herein, such
obligations which remain executory after expiration of the term or
termination of this Agreement shall remain in full force and effect
until discharged by performance and such rights as pertain thereto shall
remain in force until their expiration.
32. SEVERABILITY
------------
In the event that any term or provision of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity or unenforceability shall not affect any other term or
provision and this Agreement shall be interpreted and construed as if
such term or provision, to the extent the same shall have been held to be
invalid, illegal or unenforceable, had never been contained herein.
33. CAPTIONS
--------
The captions used in connection with the paragraphs and subparagraphs of
this Agreement are inserted only for purpose of reference. Such captions
shall not be deemed to govern, limit, modify or in any other manner
affect the scope, meaning or intent of the provisions of this Agreement
or any part thereof nor shall such captions otherwise be given any legal
effect.
34. INCORPORATION OF EXHIBITS
-------------------------
LICENSOR and LICENSEE acknowledge and agree that the provisions of
Exhibits "A" through "E" attached hereto (the Exhibits") are integral to
this Agreement and that the provisions of the Exhibits are all hereby
incorporated herein and made a part hereof as if set out in full in this
Agreement.
18
<PAGE>
BHPC.12I
35. ENGLISH LANGUAGE
----------------
This Agreement is entered into the English language only. Any
translation thereof into any other language shall be for purposes of
convenience only and shall not be considered in connection with the
interpretation of the provisions hereof.
36. REQUIRED FILING OF AGREEMENT
----------------------------
LICENSEE shall cause this Agreement to be filed with, and approved by,
all necessary governmental authorities, including the appropriate
exchange control authorities, whenever such filing and approval may be
required for the purpose of authorizing the payments herein provided.
LICENSEE shall be solely responsible for the filing of this document
with the appropriate authorities and shall bear the cost thereof, if
any. In the event of LICENSEE failing to obtain the approvals or
completing the filing set forth above within four (4) months from the
date of this Agreement, LICENSOR may terminate this Agreement forthwith.
37. REGISTRATION IN TERRITORY
-------------------------
LICENSOR will exert its best efforts to obtain trademark registration of
the Trademarks for the Licensed Product in the Territory. However,
LICENSOR has made no representation or warranty that the Trademarks will
be registered or are registerable in the Territory, and the failure to
obtain or maintain registrations thereon shall not be deemed a breach
hereunder by LICENSOR. A listing of the registrations in class 25 in the
Territory is shown in Exhibit "E", attached hereto.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Agreement shall
take effect as of the date and year first above written.
LICENSOR: LICENSEE:
BHPC MARKETING, INC., ZACARI, S.L.
a California Corporation a Spanish Limited Corporation
BY: /s/ Don Garrison BY: /s/ Robert Arnot
Don Garrison Robert Arnot
Licensing Director Chairman/Managing Director
Date: 8/19/96 Date: 8/15/96
------- -------
20
<PAGE>
[Statement of Royalties Form]
<PAGE>
SETTLEMENT AGREEMENT
This Settlement Agreement is made, in multiple originals, by and among
Polo Fashions, Inc., a corporation organized and existing under the laws of
the State of New York, having an office and place of business at 40 West 55th
Street, New York, New York ("PFI"); Beverly Hills Polo Club, Inc., a
corporation organized and existing under the laws of the State of California,
having an office and place of business at 1940 Lovelace Avenue, Los Angeles,
California ("BHPC"); Stephen Wessler, an individual residing at 19500
Valdez Drive, Tarzana, California ("Wessler"); and Gregory Lang, Inc., a
corporation organized and existing under the laws of the State of California,
having an office and place of business at 1940 Lovelace Avenue, Los Angeles,
California ("Lang"). BHPC, Wessler and Lang will hereinafter be collectively
referred to as the "Beverly Hills Polo Club Parties."
WITNESSETH:
WHEREAS, there are presently pending before the United States District
Court for the Central District of California two civil actions entitled
"Beverly Hills Polo Club, Inc. and Gregory Lang, Inc. v. Polo Fashions,
Inc., Civil Action No. 83-3342 LTL(JRx)" (the "BHPC Action") and "Polo
Fashions, Inc. v. Action Industries, Inc., et al., Civil Action
No. 84-162 LTL(JRx)" (the "PFI Action"), which involve claims
EXHIBIT D
<PAGE>
of trademark infringement, false designation of origin and unfair
competition by PFI against the Beverly Hills Polo Club Parties and others and
claims of unfair competition, antitrust violations and declaratory relief
of trademark non-infringement by various of the Beverly Hills Polo Club
Parties against PFI; and
WHEREAS, the parties hereto have vigorously contested the BHPC Action and
the PFI Action (collectively the "Civil Actions"), and have expended
considerable time and effort, and have incurred considerable expense, in doing
so; and
WHEREAS, in order to avoid the additional expense which would be
necessary for the continued prosecution of the Civil Actions, the parties are
willing to resolve the controversy among them and to settle the Civil Actions
under the terms and conditions set forth herein;
NOW, THEREFORE, in mutual consideration of the covenants and premises
contained herein, the parties agree as follows:
1. Except as provided in paragraph 3 hereunder, as of February 15, 1985,
the Beverly Hills Polo Club Parties, their affiliates, officers, agents and
employees and any person or entity under their direction or control, or in
active concert or participation with them, shall cease and desist from
anywhere in the world:
(a) Using as a design or decoration on or in connection with wearing
apparel, home furnishings,
2
<PAGE>
personal care and fragrance products, and related items, accessories and
services (collectively, the "Subject Products and Services"), including
but not limited to related packaging, labels, tags and other trade dress,
or as a trademark, service mark or trade name the work "polo" alone,
or the words "polo club" alone, apart from the composite "Beverly
Hills Polo Club," except as may be permitted by paragraph 18 herein;
(b) Using as a design or decoration on or in connection with the
Subject Products and Services, including but not limited to related
packaging, labels, tags and other trade dress, or as a trademark, service
mark or trade name the composite "Beverly Hills Polo Club" in any
configuration in which (i) the words "Beverly Hills" are not of equal
prominence with the words "Polo Club" or not in close proximity to such
words or (ii) a different type face or color is used for the words "Polo
Club" than for the words "Beverly Hills" or (iii) the word "Polo" is
surrounded by a rectangle, or (iv) the word "Polo" is in any way
emphasized;
(c) Using as a design or decoration on or in connection with the
Subject Products and Services, including but not limited to related
packaging, labels, tags and other trade dress, or as a trademark or
service mark, the design of a polo player astride a horse
3
<PAGE>
which is shown in Exhibit A (the "Polo Player Symbol"), or any design
which is a colorable imitation or simulation thereof;
(d) Using as a design or decoration on or in connection with the
Subject Products and Services, including but not limited to related
packaging, labels, tags and other trade dress, or as a trademark, service
mark or trade name the design of a polo player astride a horse which is
shown in Exhibit B (the "BHPC Symbol"), or any design which is a
colorable imitation or simulation thereof or is substantially similar
thereto, in an overall size smaller than five and a half inches by
five and a half inches (5 1/2" x 5 1/2") (measured from mallet head to
hoof and from nose to tail), except as may be permitted by paragraph 2
hereof;
(e) Using either of the typefaces shown in Exhibit C (identified
hereinafter as the "Subject Typefaces") for the name "Beverly Hills Polo
Club";
(f) Placing or causing to be placed any advertisements or using any
materials of any type making reference, either directly or indirectly to
Polo Fashions, Inc. or to Ralph Lauren or their licensees and affiliates;
and
(g) Using dark blue as the background color of any packaging, label,
tag or trade dress containing the words "Beverly Hills Polo Club", and/or
the BHPC Symbol.
4
<PAGE>
2. Notwithstanding the size limitations imposed by
paragraph 1(d) hereof, the Beverly Hills Polo Club Parties may use the BHPC
Symbol in an overall size smaller than the five and a half inches by five and
a half inches ( 5 1/2" x 5 1/2" ) set forth in paragraph 1(d) hereof but only
if
(a) the same is used in combination with and in
close proximity to the words "Beverly Hills Polo Club" in the configuration
shown in Exhibit D annexed hereto (the "Composite BHPC Logo") or the label
shown in Exhibit E annexed hereto (the "BHPC Label"); or
(b) the BHPC Symbol is used in a repetitive
pattern covering substantially all of the front or back of any of the Subject
products, provided that the initials "BHPC" shall appear in close proximity
to the BHPC Symbol, and that somewhere on each of the Subject Products the
words "Beverly Hills Polo Club" shall be prominently displayed.
3. The Beverly Hills Polo Club Parties may sell or
otherwise dispose of any and all articles of clothing and accessories which
are represented by them to be in their possession or under their control as
of February 15, 1985, as set forth in Exhibit F, to be added hereto not later
than March 1, 1985, which would otherwise come within the prohibitions of
paragraph 1 of this Agreement, and may fill orders accepted on or before such
date for any clothing or accessories coming within such prohibitions so long
as such orders are filled within ninety (90) days of such date.
Notwithstanding the foregoing,
5
<PAGE>
BHPC may have until June 15, 1985 to dispose of garments in the process of
manufacture in the Orient as of February 15, 1985. PFI or its attorneys or
such attorneys' agents, on reasonable notice, which notice shall not be
required to exceed ten (10) days, may review purchase orders, bills of
lading, or inventory records at the place of business of any Beverly Hills
Polo Club Parties sufficient to verify compliance with this paragraph. Such
information is to be used solely to verify and enforce compliance, and shall
be held in confidence by PFI's attorneys or their agents.
4. Simultaneously with its execution of this settlement
agreement, (a) BHPC shall promptly withdraw with prejudice Opposition No.
68,754 to PFI's United States Trademark Application Serial No. 333,206, filed
October 19, 1981 for the trademark POLO, and (b) Lang shall promptly withdraw
with prejudice the federal, state and foreign trademark applications listed
in Exhibit G annexed hereto, and take the appropriate steps to cancel or
delete or withdraw registrations issued pursuant to such applications; and
none of BHPC, Lang or Wessler, nor any one affiliated with each of them shall
file any trademark application with the United States Patent and Trademark
Office or with any state in the United States or in any foreign country for
any mark incorporating the words "Polo Club" and/or "Beverly Hills Polo Club"
and/or any horse and rider design, where the use of which such mark would be
prohibited hereunder, provided that in no event shall any of them file any
such application for any design of a horse and rider alone.
6
<PAGE>
5. Neither PFI nor any person or entity under its
direction or control, may oppose the registration by the Beverly Hills Polo
Club Parties of any trademark which the Beverly Hills Polo Club Parties are
entitled to register under this Agreement, nor shall they petition to cancel,
either directly or through court action the registration of any such
trademark unless said mark or registration is the basis for legal action
by BHPC, Lang or any affiliated entity against PFI or its licensees. If PFI
learns that any of its licensees objects to the registration by any of the
Beverly Hills Polo Club Parties of the words "Beverly Hills Polo Club,"
and/or the Composite BHPC Logo and/or the BHPC Label, then PFI will inform
such objecting licensee in writing of the terms of this Agreement, and
provide written confirmation thereof to BHPC.
6. The parties agree to entry in the Civil Actions of
Final Judgement Upon Consent in the form annexed hereto as Exhibit H, or in
such other form as the Court may require consistent with the terms and
conditions of this settlement Agreement.
7. None of the Beverly Hills Polo Club Parties or any
person or entity under their direction or control shall oppose any
registration by PFI or any affiliated entity of any of the trademarks or
service marks POLO, POLO BY RALPH LAUREN or the Polo Player Symbol, alone or
in combination (collectively "the PFI Marks"), nor shall they petition to
cancel,either directly or through court action, any registration owned by PFI
or any affiliated entity for any of the PFI Marks unless said
7
<PAGE>
trademark, service mark or registration is the basis for legal or
administrative action by PFI or any such affiliated entity against such a
party or its licensees.
8. The parties will not initiate any publicity concerning
the terms and conditions of this Agreement and such terms and conditions shall
be held in confidence except as otherwise provided herein. The Beverly Hills
Polo Club Parties may provide a copy of this Settlement Agreement or portions
or summaries thereof to any person or entity licensed or otherwise permitted
to use the name "Beverly Hills Polo Club," the BHPC Symbol or the composite
BHPC Logo, to potential licensees, to sales representatives or, upon inquiry
being made, to customers. Either party may refer to the terms and conditions
of this Agreement in conjunction with its registration, or judicial or
administrative protection or enforcement of its trademarks, trade names and
service marks.
9. This Settlement Agreement represents no concession by
any party as to the validity or merit of any of the claims raised in the
Civil Actions by any other party, except as may be set forth in the Final
Judgement of Exhibit H.
10. PFI and its officers, agents, employees and sales
representatives shall not make, directly or indirectly, any claim that the
purchase of products complying with the terms of this Agreement from BHPC or
Lang or their distributors or sub-licensees constitutes trademark
infringement, unfair competition or trademark dilution, nor threaten sanctions
with respect thereto. This undertaking does not in any way admit or imply
8
<PAGE>
that PFI, or any acting on its behalf, has in the past made any such claims
or threatened any such sanctions.
11. In consideration of the warranties, representations and promises
made by the Beverly Hills Polo Club Parties herein, PFI does hereby fully
release and forever discharge BHPC, Stefan, Inc., Richard Enterprises, Inc.,
Lang and Wessler and all of their respective officers, directors, agents,
employees and representatives and all those in active concert or
participation with any of them, and their customers, both immediate and
remote, from and against any and all claims, causes of action, demands,
damages or charges for trademark infringement and unfair competition made
against them by PFI in the Civil Actions or which could have been made in
such Civil Actions, up to and including the date of the execution of this
Settlement Agreement.
12. In consideration of the warranties, representations and promises
made by PFI herein, BHPC, Lang and Wessler do hereby fully release and
forever discharge PFI, its officer, directors, agents, employees and
representatives, and all those in active concert or participation with any of
them, from and against any and all claims, causes of action, demands, damages
or charges made against PFI in the Civil Actions or which could have been
made in such Civil Actions, up to and including the date of the execution of
this Settlement Agreement.
13. This Settlement Agreement represents the entire understanding
between the parties with respect to the subject matter hereof; shall not be
varied or amended except by a
9
<PAGE>
writing signed by all parties; shall be binding upon the parties, their
successors and assigns; and shall, as respects contractual construction, be
governed by and construed in accordance with the laws of the State of New
York. Neither party hereby waives any claim as to the propriety of venue or
as to the existence of personal jurisdiction, in any lawsuit or other
proceeding that may arise concerning the subject matter of this Settlement
Agreement.
14. PFI warrants and represents that it has full right and power to
enter into this Settlement Agreement.
15. Lang warrants and represents that it has full right and power to
enter into this Settlement Agreement.
16. BHPC warrants and represents that it has full right and power to
enter into this Settlement Agreement.
17. Wessler warrants and represents as follows:
(a) He is the president and sole shareholder of BHPC and Lang; and
(b) He has the full right, power and authority to enter into this
Settlement Agreement.
18. Nothing contained herein shall be deemed to preclude the Beverly
Hills Polo Club Parties, their affiliates, officers, agents and employees and
any person or entity under their direction or control, or in active concert
or participation with them, from making any use, otherwise than as a trade or
service mark, of the words "polo" or "polo club" alone, descriptively, fairly
and in good faith only to describe the sport of polo, clubs at which the
sport of polo is played (i.e.
10
<PAGE>
"polo clubs") or items of wearing apparel which have come to be described by
the word polo (e.g. "polo shirts" or "polo coats"), provided, however, that
any such use will not violate any of the terms and conditions of this
Agreement.
19. The Beverly Hills Polo Club Parties shall take all steps reasonably
necessary to ensure that any person or entity which is licensed or otherwise
permitted to use the term "Beverly Hills Polo Club", the BHPC Symbol or the
Composite BHPC Logo, complies fully with the restrictions set forth in
paragraph 1 hereof.
20. PFI acknowledges that the rights of any person or entity which it
licenses or otherwise permits to use the PFI Marks are subject to the terms
and conditions of this Agreement and that such rights cannot be used in
contravention of the provisions of paragraphs 5 and 10 hereof. PFI agrees to
inform any of its licensees whom it learns object to the use by the Beverly
Hills Polo Club Parties of any of the names or marks which they are permitted
to use hereunder of the foregoing acknowledgements.
21. In the event that a dispute arises between the parties as to the
subject matter of this Agreement, then the parties shall attempt to amicably
resolve the same prior to seeking judicial intervention. If the parties are
unable to resolve such dispute within thirty (30) days after it arises,
11
<PAGE>
then either party may take such action as it deems appropriate to protect its
rights.
IN WITNESS WHEREOF, the parties have executed this Settlement on the
days indicated adjacent to their respective signatures below.
POLO FASHIONS, INC.
Dated: 2/15/85 By: /s/ Peter Strom
Peter Strom
BEVERLY HILLS POLO CLUB, INC.
Dated: 2/20/85 By: /s/ Stephen Wessler, President
Stephen Wessler, President
STEPHEN WESSLER
Dated: 2/20/85 /s/ Stephen Wessler
GREGORY LANG, INC.
Dated: 2/20/85 By: /s/ Stephen Wessler, President
Stephen Wessler, President
12
<PAGE>
[LOGO]
EXHIBIT A
<PAGE>
[LOGO]
EXHIBIT B
<PAGE>
[LOGO]
EXHIBIT C
<PAGE>
[LOGO]
EXHIBIT D
<PAGE>
[LOGO]
Note: Typeface to be changed per Paragraph 1(e).
EXHIBIT E
<PAGE>
LICENSE AGREEMENT DETAIL SCHEDULE
1. Definition of Territory: Wholesale sales in Europe and Eastern Europe as
follows:
Portugal Andorra Italy France Belgium
Holland Greece Switzerland Austria Germany
Luxembourg Liechtenstein Latvia Norway Denmark
Sweden Poland Hungary Czech Republic Slovakia
Estonia Ukraine Belarus San Marino Cypress
Chechnia Moldavia Russia N. Ireland Ireland
Lithuania Romania Bulgaria Monaco Iceland
Finland Spain United Kingdom
2. Definition of Licensed Product (by category): DISTRIBUTION DATE:
A. Men's apparel (excluding suits, ties, underwear, January 1, 1997
shoes and full-length rainwear)
B. Women's apparel (excluding hosiery, intimate
apparel, business suits, underwear, accessories,
shoes and full length raincoats)
3. Initial Term: FROM TO
First Contract Year: July 1, 1996 December 31, 1997
Second Contract Year: January 1, 1998 December 31, 1998
Third Contract Year: January 1, 1999 December 31, 1999
4. Renewal Term:
Fourth Contract Year (if any): January 1, 2000 December 31, 2000
Fifth Contract Year (if any): January 1, 2001 December 31, 2001
Sixth Contract Year (if any): January 1, 2002 December 31, 2002
5. Advance Royalty Payment:
First Contract Year: None ($00)
6. Royalty Rate:
Six percent (6%) of Net Shipments
<PAGE>
7. Guarantees:
(A) (B) (C) (D)
Guaranteed Guaranteed Guaranteed
Target Guaranteed Annual Monthly
Net Net Royalty Royalty
Shipments Shipments Payments Payments
(in United States Dollars)
---------------------------------
First Contract Year $00 $00 $00 $00
Second Contract Year $2,000,000 $2,000,000 $120,000 $10,000
Third Contract Year $4,000,000 $4,000,000 $240,000 $20,000
INITIALS
LICENSOR: /s/DG
-----
LICENSEE: /s/ RJA
-------
<PAGE>
SECTION (I)
NET SHIPMENT STATEMENT
The written statement of Net Shipments of Licensed Product (a copy of which
is attached hereto as Exhibit "B-4") referred to in Paragraph 9a must be
certified as accurate by LICENSEE and will include, but will not be limited
to, information as to: each respective invoice number (in sequential order
inclusive of all "voided" invoices), invoice date, customer name or number,
gross dollar amount invoiced, terms of any customary trade allowances (as a
percentage and in aggregate dollars), actually credited returns (in aggregate
dollars), and other deductions taken against the gross dollar amount
invoiced, and any such other further information as LICENSOR may from time to
time request. Such statements shall be furnished to LICENSOR whether or not
any Licensed Product has been shipped, distributed and/or sold during the
preceding Royalty Period and whether or not any monies are then due LICENSOR.
SECTION (II)
BOOKS, RECORDS, AND RIGHTS TO AUDIT
Within ten (10) days following any written request by LICENSOR, LICENSEE will
deliver copies and extracts of any books of account, records, documents,
materials, and information as are requested by LICENSOR inclusive of, but not
limited to: financial statements, general ledger detail and supporting
journals, documents, sales and credit memo registers, financial projections
and wholesale price listings. All books of account and records of LICENSEE
covering all transactions relating to this Agreement shall be retained by
LICENSEE for at least three (3) years after the expiration or termination of
this Agreement for inspection by LICENSOR.
EXHIBIT "C"
Page 1 of 2
<PAGE>
SECTION (III)
DISPOSAL OF INVENTORY ON EXPIRATION OR TERMINATION
(A) Any finished Licensed Product in LICENSEE's possession unsold on the
date of the expiration of this Agreement may, subject to payment of the
Royalty payable to LICENSOR, be sold by LICENSEE, pursuant to a plan to be
approved by LICENSOR, for a period of one hundred twenty (120) days after
expiration hereof. Any Royalty paid by LICENSEE to LICENSOR during the
aforementioned one hundred twenty (120) day period is separate and apart from
the Royalty generated during the term of the Agreement and such Royalty is
not to be applied to the Guaranteed Annual Royalty Payments as outlined in
Subparagraph 10b. and column C of item 7 of the attached License Agreement
Detail Schedule. All inventory remaining after such one hundred twenty (120)
day period shall be destroyed or stripped of all imprints, lettering,
mentions or other reproductions of or references to the Trademarks and
related logos; and all molds, patterns, transfers, and other property bearing
the Trademarks of relating thereto shall be destroyed; all under the
supervision of LICENSOR.
LICENSOR shall have the first right to purchase said Licensed Product at the
direct cost price (comprised of material and direct labor expenses as set
forth in LICENSEE's books and records, plus five percent (5%) for overhead)
upon expiration or termination of this Agreement.
(B) Any finished Licensed Product in LICENSEE's possession unsold on the
date of termination of this Agreement, and all molds, patterns, transfers,
and other property bearing the Trademarks or relating thereto, shall be
destroyed by LICENSEE within thirty (30) days following the termination of
this AGreement; further, LICENSEE agrees, on or before the aforementioned
date, to provide LICENSOR with a certificate signed by LICENSEE's Chief
Executive Officer certifying under penalty of perjury that such inventory,
molds, patterns, transfers, and other property have been destroyed.
EXHIBIT "C"
Page 2 of 2
<PAGE>
BEVERLY HILLS POLO CLUB REGISTRATIONS
IN CLASS 25 IN TERRITORY
MARK COUNTRY STATUS
Beverly Hills Polo Club Benelux Registered 5/7/91
& design (Belgium, Holland, Luxembourg) #449,277
Beverly Hills Polo Club Denmark Registered 7/16/93
& design #VR 05.054
Beverly Hills Polo Club France Registered 4/6/83
& design #1,365,413
Beverly Hills Polo Club Germany Registered 3/15/95
& design #2 092 929
Beverly Hills Polo Club Greece Registered 4/11/89
& design #93232
Beverly Hills Polo Club Italy Registered 11/23/91
& design #554547
Beverly Hills Polo Club Norway Registered 1/23/92
& design #148,737
Beverly Hills Polo Club Spain Registered 4/9/92
& design #1,256,495
Beverly Hills Polo Club Sweden Registered 8/2/91
& design #225,429
Beverly Hills Polo Club Switzerland Registered 11/23/90
& design #381,887
Beverly Hills Polo Club United Kingdom Registered 1/30/86
& design #B1,259,226
EXHIBIT "E"
<PAGE>
Inc. Cls 25
Prior U.S. Cls 39
Reg. No. 1,429,311
United States Patent and Trademark Office Registered Feb. 17, 1987
- ------------------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
BEVERLY HILLS
POLO CLUB
[LOGO]
EXHIBIT A
<PAGE>
Page of
------- -------
DATE
----------------
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
SAMPLE APPROVAL FORM
(FOR STYLE ONLY! SEE SWATCH APPROVAL FORM FOR FABRIC)
NAME OF LICENSEE
---------------------------------------------------------
LICENSED PRODUCT
---------------------------------------------------------
LICENSEE'S ADDRESS
-------------------------------------------------------
PLEASE PICTURE BELOW
SEASON
---------------------
STYLE #
--------------------
FABRICATION
----------------
WHOLESALE PRICE
------------
COLORS
---------------------
SIZES
----------------------
START TAKING ORDERS
------------------
END TAKING ORDERS
--------------------
START SHIP
---------------------------
END SHIP
-----------------------------
- --------------------------------- -----------------------------
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
APPROVED DISAPPROVED
----------- --------
COMMENTS
------------------------------------------------------------------
- --------------------------------------------------------------------------
DATE RETURNED TO LICENSEE
---------------------------
BHPC MARKETING, INC., 620 West 135th Street, Gardena, CA 90248
EXHIBIT "B-1"
<PAGE>
PAGE OF
--- ---
DATE
-------------
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
SWATCH AND/OR COLOR APPROVAL FORM
(FABRIC AND COLOR ONLY! SEE SAMPLE APPROVAL FORM FOR STYLE)
NAME OF LICENSEE
-----------------------------------------------------
LICENSED PRODUCT
-----------------------------------------------------
LICENSEE'S ADDRESS
---------------------------------------------------
SEASON
---------------------------------------------------------------
LIST STYLE NUMBERS OF GARMENTS TO BE MANUFACTURED IN THIS FABRIC
-----
- ---------------------------------------------------------------------
FABRIC # AND NAME OF SUPPLIER
----------------------------------------
- ---------------------------------------------------------------------
FABRIC CONTENT AND WEIGHT
--------------------------------------------
PLEASE ATTACH 1 SET OF SWATCHES BELOW
APPROVED DISAPPROVED
----------- -----------
COMMENTS
-------------------------------------------------------------
- ---------------------------------------------------------------------
- ------------------------------- ----------------------------
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
DATE RETURNED TO LICENSEE
-------------
BHPC MARKETING, INC., 620 West 135th Street, Gardena, CA 90248
EXHIBIT "B-2"
<PAGE>
Page of
------ ------
Date
-------------
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
ADVERTISING APPROVAL FORM
NAME OF LICENSEE
-------------------------------
LICENSED PRODUCT
--------------------------------
LICENSEE'S ADDRESS
--------------------------------
CIRCLE THE FORM OF ADVERTISING WHICH IS BEING SUBMITTED: LABEL, HANG TAG,
BUSINESS CARDS, BUSINESS FORMS, RADIO SPOT, TV, FULL PAGE AD, 1/2 PAGE AD,
PACKAGING, DISPLAY, OTHER.
PLACE ADVERTISING TO BE SUBMITTED HERE, OR AFFIX TO THIS PAGE
USE PERIOD From to
---------------- ------------------
IF SUBMISSION IS LABELS OR HANG TAGS, PLEASE GIVE NAME & ADDRESS OF SUPPLIER
- ----------------------------------------------------------------------------
IF AD IS TO RUN IN A PUBLICATION, NAME OF PUBLICATION
------------------------
APPROVED DISAPPROVED
---------------------- ---------------------------
COMMENTS
------------------------------------------------------------------
- ------------------------------------------------------------------------------
- --------------------------- ------------------------------
Signature of Licensee Signature of Licensor
DATE RETURNED TO LICENSEE
----------------------
BHPC Marketing, Inc. - 620 W. 135th Street - Gardena, CA 90248
(310) 354-1444 - FAX (310) 354-1445
<PAGE>
[Statement of Royalties (Foreign) Form]
<PAGE>
Exhibit 10.22
AMENDMENT TO INTERNATIONAL EXCLUSIVE LICENSE AGREEMENT
This Amendment is made and entered into by and between BHPC Marketing, Inc.
("LICENSOR") and I.C. Isaacs Europe, S.L. by name change from Zacari 2000,
S.L. ("LICENSEE") and is dated as of June 3, 1997. This Amendment amends and
modifies that certain International Exclusive License Agreement between
LICENSOR and LICENSEE dated August 15, 1996 (the "Agreement").
(I)
The promises, covenants, agreements and declarations made and set forth
herein are intended to and shall have the same force and effect as if set
forth at length in the body of the Agreement. To the extent that the
provisions of this Amendment are inconsistent with the terms and conditions
of the AGREEMENT, the terms set forth herein shall control.
(II)
1. Effective as of May 1, 1997, the License Agreement Detail Schedule
(Wholesale sales) is hereby deleted and the following is hereby inserted:
"4. Renewal Term FROM TO
------------ ---- --
First Renewal Period (if any): January 1, 2000 December 31, 2002
Second Renewal Period (if any): January 1, 2002 December 31, 2004"
2. Paragraph 7(b) of the Agreement is hereby amended by deleting all
references to one-year renewal periods and referring in their place to
the three-year renewal terms provided for in the License Agreement Detail
Schedule as amended above.
3. The Amendment to the Agreement dated April 28, 1997, is no longer in
effect.
(III)
LICENSOR and LICENSEE acknowledge and agree that the Agreement, as amended by
this Amendment, remains in full force and effect and represents the entire
Agreement of the parties with respect to the matters contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Amendment shall take
effect as of the date and year first written above.
LICENSOR: LICENSEE:
BHPC MARKETING, INC. I. C. ISAACS & CO., L.P.
BY: /s/ Don Garrison BY: /s/ Robert Arnot
----------------------- -----------------------------
Don Garrison Robert Arnot
Director of Licensing Chairman of the Board
DATE: 6/23/97 DATE: 6/24/97
---------------------- -----------------------------
BY: /s/ Gerald Lear
------------------------------
Gerald Lear
President, C.E.O.
DATE: 6/24/97
-----------------------------
<PAGE>
Exhibit 10.23
INTERNATIONAL
-------------
EXCLUSIVE LICENSE AGREEMENT
--------------------------- BHPC.12I
THIS AGREEMENT is made and entered into this 15th day of August, 1996 by
and between BHPC Marketing, Inc., a corporation duly organized and existing
under the laws of California, having its principal place of business at 620
West 135th Street, Gardena, California 90248 (hereinafter referred to as
"LICENSOR"), and Zacari 2000, S.L., a Spanish Limited Corporation, having its
principal place of business at c/LLULL 88, B1, 08005, Barcelona, Spain
(hereinafter referred to as "LICENSEE").
WHEREAS, LICENSOR is the owner with the right to grant licenses of the
Trademarks illustrated in Exhibit "A" attached hereto (the "Trademarks"); and
WHEREAS, LICENSEE is desirous of obtaining the exclusive right to use
the aforesaid Trademarks in connection with the import or manufacture and
sale of certain licensed products defined herein.
NOW, THEREFORE, it is agreed by the parties as follows:
1. DEFINITIONS
-----------
The following terms shall have meanings as set forth below:
a. "Trademarks" shall mean the Trademarks set forth in Exhibit "A".
b. "Territory" shall mean that geographical area defined in item 1 of the
attached License Agreement Detail Schedule.
c. "Licensed Product" shall be defined as set forth in item 2 of the
attached License Agreement Detail Schedule.
d. "Net Shipments" shall mean the aggregate total of the gross amount
invoiced its purchasers by LICENSEE for all the Licensed Product sold
under the Trademarks reduced by the amount of any customary trade
allowances and returns actually credited. No deduction shall be made for
commissions nor for any costs incurred in the manufacture, sale,
distribution or exploitation of the Licensed Product.
2. RIGHTS GRANTED
--------------
LICENSOR hereby grants to LICENSEE, upon the terms and conditions set
forth herein, an exclusive, personal, non-transferable, non-assignable
license, without the right to grant sublicenses, to use the Trademarks
solely on or in conjunction with the design, manufacture, import,
distribution, advertising, promotion, shipment, and sale of the Licensed
Product in the Territory. This license is extended to and includes retail
sales only, and includes the right the grant franchise agreements in the
Territory.
<PAGE>
BHPC.12I
3. OWNERSHIP OF ARTWORK AND DESIGNS
--------------------------------
LICENSEE acknowledges and agrees that LICENSOR is the owner of all
artwork and designs involving the Licensed Product and/or Trademarks, or
any reproduction thereof, notwithstanding their invention or use by
LICENSEE and that such artwork and designs will remain the property of
LICENSOR who shall be entitled to use and license others to use same,
subject to the provisions of this Agreement.
4. GOOD WILL AND PROMOTIONAL VALUE
-------------------------------
a. LICENSEE recognizes the value of the good will associated with the
Trademarks and acknowledges that the Trademarks, and all rights therein
and the good will pertaining thereto, belong exclusively to LICENSOR.
LICENSEE further recognizes and acknowledges that the Trademarks have
acquired secondary meaning in the mind of the public.
b. LICENSEE agrees that its use of the Trademarks shall inure to the benefit
of LICENSOR and that LICENSEE shall not, at any time, acquire any rights
in the Trademarks by virtue of any use it may make of the Trademarks.
c. LICENSEE acknowledges that LICENSOR is entering into this Agreement not
only in consideration of the royalties paid hereunder but also for the
good will and promotional value to be secured by LICENSOR for the
Trademarks as a result of the manufacture, offering for sale, sale,
advertising, promotion, shipment and distribution of the Licensed Product
by LICENSEE.
5. QUALITY STANDARDS, PRODUCT APPROVALS, AND INSPECTION
----------------------------------------------------
a. The quality of the Licensed Product, as well as the quality of all
promotional, advertising and packaging material (see Paragraph 6) which
includes the Trademarks (the "Promotional and Packaging Material"), shall
be at least as high as the best quality of similar products and
promotional, advertising and packaging material presently shipped,
distributed, sold, used, manufactured or licensed by LICENSOR in the
Territory and shall be in full conformance with all applicable laws and
regulations. LICENSEE acknowledges that the maintenance of the high
quality of the Licensed Product, and the control by LICENSOR over
the nature, quality and manner of distribution of all Licensed Products,
are essential elements of this license. Except as specifically provided
in Paragraph 8d, below, LICENSEE shall not offer for sale, advertise,
promote, distribute, or use for any purpose any Licensed Product that is
damaged, defective, or are "seconds".
2
<PAGE>
BHPC.12I
b. In order to maintain the high quality standard prescribed by LICENSOR,
LICENSEE may not manufacture, use, offer for sale, sell, advertise,
promote, ship and/or distribute any Licensed Product or any Promotional
and Packaging Material relating to the Licensed Product until it has
received all written approvals of same from LICENSOR in the manner
provided herein. Such approval shall not be unreasonably withheld. Should
LICENSOR fail to approve in writing any of the submissions furnished it by
LICENSEE within fourteen (14) days from the date of submission thereof,
such failure shall be considered to be a disapproval thereof.
c. Before commencing, or authorizing third parties to commence, the design or
development of any Licensed Product or of Promotional and Packaging
Material which have not been previously approved in writing by LICENSOR:
(i) Prior to the production of the Licensed Product, there shall be a
pre-production showing of the Licensed Product at a time and date to
be mutually agreed upon by the parties. LICENSEE shall submit for
LICENSOR's prior written approval all final designs, specifications,
fabrications, and color information.
(ii) Prior to the production of each collection (also known in the trade
as a "line" or a "season"), LICENSEE shall submit to LICENSOR a
completed "Sample Approval Form" (Exhibit "B-1") for each proposed
item of the Licensed Product along with: at least one (1) final
sample of each style in the collection; one (1) set of material
which shows color and fabrication, to be attached to a "Swatch
Approval Form" (Exhibit "B-2"); and one (1) photograph of each sample
to be attached to the "Sample Approval Form" (Exhibit "B-1"). Once a
proposed item of the Licensed Product has been approved, LICENSEE
shall not deviate in any material respect from: (1) any information,
description or specification on the "Sample Approval Form" or
"Swatch Approval Form"; or (2) the quality of or material used on
an approved sample, without the prior written consent of LICENSOR.
Each style, color and fabrication must be approved for each season,
regardless of whether it was approved for a prior season.
(iii) Within two (2) weeks following the commencement of each first
production run of the Licensed Product (or, if production of the
various styles of the Licensed Product commences at different times,
within two (2) weeks after commencement of each style's first
production run), LICENSEE shall deliver to LICENSOR, at least
one (1), finished production sample of each style. If the style,
appearance or quality of any production sample is different from
what was previously approved, LICENSEE shall make the
3
<PAGE>
BHPC.12I
necessary changes so that it conforms to what was originally
approved.
d. LICENSEE agrees that the Licensed Product and all Promotional and
Packaging Material shall contain only those legends, markings
and/or notices as required from time to time by LICENSOR to give
appropriate notice to the consuming public of LICENSOR's right,
title and interest thereto.
e. LICENSOR may, periodically and from time to time during the
term of this Agreement, require that LICENSEE submit to LICENSOR,
at no cost to LICENSOR, or LICENSOR or its designees may randomly
select and retain during the inspection referred to in
Subparagraph 5f, below, one (1) additional set of Production
Samples of the Licensed Product and/or the Promotional and
Packaging Material relating to the Licensed Product for subsequent
review and written approval of the quality of, trademark usage and
notice on same, and for any other purpose that LICENSOR deems
appropriate.
f. To assure that the provisions of this Paragraph 5 are being
observed, LICENSEE agrees that it will allow LICENSOR or its
designees, periodically and from time to time
during the term of this Agreement, to enter LICENSEE's premises
and/or the premises where the Licensed Product is being
manufactured or inventoried during regular business hours and upon
reasonable notice, for the purposes of inspecting and approving the
Licensed Product and the Promotional and Packaging Material
relating to the Licensed Product.
g. In the event that the quality standards and/or trademark and
copyright usage and notice requirements hereinabove referred to
are not met, then, upon receipt of written notice from LICENSOR,
LICENSEE shall immediately discontinue any and all activities with
respect to the Licensed Product in connection with which the said
quality standards and/or trademark and copyright usage and notice
requirements have not been met.
6. ADVERTISING/USE OF THE TRADEMARK
--------------------------------
a. LICENSEE will adopt and carry out its own marketing and advertising
program with respect to the Licensed Product. LICENSEE agrees
that LICENSEE's advertising, public relations and sales promotion
activities will be subject to prior consultation with, and written
approval by, LICENSOR as to the general form and content only with
respect to the use of the Trademarks and other notices.
b. LICENSEE shall, on the last day of each respective Contract Year,
submit to LICENSOR any documentation as shall be reasonably
requested by LICENSOR to evidence the expenditure of such
Advertising Expense. In the event that LICENSEE fails to spend the
entire Advertising Expense during the
4
<PAGE>
BHPC.12I
respective Contract Year in which the Advertising Expense was to
be expended hereunder, LICENSEE will, on the day following the
last day of the respective Contract Year, pay to LICENSOR the
total sum of the Advertising Expense which was not expended
hereunder.
c. Before publication of any advertisement or promotion, LICENSEE
shall submit every element of the advertisement or promotion to
LICENSOR for written approval hereunder using the "Advertising
Approval Form" (Exhibit "B-3").
d. LICENSEE agrees that upon request of LICENSOR, it shall loan a
reasonable number of products to LICENSOR and its other licensees
for advertising and promotional purposes.
e. LICENSOR may purchase the Licensed Product from LICENSEE at the
cost of manufacture. No royalty shall be payable to LICENSOR.
f. Advertising directed to the public may not feature the name of
LICENSEE. If approved, advertising directed to the trade may
feature the following: BHPC Marketing, Inc. under Trademark
License to (Name of LICENSEE).
g. LICENSEE agrees that the Trademark will appear on each Licensed
Product and its packaging, if any. LICENSEE shall use only those
tags, labels and packaging materials which have been previously
approved in writing. All tags, labels and packaging materials
bearing the Trademark must be submitted on the "Advertising
Approval Form" (Exhibit "B-3").
h. LICENSEE shall affix such legends, markings and notices on all
License Product as are required by LICENSOR and the law.
i. LICENSEE must submit for approval to LICENSOR a printer's proof of
each item before final printing.
7. DURATION OF THE AGREEMENT
-------------------------
a. This Agreement shall continue for three (3) consecutive Contract
Years in respective durations as set forth in item 3 of the
attached License Agreement Detail Schedule (hereinafter
collectively the "Initial Term") and shall then expire unless
sooner terminated in accordance with the terms and conditions set
forth herein.
b. If LICENSEE fully performs according to all of the terms and
conditions hereof including, without limitation, the terms and
conditions specifically enumerated below, LICENSEE shall have
three (3) consecutive options to renew this Agreement for three
(3) consecutive contract periods, i.e. Contract Years,
5
<PAGE>
BHPC.12I
of one (1) year each (hereinafter collectively the "Renewal
Term"). In order to exercise each individual option, LICENSEE must
provide LICENSOR with written notice of its intention to exercise each
respective option and such written notice must be received by LICENSOR
no later than one hundred eighty (180) days prior to the expiration of
the Initial Term or immediately preceding Contract Year of the Renewal
Term. In the event that LICENSEE fails to exercise any of the
aforementioned options in a timely manner, the license granted herein to
LICENSEE will thereafter become non-exclusive for the remaining term of
this Agreement and LICENSOR may enter into such arrangements as it deems
appropriate with respect to the licensing of the Trademarks and the
Licensed Product. Except as specifically set forth herein to the
contrary, LICENSEE's performance in the Renewal Term shall be pursuant
to the same terms and conditions recited herein for the Initial Term.
8. ROYALTIES
---------
a. "Royalty", as used in this Agreement, shall consist of:
(i) "LICENSEE" paying to LICENSOR, during the term of this Agreement, a
Royalty in an amount equal to four percent (4%) of the Wholesale
Purchases by "LICENSEE" for Licensed Product under the Trademarks to
Beverly Hills Polo Club Retail Stores. If "LICENSEE" purchases product
from another authorized BHPC LICENSEE, the only royalty payable to
LICENSOR, relative to such goods, shall be the royalty referred to in
the preceding sentence. The authorized BHPC LICENSEE selling to
"LICENSEE" will deduct any royalty amount from the purchase price paid
by "LICENSEE".
(ii) LICENSEE paying to LICENSOR, during the term of this Agreement, a
Royalty in an amount equal to two percent (2%) of retail sales of
Licensed Product by Beverly Hills Polo Club Franchise Retail Stores.
b. LICENSEE shall pay to LICENSOR, concurrently with the execution of
this Agreement with respect to the First Contract Year, an Advance
Royalty Payment equal to the amount set forth in item 5 of the attached
License Agreement Detail Schedule, no part of which shall be
refundable. The Advance Royalty Payment shall not reduce or offset the
payment of any Guaranteed Minimum Royalty hereunder. However, the
Advance Royalty Payment may be applied to reduce and offset the payment
of any royalty due hereunder in excess of the Guaranteed Annual Minimum
Royalty.
c. Off-priced Merchandise shall be defined as either close-out
Licensed Product or substandard Licensed
6
<PAGE>
BHPC.12I
Product. In the event LICENSEE is desirous of increasing
Off-priced Merchandise shipping beyond fifteen percent (15%) of total
production of Licensed Product in any Contract Year, LICENSEE must
receive LICENSOR's prior written approval thereof on a case-by-case
basis. In no event will LICENSEE offer for sale, or distribute any
substandard Licensed Product unless the Licensed Product are clearly
identified to the consuming public as being "seconds".
9. PAYMENT
-------
a. The payments provided for in Paragraph 8, above, shall be based
upon all Net Shipments in each month (the "Royalty Period") and shall be
due and payable by LICENSEE to LICENSOR by the twentieth (20th) day
following each month. All Guaranteed Monthly Royalty Payments are due
and payable by LICENSEE to LICENSOR on the twentieth (20th) day of each
respective calendar month for that Contract Year. At the time of each
such payment, LICENSEE shall provide LICENSOR with a complete, accurate,
written statement of its Net Shipments of Licensed Product for the
Royalty Period. Such statement of Net Shipments of Licensed Product (a
copy of which is attached hereto as Exhibit "B-4") must be certified as
accurate by LICENSEE and will include, but will not be limited to,
information as to: customer name, gross amount invoiced, terms of any
customary trade allowances actually credited, returns and other
deductions taken against the gross amount invoiced, and any such other
further information as LICENSOR may from time to time request. All Net
Shipments shall be stated in the currency of the Country where they were
made, followed by the equivalent amount for such Net Shipments in United
States currency, followed by the exchange rate applied.
b. All taxes imposed as a result of the existence of this Agreement
or the performance by the parties of their obligations hereunder shall
be borne and paid by LICENSEE, excepting therefrom any withholding tax
imposed on LICENSEE, which shall be paid by LICENSOR. LICENSEE shall
deduct such withholding tax from the monthly Royalty Payments, and
provide to LICENSOR, on the twentieth (20th) day of the first month of
the following Contract Year, an accounting of said withholding taxes
paid by LICENSEE, and shall provide to LICENSOR the original tax
withholding certificate for each month.
7
<PAGE>
BHPC.12I
c. LICENSEE's statements shall be submitted to:
BHPC Marketing, Inc.
620 West 135th Street
Gardena, California 90248
Attn: Royalty Receivables Department
All amounts payable to LICENSOR by LICENSEE shall be wire transferred to:
Bank Name: First Interstate Bank
Bank ABA#: 122000218
Bank Address: 707 Wilshire Blvd.
Los Angeles, CA 90017
Account Name: BHPC Marketing, Inc.
Account Number: 149-6-38302
d. The receipt and/or acceptance by LICENSOR of any of the statements or
reports furnished or payments paid hereunder to LICENSOR (or the cashing
of any checks paid hereunder) shall not preclude LICENSOR from questioning
the correctness thereof at any time and, in the event that any
inconsistencies or mistakes are discovered in such statements, reports, or
payments, they shall immediately be rectified by LICENSEE and the
appropriate payment shall immediately be made by LICENSEE.
e. All payments made hereunder shall be in United States dollars in United
States currency; amounts shall be computed at the exchange rate existing at
noon on the last business day preceding the day payment is due to be made
hereunder. If payment is late, LICENSOR has the option to require that
payment be made at the exchange rate on the day preceding actual payment.
f. Time is of the essence with respect to all payments to be made hereunder
by LICENSEE. In the event LICENSEE shall fail to pay any sum required to be
paid by this Agreement after the due date thereof, the amount owing shall
thereupon bear interest at the maximum annual percentage rate allowable by
law from the due date until paid.
10. GUARANTEES
a. Guaranteed Annual Royalty Payments - LICENSEE shall pay, for each
Contract Year during the term of
8
<PAGE>
BHPC.12I
this Agreement, beginning with the First Contract Year, the respective
Guaranteed Annual Royalty Payments set forth in item 7 of the attached
License Agreement Detail Schedule.
b. Guaranteed Target Net Shipments - If, in any Contract Year, LICENSEE does
not achieve the Guaranteed Target Net Shipment Volume figure set forth in
item 7 of the attached License Agreement Detail Schedule LICENSOR may, at
its option, immediately thereafter terminate this Agreement in writing.
c. Guaranteed Net Shipments - If, in any Contract Year, LICENSEE does not
achieve the Guaranteed Net Shipments figure for a particular country set
forth in item 7 of the attached Licensed Agreement Detail Schedule
LICENSOR may, at its option, immediately thereafter terminate this Agreement
in writing for that particular country only.
d. Guaranteed Monthly Royalty Payments - In order to ensure that the above
guarantees are met, LICENSEE shall pay to LICENSOR each month pursuant to
Paragraphs 8 and 9, above, the respective Guaranteed Monthly Royalty
Payments set forth in item 7 of the attached License Agreement Detail
Schedule for each Contract Year during the Term of this Agreement. In the
event that any actual Monthly Royalty Payment calculated in accordance with
Paragraph 8, above, is less than the applicable Guaranteed Monthly Royalty
Payment, LICENSEE shall pay to LICENSOR the Guaranteed Monthly Royalty
Payment in accordance with Paragraph 9. In the event that any actual
Monthly Royalty Payment calculated in accordance with Paragraph 8 exceeds
the Guaranteed Monthly Royalty Payment, the actual Royalty payment shall be
paid to LICENSOR in accordance with Paragraph 9.
e. In the event of the termination of this entire Agreement, LICENSEE is
obligated to pay the balance of the Guaranteed Annual Royalty Payments due
for the remainder of the Contract Year in progress, and payment in full
shall be due and payable within 30 days of said termination.
11. EXPLOITATION BY LICENSEE
a. LICENSEE agrees to commence, and diligently continue thereafter, the
distribution, shipment and sale of the Licensed Product in commercially
reasonable quantities in the Territory on or before the respective
distribution date set forth next to the Licensed Product described in
item 2 of the attached License Agreement Detail Schedule.
b. LICENSEE agrees that the Licensed Product will only be shipped to and
sold by authorized Beverly Hills
9
<PAGE>
BHPC.12I
Polo Club Retail stores. The manner and scope of the distribution of the
Licensed Product, availability, variety, fabrication, colors and sizes are
critical to the promotion, enhancement and protection of the Trademarks and
their associated goodwill. LICENSEE acknowledges that it has no right to
and shall not sell or distribute the Licensed Product to any diverter or to
anyone outside of the Territory or to any Distributor who is not a BHPC
Authorized Distributor.
c. LICENSEE further agrees to sell to LICENSOR, if requested to do so by
LICENSOR, any product manufactured or sold by LICENSEE, from LICENSEE'S
regular production at LICENSEE's customary net selling price.
12. BOOKS, RECORDS, AND RIGHTS TO AUDIT
a. LICENSEE agrees that it shall keep complete and accurate written books of
accounts and records, maintained in accordance with generally accepted
accounting principles consistently applied, at its principal place of
business, covering all Licensed Product manufactured, distributed, and sold
under the Trademarks. LICENSEE shall provide LICENSOR with the following:
(i) a certified, audited, set of financial statements (i.e., balance sheet,
income statement, and sources and uses of funds) to be delivered to
LICENSOR within ninety (90) days after the end of each fiscal year of
LICENSEE. All such financial information must be prepared by an
independent certified public accountant, having no interest whatsoever in
LICENSEE's business other than that of an independent certified public
accountant.
b. LICENSOR and its duly authorized representatives shall have the right, at
all reasonable hours of the day, to audit LICENSEE's books of account and
records and all other documents and material in the possession or under the
control of LICENSEE with respect to the subject matter and the terms of
this Agreement. Within ten (10) days following any written request by
LICENSOR, LICENSEE will deliver copies and extracts of any books of
account, records, documents, materials, and information as are requested by
LICENSOR inclusive of, but not limited to: financial statements, general
ledger detail and supporting journals, documents, sales and credit memo
registers, financial projections and wholesale price listings. All books
of account and records of LICENSEE covering all transactions relating to
this Agreement shall be retained by LICENSEE for at least three (3) years
after the expiration or termination of this Agreement for inspection by
LICENSOR. In the event that any such audit reveals an underpayment by
LICENSEE,
10
<PAGE>
BHPC.12I
LICENSEE shall immediately remit payment to LICENSOR in the amount of such
underpayment plus interest calculated at the maximum annual percentage rate
allowable by law, compounded daily, calculated from the date such payment
was actually due until the date when such payment is, in fact, actually
made. In the event that any material underpayment is revealed by any
such audit, LICENSEE shall pay all reasonable costs and expenses of the
examination and audit, including any reasonable travel expenses incurred by
LICENSOR in making such examination, and costs and expenses of any
accountants or other persons retained by LICENSOR to examine, audit, or
analyze LICENSEE's records. A "material underpayment" is hereby defined as
an underpayment of five percent (95%) or more.
13. INSURANCE
LICENSEE shall obtain and maintain at its sole cost and expense
throughout the Term and the Disposal Period standard product liability
insurance, the form of which must be acceptable to LICENSOR, from a
qualified insurance company licensed to do business naming LICENSOR as
additional named insured, which policy shall provide protection against
any and all claims, demands and causes of action arising out of any
defects or failure to perform, alleged or otherwise, in the Licensed
Product or any material used in connection therewith or any use thereof.
The amount of the coverage shall be a minimum of One Million
Dollars ($1,000,000) combined single limit for each single occurrence for
bodily injury and One hundred Thousand Dollars ($100,000) for property
damage. Said policy shall provide for ten (10) days notice to LICENSOR
from the insurer by registered or certified mail, return receipt
requested, in the event of any modification, cancellation or termination
of said policy. LICENSEE shall furnish to LICENSOR a certified copy of
said policy providing such coverage within ten (10) days after the date
of this Agreement and in no event shall LICENSEE manufacture, distribute
or sell the Licensed Product prior to the receipt by LICENSOR of such
evidence of insurance.
14. USE, DISPLAY, AND SALE INVOLVING THE TRADEMARKS AND COPYRIGHT
In order to protect the Trademarks and LICENSOR's reputation, LICENSEE
will manufacture, distribute and sell the Licensed Product in compliance
with all applicable laws. In no event shall LICENSEE, or any affiliated
entity, manufacture, import, distribute or sell any products using any
products using any trademark or other designation containing the words
"BEVERLY HILLS", or 'POLO", or depicting any equestrian figure,
11
<PAGE>
BHPC.12I
without the written consent of LICENSOR.
b. LICENSEE shall exercise all reasonable efforts, within the limits
allowed by the laws and governmental regulations in effect in the
Territory, to ensure that its merchandising and sale of the Licensed Product
shall conform to policies and methods suitable for goods of high quality
sold under a prestigious label of worldwide repute.
15. OWNERSHIP OF THE TRADEMARKS
---------------------------
a. LICENSEE agrees that nothing in this Agreement shall give LICENSEE any
right, title, or interest in the Trademarks, other than the license to use
the Trademarks on the Licensed Product; that such marks are the sole
property of LICENSOR; that all such uses by LICENSEE of such marks shall
inure only to the benefit of LICENSOR; and it being understood that all
right, title and interest relating thereto are expressly reserved by the
LICENSOR except for the rights being licensed hereunder.
b. LICENSEE agrees and acknowledges that if it has obtained or obtains
in the future, in any country, any right, title, or interest in any marks
which are confusingly similar to the Trademark, (including the filing of
any application for trademarks or service mark registration or the
obtaining of any issued registration), that LICENSEE has acted or will act
as an agent and for the benefit of LICENSOR. LICENSEE further agrees to
execute any and all instruments deemed by LICENSOR, its attorneys or
representatives, to be necessary to transfer such right, title, or
interest to LICENSOR to protect LICENSOR's right, title and interest in
such marks.
c. LICENSEE agrees not to raise or cause to be raised to third parties,
either during the term of this Agreement or after its expiration or
termination, on any grounds whatsoever, any questions concerning the
validity of the Trademarks or LICENSOR's rights therein, or any other
trademark or service mark owned by LICENSOR.
16. COMPLIANCE WITH LIMITATIONS ON USE OF TRADEMARKS
------------------------------------------------
LICENSEE agrees that the Licensed Product, and all labels, hang tags,
packaging and other trade dress, used in connection with such Licensed
Products, shall not violate any restrictions on use or display of the marks
as provided in that Settlement Agreement and Consent Judgement with Polo
Fashions, Inc., a copy of which is attached hereto as Exhibit "D". Nothing
contained in this Agreement makes Polo Fashions, Inc., or any
12
<PAGE>
BHPC.12I
related company, a third party beneficiary of this Agreement.
17. THIRD PARTY INFRINGEMENT
------------------------
LICENSEE agrees to notify LICENSOR in writing of any infringements or
imitations by third parties of the Trademarks, the Licensed Product and/or
the Promotional and Packaging Material which may come to LICENSEE's
attention. In the event that a third party should infringe any of the
Trademark rights or any other rights under this Agreement in the Territory,
LICENSOR shall have the sole right to determine whether any action shall be
taken on the account of such infringement, and LICENSEE shall not take any
action on account of any infringement without first obtaining written
consent of LICENSOR, such consent not to be unreasonably withheld.
18. ASSIGNABILITY AND MANUFACTURING
-------------------------------
a. The license granted hereunder is, and shall remain, personal to LICENSEE
and shall not be granted, assigned, or otherwise conveyed by any act of
LICENSEE or by operation of law. For the purposes of this Paragraph 18,
any sale or transfer of any ownership interest in LICENSEE shall
constitute a prohibited assignment of the license granted hereunder.
LICENSEE shall have no right to grant any sublicenses without LICENSOR's
prior express written approval. Any attempt on the part of LICENSEE to
arrange to sublicense or assign to third parties its rights under this
Agreement, shall constitute a material breach of this Agreement.
b. LICENSOR shall have the right to assign its rights and obligations under
this Agreement without the approval of LICENSEE.
c. LICENSEE has the right to enter into franchise agreements using
franchise agreements previously approved by LICENSOR. Any material change
to said franchise agreement must be approved in writing by LICENSOR.
19. NO AGENCY, JOINT VENTURE, PARTNERSHIP
-------------------------------------
The parties hereby agree that no agency, joint venture, or partnership
is created by this Agreement, and that neither party shall incur any
obligation in the name of the other without the other's prior written
consent.
20. INDEMNIFICATION
---------------
Except for claims of trademark infringement or similar claims, LICENSEE
will indemnify, defend and hold
13
<PAGE>
BHPC.12I
LICENSOR harmless from any and all liabilities, claims, obligations, suits,
judgments and expenses whatsoever, including court costs and attorney's
fees, which LICENSOR may incur or which may be asserted against LICENSOR and
which arise or occur with respect to the operation of LICENSEE's business as
it relates to the design, import, manufacture, distribution, promotion,
advertisement, and sale of the Licensed Product under the Trademarks or with
respect to this Agreement and LICENSEE's performance hereunder; and further
provided that LICENSOR shall have the right to undertake and conduct the
defense of any cause of action so brought and handle any such claim or
demand. Such indemnity shall extend to liabilities and claims incurred
after the expiration or termination of this Agreement but which are based on
acts or events whose proximate cause arose during this Agreement.
21. TERMINATION
-----------
a. In addition to the termination rights provided elsewhere in this
Agreement, LICENSOR will have the right to terminate this Agreement in the
event that: (i) LICENSEE violates or fails to perform any agreement,
obligation, term, or condition of this Agreement and that violation or
failure to perform is not cured within ten (10) days following written
notice thereof; or (ii) LICENSEE becomes insolvent, files a voluntary
petition in bankruptcy, a petition is filed against LICENSEE to have
LICENSEE adjudicated as bankrupt and same is not dismissed in sixty (60)
days, LICENSEE enters into any composition with the creditors of LICENSEE
or becomes subject to reorganization under the United States Bankruptcy
Code or under any other bankruptcy law. Provided, however, such
termination shall not relieve LICENSEE of the obligation to pay any Royalty
accrued up to the effective date of termination, nor prejudice any cause of
action or claim of LICENSOR accrued, or to accrue, on account of the breach
or default of LICENSEE.
b. Notwithstanding the provisions of sub-paragraph 21a.(i) to the contrary,
in the event that LICENSEE violates this Agreement or fails to perform any
agreement, obligation, term, or condition of this Agreement for the third
(3rd) time, for any reason, LICENSEE shall forfeit the right to cure such
violation or failure to perform, and this Agreement will terminate upon the
giving of the written notice thereof.
22. EFFECT OF EXPIRATION OR TERMINATION
-----------------------------------
a. Upon expiration or termination of this Agreement, all rights and
licenses granted to LICENSEE hereunder
14
<PAGE>
BHPC.12I
shall immediately expire, shall forthwith revert to LICENSOR, and LICENSEE
shall immediately cease and desist from using the Trademarks and any
technical information supplied by LICENSOR to LICENSEE hereunder. To this
end, LICENSEE will be deemed to have automatically assigned to LICENSOR,
upon such expiration or termination, the Trademarks, equities, good will,
titles, and other rights in or to the Licensed Product and all adaptions,
compilations, modifications, translations and versions thereof, and all
other trademarks used in connection therewith which have been or may be
obtained by LICENSEE or which may vest in LICENSEE and which have not
already been assigned to LICENSOR. LICENSOR may thereafter, in its sole
discretion enter into such arrangements as it deems desirable, with any
other party, for the manufacture, promotion and sale of the Licensed Product
in the Territory. LICENSEE shall, within thirty (30) days after expiration
or termination of this Agreement as the case may be, furnish LICENSOR with
a full and detailed written statement of the Licensed Product in its
inventory or the Licensed Product in progress. LICENSOR shall have the
option of conducting a physical inventory at the time of expiration or
termination and/or at a later date in order to ascertain or verify such
statement. In the event that the LICENSEE refuses to permit LICENSOR to
conduct such physical inventory, LICENSEE shall forfeit its right hereunder
to dispose of such inventory. In addition to such forfeiture, LICENSOR
shall have recourse to all other remedies available to it.
b. Upon the termination of this Agreement, LICENSEE shall, within ten (10)
days following termination, give written notice to LICENSOR of the : (i)
Licensed Product, by style, in its possession or under its control; (ii)
location of the inventory of the Licensed Product; (iii) amount of the work
in process; (iv) Licensed Product in transit; and (v) name, address, and
telephone number of each contractor, shipper and/or sales representative.
c. LICENSEE shall accept no order, or undertake any new production, that
would be delivered after the date of expiration of this Agreement. Three
(3) months prior to the expiration of this Agreement, and monthly thereafter
until expiration, LICENSEE shall provide to LICENSOR an inventory, by style,
of all the Licensed Product in its possession or under its control, and all
work in process. Three (3) months prior to the expiration of this
Agreement, and weekly until expiration, LICENSEE shall provide LICENSOR with
copies of all orders, invoices, bills of lading, credit memoranda, and
statements provided to LICENSEE's
15
<PAGE>
BHPC.12I
factor (if any). LICENSEE shall be entitled to sell its inventory, of the
Licensed Product through and until the date of the expiration of this
Agreement only if the inventory, and all documents listed above, are
delivered to LICENSOR in a timely fashion.
d. LICENSEE shall deliver to LICENSOR, upon termination of this Agreement or
thirty (30) days prior to the expiration of this Agreement: (i) the names,
addresses, and telephone numbers of each supplier of any item having the
Trademarks and (ii) all materials which reproduce the Trademarks on the
Licensed Product and/or Promotional and Packaging Material relating to the
Licensed Product or shall give LICENSOR satisfactory evidence of their
destruction. LICENSEE shall be responsible to LICENSOR for any damages
caused by the unauthorized use of LICENSEE or by others of such
reproduction materials which are not turned over to LICENSOR.
e. Any finished Licensed Product in LICENSEE's possession unsold on the date
of the expiration of this Agreement may, subject to payment of the Royalty
payable to LICENSOR, be sold by LICENSEE, pursuant to a plan to be
approved by LICENSOR, for a period of one hundred twenty (120) days after
expiration hereof. Any Royalty paid by LICENSEE to LICENSOR during the
aforementioned one hundred twenty (120) day period is separate and apart
from the Royalty generated during the term of the Agreement and such
Royalty is not to be applied to the Guaranteed Annual Royalty Payments as
outlined in Subparagraph 10b and column C of item 7 of the attached License
Agreement Detail Schedule. All inventory remaining after such one hundred
twenty (120) day period shall be destroyed or stripped of all imprints,
lettering, mentions or other reproductions of or references to the
Trademarks and related logos; and all molds, patterns, transfers, and
other property bearing the Trademarks of relating thereto shall be
destroyed; all under the supervision of LICENSOR. LICENSOR shall have the
first right to purchase said Licensed Product at the direct cost price
(comprised of material and direct labor expenses as set forth in
LICENSEE's books and records, plus five percent (5%) for overhead) upon
expiration or termination of this Agreement.
f. Any finished Licensed Product in LICENSEE's possession unsold on the date
of termination of this Agreement, and all molds, patterns, transfers and
other property bearing the Trademarks or relating thereto, shall be
destroyed by LICENSEE within thirty (30) days following the termination of
this Agreement; further, LICENSEE agrees, on or before the aforementioned
date, to provide LICENSOR with a certificate
16
<PAGE>
BHPC.12I
signed by LICENSEE's Chief Executive Officer certifying under penalty of
perjury that such inventory, molds, patterns, transfers, and other property
have been destroyed.
23. MODIFICATION: WAIVER
No modification of any of the terms or provisions of this Agreement shall
be valid unless contained in a writing signed by the parties. No waiver by
either party of a breach or a default hereunder shall be deemed a waiver
by such party of a subsequent breach or default of a like or similar
nature. Resort by LICENSOR to any remedies referred to in this Agreement
or arising by reason of a breach of this Agreement by LICENSEE shall not
be construed as a waiver by LICENSOR of its right to resort to any and all
other legal and equitable remedies available to LICENSOR.
24. FORCE MAJEURE
Neither LICENSOR nor LICENSEE shall be liable to each other or be deemed
in breach or default of any obligations contained in this Agreement, for
any delay or failure to perform due to causes beyond its reasonable
control, including but not limited to delay due to the elements, acts of
the United States Government, acts of foreign government, acts of God,
fires, floods, epidemics, embargoes, riots, strikes, any of the foregoing
events being referred to as a "Force Majeure" condition. In such event,
dates for performance shall be extended for the period of delay resulting
from the Force Majeure condition. The party affected by a Force Majeure
condition shall, as soon as practicable, notify the other party of the
nature and extend of such condition.
25. NOTICE
All notices, approvals, consents, requests, demands, or other
communications to be given to either party in writing may be effected by
personal delivery or by depositing the same in the mail, certified and
return receipt requested, postage prepaid. Such communication shall be
addressed to LICENSEE and LICENSOR at their respective addresses as set
forth in the preamble above.
26. CONSTRUCTION: VENUE
This agreement shall be construed in accordance with the laws of the State
of California, U.S.A., and the parties agree that it is executed and
delivered in that state, and any claims arising hereunder shall, at
LICENSOR's election, be prosecuted in the appropriate Court of the State
of California in Los Angeles
17
<PAGE>
BHPC.12I
County or any Federal District Court therein.
27. ENTIRE AGREEMENT
This Agreement, contains the entire understanding of the parties and there
are not representations, warranties, promises, or undertakings other than
those contained herein. This Agreement supersedes and cancels all previous
agreements between the parties hereto.
28. CONFIDENTIAL INFORMATION
LICENSOR and LICENSEE agree (and shall instruct their partners, officers,
directors, designers, and other persons to whom disclosure is made) that
during the term of the Agreement and for a period of two (2) years
following the termination or expiration of this Agreement to keep strictly
confidential all designs, manufacturing instructions, and other
information relating to the Licensed Product that are not otherwise
available to the public, whether furnished by one to the other or in any
way acquired by either party; and the same shall be used by either party
solely under this Agreement and for the purpose of marketing of the
Licensed Product.
29. EQUITABLE RELIEF
LICENSEE acknowledges and agrees that: (i) LICENSEE's failure to meet the
quality standards herein; (ii) LICENSEE's failure: (a) to use the
Trademarks, or (b) to manufacture, offer for sale, sell, advertise,
promote, ship or distribute the Licensed Product, both in accordance with
the provisions of this Agreement; or (iii) any unauthorized use or
disclosure of confidential information of LICENSOR, cannot be compensated
adequately with a remedy or law and will cause irreparable damage to
LICENSOR. Accordingly, the parties agree that LICENSOR may seek from any
court having jurisdiction, such equitable relief by way of temporary
restraining orders, permanent injunctions or otherwise as is available to
compel the discontinuance of such conduct. LICENSEE agrees that any court
of general jurisdiction in Los Angeles County or any Federal District
Court therin shall have jurisdiction of such claim.
30. ATTORNEYS' FEES
In the event any legal action becomes necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled, in
addition to its court costs, to such reasonable attorneys' fees as shall
be fixed by a court of competent jurisdiction.
18
<PAGE>
BHPC.12I
31. BINDING EFFECT
This Agreement shall be binding on the parties, and their successor and
assigns.
32. SURVIVAL OF THE RIGHTS
Notwithstanding anything to the contrary contained herein, such obligation
which remain executory after expiration of the term or termination of this
Agreement shall remain in full force and effect until discharge by
performance and such rights as pertain thereto shall remain in force until
their expiration.
33. SEVERABILITY
In the event that any term or provision of this Agreement shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity or unenforceability shall not affect any other term or provision
and this Agreement shall be interpreted and construed as if such term or
provision, to the extent the same shall have been held to be invalid,
illegal or unenforceable, had never been contained herein.
34. CAPTIONS
The captions used in connection with the paragraphs and subparagraphs of
this Agreement are inserted only for purpose of reference. Such captions
shall not be deemed to govern, limit, modify or in any other manner affect
the scope, meaning or intent of the provisions of this Agreement or any
part thereof nor shall such captions otherwise be given any legal effect.
35. INCORPORATION OF EXHIBITS
LICENSOR and LICENSEE acknowledge and agree that the provisions of
Exhibits "A" through "E" attached hereto (the Exhibits") are integral to
this Agreement and that the provisions of the Exhibits are all hereby
incorporated herein and made a part hereof as if set out in full in this
Agreement.
36. ENGLISH LANGUAGE
This Agreement is entered into the English language only. Any translation
thereof into any other language shall be for purposed of convenience only
and shall not be considered in connection with the interpretation of the
provision hereof.
37. REQUIRED FILING OF AGREEMENT
LICENSEE shall cause this Agreement to be filed with, and approved by, all
necessary governmental authorities, including the appropriate exchange
control authorities, whenever such filing and approval may
19
<PAGE>
BHPC.12I
be required for the purpose of authorizing the payments herein provided.
LICENSEE shall be solely responsible for the filing of this document with
the appropriate authorities and shall bear the cost thereof, is any. In
the event of LICENSEE failing to obtain the approvals or completing the
filing set forth above within four (4) months from the date of the first
franchise agreement being signed, LICENSOR may terminate this Agreement
forthwith.
38. REGISTRATION IN TERRITORY
LICENSOR will exert its best efforts to obtain trademark registration of
the Trademarks for the Licensed Product in the Territory. However, LICENSOR
has made no representation or warranty that the Trademarks will be
registered or are registerable in the Territory, and the failure to obtain
or maintain registrations thereon shall not be deemed a breach hereunder
by LICENSOR. A listing of the registrations in class 25 in the Territory
is shown in Exhibit "E", attached hereto.
39. LICENSEE agrees that any Licensed Product purchased for the Territory
will be purchased from other official Beverly Hills Polo Club licensees
within said Territory. If a licensee does not exist in the Territory for a
specific product category, then LICENSEE may purchase the Licensed Product
from any other official Beverly Hills Polo Club licensee, worldwide.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Agreement shall
take effect as of the date and year first above written.
LICENSOR: LICENSEE:
BHPC MARKETING, INC., ZACARI, S.L.
a California Corporation a Spanish Limited Corporation
BY: /s/ Don Garrison BY: /s/ Robert Arnot
------------------------------ ---------------------------------
Don Garrison Robert Arnot
Licensing Director Chairman/Managing Director
Date: 8/19/96 Date: 8/15/96
---------- -----------
21
<PAGE>
LICENSE AGREEMENT DETAIL SCHEDULE
---------------------------------
1. Definition of Territory: Retail Stores in Europe and Eastern Europe:
------------------------
Portugal Andorra Italy France Belgium
Holland Greece Switzerland Austria Germany
Luxembourg Liechtenstein Latvia Norway Denmark
Sweden Poland Hungary Czech Republic Slovakia
Estonia Ukraine Belarus San Marino Cypress
Chechnia Moldavia Russia N. Ireland Ireland
Lithuania Romania Bulgaria Monaco Iceland
Finland Spain United Kingdom
2. Definition of Licensed Product (by category): DISTRIBUTION DATE:
-------------------------------------------- -----------------
A. Men's apparel: pants, woven shirts, knit shirts, January 1, 1997
jeans, shorts, sweaters, outerwear (excluding
dress shirts & suits)
B. Women's apparel: slacks, skirts, dresses,
sweaters, outerwear, blouses and jeans
C. All other BHPC Licensed Product produced by other Licensees.
3. Initial Term: FROM TO
------------ ---- --
First Contract Year: July 1, 1996 December 31, 1997
Second Contract Year: January 1, 1998 December 31, 1998
Third Contract Year: January 1, 1999 December 31, 1999
4. Renewal Term:
------------
Fourth Contract Year (if any): January 1, 2000 December 31, 2000
Fifth Contract Year (if any): January 1, 2001 December 31, 2001
Sixth Contract Year (if any): January 1, 2002 December 31, 2002
5. Advance Royalty Payment:
-----------------------
First Contract Year: None ($00)
6. Royalty Rate:
------------
Four percent (4%) of Wholesale Purchases by Beverly Hills Polo Club
Retail Stores, and two percent (2%) of Retail Sales by Beverly Hills Polo
Club Franchise Retail Stores.
<PAGE>
7. Guarantees:
----------
(A) (B) (C) (D)
Guaranteed Guaranteed Guaranteed
Target Guaranteed Annual Monthly
Net Net Royalty Royalty
Shipments Shipments Payments Payments
(in United States Dollars)
--------------------------------
First Contract Year $00 $00 $00 $00
Second Contract Year $1,000,000 $1,000,000 $ 60,000 $ 5,000
Third Contract Year $2,000,000 $2,000,000 $120,000 $10,000
INITIALS
--------
LICENSOR: /s/ DG
---------
LICENSEE: /s/ RJA
---------
<PAGE>
Int. Cmt. 25
Prior U.S. Cht 39
Reg. No. 1,429,311
United States Patent and Trademark Office Registered Feb. 17, 1987
- -------------------------------------------------------------------
TRADEMARK
PRINCIPAL REGISTER
[LOGO]
EXHIBIT A
<PAGE>
PAGE OF
--- ---
DATE
----------
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
SAMPLE APPROVAL FORM
(FOR STYLE ONLY! SEE SWATCH APPROVAL FORM FOR FABRIC)
NAME OF LICENSEE
-----------------------------------------------------
LICENSED PRODUCT
-----------------------------------------------------
LICENSEE'S ADDRESS
---------------------------------------------------
PLEASE PICTURE BELOW
SEASON
--------------------
STYLE #
-------------------
FABRICATION
-----------------
WHOLESALE PRICE
-------------
COLORS
----------------------
SIZES
-----------------------
START TAKING ORDERS
---------
END TAKING ORDERS
-----------
START SHIP
------------------
END SHIP
--------------------
- ----------------------------------- -----------------------------
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
APPROVED DISAPPROVED
----------- ----------
COMMENTS
-------------------------------------------------------------
- ---------------------------------------------------------------------
DATE RETURNED TO LICENSEE
-----------------------
BHPC MARKETING, INC., 620 West 135th Street, Gardena, CA 90248
EXHIBIT "B-1"
<PAGE>
PAGE OF
------- ------
DATE
----------------
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
630 W. 135th Street
Gardena, CA 90248
SWATCH AND/OR COLOR APPROVAL FORM
(FABRIC AND COLOR ONLY! SEE SAMPLE APPROVAL FORM FOR STYLE)
NAME OF LICENSEE
--------------------------------------------------------------
LICENSED PRODUCT
--------------------------------------------------------------
LICENSEE'S ADDRESS
--------------------------------------------------------------
SEASON
------------------------------------------------------------------------
LIST STYLE NUMBERS OF GARMENTS TO BE MANUFACTURED IN THIS FABRIC
--------------
- ------------------------------------------------------------------------------
FABRIC # AND NAME OF SUPPLIER
------------------------------------------------
- ------------------------------------------------------------------------------
FABRIC CONTENT AND WEIGHT
-----------------------------------------------------
PLEASE ATTACH 1 SET OF SWATCHES BELOW
APPROVED DISAPPROVED
---------------- --------------
COMMENTS----------------------------------------------------------------------
- ------------------------------------------------------------------------------
- -------------------------------- -------------------------------
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
DATE RETURNED OF LICENSEE
-------------------------
BHPC MARKETING, INC., 620 West 135th Street, Gardena, CA 90248
EXHIBIT "B-2"
<PAGE>
Page of
----- -----
Date
------------
FORM MUST BE SUBMITTED COMPLETE SUBMIT TO THE ATTENTION OF:
BHPC MARKETING, INC.
620 W. 135th Street
Gardena, CA 90248
ADVERTISING APPROVAL FORM
NAME OF LICENSEE
----------------------------
LICENSED PRODUCT
----------------------------
LICENSEE'S ADDRESS
--------------------------------------------------------
CIRCLE THE FORM OF ADVERTISING WHICH IS BEING SUBMITTED: LABEL, HANG TAG,
BUSINESS CARDS, BUSINESS FORMS, RADIO SPOT, TV, FULL PAGE AD, 1/2 PAGE AD,
PACKAGING, DISPLAY, OTHER.
PLACE ADVERTISING TO BE SUBMITTED HERE, OR AFFIX TO THIS PAGE
USE PERIOD From to
--------- ---------
IF SUBMISSION IS LABELS OR HANG TAGS, PLEASE GIVE NAME & ADDRESS OF SUPPLIER
- ------------------------------------------------------------------------------
IF AD IS TO RUN IN A PUBLICATION, NAME OF PUBLICATION
-------------------------
APPROVED DISAPPROVED
------------ -----------
COMMENTS
----------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ----------------------------- ---------------------------
Signature of Licensee Signature of Licensor
DATE RETURNED TO LICENSEE
---------------
BHPC Marketing, Inc. - 620 W. 135th Street - Gardena, CA 90248
(310) 354-1444 - FAX (310) 354-1445
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ROYALTIES (FOREIGN)
FOR SALES TO RETAIL STORES
FOR --------------- TO --------------- 19 -----
(MONTH)
LICENSEE NAME -------------------------------- ROYALTY % -----
LICENSEE ADDRESS ----------------------------- CONVERSION RATE ------------ TO ------------ US DOLLARS
- ---------------------------------------------- DATE OF CONVERSION RATE ------------------------------
- ---------------------------------------------- LICENSED PRODUCT -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
CUSTOMER GROSS LESS NET SALES NET SALES GROSS ROYALTIES TAXES PAID NET ROYALTY AMT.
NAME SALES RETURNS* LOCAL CUR. US$ US$ US$ US$
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS -------------------------------------------------------------------------------------------------------------------------
Send Statement to: BHPC Marketing, Inc.
620 West 135th Street I CERTIFY THAT THE ABOVE IS ACCURATE
Gardena, CA 90248
U.S.A. ----------------------------------------------------- -------------
Signature and Title Date
Please see License Agreement for the amount of permissible deductions.
Exhibit "B-4"
</TABLE>
<PAGE>
<TABLE>
[logo] STATEMENT OF ROYALTIES (FOREIGN)
FOR TO 19
---------------- ------------- -----
(Quarter)
LICENSEE NAME
--------------------------------
LICENSEE ADDRESS CONVERSION RATE TO U.S. DOLLARS ROYALTY %
------------------------------ ----------- --------- ---------------
- --------------------------------------------- DATE OF CONVERSION RATE
----------------------------
LICENSEE PRODUCT(S)
---------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
ITEM/ NUMBER OF NUMBER OF UNIT WHOLESALE GROSS LESS LESS LESS TRADE LESS NET SALES LOCAL
STYLE NO. UNITS SOLD UNITS RETURNED PRICE SALES ALLOWANCES* MARKDOWNS* DISCOUNTS* RETURNS* CURRENCY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NET SALES GROSS ROYALTIES TAXES PAID NET ROYALTY AMT.
U.S. DOLLARS U.S. DOLLARS U.S. DOLLARS U.S. DOLLARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SEND STATEMENT TO: BHPC MARKETING, INC. I CERTIFY THAT THE ABOVE IS ACCURATE
620 W. 135th Street
Gardena, CA 90248 ------------------------------------ -------------------------------------
SIGNATURE TITLE
------------------------------------ -------------------------------------
NAME DATE
*PLEASE SEE THE LICENSE AGREEMENT FOR
THE AMOUNT OF PERMISSIBLE DEDUCTIONS.
</TABLE>
<PAGE>
SECTION (I)
NET SHIPMENT STATEMENT
The written statement of Net Shipments of Licensed Product (a copy of which
is attached hereto as Exhibit "B-4") referred to in Paragraph 9a must be
certified as accurate by LICENSEE and will include, but will not be
limited to, information as to: each respective invoice number (in sequential
order inclusive of all "voided" invoices), invoice date, customer name or
number, gross dollar amount invoiced, terms of any customary trade allowances
(as a percentage and in aggregate dollars), actually credited returns (in
aggregate dollars), and other deductions taken against the gross dollar
amount invoiced, and any such other further information as LICENSOR may
from time to time request. Such statements shall be furnished to LICENSOR
whether or not any Licensed Product has been shipped, distributed and/or
sold during the preceding Royalty Period and whether or not any monies are
then due LICENSOR.
SECTION (II)
BOOKS, RECORDS, AND RIGHTS TO AUDIT
Within ten (10) days following any written request by LICENSOR, LICENSEE
will deliver copies and extracts of any books of account, records,
documents, materials, and information as are requested by LICENSOR
inclusive of, but not limited to: financial statements, general ledger
detail and supporting journals, documents, sales and credit memo registers,
financial projections and wholesale price listings. All books of account and
records of LICENSEE covering all transactions relating to this Agreement
shall be retained by LICENSEE for at least three (3) years after the
expiration or termination of this Agreement for inspection by LICENSOR.
EXHIBIT "C"
Page 1 of 3
<PAGE>
SECTION (III)
INSURANCE REQUIREMENTS
All such policies of insurance shall have endorsements or coverage with
combined single limits of not less than $1,000,000 with deductibles
reasonably acceptable to LICENSOR and shall name LICENSOR, and those
designated by LICENSOR, as additional insureds thereunder. Such policies
of insurance shall contain:
a. severability of interest;
b. cross liability; and
c. endorsement stating: "Such insurance as is afforded by this policy for the
benefit of BHPC Marketing, Inc. shall be primary as respects any
liability of claims arising out of (LICENSEE's) operation, and any
insurance carried by BHPC Marketing, Inc. shall be excess and
non-contributory."
The policies shall provide for ten (10) days notice to LICENSOR from the
insurer by Registered or Certified Mail, return receipt requested, in the
event of any modification, cancellation or termination. LICENSEE agrees to
furnish LICENSOR a certificate of insurance or copy of the policies
evidencing same within thirty (30) days after execution of this Agreement
and from time to time as requested by LICENSOR within ten (10) days of
LICENSOR's request; in no event, shall LICENSEE manufacture, offer for sale,
sell, advertise, promote, ship and/or distribute the Licensed Product prior
to receipt by LICENSOR of such evidence of insurance.
SECTION (IV)
DISPOSAL OF INVENTORY ON EXPIRATION OR TERMINATION
(A) Any finished Licensed Product in LICENSEE's possession unsold on the
date of the expiration of this Agreement may, subject to payment of the
Royalty payable to LICENSOR, be sold by LICENSEE, pursuant to a plan to be
approved by LICENSOR, for a period of one hundred twenty (120) days after
expiration hereof. Any Royalty paid by LICENSEE to LICENSOR during the
aforementioned one hundred twenty (120) day period is separate and apart from
the Royalty generated during the term of the Agreement and such Royalty is
not to be applied to the Guaranteed Annual Royalty Payments as outlined in
Subparagraph 10b. and column C of item 7 of the attached License Agreement
Detail Schedule. All inventory remaining after such one hundred twenty (120)
day period shall be destroyed or stripped of all imprints, lettering,
mentions or other reproductions of or references to the Trademarks and
related logos; and all molds, patterns, transfers, and other property bearing
the Trademarks of relating thereto shall be destroyed; all under the
supervision of LICENSOR.
EXHIBIT "C"
Page 2 of 3
<PAGE>
LICENSOR shall have the first right to purchase said Licensed Product at the
direct cost price (comprised of material and direct labor expenses as set
forth in LICENSEE's books and records, plus five percent (5%) for overhead)
upon expiration or termination of this Agreement.
(B) Any finished Licensed Product in LICENSEE's possession unsold on the
date of termination of this Agreement, and all molds, patterns, transfers,
and other property bearing the Trademarks or relating thereto, shall be
destroyed by LICENSEE within thirty (30) days following the termination of
this Agreement; further, LICENSEE agrees, on or before the aforementioned
date, to provide LICENSOR with a certificate signed by LICENSEE's Chief
Executive Officer certifying under penalty of perjury that such inventory,
molds, patterns, transfers, and other property have been destroyed.
EXHIBIT "C"
Page 3 of 3
<PAGE>
BEVERLY HILL POLO CLUB REGISTRATIONS
IN CLASS 25 IN TERRITORY
MARK COUNTRY STATUS
Beverly Hills Polo Club Benelux Registered 5/7/91
& design (Belgium, Holland,
Luxembourg) #449,277
Beverly Hills Polo Club Denmark Registered 7/16/93
& design #VR 05.054
Beverly Hills Polo Club France Registered 4/6/83
& design #1,365,413
Beverly Hills Polo Club Germany Registered 3/15/95
& design #2 092 929
Beverly Hills Polo Club Greece Registered 4/11/89
& design #93232
Beverly Hills Polo Club Italy Registered 11/23/91
& design #554547
Beverly Hills Polo Club Norway Registered 1/23/92
& design #148,737
Beverly Hills Polo Club Spain Registered 4/9/92
& design #1,256,495
Beverly Hills Polo Club Sweden Registered 8/2/91
& design #225,429
Beverly Hills Polo Club Switzerland Registered 11/23/90
& design #381,887
Beverly Hills Polo Club United Kingdom Registered 1/30/86
& design #B1,259,226
EXHIBIT "E"
<PAGE>
SETTLEMENT AGREEMENT
--------------------
This Settlement Agreement is made, in multiple originals, by and
among Polo Fashions, Inc., a corporation organized and existing under the
laws of the State of New York, having an office and place of business at 40
West 55th Street, New York, New York ("PFI"); Beverly Hills Polo Club, Inc.,
a corporation organized and existing under the laws of the State of
California, having an office and place of business at 1940 Lovelace Avenue,
Los Angeles, California ("BHPC"); Stephen Wessler, an individual residing at
19500 Valdez Drive, Tarzana, California ("Wessler"); and Gregory Lang, Inc.,
a corporation organized and existing under the laws of the State of
California, having an office and place of business at 1940 Lovelace Avenue,
Los Angeles, California ("Lang"). BHPC, Wessler and Lang will hereinafter be
collectively referred to as the "Beverly Hills Polo Club Parties."
WITNESSETH:
WHEREAS, there are presently pending before the United States
District Court for the Central District of California two civil actions
entitled "Beverly Hills Polo Club, Inc. and Gregory Lang, Inc. v. Polo
Fashions, Inc., Civil Action No. 83-3342 LTL (JRx)" (the "BHPC Action") and
"Polo Fashions, Inc. v. Action Industries, Inc., et al., Civil Action No.
84-162 LTL (JRx)" (the "PFI Action"), which involve claims
EXHIBIT D
<PAGE>
of trademark infringement, false designation of origin and unfair competition
by PFI against the Beverly Hills Polo Club Parties and others and claims of
unfair competition, antitrust violations and declaratory relief of trademark
non-infringement by various of the Beverly Hills Polo Club Parties against
PFI; and
WHEREAS, the parties hereto have vigorously contested the BHPC
Action and the PFI Action (collectively the "Civil Actions"), and have
expended considerable time and effort, and have incurred considerable
expense, in doing so; and
WHEREAS, in order to avoid the additional expense which would be
necessary for the continued prosecution of the Civil Actions, the parties are
willing to resolve the controversy among them and to settle the Civil Actions
under the terms and conditions set forth herein;
NOW, THEREFORE, in mutual consideration of the covenants and
premises contained herein, the parties agree as follows:
1. Except as provided in paragraph 3 hereunder, as of February
15, 1985, the Beverly Hills Polo Club Parties, their affiliates, officers,
agents and employees and any other person or entity under their direction or
control, or in active concert or participation with them, shall cease and
desist from anywhere in the world:
(a) Using as a design or decoration on or in connection with
wearing apparel, home furnishings,
2
<PAGE>
personal care and fragrance
products, and related items, accessories and services (collectively,
the "Subject Products and Services"), including but not limited to
related packaging, labels, tags and other trade dress, or as a
trademark, service mark or trade name the word "polo" alone, or the
words "polo club" alone, apart from the composite "Beverly Hills Polo
Club," except as may be permitted by paragraph 18 herein;
(b) Using as a design or decoration on or in connection with
the Subject Products and Services, including but not limited to
related packaging, labels, tags and other trade dress, or as a
trademark, service mark or trade name the composite "Beverly Hills
Polo Club" in any configuration in which (i) the words "Beverly Hills"
are not of equal prominence with the words "Polo Club" or not in close
proximity to such words or (ii) a different type face or color is used
for the words "Polo Club" than for the words "Beverly Hills" or (iii)
the word "Polo" is surrounded by a rectangle, or (iv) the word "Polo"
is in any way emphasized;
(c) Using as a design or decoration on or in connection with
the Subject Products and Services, including but not limited to
related packaging, labels, tags and other trade dress, or as a
trademark or service mark, the design of a polo player astride a horse
3
<PAGE>
which is shown in Exhibit A (the "Polo Player Symbol"), or any design
which is a colorable imitation or simulation thereof;
(d) Using as a design or decoration on or in connection with
the Subject Products and Services, including but not limited to
related packaging, labels, tags and other trade dress, or as a
trademark, service mark or trade name the design of a polo player
astride a horse which is shown in Exhibit B (the "BHPC Symbol"), or
any design which is a colorable imitation or simulation thereof or is
substantially similar thereto, in an overall size smaller than five
and a half inches by five and a half inches (5 1/2" x 5 1/2")
(measured from mallet head to hoof and from nose to tail), except as
may be permitted by paragraph 2 hereof;
(e) Using either of the typefaces shown in Exhibit C
(identified hereinafter as the "Subject Typefaces") for the name
"Beverly Hills Polo Club";
(f) Placing or causing to be placed any advertisements or
using any materials of any type making reference, either directly or
indirectly to Polo Fashions, Inc. or to Ralph Lauren or their
licensees and affiliates; and
(g) Using dark blue as the background color of any
packaging, label, tag or trade dress containing the words "Beverly
Hills Polo Club", and/or the BHPC Symbol.
4
<PAGE>
2. Notwithstanding the size limitations imposed by paragraph 1(d)
hereof, the Beverly Hills Polo Club Parties may use the BHPC Symbol in an
overall size smaller than the five and a half inches by five and a half
inches (5 1/2 x 5 1/2) set forth in paragraph 1(d) hereof but only if
(a) the same is used in combination with and in close proximity
to the words "Beverly Hills Polo Club" in the configuration shown in
Exhibit D annexed hereto (the "Composite BHPC Logo") or the label shown
in Exhibit E annexed hereto (the "BHPC Label"); or
(b) the BHPC Symbol is used in a repetitive pattern covering
substantially all of the front or back of any of the Subject Products,
provided that the initials "BHPC" shall appear in close proximity to the
BHPC Symbol, and that somewhere on each of the Subject Products the words
"Beverly Hills Polo Club" shall be prominently displayed.
3. The Beverly Hills Polo Club Parties may sell or otherwise dispose
of any and all articles of clothing and accessories which are represented by
them to be in their possession or under their control as of February 15,
1985, as set forth in Exhibit F, to be added hereto not later than March 1,
1985, which would otherwise come within the prohibitions of paragraph 1 of
this Agreement, and may fill orders accepted on or before such date for any
clothing or accessories coming within such prohibitions so long as such
orders are filled within ninety (90) days of such date. Notwithstanding the
foregoing,
5
<PAGE>
BHPC may have until June 15, 1985 to dispose of garments in
the process of manufacture in the Orient as of February 15, 1985. PFI or
its attorneys or such attorneys' agents, on reasonable notice, which notice
shall not be required to exceed ten (10) days, may review purchase orders,
bills of lading, or inventory records at the place of business of any Beverly
Hills Polo Club Parties sufficient to verify compliance with the paragraph.
Such information is to be used solely to verify and enforce compliance, and
shall be held in confidence by PFI's attorneys or their agents.
4. Simultaneously with its execution of this settlement agreement,
(a) BHPC shall promptly withdraw with prejudice Opposition No. 68,754 to
PFI's United States Trademark Application Serial No. 333,206, filed October
19, 1981 for the trademark POLO, and (b) Lang shall promptly withdraw with
prejudice the federal, state and foreign trademark applications listed in
Exhibit G annexed hereto, and take the appropriate steps to cancel or delete
or withdraw registrations issued pursuant to such applications; and none of
BHPC, Lang or Wessler, nor any one affiliated with each of them shall file
any trademark application with the United States Patent and Trademark Office
or with any state in the United States or in any foreign country for any mark
incorporating the words "Polo Club" and/or "Beverly Hills Polo Club" and/or
any horse and rider design, where the use of which such mark would be
prohibited hereunder, provided that in no event shall any of them file any
such application for any design of a horse and rider alone.
6
<PAGE>
5. Neither PFI nor any person or entity under its direction or
control, may oppose the registration by the Beverly Hills Polo Club Parties
of any trademark which the Beverly Hills Polo Club Parties are entitled to
register under this Agreement, nor shall they petition to cancel, either
directly or through court action the registration of any such trademark
unless said mark or registration is the basis for legal action by BHPC, Lang
or any affiliated entity against PFI or its licensees. If PFI learns that
any of its licensees objects to the registration by any of the Beverly Hills
Polo Club Parties of the words "Beverly Hills Polo Club," and/or the
Composite BHPC Logo and/or the BHPC Label, then PFI will inform such
objecting licensee in writing of the terms of this Agreement, and provide
written confirmation thereof to BHPC.
6. The parties agree to entry in the Civil Actions of Final Judgment
Upon Consent in the form annexed hereto as Exhibit H, or in such other form
as the Court may require consistent with the terms and conditions of this
Settlement Agreement.
7. None of the Beverly Hills Polo Club Parties or any person or
entity under their direction or control shall oppose any registration by PFI
or any affiliated entity of any of the trademarks or service marks POLO, POLO
BY RALPH LAUREN or the Polo Player Symbol, alone or in combination
(collectively "the PFI Marks"), nor shall they petition to cancel, either
directly or through court action, any registration owned by PFI or any
affiliated entity for any of the PFI Marks unless said
7
<PAGE>
trademark, service mark or registration is the basis for legal or
administrative action by PFI or any such affiliated entity against such a
party or its licensees.
8. The parties will not initiate any any publicity concerning the
terms and conditions of this Agreement and such terms and conditions shall be
held in confidence except as otherwise provided herein. The Beverly Hills
Polo Club Parties may provide a copy of this Settlement Agreement or portions
or summaries thereof to any person or entity licensed or otherwise permitted
to use the name "Beverly Hills Polo Club," the BHPC Symbol or the Composite
BHPC Logo, to potential licensees, to sales representatives or, upon inquiry
being made, to customers. Either party may refer to the terms and conditions
of this Agreement in conjunction with its registration, or judicial or
administrative protection or enforcement of its trademarks, trade names and
service marks.
9. This Settlement Agreement represents no concession by any party as
to the validity or merit of any of the claims raised in the Civil Actions by
any other party, except as may be set forth in the Final Judgment of Exhibit H.
10. PFI and its officers, agents, employees and sales representatives
shall not make, directly or indirectly, any claim that the purchase of
products complying with the terms of this Agreement from BHPC or Lang or
their distributors or sublicensees constitutes trademark infringement, unfair
competition or trademark dilution, nor threaten sanctions with respect
thereto. This undertaking does not in any way admit or imply
8
<PAGE>
that PFI, or anyone acting on its behalf, has in the past made any such
claims or threatened any such sanctions.
11. In consideration of the warranties, representations and
promises made by the Beverly Hills Polo Club Parties herein, PFI does hereby
fully release and forever discharge BHPC, Stefan, Inc., Richard Enterprises,
Inc. Lang and Wessler and all of their respective officers, directors,
agents, employees and representatives and all those in active concert or
participation with any of them, and their customers, both immediate and
remote, from and against any and all claims, causes of action, demands,
damages or charges for trademark infringement and unfair competition made
against them by PFI in the Civil Actions or which could have been made in
such Civil Actions, up to and including the date of the execution of this
Settlement Agreement.
12. In consideration of the warranties, representations and
promises made by PFI herein, BHPC, Lang and Wessler do hereby fully release
and forever discharge PFI, its officers, directors, agents, employees and
representatives, and all those in active concert or participation with any of
them, from and against any and all claims, causes of action, demands, damages
or charges made against PFI in the Civil Actions or which could have been
made in such Civil Actions, up to and including the date of the execution of
this Settlement Agreement.
13. This Settlement Agreement represents the entire understanding
between the parties with respect to the subject matter hereof; shall not be
varied or amended except by a
9
<PAGE>
writing signed by all parties; shall be binding upon the parties, their
successors and assigns; and shall, as respects contractual construction, be
governed by and construed in accordance with the laws of the State of New
York. Neither party hereby waives any claim as to the propriety of venue or
as to the existence of personal jurisdiction, in any lawsuit or other
proceeding that may arise concerning the subject matter of this Settlement
Agreement.
14. PFI warrants and represents that it has full right and power
to enter into this Settlement Agreement.
15. Lang warrants and represents that it has full right and power
to enter into this Settlement Agreement.
16. BHPC warrants and represents that it has full right and power
to enter into this Settlement Agreement.
17. Wessler warrants and represents as follows:
(a) He is the president and sole shareholder of BHPC and
Lang; and
(b) He has the full right, power and authority to enter into
this Settlement Agreement.
18. Nothing contained herein shall be deemed to preclude the
Beverly Hills Polo Club Parties, their affiliates, officers, agents and
employees and any person or entity under their direction or control, or in
active concert or participation with them, from making any use, otherwise
than as a trade or service mark, of the words "polo" or "polo club" alone,
descriptively, fairly and in good faith only to describe the sport of polo,
clubs at which the sport of polo is played (i.e.
10
<PAGE>
"polo clubs") or items of wearing apparel which have come to be described by
the word polo (e.g. "polo shirts" or "polo coats"), provided, however, that
any such use will not violate any of the terms and conditions of this
Agreement.
19. The Beverly Hills Polo Club Parties shall take all steps
reasonably necessary to ensure that any person or entity which is licensed or
otherwise permitted to use the term "Beverly Hills Polo Club", the BHPC
Symbol or the Composite BHPC Logo, complies fully with the restrictions set
forth in paragraph 1 hereof.
20. PFI acknowledges that the rights of any person or entity which
it licenses or otherwise permits to use the PFI Marks are subject to the
terms and conditions of this Agreement and that such rights cannot be used in
contravention of the provisions of paragraphs 5 and 10 hereof. PFI agrees to
inform any of its licensees whom it learns object to the use by the Beverly
Hills Polo Club Parties of any of the names or marks which they are permitted
to use hereunder of the foregoing acknowledgements.
21. In the event that a dispute arises between the parties as to
the subject matter of this Agreement, then the parties shall attempt to
amicably resolve the same prior to seeking judicial intervention. If the
parties are unable to resolve such dispute within thirty (30) days after it
arises,
11
<PAGE>
then either party may take such action as it deems appropriate to protect its
rights.
IN WITNESS WHEREOF, the parties have executed this Settlement on
the days indicated adjacent to their respective signatures below.
POLO FASHIONS, INC.
Dated: 2/15/85 By: /s/ Peter Strom
--------------------------- ---------------------------------
Peter Strom
BEVERLY HILLS POLO CLUB, INC.
Dated: 2/20/85 By: /s/ Stephen Wessler, President
--------------------------- ---------------------------------
Stephen Wessler, President
STEPHEN WESSLER
Dated: 2/20/85 /s/ Stephen Wessler
--------------------------- ------------------------------------
GREGORY LANG, INC.
Dated: 2/20/85 By: /s/ Stephen Wessler, President
0028m --------------------------- ---------------------------------
Stephen Wessler, President
12
<PAGE>
[LOGO]
EXHIBIT A
<PAGE>
[LOGO]
EXHIBIT B
<PAGE>
BEVERLY HILLS
POLO CLUB
[LOGO]
EXHIBIT C
<PAGE>
BEVERLY HILLS
POLO CLUB
[LOGO]
Note: Typeface to be changed per Paragraph 1(e).
EXHIBIT D
<PAGE>
BEVERLY HILLS
POLO CLUB
[LOGO]
Note: Typeface to be changed per Paragraph 1(e).
EXHIBIT E
<PAGE>
Exhibit 10.24
AMENDMENT TO INTERNATIONAL EXCLUSIVE LICENSE AGREEMENT
This Amendment is made and entered into by and between BHPC Marketing, Inc.
("LICENSOR") and I.C. Isaacs Europe, S.L. by name change from Zacari 2000,
S.L. ("LICENSEE") and is dated as of June 3, 1997. This Amendment amends and
modifies that certain International Exclusive License Agreement between
LICENSOR and LICENSEE dated August 15, 1996 (the "Agreement").
(I)
The promises, covenants, agreements and declarations made and set forth
herein are intended to and shall have the same force and effect as if set
forth at length in the body of the Agreement. To the extent that the
provisions of this Amendment are inconsistent with the terms and conditions
of the AGREEMENT, the terms set forth herein shall control.
(II)
1. Effective as of May 1, 1997, the License Agreement Detail Schedule
(Retail Stores) is hereby deleted and the following is hereby inserted:
"4. Renewal Term FROM TO
------------ ---- --
First Renewal Period (if any): January 1, 2000 December 31, 2002
Second Renewal Period (if any): January 1, 2002 December 31, 2004"
2. Paragraph 7(b) of the Agreement is hereby amended by deleting all
references to one-year renewal periods and referring in their place to
the three-year renewal terms provided for in the License Agreement Detail
Schedule as amended above.
3. The Amendment to the Agreement dated April 28, 1997, is no longer in
effect.
(III)
LICENSOR and LICENSEE acknowledge and agree that the Agreement, as amended by
this Amendment, remains in full force and effect and represents the entire
Agreement of the parties with respect to the matters contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Amendment shall take
effect as of the date and year first written above.
LICENSOR: LICENSEE:
BHPC MARKETING, PNC. I. C. ISAACS & CO., L.P.
BY: /s/ DON GARRISON BY: /s/ ROBERT ARNOT
------------------------- -------------------------
Don Garrison Robert Arnot
Director of Licensing Chairman of the Board
DATE: 6/23/97 DATE: 6/24/97
----------------- ------------------
BY: /s/ GERALD LEAR
-------------------------
Gerald Lear
President, C.E.O.
DATE: 6/24/97
------------------
<PAGE>
Exhibit 10.25
AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
This Amendment is made and entered into by and between BHPC Marketing, Inc.
("LICENSOR") and I.C. Isaacs Europe S.L. ("LICENSEE") and is dated as of July
29, 1997. This Amendment amends and modifies that certain Exclusive License
Agreement between LICENSOR and LICENSEE, dated August 15, 1996 (the
"Agreement").
(I)
The promises, covenants, agreements and declarations made and set forth
herein are intended to and shall have the same force and effect as if set
forth at length in the body of the Agreement. To the extent that the
provisions of this Amendment are inconsistent with the terms and conditions
of the Agreement, the terms set forth herein shall control.
(II)
1. The following product category is hereby added to the License Agreement
for wholesale sales and retail stores (Europe) and is effective August 1,
1997 for distribution January 1, 1998.
"Men's dress shirts with neck sizes and sleeve lengths to include
fabrics of 100% cotton and cotton and synthetic mixtures."
(III)
LICENSOR AND LICENSEE acknowledge and agree that the Agreement, as amended by
this Amendment, remains in full force and effect and represents the entire
agreement of the parties with respect to the matters contained herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto agree that this Amendment shall take
effect as of the date and year first written above.
LICENSOR: LICENSEE:
BHPC MARKETING, INC. I.C. ISAACS & CO., L.P.
BY: /s/ Roger Tomlinson BY: /s/ Robert Arnot
---------------------------- ----------------------------
Roger Tomlinson Robert Arnot
Director of Marketing Chairman of the Board
DATE: 7/29/97 DATE: 8/7/97
---------------------- ----------------------
BY: /s/ Gerald W. Lear
----------------------------
Gerald Lear
President, C.E.O.
DATE: 8/7/97
----------------------
<PAGE>
Exhibit 10.26
TRADEMARK LICENSE
AND TECHNICAL ASSISTANCE AGREEMENT
AGREEMENT dated this 1st day of November, 1997, by and between GIRBAUD
DESIGN, INC., ("Licensor") a corporation organized and existing under the
laws of the State of Delaware having its offices at 411 East 50th Street, New
York, New York 10022.
and
I.C. ISAACS AND COMPANY, L.P. ("Licensee"), a limited partnership
organized and existing under the laws of Delaware having its offices at 3840
Bank Street, Baltimore, Maryland 21224-2522 and 350 Fifth Avenue, Suite 1029,
New York 10118. Wurzburg Holding S.A. (the "Trademark Owner"), a Luxembourg
corporation having its offices at 134 Boulevard de la Petrussel-2330,
Luxembourg, joins in this Agreement for purposes of Section 1.3 hereof as a
material inducement for Licensee to enter into this Agreement.
W I T N E S S E T H
WHEREAS, Licensor is the holder of all rights to license certain
trademarks and tradenames hereinafter defined (the "Marks") within the
Territory hereinafter defined (the "Territory") which Marks are known
throughout the world in connection with creative design and products of high
quality in various fields of fashion and accessories; and
WHEREAS, Licensor possesses certain technical know-how and expertise with
respect to the design, manufacture, promotion and marketing of the Products,
as said term is defined hereinafter; and
WHEREAS, Licensor, due to the character of its designers and the quality
of its techniques, has acquired recognition and prestige in the field of
fashion design, and Licensee is desirous of consulting and cooperating with
Licensor in the design and marketing of said Products; and
WHEREAS, Licensee wishes a license to engage in the manufacture,
importation, distribution, and sale of certain products that bear the Marks
and to avail itself of the creative design, know-how and quality control
services of Licensor; and
WHEREAS, Licensee is desirous of securing the design and technical
expertise and quality control services of Licensor in connection with
manufacturing and promoting the Products;
WHEREAS, Licensee has requested, and Licensor has agreed to grant to
Licensee, the right and license to use the Marks upon and subject to the
terms and conditions hereinafter set forth;
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NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and undertakings
hereinafter set forth, the parties have agreed as follows:
1. Grant
1.1 Licensor hereby grants to Licensee, and Licensee hereby accepts, for
the term of this Agreement pursuant to the terms, conditions and covenants
hereinafter set forth, an exclusive license (even against Licensor and its
affiliated entities):
(a) To manufacture and/or cause to be manufactured anywhere in the world
and to import, promote, distribute and sell within the Territory with
exclusivity two of Licensor's collections of clothes: a men's "Jean"
collection and a men's "Casual" collection, including outerwear as further
described in Exhibit C (the "Products") fashioned after archival and newer
designs created by Licensor or an affiliate thereof and designs provided or
recommended by Licensee and approved by Licensor (which approval shall not be
unreasonably withheld), under the terms and conditions hereinafter set forth
and bearing the trademarks set forth in Exhibit A attached hereto (the
"Marks"). Licensee agrees to label the men's Jean collection and the men's
Casual collection differently so that there is some product line
differentiation.
(b) To use and display the Marks within the Territory, but solely in
advertising and promoting the Products within the limits herein set forth, to
the specific exclusion of any use of said Marks in combination with any other
trademarks not approved by Licensor or in any form in connection with any
other products or with Licensee's overall business operation (except for
accurate references to the relationship between Licensor and Licensee and as
required by law) or in Licensee's trade or corporate names, except as may
otherwise be provided herein.
(c) To use the know-how, designs, copyrights, and patents, if any, of
Licensor and its affiliates in connection with the manufacture of the
Products.
1.2 The License herein granted shall only extend to products designed,
manufactured, promoted, advertised and sold according to high standards of
quality and in full compliance with the terms and conditions hereof, so as to
maintain, enhance and protect the image and prestige associated with the
Marks.
1.3 The Trademark Owner hereby represents to Licensee (i) that Licensor
has all necessary rights to grant to Licensee the exclusive license in the
Territory to import, promote, distribute and sell the Products in accordance
with the terms of this Agreement and that Trademark Owner will not, directly
or indirectly, take any action or cause others to take any action
inconsistent therewith, (ii) that Licensor, Trademark Owner or an affiliated
entity has or will secure the rights to authorize Licensee to manufacture
products at least in the countries listed in Exhibit B hereto (the
"Manufacturing Countries"), (iii) that Trademark Owner will take all
reasonable and diligent steps in the Territory and the Manufacturing
Countries to obtain and maintain valid and in effect trademark registrations
for the Marks to cover all the Products, and (iv) that it will fully
cooperate with Licensor and Licensee in implementing the provisions of this
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Agreement which relate to the protection of the Marks, in protecting the
rights of Licensee to use the Marks, and in preventing the importation into
the Territory of Products manufactured by or for other licensees of the Marks
outside of the Territory. Licensee will take reasonable and diligent steps
to ensure that its foreign manufacturers do not, directly or indirectly,
distribute any merchandise branded with the Marks which is manufactured for
Licensee to anyone other than Licensee (and its agents) for distribution in
the Territory.
1.4 Notwithstanding any other provision of this Agreement, Licensor
hereby acknowledges that Licensee manufactures, promotes and distributes
other collections of apparel, including but not limited to the branded BOSS
collections and the Beverly Hills Polo Club collections, and that nothing in
this Agreement is intended to restrict in any way Licensee's ability to
conduct those other businesses as presently conducted or as they may be
expanded in the future in Licensee's regular course of business.
1.5 In connection with the development and implementation of the
licensing relationship between the parties and in order to resolve any
potential issues with respect to the labeling of certain of Licensee's Boss
product lines, Licensee acknowledges that Licensor or its affiliates own the
horizontal, rectangular label shown in Exhibit D hereto as positioned on the
fly of pants. In furtherance thereof, Licensee agrees that, commencing with
garment collections to be shown to the trade at the February 1999 Magic Show
(USA) and thereafter, Licensee will not manufacture or distribute any pants
which have on the fly of the pant a label which bears the horizontal
rectangular shape and size of the label shown in Exhibit D hereto. From and
after February 1999, Licensee may continue to distribute existing inventory
of pants bearing the horizontal, rectangular label shown in Exhibit D until
such inventory is exhausted, and Licensee's customers may likewise continue
to sell products bearing such labels which are in their possession or were on
order prior to February 1999 until such inventory is exhausted.
Notwithstanding anything else in this Agreement, Licensor (for itself and its
affiliates) agrees that it will not object to the use by Licensee (and its
affiliates) of the particular labels and markings to be positioned on the fly
of pants which are shown on Exhibit E attached hereto and others not limited
by color, or size (if larger) or design (if similar).
2. Term and Territory
2.1 The initial term of this Agreement shall commence and become
effective as of the date first written above and shall expire on December 31,
1999 unless sooner terminated as hereinafter provided. Licensor shall
coordinate with the prior Licensee of the Products in the Territory for a
smooth transition so that Licensee has the ability to fill orders for
Products from existing and new customers, without any gap in time, as soon as
the former licensee ceases to ship Products, and Licensor shall as soon as
possible (and not later than 30 days after the date hereof) advise Licensee
of the date in which shipments can commence in accordance with this sentence
(which date shall not be later than May 1, 1998). Licensee shall have the
option to
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renew this Agreement for an additional term of three years commencing on
January 1, 2000 and ending on December 31, 2002.
2.2 The License herein granted shall only extend to the United States of
America (Fifty states and the District of Columbia), Puerto Rico and the U.S.
Virgin Islands, and shall include sales made to all branches of the United
States military for distribution in United States military installations
anywhere (the "Territory").
2.3 Licensee shall promptly refer to Licensor all requests or inquiries
relating to the Products from outside the Territory or from within the
Territory if the request or inquiry concerns the possible sale or delivery
outside the Territory. Likewise, Licensor shall (and shall cause its
affiliates to) promptly refer to Licensee all requests or inquiries relating
to the Products from within the Territory or from outside the Territory if
the request or inquiry concerns the possible sale or delivery inside the
Territory.
2.4 Licensee recognizes and acknowledges that similar products may be
under license to other licensees for areas outside the Territory and that no
Products will be sold, directly or for export, shipped to a destination or
delivered by Licensee outside the Territory. Licensee shall not, directly or
indirectly, market, distribute or sell products outside the Territory and
shall use its reasonable commercial efforts to ensure that products it has
sold or distributed are not resold or redistributed outside the Territory,
nor shall Licensee sell or distribute Products to any person or entity which
it knows, has reason to believe or has been notified by Licensor that such
person or entity has exported or intends to export Products from the
Territory. Licensee shall exercise reasonable commercial efforts to ensure
that products manufactured by or for other licensees of the Marks outside the
Territory are not exported to the Territory in violation of Licensee's
exclusivity under this Agreement.
3. Use of the Trademarks
3.1 Licensee shall have the right, during the term of this Agreement, to
the use of the Marks with respect to and only with respect to the Products
and the Territory as defined herein (and in other parts of the world as it
relates to manufacturing Products bearing the Marks). All Products
manufactured, sold and distributed pursuant to this Agreement shall bear one
or more of the Marks except as hereinafter provided and no such Products
shall be sold or otherwise distributed by Licensee under any trademark other
than one or more of the Marks. Licensee shall not use the Marks on or in
connection with products manufactured from designs not approved pursuant to
this Agreement.
3.2 The license herein granted shall apply only to those Marks included
in Exhibit A and shall not include nor be deemed to include any other
trademarks which Licensor or its affiliates and subsidiaries may now or
hereafter own. Licensor agrees during the term of this Agreement to maintain
and uphold the reputation and goodwill attendant to the Marks and not to take
any action which is likely to adversely affect the public image of the Marks
and the quality of the products sold thereunder.
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3.3 Except as provided herein, Licensee further agrees that it will not
reproduce or use the distinguishing styling features or the patterns provided
by Licensor or an affiliate or subsidiary of Licensor for the manufacture and
sale of Products under any label or trademark other than the Marks or for the
Products. Nothing in this Agreement is intended to preclude Licensee from
utilizing in any of its other product collections, any designs, markings,
garment features, coloring, method of fabrication, materials, construction,
or patterns that are common in the trade or merely functional or utilitarian
in nature.
3.4 Sales by Licensee shall be deemed to have been made by Licensor for
purposes of trademark registration and all uses of the Marks by Licensee
shall be deemed to inure to Licensor's benefit. Licensee will not, at any
time, knowingly do or suffer to be done any act or thing which may, in any
way, adversely affect any rights of Licensor in and to the Marks or any
registration thereof. Licensee further agrees that it shall not sell the
Products as miscuts, seconds, irregulars or as otherwise damaged merchandise
except as otherwise permitted under this Agreement, if it were detrimental in
Licensor's reasonable opinion to the goodwill embodied in the Marks.
3.5 Licensor reserves all rights to the Marks except as specifically
granted herein to Licensee and may exercise such rights at any time.
Licensee acknowledges that Licensor is the sole and rightful owner of all
right, title and interest in the Marks and shall not claim any title to the
Marks nor any right to use said Marks except as provided herein. Licensee
shall not question, attack, contest or otherwise impugn the validity of the
Marks or their registration(s), including, but not limited to, in connection
with any action brought seeking to enforce the terms of this Agreement. The
use of the Marks pursuant to or as specified in this Agreement shall be for
the benefit of Licensor, and shall not vest in Licensee any title to or right
or presumptive right to expand or continue such use. Licensee, for itself
and its affiliated companies, covenants and agrees that it shall, at no time,
adopt or use any trademark, tradename or corporate name which is likely to
cause confusion with any of the Marks except with the prior written consent
of Licensor. The provisions of this Paragraph shall survive the expiration
or earlier termination of this Agreement.
3.6 All Products bearing the Marks shall be manufactured exclusively
from designs and specifications provided by Licensor and its affiliates or
otherwise selected by Licensee from the archives of Licensor and its
affiliates or created by Licensee and submitted to Licensor for approval
under the terms of this Agreement (which approval shall not be unreasonably
withheld). No Products other than those manufactured in strict compliance
therewith shall bear the Marks. Licensee shall use only the Marks indicated
in Exhibit A and only in connection with the Products as defined in Article
1. The license herein granted shall confer unto Licensee no proprietary
rights whatsoever in the name Marithe & Francois Girbaud, the Marks, logos or
the goodwill now attached or hereafter to become attached thereto. Without
Limiting Licensee's ability to conduct its other businesses, Licensee shall
only use the Marks as provided herein and in full compliance with the terms
and conditions hereof and only for the duration of this Agreement.
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3.7 Notwithstanding any other provision of this Agreement, Licensor
acknowledges that Licensee intends to select from existing and archival
designs, fabrics and stylistic features associated with the Marks and the
Products and also to recommend to Licensor modifications, updates, and
desirable additions to those designs and stylistic features associated with
the Marks and products bearing the Marks so as to maintain the image for the
Products, the Marks and the tags, labels and other collateral used with the
Products that is suitable for successful distribution in the Territory at
competitive price ranges. Licensor agrees to consider in good faith and
reasonably all such design and stylistic feature recommendations made by
Licensee and, unless they significantly detract from the goodwill associated
with the marks, to approve the implementation of those recommendations by
Licensee subject to Licensor's right to review and approve samples under this
Agreement. Licensee shall have discretion to select designs and stylistic
features associated with former collections of apparel sold under the Marks
for incorporation into Licensee's Products and shall have no obligation to
accept any designs, fabrics or stylistic features that, in licensee's
reasonable opinion, would not be commercially successful in the Territory or
would be too expensive to manufacture in light of the expected marketability.
3.8 Subject to Section 3.7, the use of the Marks, including the specific
design, artwork or graphics thereof and any tags, wrappers, letterhead,
invoices, stationery or other items incorporating the Marks must be in full
compliance with the Licensor's written policies and procedures, as they are
communicated to Licensee from time to time, and is, in each instance, subject
to the prior written approval of Licensor, which approval shall not be
unreasonably withheld. Licensor can only promulgate policies and procedures
that change the guidelines for use of the Marks prospectively and not with
respect to any Products already approved by Licensor or for Product
collections which have been designed. The Marks may only be used by Licensee
as part of an approved label and may only be used in their entirety.
Licensee shall not alter or modify the Marks in any manner whatsoever nor
shall Licensee add to, remove or abbreviate any part or distinctive feature
thereof including script, graphics, colors or logos.
3.9 Licensee shall cooperate fully and in good faith with Licensor for
the purpose of securing, preserving and protecting Licensor's rights in and
to the Marks in the Territory and the Manufacturing Countries. Without
limiting the rights of Licensee under this Agreement, Licensee shall execute,
deliver and/or file any and all documents which Licensor reasonably requests
to make fully effective or to implement the provisions of this Agreement
relating to the ownership or registration of the Marks in the Territory and
Manufacturing Countries. All costs and expenses for any application for
registration or extension of registration with respect to the Products within
the Territory and Manufacturing Countries shall be borne by Licensor.
3.10 Licensee will use the Marks in the Territory strictly in compliance
with the legal requirements obtaining therein. Whenever any of the Marks is
used on any Product or item of packaging or labeling or in any advertisement
or other promotion material, it must be followed, in the case of a registered
trademark by the registration symbol, i.e. -Registered Trademark-, and in the
case of all other trademarks by the symbol -TM-, or other appropriate symbols
of similar import acceptable to Licensor. Licensee shall duly display all
other notices with respect to the Marks on the Products
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and otherwise as are or may be required by the trademark laws and regulations
applicable within the Territory or any portion thereof.
3.11 Any copyright, design patent or any similar industrial or
intellectual property right which exist or may be created in any sketch,
design, sample, print, package, label, tag or the like used uniquely in
connection with the Products shall be the property of Licensor, and if not
created by Licensor they shall be deemed works made by Licensee for hire for
Licensor. Licensee shall place a copyright notice whenever required by
Licensor to protect said copyrights. Licensee shall not knowingly, at any
time, do or cause to be done any act or thing which may adversely affect any
rights of Licensor in such sketches, designs, samples, prints, packages,
labels, tags and the like and will do at Licensor's cost all things
reasonably required by Licensor to preserve and protect said rights. Nothing
herein is intended to preclude Licensee from utilizing in any of its other
product collections, any designs, markings, garment features, coloring,
method of fabrication, materials, construction, or patterns that are not
uniquely associated with Licensor's products or which are otherwise common in
the trade or merely functional in nature, and Licensee shall not assign any
rights thereof to Licensor. Licensee does not warrant that any proprietary
rights will exist in any designs or other materials created by or for it in
connection with the Products.
4. Provision left blank intentionally.
5. Royalties
5.1 Subject to the provisions of Section 1.4 above, Licensee agrees to
exercise its best efforts to promote and maximize sales of the Products
throughout the Territory. Licensee shall conduct its activities pursuant to
this Agreement so as to enhance the goodwill and reputation of the Marks and
shall not engage in conduct known to be detrimental to the same.
5.2 In consideration of the rights granted to Licensee pursuant to this
Agreement, Licensee shall pay to the Licensor for each Calendar Year during
the Term, or any portion thereof, Royalties in an amount of 6.25% of all Net
Sales (the "Royalties"). The Royalties for close-out sales under Section 5.9
and irregulars shall be 3.0% of Net Sales of the close-out Products. In no
event shall the amount of Royalties (including close-out Royalties) due and
payable for any Calendar Year be less than the minimum amount ("Minimum
Royalties") set forth for each Calendar Year as follows:
Minimum 1998 $1,200,000
1999 $1,500,000
2000 $2,000,000
2001 $2,500,000
2002 $3,000,000
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The term "Calendar Year" shall mean January 1 through December 31 of each
year of the term. For purposes of paying Royalties, the first Calendar Year
of this Agreement commences on January 1, 1998.
5.3 The term "Net Sales" shall mean the invoiced price (excluding sales
tax, insurance and shipping charges) for Products shipped or sold by Licensee
or any of its subsidiaries or affiliates, or authorized sub-licensees, during
the relevant period, less credits granted for Products actually returned and
accepted, and reasonable customary and usual trade discounts and mark-downs
actually granted to non-affiliated customers and an allowance for bad debt.
Bad debt shall consist of any accounts receivable of a customer who is under
a bankruptcy or insolvency proceeding, or which is otherwise uncollected
despite Licensee's collection efforts for at least 120 days after the due
date, and shall be considered a reduction of the invoiced price for Products
only up to an aggregate amount of 1.5% of Net Sales during each Calendar Year
of the term and any renewal of this Agreement. For purposes of calculating
royalties due for any sale, transfer or other distribution of Products made
otherwise than at arm's length, the "Net Sales" price of such Products shall
be deemed to be the "Net Sales" price of a corresponding sale to unaffiliated
independent retailers. The royalties herein provided shall be due and paid on
sales of any and all Products bearing the Marks by Licensee or its
affiliates. Except as may be otherwise provided herein, no deduction shall
be made for any discount, mark-down, advertising allowance, other allowances
of any kind or for any purpose whatsoever or costs incurred by Licensee.
Royalties shall not be due to Licensor on products sold by Licensee to
Licensor under this Agreement.
5.4 In the event that Licensee sells Products in a currency or
currencies other than United States dollars, the "Net Sales" price, with
respect to such sales, shall be computed on the basis of the average exchange
rates of said currency or currencies into U.S. dollars, as of the close of
business on the last day of each of the three months of each applicable
calendar quarter as published in The Wall Street Journal.
5.5 The Minimum Royalties shall be paid in equal monthly payments on the
last day of each calendar month during the term. Payments for the initial
term will start on January 31, 1998, and there will be equal monthly payments
of $100,000 each, with the last payment for 1998 due on December 31, 1998.
For all other Calendar Years, there will be 12 equal monthly payments each in
the amount of 1/12 of the Minimum Royalties payable for that Calendar Year as
stated above. Actual Royalties shall be paid quarterly within thirty (30)
days of the last day of each calendar quarter with respect to sales of
Products during said calendar quarter. Within 30 days of the end of a
calendar quarter commencing in Calendar Year 1998, Licensee will calculate
actual Royalties owed to Licensor based on actual Net Sales of Products
during the preceding calendar quarter and shall by the 30th day following the
end of the quarter remit to Licensor the difference between the total
Royalties paid during the calendar quarter as Minimum Royalties and the
actual Royalties due for that quarter. If the Minimum Royalties are greater
than the actual Royalties due in any quarter, then Licensee shall not owe
Licensor any further payments for that calendar quarter. There will be no
deductions or set offs from any payments whatsoever, unless agreed to by the
parties.
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5.6 Licensee shall, within thirty (30) days of the end of each calendar
quarter and within ninety (90) days of the end of each Calendar Year during
the term hereof, provide Licensor with a certified statement of sales of the
Products during the immediately preceding calendar quarter or Calendar Year,
as the case may be. Said statement shall be signed by a duly authorized
officer of the Licensee and be certified by said officer as true and
accurate. Said statement shall conform to a format agreed upon between the
parties and, at the option of Licensor, be subdivided by Product.
5.7 All royalties payable hereunder shall be paid directly to a bank
designated by Licensor, in writing, as depositary (the "Depositary").
5.8 Late payments of royalties shall bear interest at the Citibank,
N.A., New York prime rate plus 3% per annum, but, in no event shall exceed
the maximum rate permitted under applicable law.
5.9 For the purpose of this Agreement, close-outs are defined as
Products sold at a reduction of twenty (20%) percent or greater from
Licensee's regular full list price of such Products and Licensee acknowledges
that the excessive or indiscriminate disposal of close-outs may adversely
affect the prestige attached to the Marks. Licensee shall therefore exercise
its reasonable efforts to plan and conduct its manufacturing and sales
operations with a view to limiting the quantity of close-outs and to
disposing of all Products through normal channels of distribution and
otherwise only through stores specialized in high quality close-outs,
including outlets, such as Ross Stores, T.J. Maxx, Filene's Basement, and the
like, that offer for sale other similar designer labels. All sales of
close-outs shall comply with the terms specified herein.
5.10 Only genuine end-of-season close-outs may be sold under the label,
or with any reference to the Marks. No close-outs shall be shipped until at
least ninety (90) days shall have elapsed from the date of the first
substantial delivery by Licensee of a season's collection of which it is a
part.
5.11 For purposes of calculating Royalties, the Net Sales price of such
authorized close-out sales shall be based on the actual reduced Net Sales
price for said Products. On excessive close-out sales (which shall be
defined as close out sales equivalent to more than 30% of Net Sales for the
first Calendar Year of this Agreement and to more than 10% for any subsequent
Calendar Year of this Agreement), the royalties shall be computed at the
normal Net Sales price as applied to the initial standard (i.e.
non-close-out) selling price of the Product. Within sixty (60) days of the
close of each calendar quarter and within ninety (90) days of the close of
each Calendar Year, Licensee shall furnish to Licensor a statement setting
forth the amount of total regular sales and total close-out sales. At the
option of Licensor, said statement shall be subdivided by Product class.
5.12 Receipt or acceptance by Licensor of any royalty payments due
hereunder, in an amount or amounts which are less than amount or amounts due,
shall not constitute a waiver of Licensor's rights in or to the balance
thereof which shall remain due and payable pursuant to the
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terms of this Agreement. Any excess Royalties paid by Licensee to Licensor
hereunder during any Calendar Year which were paid in error shall be counted
as a credit against future Royalties due to Licensor.
5.13 Licensee shall provide Licensor for each calendar quarter within
forty-five (45) days of the end of the preceding calendar quarter, reports
setting forth in reasonable detail sales by U.S. dollars and unit shipments
with respect to each product collection and models in each product
collection, aggregate sales to regular price customers, off-price customers,
large retailers, specialty retailers and sales by significant geographic
segments. Such report shall be in accordance with Licensee's current
reporting capabilities and format.
6. Designs and Technical Assistance
6.1 Licensor shall provide Licensee with recommendations for a full and
varied collection of Products (as a "collection" is customarily defined in
the trade) for each of the four seasons (fall, winter, spring, summer) that
Licensor in consultation with Licensee and subject to Section 3.7 above,
shall deem appropriate for sale in the Territory. Licensor shall develop
each seasonal collection in a timely manner so that Licensee shall have
sufficient time to produce the Products but in any event in accordance with
the following minimum lead times:
Collection Delivery Date by Licensor
Fall August 15
Winter November 15
Spring February 15
Summer May 15
6.2 The recommended collection will contain a basic core offering of
jeans and shirts in addition to a casual informal sportswear line of tops,
bottoms and outerwear pieces designed to be worn separately or collectively.
Licensor will be conscious in its design and selection of the Products for
the Territory as to the cost and commercial availability of the raw
materials, the degree and sophistication of the construction, the cost of
manufacturing, and the current fashion trends in vogue with the target
customers in the Territory. The final collections shall be determined by
Licensor and Licensee in close consultation with each other, with the final
approval authority residing in Licensor who shall act in good faith in
considering Licensee's garment proposals and Licensee's concern's with any
designs or features proposed by Licensor.
6.3 Subject to the rights of Licensee under Section 3.7, Licensor shall
make available to Licensee in New York, on a basis sufficiently timely to
meet scheduled deliveries to customers as stated in section 6.1 above, such
samples, patterns, sketches, photographs, technical specifications and other
materials and information relating to the design and manufacture of the
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Products (all such materials and information are hereinafter referred to as
"Technical Information") as they may create in the normal course of their
operations and as may be reasonably necessary to enable Licensee to carry out
its obligations under this Agreement. Without limiting the generality of the
foregoing, the Technical Information will include the basic cuttings for the
collections, the patterns for each model, a sample of each model in base
size, technical specifications concerning the making and fitting of each
model and information concerning the selection, fabrication and treatment of
materials and fabrics (including the names and references of the
manufacturers) and supplies and accessories (labels, designs, etc.). If
Technical Information, including finished samples, is shown to any third
person with or without the prior written consent of Licensor, Licensee shall
take any and all action necessary to ensure that such third person fully
conforms to all applicable terms and conditions hereof, specifically to avoid
any unauthorized use of the Technical Information. All such Technical
Information shall remain the sole property of Licensor and Licensee shall
have no ownership interest therein subject to the second sentence of Section
3.3 above. Upon the expiration or earlier termination of this Agreement, all
Technical Information in the possession or under the control of Licensee
shall be immediately returned to Licensor. In order to reimburse Licensor
for its costs, and not as a purchase price or with any transfer of ownership,
Licensee shall pay to Licensor an amount equal to two and one half (2.5)
times the ordinary wholesale price for any samples so ordered, F.O.B. place
of shipment, plus shipping costs and duties, of all samples furnished to
Licensee hereunder. Such amounts shall be paid within thirty (30) days of
delivery. Licensor shall not request that Licensee that Licensee make any
material changes or modifications to product designs approved by Licensor
under this Agreement and any such changes shall be prospective only.
6.4 Licensor must keep a current archive of products previously offered
under the Marks in an accessible location in the New York Metropolitan area.
Licensor will maintain in the New York Metropolitan area at least one
representatives of Licensor with authority to act for Licensor under this
Agreement and to facilitate consultation between Licensor and Licensee. Any
archive piece borrowed by Licensee from Licensor shall be logged by Licensor
and must be returned within three (3) months. Licensee acknowledges that the
failure to return any archive piece within the required time shall be
detrimental to Licensor, the Marks and the Products and may subject Licensee
to liability for damages to Licensor. Licensee may remove small pieces of
fabric from archival pieces for the purpose of sourcing the fabric necessary
to manufacture the Products.
6.5 Prior to manufacturing, selling or distributing any Products in any
seasonal collection, Licensee shall make available for inspection in New York by
Licensor CAD (computer aided design) samples (with proposed colors and fabrics)
of each Product in any proposed seasonal collection sufficiently far in advance
of first manufacture to permit Licensee to make any changes requested by
Licensor. Licensee shall notify Licensor of the date on which samples are made
available and of the scheduled first production date. Licensor shall inspect
said samples and either approve or reject the same, in writing, no later than
five (5) days after the inspection date. Any sample not rejected in a timely
fashion shall be deemed approved. Once a
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sample has been approved, Licensee shall not make any material changes (and
Licensor shall not require any changes) to the design thereof, including
materials, fabrics, colors and quality of workmanship, without Licensor's
prior written approval. All samples of Products submitted to Licensor
pursuant to this Paragraph 6.5 shall be provided at Licensee's sole cost and
expense. As an alternative to the process described herein, Licensee shall
provide to Licensor a calendar of product development, prototyping and
manufacture similar to that which Licensee follows in connection with its
BOSS product lines, and Licensor shall have the right to review and comment
on the Products in New York as they go through development at such points in
the development process noted on the calendar as Licensor deems appropriate,
provided that Licensor must do so while there is sufficient time for Licensee
to make changes requested by Licensor. No Products shall be displayed,
manufactured, distributed (including offerings for samples) and/or sold by
Licensor unless such Products are at least equal in quality, workmanship, fit
and design to the samples previously approved by Licensor in accordance with
this Paragraph 6.5, all materials used shall conform to the specifications
indicated in the Technical Information concerning each Product approved by
Licensor.
6.6 In order to control the production and quality of manufacturing,
Licensor may, at its option, send one (1) representative to Licensee's
facilities, five (5) times a year, (corresponding to the five fashion
seasons). Licensor shall be responsible for the cost of business class
round-trip air fare for such visits from Europe to the United States and for
all lodging and food expenses related to such visits. The Licensee may, at
its option and at its cost, send technicians to Licensor's facilities, in
order to obtain any information necessary to the realization of the
collection (but without prejudice to Licensor's obligation to provide any
necessary Technical Information in New York). Such visit shall be at a date
to be agreed upon by both parties, on or before the delivery of each
collection. Nothing in this Section shall grant Licensor the right to
inspect or visit any portion of any facility where Licensee conducts its
other lines of business.
6.7 Licensee agrees that it shall treat all non-public information
relating to the design, manufacture, marketing and sale of the Products as
Proprietary Information. No Proprietary Information other than manufacturing
specifications and finished samples, shall be shown to any third party
without the prior consent of Licensor. Licensee shall use its reasonable
efforts to ensure that its employees, agents, subcontractors (if any) and
others subject, directly or indirectly, to its control, do not disclose or
make any unauthorized use of any Technical Information. Likewise, Licensor
shall treat all non-public information relating to the manufacture, sourcing,
marketing, forecasts and sale of the Products by Licensee and its agents as
Proprietary Information of Licensee. No Proprietary Information shall be
disclosed to any third party or used for any purpose not related to this
Agreement by Licensee or its agents.
6.8 Subject to the other provisions of this Agreement, any Designs and
other materials provided or approved by Licensor for use under this Agreement
shall remain the property of Licensor and are licensed hereunder solely and
exclusively for use in connection with the manufacture and sale of the
Products in the Territory. Licensor may use and permit others to use
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said Designs and other material in any manner they desire, provided that such
use does not conflict with any rights granted to Licensee hereunder.
Licensee specifically acknowledges that such Designs and other materials may
be used by Licensor and other licensees on the Products in jurisdictions
outside the Territory and on products other than Products anywhere in the
world.
6.9 Licensee shall take all reasonable precautions to protect the
secrecy of the materials, samples, designs and Technical Information
described in this Article 6 prior to their commercial distribution or the
showing of samples for sale.
6.10 (a) In order to maintain the distinctiveness of the image, quality
and special characteristics of the Products, Licensor may recommend, but not
require, that Licensee use fabrics and yarns produced by manufacturers
specified by Licensor, so long as the quality of products and price and
reasonable delivery terms shall be equivalent to those offered by other
manufacturers. When Licensee elects to deal with such manufacturers, it shall
also use its reasonable commercial efforts to maintain a good commercial
relationship with these manufacturers. In this regard, Licensee undertakes,
except in the case of defective, low quality or untimely goods, not to make
any changes or cancellations of orders of such fabrics and yarns contrary to
commercial usage.
(b) Certain collections of Products or certain particular Products
are and may in the future be fabricated in special fabrics and yarns,
developed by Licensor. These fabrics and yarns carry with them a particular
name and are or will be protected by the registration of a mark or
fabrication patent. These fabrics or yarns constitute an essential and
distinctive element of such Products and it is thereby necessary, to protect
the originality and technical components of such fabrics and yarns, to
license a very limited number of manufacturers with the right to use the
technical components and the know-how to produce these fabrics. Licensee
shall consequently deal with certain manufacturers designated by Licensor in
order to manufacture such Products. A copy of orders placed by Licensee with
such manufacturers shall be sent at the same time to Licensor. Licensee
shall be entitled to quality of products and price and delivery terms from
such manufacturers equivalent to those given to other licensees of Licensor
outside the Territory. Licensee undertakes, except in the case of defective,
poor quality or late delivery of goods, to maintain a good commercial
relationship with these manufacturers and not to make any changes or
cancellations of orders of such fabrics and yarns contrary to commercial
usage.
7. Manufacture and Technical Data
7.1 Licensor shall consult with Licensee regarding the manufacturing
process, methods of production, treatment, fabrics and technical
specifications necessary for the production of high quality products from
designs approved by Licensor. All such information shall be strictly
confidential and shall not be disclosed by Licensee nor its agents and/or
employees without the prior written consent of Licensor.
7.2 The Products shall not be manufactured by anyone other than Licensee
and/or quality manufacturers chosen by Licensee. Licensee shall take
reasonable and diligent steps
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necessary to ensure that such manufacturer fully conforms to all applicable
terms and conditions hereof, that said manufacturer produces only those
Products specifically ordered by Licensee and in the quantities ordered
without over-runs or extra labels, and, that said manufacturer controls the
manufacture and production to avoid any possible use that might be
detrimental to the Marks, or unauthorized use of the Technical Information.
7.3 Licensor reserves the right to require Licensee to terminate a
manufacturer whose workmanship has suffered, in the reasonable opinion of
Licensor, a deterioration in quality which is not satisfactorily corrected
within thirty (30) days after notice thereof to Licensee, or any manufacturer
who, in Licensor's reasonable opinion fails to comply with any provision
hereof or whose conduct, if committed by Licensee, would constitute a breach
of this Agreement, provided that Licensor must make a reasonable allowance
for completion of current orders by the manufacturer.
7.4 No disapproved or otherwise defective Products shall be sold by
Licensee under or with any reference whatsoever to the Marks if it were
detrimental to the Marks. Should any Products manufactured and sold by
Licensee be defective, in the sole opinion of Licensor, Licensee shall, at
its sole cost and expense, take any and all reasonable action necessary to
withdraw and remove said Products from the market through repurchase or
otherwise.
8 Advertising and Promotion
8.1 Throughout the duration of this Agreement, Licensee shall spend upon
advertising of the Products throughout the Territory an annual minimum of
three percent (3%) of Net Sales but no less than $500,000 per year, except
that for the time between the effective date and December 31, 1998, the
minimum advertising expense shall be only $350,000 (the "Minimum Advertising
Expense"). This Minimum Advertising Expense is an independent obligation, and
amounts spent on advertising Licensee shall not be deducted from Royalties
nor from any other amounts due and owing from Licensee to Licensor under this
Agreement.
8.2 Advertising expenses shall be defined as direct expenses for
promotions such as television, radio, printed press and billboards
advertising, celebrity endorsements, event sponsorships, in store point of
sale items, store promotions, and new shop in shop fixturing, at the
exclusion of any other expenses, except that the participation in trade shows
described in Article 10 below shall be included in the Minimum Advertising
Expenses.
8.3 Licensee shall exercise every reasonable effort to promote and
advertise the Products throughout the Territory and shall, prior to the end
of each calendar year, submit to Licensor, in reasonable detail, proposed
plans and budgets for the subsequent annual promotional campaign. Licensor
shall cooperate, as may reasonably be required by Licensee, in furnishing, at
cost, such advertising and promotional material, as is available to Licensor
and which appears suitable, in Licensor's opinion, for the Territory.
Licensor and Licensee shall cooperate closely in the creation and execution
of advertising programs.
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8.4 Licensee shall submit to Licensor for review, prior to submission to
the advertising agency, any campaign briefing materials, and shall consult
with Licensor before accepting any creative response to such briefing
materials. Visual representation of Products and of the Trademarks shall be
subject to written approval by Licensor (which shall not be unreasonably
withheld) prior to public distribution or display in any medium provided,
however, that any advertising or promotional materials supplied by Licensor
will not require its approval prior to dissemination by Licensee. Except as
otherwise provided in this Agreement, all advertising campaigns in the
Territory shall correspond to the international advertising theme and image
worldwide. Licensor will make available to Licensee all advertising
campaigns produced worldwide. The Licensee shall cause its advertising staff
and/or agency to consult with Licensor's designated advertising agency and/or
creative staff, at least twice a year, for a review of Product image and with
a view toward coordinating and enhancing worldwide advertising strategy.
Approved advertising and promotional materials shall not be disapproved by
Licensor for use within the same campaign.
8.5 Licensee shall submit to Licensor, for its prior approval, not to be
unreasonable withheld, any and all advertising for any medium referring to
the Products before publication or dissemination thereof. Should Licensor
deem said materials appropriate for use outside the Territory, it shall have
the right to use the same, provided, however, any additional costs incurred
thereby, if any, for advertising agency fees, talent, residuals, copyright
clearances, photographers fees, or otherwise shall be paid and secured by
Licensor.
8.6 Licensee shall, on January 31st of each year commencing January 31,
1999, inform Licensor of its expenditures in fulfillment of its advertising
and promotional obligations during the preceding year and shall account to
Licensor for the use thereof.
8.7 Failure on the part of Licensee to make the Minimum Advertising
Expenses required hereunder during any contract year shall constitute a
material breach hereof. Notwithstanding, Licensor may, at its sole
discretion, permit Licensee to cure such breach by either paying to Licensor
the amount by which the actual expenses fell short of the Minimum required
or, by allowing Licensee to increase its advertising obligations for the
immediately subsequent year by an amount equal to the deficiency.
8.8 Notwithstanding any other provision of this Agreement, Licensor
acknowledges and agrees that Licensee may primarily focus its advertising and
promotion of the Products on the Girbaud brand and is not required (i) to
implement or follow as its primary campaign for the Products in the Territory
the "BE" theme adopted by Licensor in other geographic areas, or (ii) to
apply the word "BE" to the Products themselves by either temporary or
permanently affixed means.
8.9 Licensor shall arrange. at Licensee's request, the participation of
one or both of the designers - Marithe and Francois Girbaud - when available,
in certain social events. Such participation shall be at Licensee's expense
with first class hotels and restaurants and first class air travel and local
transportation.
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9. Sales
9.1 Licensee shall keep Licensor fully and promptly informed of all its
successive price lists and sales policies relating to the Products which
information shall be kept by Licensor in strict confidence and not be used
for any purpose not relating to this Agreement. Licensee hereby acknowledges
that repeated untimely deliveries by Licensee to its customers (except for
force majeure) and/or the delivery, distribution and sale of defective
Products would adversely affect the reputation of the Licensor and the
prestige of the Marks and shall constitute a material breach of this
Agreement.
9.2 All Products manufactured, distributed or sold by Licensee shall be
marked, labeled, packaged, advertised, distributed and sold in accordance
with the terms and conditions of this Agreement and in accordance with all
laws, rules and regulations applicable within the Territory and any
subdivision thereof and, in such a manner as to not mislead or deceive the
public.
10. Trade Shows
10.1 Licensee shall participate in and contribute to the costs and
expenses of two (2) annual fashion shows in the Territory ("the Fashion
Shows"). Licensee shall, within ten (10) business days of receipt of the
invoice pay to Licensor an amount of $75,000 twice per Calendar Year provided
that Licensor actually implements the Fashion Shows. Licensee's obligation
to participate in the Fashion Shows by paying the amounts indicated above
shall be an independent obligation and no sums incurred by Licensee under
this provision shall be deducted from Royalties payable to Licensor, nor from
any other amounts due and owing from Licensee to Licensor under the terms of
this Agreement (except that they will count under Section 8.2 above).
10.2 Licensee may participate, at its discretion, in other major trade
shows, which participation shall be at its sole cost and expense. Any
expenditures so incurred shall be considered advertising expenses pursuant to
Section 8.2 hereof. Should Licensor organize cooperative exhibitions at such
other trade shows in the Territory with its licensees, Licensee shall
participate in such shows and shall share in the cost and expense thereof in
an amount representing its pro rata cost and expense, which amount shall be
agreed upon prior to the event.
11. Access to Books and Records
11.1 Licensee shall, at its sole cost and expense, maintain complete and
accurate sets of books and records (including the originals or copies of
documents supporting entries herein) covering all transactions arising out
of, in connection with or relating to this Agreement.
11.2. Licensor and/or its duly authorized representatives shall have
the right (subject to confidentiality obligations reasonably acceptable to
Licensee) upon five (5) days prior written notice, to examine and audit said
books, records and all other documents in Licensee's possession
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or under Licensee's control relating to the subject matter of and terms of
this Agreement. Said right shall be exercisable during normal business hours
once each Calendar Year during the term hereof and, once a year during the
three Calendar Years immediately following the expiration or earlier
termination hereof. All said books, records and documents shall be kept and
made accessible during the full term hereof and for three years thereafter.
11.3 Any auditor designated by Licensor to audit and examine Licensee's
books, records and documents, shall be approved in advance by Licensee, such
approval not to be unreasonably withheld. In the event that an audit or
examination of Licensee's books, records and documents reveals an
underpayment of any Royalties due hereunder, Licensee shall immediately pay
to Licensor the amount of such deficiency, plus interest thereon from the
date said Royalties were due at the interest sale rate specified in Paragraph
5.8 hereof.
11.4 In the event that an audit of Licensee's books and records shall
reveal that Licensee's Royalties were underpaid by an amount equal to 5% or
more in any year, Licensee shall bear the cost of said audit.
12. Protection of the Marks
12.1 Licensor represents that the Marks are and shall be during the term
of this Agreement valid and enforceable trademarks in the Territory and the
Manufacturing Countries; that they are owned by Licensor or that Licensor is
authorized and empowered by the registered owner to grant the License herein
contained and that this Agreement does not conflict to any other Agreement to
which Licensor is a party, that the use of the Marks in the Territory will
not infringe upon any other trademark in the Territory and that the Licensor
will defend, indemnify and hold harmless Licensee against any claim against
Licensee (including by its manufacturers and customers) in connection with
the use of the Marks and any damages paid in settlement or as part of a
judgment in such claim (including attorney's fees and costs).
12.2 Licensee shall promptly notify Licensor, in writing, of any
infringement, threatened infringement, or otherwise unauthorized use or
threatened use of the Marks, or confusingly similar trademarks or tradenames,
whether in connection with the Products or otherwise, of which it may have
knowledge or suspicion. In the event of an infringement, threatened
infringement, or otherwise unauthorized use of the Marks, or confusingly
similar trademarks or tradenames in the Territory or Manufacturing Countries,
Licensee shall take such immediate action as may reasonably be necessary to
protect the Mark(s) and the rights of the Licensor therein, until Licensor is
in a position to take whatever action is required (provided that Licensor
must act diligently and promptly). Licensor and Licensee shall mutually
decide what actions shall be taken, including any actions in collaboration
with investigators or U.S. Customs, cease and desist correspondence, and
application for injunctive relief, and shall designate counsel for such
purpose, and, in such case, Licensee shall pay one half of the cost and
expense incurred in such actions in the Territory or Manufacturing Countries,
up to and including an amount equal to 0.25% of Net Sales, payable for each
year during which any such actions are taken, brought and/or pending, within
thirty (30) days of receipt of the documented invoice. Licensor warrants
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payment of the balance by Licensor. In the event of an award of monetary
damages, the proceeds thereof shall be shared pro rata to the expenses paid
by the parties. Licensee shall abide by regulations, laws and practices
applicable to the Products in force or use in the Territory in order to
safeguard Licensor's rights to the Marks.
12.3 Licensee shall cooperate with Licensor in any action based upon the
unauthorized manufacture, sale and/or use in the Territory or outside the
Territory by any of Licensee's manufacturers and suppliers of Products,
labels and tags bearing the Mark at Licensee's cost (but without further
liability from Licensee to Licensor provided that Licensee has met its
obligations under this Agreement).
12.4 Upon the expiration or earlier termination of this Agreement,
Licensee shall immediately and absolutely cease and discontinue the use of
the Marks in any manner or form whatsoever subject, however, to the
provisions of Article 14 hereof.
13. Termination
13.1 In the event of a breach of a payment obligation by Licensee under
this Agreement not cured in all material respects within ten (10) days from
the receipt of a written notice thereof, or in the event of any other breach
of this Agreement by Licensee not cured in all material respects within
forty-five (45) days from the date of receipt of written notice thereof, this
Agreement may be terminated by the Licensor. The exercise or failure to
exercise the aforementioned right of termination during an extended period of
time shall not be considered a waiver by Licensor of any right to terminate
this Agreement nor of any other legal or equitable rights and remedies. A
good faith payment dispute shall not deemed a breach of this Agreement by
Licensee. In the event of a breach of this Agreement by Licensor not cured in
all material respects within forty-five (45) days from the date of receipt of
written notice thereof, this Agreement may be terminated by the Licensee.
The exercise or failure to exercise the aforementioned right of termination
during an extended period of time shall not be considered a waiver by
Licensee of any right to terminate this Agreement nor of any other legal or
equitable rights and remedies.
13.2 This Agreement shall immediately terminate and, Licensor shall be
relieved of all liability to Licensee, if Licensee: (i) admits in writing its
inability, or is unable, to pay its debts as they mature, (ii) makes a
general assignment for the benefit of creditors, (iii) is adjudicated a
bankrupt or files a petition or answer, seeking reorganization or an
arrangement with creditors, (iv) files a petition or otherwise avails itself
of any bankruptcy or insolvency law or statute of any country or any state or
subdivision thereof, now or hereafter in effect, (v) suffers a petition or
proceeding filed against it under any provision of the Bankruptcy Act or any
other insolvency law or statute of any country or any state or subdivision
thereof, which petition or proceeding is not dismissed within sixty (60) days
after the commencement thereof, (vi) has a receiver, trustee, custodian,
conservator or other person appointed by any court to take charge of its
affairs or assets or business and such appointment is not vacated or
discharged within sixty (60) days
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thereafter, or (vii) discontinues its business as it relates to the Products
or suspends it, for whatever cause, for more than 120 consecutive days.
14. Remaining Inventory
14.1 Upon the expiration or earlier termination of this Agreement, for
any reason whatsoever, Licensee shall, within thirty (30) days thereof,
deliver to Licensor a complete and accurate schedule of Licensee's inventory
of Products, work in progress and raw materials. Such schedule shall be
prepared as of the close of business on the date of such termination.
14.2 Licensor shall thereupon have the option, exercisable by written
notice delivered to Licensee within thirty (30) days of receipt of the
schedule of inventory, to purchase any or all of the inventory for an amount
equal to Licensee's actual cost, F.O.B. factory or LDP with freight
warehouse, as defined according to Generally Accepted Accounting Principles
of the United States. Should Licensor send such notice, Licensee will ship to
Licensor all of the inventory specified therein, within thirty (30) days of
receipt thereof for inventory located in Licensee's facilities, or, for all
other inventory, promptly thereafter but no more than forty-five (45) days
thereafter. Licensor shall pay Licensee for such inventory within thirty
(30) days of receipt.
14.3 In the event that Licensor elects not to exercise its option to
purchase the remaining inventory, Licensee shall have a period of six (6)
months from the effective date of termination to complete work in progress
and to sell and deliver to other purchasers its remaining inventory under
Licensor's Marks on a non-exclusive basis. Licensee will make its reasonable
effort to sell only to the previous season's customers and to sell only at
regular prices. Royalties on said sales shall be due on the 30th day
following the sale thereof.
14.4 The right provided immediately above shall only apply to the
remaining inventory of Products as are in good saleable condition. Licensee
shall not commence the manufacture of Products during said period and, at the
end of such six (6) month period, shall not sell any of its then remaining
inventory, unless completely debranded by the removal of all labels, tags,
lining, embroidery which identifies the Mark(s).
14.5 If termination is due to the uncured defective quality of the
Products manufactured, imported, sold or distributed by Licensee or the
unauthorized use of Licensor's Marks by Licensee, Licensee shall be deemed to
have waived the provisions of this Article 14 and shall not sell or
distribute any remaining inventory, whatsoever, unless completely debranded.
14.6 All imprints, lettering, stationery, tags, labels, packaging,
lining, embroidery or other reproductions of or reference to the Marks shall
be removed from all inventory remaining after such six (6) month period and
shall be immediately returned to Licensor at no charge or shall be destroyed
together with such remaining inventory which cannot be debranded. Either
operation shall be conducted under the control of Licensor. In the event
that Licensee shall be deemed to have waived the six (6) month inventory
liquidation period, as provided in Paragraph
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14.3 above, the provisions of this Paragraph 14.6 shall be applicable
immediately upon receipt of the Notice of Termination.
14.7 Upon the expiration or earlier termination of this Agreement, for
any reason whatsoever, all rights of Licensee under this Agreement shall
terminate forthwith and all Royalties on sales theretofore made shall become
immediately due and payable. Licensee shall, subject to the provisions of
Paragraph 14.3, immediately discontinue all use of the Marks, any imitation
or simulation thereof or any Marks similar thereto (subject to the second
sentence of section 3.7 above) and shall promptly transfer to Licensor, at
cost, all registrations, filings, and rights with regard to the Marks it may
have had.
14.8 Upon the expiration or earlier termination of this Agreement,
Licensee shall deliver to Licensor, freight and insurance charges at
Licensee's expense unless Licensor's default or its notice of non-renewal has
caused such termination, all technical information, fabric production
information, patterns, markers (provided that markers and graded patterns,
with respect to which Licensee has not recovered the value thereof, shall be
purchased from Licensee by Licensor at original invoice cost), sketches,
designs, colors and the like in its possession or control, designed or
approved by Licensor, and, at cost, all samples, labels, tags, packaging
material, business supplies and advertising and promotional materials bearing
the Marks in Licensee's possession or control.
15. Force Majeure
(a) Neither party shall be responsible for any delay or failure in
performance of any part of this Agreement to the extent that such delay or
failure is caused by fire, flood, explosion, war, embargo, labor problems,
shortage, government requirement, civil or military authority, act of God,
act or omission of carriers or other similar causes beyond its control. If
any such event of force majeure occurs, the party delayed or unable to
perform shall give immediate notice to the other party, and shall resume
performance once the condition ceases with an option in the affected party to
extend the period of this Agreement up to the length of time the condition
endured. During the event of force majeure the parties shall consult with
each other regarding efforts to mitigate the force majeure and continue
performance hereunder.
(b) Licensor shall have the right to terminate this Agreement in whole
or as to a portion thereof without further liability by Licensee.
(i) In the event that the sales operations of Licensee are suspended or
disrupted because of a recognized cause of force majeure (including strikes,
lockouts, war, natural disaster or other similar cause), and should such
suspension or disruption last for a consecutive period of 180 days, unless
Licensee shall forthwith take affirmative steps to rectify the situation,
except that if it is apparent at the time of such suspension or disruption
that it cannot be rectified within the 180 day period, Licensor may terminate
forthwith.
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(ii) In the event that payment to Licensor of any Royalties or other sums
due under this Agreement is prohibited or otherwise made impossible for a
period of ninety (90) days by the laws and/or regulations in effect in the
Territory or any portion thereof.
16. Assignment, Sublicenses
16.1 The License and rights granted hereunder are personal in nature.
Licensee recognizes and acknowledges that Licensor has agreed to contract
with Licensee in reliance upon the experience, reputation and personal
qualities of the management and shareholders of Licensee. Licensor shall
have the right to terminate this Agreement in the event Licensee (or an
authorized assignee or successor under the control of Licensee) shall no
longer be under the control of Licensee. Licensee shall not sell, transfer ,
sublicense or assign its rights and interest hereunder, without the prior
written consent of Licensor, which consent shall not be unreasonably
withheld; provided, however, that Licensee shall be permitted, upon notice to
Licensor, to transfer, sublicense or assign its rights and interest hereunder
to any corporation or other legal entity which is under common control with
Licensee. For the purpose of this Article 16, "Control", shall mean majority
ownership.
16.2 Any sale or other transfer of all or a majority of the outstanding
capital stock of Licensee, excluding sales of capital stock of Licensee in a
public offering that widely distributes such stock, but, including
specifically, without limitation, any merger, consolidation or similar
combination, shall be deemed an assignment of the Licensee's rights, interest
and obligations under this Agreement. However, an assignment to an entity
controlled by Licensee shall be permitted.
16.3 A sale or other transfer of all or substantially all of the assets
of Licensee shall be deemed an assignment of Licensee's rights and interest
under this Agreement, but such an assignment to an entity controlled by
Licensee shall be permitted.
16.4 Licensor shall, with the prior written consent of Licensee, which
consent shall not be unreasonably withheld (except as otherwise provided in
this Article 16) have a right to sell, transfer, lease or assign its rights
and interest in this Agreement, provided that no such consent shall be
required in the case of a sale, transfer, lease or assignment by Licensor to
a corporation in which Licensor beneficially owns a majority of the voting
stock, and provided further, that Licensor hereby agrees and acknowledges
that their services are personal in nature and essential to this Agreement.
Sublicensing of the Licensed Marks, Products and/or Territories shall not be
permitted without the express prior written consent of Licensor (but this
does not prohibit the subcontracting of manufacturing and other production
tasks by Licensee).
17. Arbitration
17.1 Any claim controversy arising out of or relating to this Agreement
shall be resolved by binding arbitration in the City of New York pursuant to
the rules then obtaining of
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the American Arbitration Association. The panel of Arbitrators appointed to
settle any controversy or claim shall consist of three (3) arbitrators
experienced in agreements of this type.
17.2 The arbitrators sitting in any such controversy shall have no power
or jurisdiction to alter or modify any express provision of this Agreement or
to make any award which by its terms effects such alternation or modification.
17.3 The parties consent for award enforcement purposes to the
jurisdiction of the appropriate state and/or federal courts within the State
of New York and further consent that any demand for arbitration or any
process or notice of motion or other application to the court or a judge
thereof, in connection with the same, may be served in or out of the State of
New York, by registered mail or by personal service, provided a reasonable
time for appearance is allowed.
17.4 The provision for arbitration herein shall not be deemed a waiver of
the rights of either party to any provisional remedy provided under state or
federal law. It is agreed that in the event of any violation hereof, the
other party hereto shall have the right to seek a preliminary injunction
enjoining any further violation of this Agreement pending arbitration.
18. Transfer of Existing Business in the Territory
Licensor will undertake all reasonable steps to assist in the transfer of
the existing business in the Territory and in coordinating the transition of
the business from VF and the provision to Licensee of all information in the
possession of VF necessary for Licensee to be able to continue servicing the
existing business under the Marks in the Territory. Licensee accepts no
liability with respect to any conduct of any business under the Marks by any
other entity at any time. Licensor shall indemnify and hold harmless
Licensee and any of its officers, directors, and agents for any claims or
damages (including attorneys' fees and costs) resulting from the conduct of
the business under the Marks by any third party.
19. Relationship
Nothing herein shall create or be deemed to create any agency,
partnership, joint venture or other similar relationship between the parties
hereto. Licensee shall not represent itself as the legal representative,
agent or partner of Licensor and shall have no right to create or assume any
obligations express or implied, on behalf of Licensor.
20. Merger
This Agreement sets forth the entire and complete Agreement among the
parties hereto with respect to its subject matter. This Agreement supersedes
and annuls all prior understandings, arrangements and agreements, oral or
written, between the parties relating to its subject matter. Neither this
Agreement nor any provision hereof may be modified, waived or discharged
except by subsequent written instrument signed by each party.
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21. Severability
If for any reason whatsoever, any provision of this Agreement shall be
declared invalid, illegal or unenforceable, in whole or in part, such
provision shall be ineffective to the extent of such invalidity, illegality
or unenforceability without effecting the validity, legality or
enforceability of the remaining provisions hereof or any other portion
thereof not declared illegal or unenforceable shall remain in full force and
effect.
22. Reversion of Rights and Territories
Upon the expiration or earlier termination of this Agreement and subject
to the other provisions of this Agreement, all rights with respect to the
Marks, Products and Territory shall immediately revert to Licensor.
23. Remedies and Waivers
No failure on the part of the Licensor or Licensee to exercise, and no
delay on its part in exercising any right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise
of any right or remedy preclude any other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies provided
herein are cumulative and are not exclusive of any other rights or remedies
provided by law or in equity.
-23-
<PAGE>
24. Notices
All reports, approvals and notices required or permitted to be given
under this Agreement shall, unless specifically provided otherwise in this
Agreement, be deemed to have been given if mailed by (i) registered or
certified mail, return receipt requested (if such service is available),
postage prepaid, or (ii) telecopy, receipt confirmed, and follow up hard copy
by overnight express, to the party concerned at its address indicated below
(or at such other address or addresses as any party hereto may from time to
time respectively designate by notice in writing to the other party).
If to Licensor, to: GIRBAUD DESIGN, INC.
411 East 50th Street
New York, New York 10022
Fax- 212-755-4450
With a copy to:
Martin & Maynadier, LLC
324 East 51st Street
New York, New York 10022
Fax- 212-754-3397
If to Licensee, to: I.C. ISAACS AND CO., L.P.
350 Fifth Avenue, Suite 1029
New York, New York 10118
Attn: Chairman and Co-CEO
Fax-212-695-7579
With a copy to:
I.C. Isaacs and Co., L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attn: President and Co-CEO
Fax- 410-558-2096
Robert J. Mathias, Esquire
Piper & Marbury L.L.P.
36 S. Charles Street
Baltimore, Maryland 21201
Fax- 410-539-0489
-24-
<PAGE>
25. Governing Law
This Agreement shall be construed, and interpreted in accordance with and
as governed by the laws of the State of New York, without regard to the
conflict of laws provisions thereof.
26. Right of First Refusal
Should Licensor decide, at its initiative or upon an offer from a third
party, to introduce, market, import, manufacture and/or distribute, or cause
to be introduced, marketed, imported or manufactured, within the Territory,
any of the following additional products: Men's Active, Boys', Women's and
Girls' Jeans, Casual or Active collections, Licensee shall have a right of
First Refusal for a license for these products, with terms and royalty rates
as offered by the third party or otherwise to be discussed and agreed upon at
that time. Without limitation to the previous sentence, Licensor and
Licensee shall, at the option of Licensee, negotiate in good faith in August
1998 the financial terms applicable to an extension of this Agreement to add
Women's Jean and Women's Casual collections to the Products commencing with
products to be presented at the February 1999 Magic Show in the USA.
27. Indemnification and Insurance
27.1 Licensee does hereby indemnify and hold harmless Licensor from and
against any and all losses, liability, damages and expenses (including
reasonable attorneys fees and expenses) which it may incur or be obligated to
pay as a result of or in defending any action, claim or proceeding against
Licensor, for or by reason of any acts or omissions committed by Licensee or
any of its servants, agents or employees in connection with Licensee's
performance of this Agreement. Licensee shall immediately notify Licensor of
any claim or law suit seeking damages in excess of $100,000. The provisions
of this Paragraph and Licensee's obligations hereunder shall survive the
expiration or earlier termination of this Agreement. In the event that a
judgment, levy, attachment or other seizure is entered against Licensor
arising from any claim as to which indemnification is provided hereunder,
Licensor shall promptly post the necessary bond to prevent execution against
any property of Licensor.
27.2 Licensee shall procure and maintain in full force and effect, at its
sole cost and expense, at all times during which Products are being sold, a
product liability insurance policy with respect to the Products with a limit
of liability of not less that $1,000,000. Such insurance policy shall
include Licensor as an additional insured thereunder and shall provide for at
least thirty (30) days prior written notice to Licensor of the cancellation
or substantial modification thereof. Such insurance may be obtained by
Licensee in conjunction with a policy of products liability insurance which
covers products other than the Products. Licensee will deliver a certificate
of such insurance to Licensor promptly upon issuance of said insurance policy
and shall, from time to time upon reasonable request by Licensor, promptly
furnish to Licensor evidence of the maintenance of said insurance policy.
Likewise, without limitation of its indemnification obligations under this
Agreement, Licensor shall procure and maintain in full force and effect, at
its sole cost and expense, at all times during which Products are being sold,
a
-25-
<PAGE>
product liability insurance policy with respect to potential liability under
this Agreement with a limit of liability of not less that $1,000,000.
28. Limitation of Liability
EXCEPT WITH RESPECT TO INDEMNIFICATION OBLIGATIONS DUE TO THIRD PARTIES,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR SIMILAR DAMAGES ARISING FROM A BREACH OF THIS AGREEMENT OR
OF ANY ORDER HEREUNDER EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
29. Plural, Singular
Whenever the singular is used it shall include the plural and vice versa.
30. Headings
The headings of the Articles and Paragraphs of this Agreement are for
convenience only and shall in no way be deemed to limit or affect the terms
or conditions of this Agreement.
31. Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed, by their respective duly
authorized officers, this Agreement as of the day and year first above
written.
GIRBAUD DESIGN, INC. I.C. ISAACS AND COMPANY, L.P.
By: /s/ Francois Girbaud By: /s/ Robert J. Arnot
----------------------- ---------------------------
Name: Francois Girbaud Name: Robert J. Arnot
Title: Title: Chairman & CEO
WURZBURG HOLDING SA
By: /s/ Illegible
-----------------------
Name:
Title:
-26-
<PAGE>
EXHIBIT A
THE MARKS
United States Trademark Registrations
1) MARITHE & FRANCOIS GIRBAUD
(As registered with the United States Patent and Trademark Office under the
number 1,311,173)
2) GIRBAUD
(As registered with the United States Patent and Trademark Office under the
number 1,885,045)
3) FLY LABEL WITH MARITHE & FRANCOIS GIRBAUD
[LOGO]
(As registered with the United States Patent and Trademark Office under the
number 1,354,187)
<PAGE>
4) FLY LABEL WITH PARALLEL LINES
[LOGO]
(As registered with the United States Patent and Trademark Office under the
number 1,495,182)
5) LABEL MARITHE & FRANCOIS GIRBAUD
[LOGO]
(As registered with the United States Patent and Trademark Office under the
number 1,564,635)
6) TEAR-AWAY LABEL
[LOGO]
(As registered with the United States Patent and Trademark Office under the
number 1,810,839)
<PAGE>
7) FLY LABEL
(As registered with the United States Patent and Trademark Office under the
number 1,852,439)
8) FLY LABEL (SLANTED)
(As registered with the United States Patent and Trademark Office under the
number 1,872,530)
[LOGO]
<PAGE>
EXHIBIT B
MANUFACTURING COUNTRIES
Hong Kong
Indonesia
Macao
Mexico
China
Philippines
Vietnam
Republic of South Korea
Taiwan
Thailand
Bahrain
Bangladesh
Brazil
Botswana
Canada
Colombia
Costa Rica
Dominican Republic
Egypt
Ecuador
El Salvador
Guatemala
Honduras
India
Jamaica
Lesotho
Madagascar
Malaysia
Maldives
Mauritius
Mongolia
Nepal
Oman
Pakistan
Peru
Qatar
Saipan
Saudi Arabia
Seychelles
<PAGE>
Singapore
South Africa
Sri Lanka
Turkey
United Arab Emirates
<PAGE>
EXHIBIT C
THE PRODUCTS
MEN'S JEANS
A category of jeanswear dress which is color and fabric driven. Its
cornerstone is denim with an emphasis on new washes and new finishes. It
encompasses signature M & F Girbaud styles, as well as, new progressive
shapes. The product offering includes but is not limited to jeans, pants,
knit tops, T-shirts, sweatshirts, caps, sweaters, outerwear, vests, woven
shirts, shorts and jackets and other types of garments typically considered
jeanswear in the industry.
MEN'S CASUAL
A category of relaxed dress for multiple end uses; weekend wear, Casual
Friday etc. Modern comfort driven fabrics and blends offer an alternative to
traditional khakis. Men's Casual includes but is not limited to city casual
pants (including khakis) and jackets, shorts, woven shirts, knit tops,
sweaters, vests, caps, outerwear, and shirts, and other types of garments
typically considered casual wear in the industry.
<PAGE>
EXHIBIT D
LABEL TO BE PHASED OUT
7) FLY LABEL
[LOGO]
(As registered with the United States Patent and Trademark Office under the
number 1,852,439)
<PAGE>
EXHIBIT E
LABELS FOR SECTION 1.5
[LOGO]
<PAGE>
[LOGO]
<PAGE>
I. C. ISAACS
PENSION PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
1.01 ACCRUED BENEFIT.......................................... 2
1.02 ACTURIAL EQUIVALENT (EQUIVALENCE)......................... 2
1.03 ANNIVERSARY DATE......................................... 3
1.04 ANNUAL ADDITIONS......................................... 3
1.05 ANNUAL BENEFIT........................................... 3
1.06 ANNUITY STARTING DATE.................................... 3
1.07 APPLICABLE LIFE EXPECTANCY............................... 3
1.08 AVERAGE ANNUAL COMPENSATION.............................. 4
1.09 BENEFICIARY.............................................. 4
1.10 BREAK IN SERVICE......................................... 4
1.11 CODE..................................................... 4
1.12 COMPENSATION............................................. 4
1.13 DEFINED BENEFIT PLAN..................................... 5
1.14 DEFINED BENEFIT DOLLAR LIMITATION........................ 5
1.15 DEFINED BENEFIT (PLAN) FRACTION.......................... 5
1.16 DEFINED CONTRIBUTION PLAN................................ 5
1.17 DEFINED CONTRIBUTION (PLAN) FRACTION..................... 5
1.18 DISABILITY............................................... 6
1.19 DISTRIBUTION CALENDAR YEAR............................... 6
1.20 EARLIEST RETIREMENT AGE.................................. 6
1.21 EARLY RETIREMENT AGE..................................... 6
1.22 EARNED INCOME............................................ 6
1.23 EFFECTIVE DATE........................................... 6
1.24 ELECTION PERIOD.......................................... 6
1.25 EMPLOYEE................................................. 6
1.26 EMPLOYER................................................. 6
1.27 ENTRY DATE............................................... 7
1.28 FAMILY MEMBER............................................ 7
1.29 FIRST DISTRIBUTION CALENDAR YEAR......................... 7
1.30 FUND..................................................... 7
1.31 HIGHEST AVERAGE COMPENSATION............................. 7
1.32 HIGHLY COMPENSATED EMPLOYEE.............................. 7
1.33 HOUR OF SERVICE.......................................... 8
1.34 JOINT AND SURVIVOR ANNUITY............................... 9
1.35 KEY EMPLOYEE............................................. 9
1.36 LEASED EMPLOYEE.......................................... 9
1.37 LIMITATION YEAR.......................................... 9
1.38 MAXIMUM PERMISSIBLE AMOUNT............................... 9
1.39 NORMAL RETIREMENT AGE.................................... 9
1.40 NORMAL RETIREMENT BENEFIT................................ 10
1.41 NORMAL RETIREMENT DATE................................... 10
1.42 OWNER-EMPLOYEE........................................... 10
1.43 PARTICIPANT.............................................. 10
1.44 PERMISSIVE AGGREGATION GROUP............................. 10
1.45 PLAN..................................................... 10
1.46 PLAN ADMINISTRATOR....................................... 10
1.47 PLAN YEAR................................................ 10
1.48 PROJECTED ANNUAL BENEFIT................................. 10
1.49 QUALIFIED DEFERRED COMPENSATION PLAN..................... 10
1.50 QUALIFIED DOMESTIC RELATIONS ORDER (QDRO)................ 10
1.51 QUALIFIED EARLY RETIREMENT AGE........................... 10
1.52 QUALIFIED JOINT AND SURVIVOR ANNUITY..................... 11
1.53 REQUIRED AGGREGATION GROUP............................... 11
<PAGE>
1.54 REQUIRED BEGINNING DATE.................................. 11
1.55 ROLLOVER CONTRIBUTION.................................... 11
1.56 SELF-EMPLOYED INDIVIDUAL................................. 11
1.57 SERVICE.................................................. 11
1.58 SHAREHOLDER-EMPLOYEE..................................... 11
1.59 SIMPLIFIED EMPLOYEE PENSION PLAN (SEP).................. 11
1.60 SOCIAL SECURITY RETIREMENT AGE........................... 11
1.61 SPONSOR.................................................. 11
1.62 SPOUSE (SURVIVING SPOUSE)................................ 11
1.63 SUPER TOP-HEAVY PLAN..................................... 12
1.64 TOP-HEAVY DETERMINATION DATE............................. 12
1.65 TOP-HEAVY PLAN........................................... 12
1.66 TOP-HEAVY RATIO.......................................... 12
1.67 TOP-PAID GROUP........................................... 13
1.68 TRANSFER CONTRIBUTION.................................... 13
1.69 TRUSTEES................................................. 13
1.70 VALUATION DATE........................................... 13
1.71 VESTED ACCRUED BENEFIT................................... 13
1.72 VOLUNTARY CONTRIBUTION................................... 13
1.73 WELFARE BENEFIT FUND..................................... 13
1.74 YEAR OF CREDITED SERVICE................................. 14
1.75 YEAR OF SERVICE.......................................... 14
ARTICLE 2
ELIGIBILITY REQUIREMENTS
2.01 PARTICIPATION............................................ 15
2.02 EMPLOYMENT RIGHTS........................................ 15
2.03 SERVICE WITH CONTROLLED GROUPS........................... 15
2.04 OWNER-EMPLOYEES.......................................... 16
2.05 LEASED EMPLOYEES......................................... 16
2.06 CESSATION OF PARTICIPATION............................... 16
2.07 WAIVER OF PARTICIPATION.................................. 16
ARTICLE 3
EMPLOYER CONTRIBUTIONS
3.01 AMOUNT................................................... 17
3.02 EXPENSES AND FEES........................................ 17
3.03 RESPONSIBILITY FOR CONTRIBUTIONS......................... 17
3.04 RETURN OF CONTRIBUTIONS.................................. 17
ARTICLE 4
EMPLOYEE CONTRIBUTIONS, ROLLOVERS AND TRANSFERS
4.01 VOLUNTARY CONTRIBUTIONS.................................. 18
4.02 ROLLOVER CONTRIBUTIONS................................... 18
4.03 TRANSFER CONTRIBUTIONS................................... 18
4.04 SEPARATE ACCOUNTS........................................ 18
4.05 ADJUSTMENTS TO PARTICIPANT ACCOUNTS...................... 19
4.06 NONFORFEITABILITY........................................ 19
4.07 IN-SERVICE WITHDRAWALS................................... 19
4.08 WITHDRAWAL ON TERMINATION OF EMPLOYMENT.................. 19
4.09 WITHDRAWAL ON DEATH...................................... 20
4.10 EMPLOYEE INVESTMENT DIRECTION............................ 20
ARTICLE 5
RETIREMENT BENEFITS
5.01 BENEFIT AT NORMAL RETIREMENT............................. 21
5.02 LATE RETIREMENT BENEFIT.................................. 22
5.03 DISABILITY RETIREMENT BENEFIT............................ 22
5.04 DEFINITE BENEFIT REQUIREMENTS............................ 24
<PAGE>
5.05 EARLY RETIREMENT BENEFIT................................. 24
5.06 CASH-OUT OF RETIREMENT BENEFITS.......................... 24
5.07 IMMEDIATELY DISTRIBUTABLE BENEFITS....................... 24
5.08 FORM OF PAYMENT.......................................... 25
5.09 OPTIONAL FORMS OF PAYMENT................................ 25
5.10 COMMENCEMENT OF BENEFITS.................................. 25
5.11 IN-SERVICE WITHDRAWALS NOT PERMITTED..................... 26
5.12 CLAIMS PROCEDURES........................................ 26
5.13 DIRECT ROLLOVERS......................................... 26
ARTICLE 6
DISTRIBUTION REQUIREMENTS
6.01 PAYMENT SUBJECT TO JOINT AND SURVIVOR PROVISIONS......... 28
6.02 MINIMUM DISTRIBUTION REQUIREMENTS........................ 28
6.03 LIMIT ON DISTRIBUTION PERIODS............................ 28
6.04 DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR...... 28
6.05 REQUIRED BEGINNING DATE.................................. 30
6.06 DESIGNATION OF BENEFICIARY FOR DEATH BENEFIT............. 30
6.07 DEATH AFTER COMMENCEMENT OF BENEFITS..................... 30
6.08 DEATH PRIOR TO COMMENCEMENT OF BENEFITS.................. 30
6.09 CALCULATION OF LIFE EXPECTANCY........................... 31
6.10 BENEFICIARY ELECTION OF DISTRIBUTION METHOD.............. 31
6.11 PAYMENTS TO A CHILD OF A PARTICIPANT..................... 31
6.12 DEEMED DISTRIBUTION STARTING DATE........................ 31
6.13 TRANSITIONAL RULES....................................... 31
ARTICLE 7
JOINT AND SURVIVOR AND DEATH BENEFIT REQUIREMENTS
7.01 PRECEDENCE OVER CONFLICTING PROVISIONS................... 33
7.02 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY.......... 33
7.03 DEATH BENEFIT PRIOR TO COMMENCEMENT OF BENEFITS........... 33
7.04 QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY................ 33
7.05 QUALIFIED ELECTION....................................... 34
7.06 NOTICE REQUIREMENTS FOR JOINT AND SURVIVOR ANNUITY....... 35
7.07 NOTICE REQUIREMENTS FOR PRE-RETIREMENT SURVIVOR ANNUITY.. 35
ARTICLE 8
VESTING OF BENEFITS
8.01 EMPLOYER PAID BENEFITS................................... 36
8.02 CALCULATING VESTING BENEFIT.............................. 36
8.03 PAYMENT OF VESTED BENEFITS............................... 37
8.04 REINSTATEMENT OF BENEFITS................................ 37
8.05 FORFEITURES.............................................. 37
ARTICLE 9
LIMITATIONS ON BENEFITS
9.01 PARTICIPATION IN THIS PLAN............................... 38
9.02 PARTICIPATION IN MULTIPLE PLANS.......................... 38
9.03 DEFINITIONS.............................................. 39
ARTICLE 10
ADMINISTRATION
10.01 PLAN ADMINISTRATOR...................................... 43
10.02 TRUSTEES................................................ 43
10.03 FEES AND EXPENSES....................................... 44
10.04 DIVISION OF DUTIES AND INDEMNIFICATION.................. 44
<PAGE>
ARTICLE 11
TRUST FUND
11.01 THE FUND................................................ 46
11.02 CONTROL OF PLAN ASSETS.................................. 46
11.03 EXCLUSIVE BENEFIT RULES................................. 46
11.04 ASSIGNMENT AND ALIENATION OF BENEFITS................... 46
11.05 QUALIFIED DOMESTIC RELATIONS ORDER...................... 46
ARTICLE 12
INVESTMENTS
12.01 FIDUCIARY STANDARDS..................................... 48
12.02 FUNDING ARRANGEMENT..................................... 48
12.03 INVESTMENT ALTERNATIVES................................. 48
12.04 PARTICIPANT LOANS....................................... 49
12.05 EMPLOYER INVESTMENT DIRECTION........................... 49
ARTICLE 13
TOP-HEAVY PROVISIONS
13.01 APPLICABILITY OF RULES.................................. 51
13.02 MINIMUM BENEFIT......................................... 51
13.03 LIMITATIONS ON BENEFITS................................. 52
13.04 MINIMUM VESTING......................................... 52
ARTICLE 14
AMENDMENT BY SPONSOR
14.01 AMENDMENT BY SPONSOR.................................... 53
14.02 AMENDMENT BY EMPLOYER................................... 53
14.03 TERMINATION............................................. 53
14.04 ALLOCATION OF ASSETS UPON TERMINATION................... 53
14.05 EARLY TERMINATION PROVISIONS............................ 54
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.01 INABILITY TO ACT........................................ 57
15.02 QUALIFICATION OF EMPLOYER'S PARTICIPATION IN PLAN....... 57
15.03 MERGERS AND CONSOLIDATIONS.............................. 57
15.04 QUALIFICATIONS OF PLAN.................................. 57
15.05 GOVERNING LAW........................................... 57
15.06 HEADINGS AND SUBHEADINGS................................ 57
15.07 PLAN SUBJECT TO SEPARATE TRUST AGREEMENT................ 57
<PAGE>
I.C. ISAACS
PENSION PLAN
THIS AGREEMENT is made and entered into this 23rd day of Dec., 1994, by
---- --- ----
I.C. ISAACS & COMPANY, L.P. (hereafter called the Sponsor).
WITNESSETH;
WHEREAS, the Sponsor previously established the I.C. Isaacs Pension Plan
(hereafter called the Plan), effective December 1, 1953, for the exclusive
benefit of the Employees of the Employer and their Beneficiaries in order to
provide retirement and other incidental benefits to such Employees and
Beneficiaries, thereby supplementing their social security benefits; and
WHEREAS, the Sponsor believes that continued contributions to the Plan
will help to strengthen the bonds of loyalty and mutual understanding that
have existed between the Employer and its employees, thereby making possible
the continued growth of its business; and
WHEREAS, in accordance with the terms of the Plan, the Sponsor has the
ability at any time, and from time to time, to amend the Plan;
NOW, THEREFORE, the Sponsor amends and restates the Plan in its entirety
to comply with all applicable statutes, including the employee Retirement
Income Security Act of 1974 (ERISA), the Tax Equity and Fiscal
Responsibility Act of 1982, the Tax Reform Act of 1984, the Retirement Equity
Act of 1984, the Tax Reform Act of 1986, the Omnibus Budget Reconciliation
Acts of 1986 and 1987, the Technical and Miscellaneous Revenue Act of 1988,
and the Revenue Reconciliation Act of 1989, said amendment and restatement to
be effective as of January 1, 1989, except as otherwise noted herein and with
respect to the following provisions which shall be effective as of the dates
shown or referenced: (1) Leased Employees-for Service performed after December
31, 1986; (2) Definition of Annual Additions-for LImitation Years beginning
after December 31, 1986; (3) Section 9.03(g)-for Limitation Years beginning
after December 31, 1986; and (4) Provisions more restrictive than those
contained in the Deficit Reduction and Retirement Equity Act of 1984 and the
temporary Retirement Equity Act regulations-for Plan Years beginning after
the dates specified in the Tax Reform Act of 1986:
<PAGE>
ARTICLE 1
DEFINITIONS
1.01 ACCRUED BENEFIT: The benefit amount earned by a Participant as of a
specified date as determined under Section 5.01. The accrual computation
period computing a Participant's Accrued Benefit shall be the Plan Year.
A Participant's Accrued Benefit shall be reduced or offset by the
Actuarial Equivalent of (i) any Plan benefits previously paid, and
(ii) to the extent such benefits are attributable to concurrent periods
of Service, any benefit entitlement from any other Defined Benefit Plan
sponsored by or contributed to by the Employer. A Participant who is
employed on the last day of the Plan Year and who completes a Year of
Service will accrue a benefit under the Plan for such Plan Year. Any
other Participant who terminates employment during the Plan Year will
accrue a benefit for each month in which he or she is credited with one
Hour of Service. In addition, to the extent necessary to satisfy the
minimum coverage requirements of Code Section 410(b) or the minimum
participation requirements of Code Section 401(a)(26) for a Plan Year,
a Year of Credited Service shall also be credited for purposes of
determining Accrued Benefits for such Plan Year for:
(a) Participants who have completed more than 500 Hours of Service,
but less than a Year of Service, during the Plan Year and are
employed by the Employer on the last day of the Plan Year of
reference, if necessary, and
(b) Participants who have completed more than 500 Hours of Service,
but less than a Year of Service, during the Plan Year in the
order of those Participants with the lowest Compensation first,
if necessary, and
(c) Any additional Participants determined by the Plan Administrator
under any other non-discriminatory method, including any Employee
who has waived further benefit accruals or waived participation
in the Plan.
Notwithstanding any other provision in the Plan, each Section
401(a)(17) Employee's Accrued Benefit will be the greater of (a) such
Employee's Accrued Benefit as of the last day of the last plan year
beginning before January 1, 1994, frozen in accordance with regulation
1.401(a)(4)-13, and (b) such Employee's Accrued Benefit determined with
respect to the benefit formula applicable for the Plan Year beginning on
or after January 1, 1994, as applied to the Employee's total Years of
Service taken into account under the Plan for purposes of benefit
accruals. A Section 401(a)(17) Employee means an Employee whose
current Accrued Benefit as of a date on or after the first day of the
first Plan Year beginning on or after January 1, 1994 is based on
Compensation for a year beginning prior to the first day of the first
Plan Year beginning on or after January 1, 1994 that exceeded $150,000.
1.02 ACTUARIAL EQUIVALENT (EQUIVALENCE): A benefit having the same value on
the date payment commences as another stated benefit, determined on the
basis of the tables and factors in Exhibit B attached hereto and by
reference made a part hereof; or, in the case of benefits paid in a lump
sum, the Code Section 417(e) interest rates, as in effect on the first
business day of the month during which the lump sum benefit is computed
to be payable, whichever produces the greater benefit.
The Code Section 417(e) interest rate is the applicable interest rate.
The applicable interest rate is the interest rate which would be used (as
of either the date on which benefits are computed to be payable, or the
first day of the Plan Year which contains the Annuity Starting Date) by
the Pension Benefit Guaranty.
2
<PAGE>
Corporation for a trusteed single-employer plan to value a benefit upon
termination of an insufficient trusteed single-employer plan. The Code
Section 417(e) interest rate limitations shall apply to distributions in
Plan Years beginning after 1984. Notwithstanding the foregoing, the Code
Section 417(e) interest rate limitations shall not apply to any
distributions commencing in Plan Years beginning before 1987, if such
distributions were determined in accordance with the interest rate(s) as
required by Regulation Section 1.417(e)-1T(e) (including the PBGC
immediate interest rate).
The Actuarial Equivalent of an Accrued Benefit shall be determined as of
the first day of the month coincident with or next following the date of
determination or the actual commencement of benefits, on the basis of the
payee's nearest age in years or actual age in years and months
consistently determined as of such applicable date. If a benefit is
payable one month or more subsequent to the date of initial
determination, it shall either be adjusted for interest to the date of
actual distribution, or reevaluated based on the payee's then current
age, as determined by the Plan Administrator on a nondiscriminatory basis.
In the event of a change in the definition of Actuarial Equivalent, in no
event shall the lump sum Actuarial Equivalent of a Participant's Accrued
Benefit determined on the date of benefit commences be less than the
Actuarial Equivalent value of the Accrued Benefit as determined one day
prior to the date of such change (but without regard to any changes in
interest rates under Code Section 417(e) as used by the Pension Benefit
Guaranty Corporation), based on the terms of the Plan as in effect on
such day. If a Participant's Accrued Benefit is payable at any time
prior to his or her Early or Normal Retirement Age or in a form other
than the Normal Retirement Benefit, it shall be adjusted to reflect
the Actuarial Equivalent of such amount as of the first day of the month
coincident with or next following the actual commencement of benefits, on
the basis of the Participant's age as of such applicable date.
Nothing contained in this Section 1.02 shall have the effect of reducing
the Accrued Benefit of any Employee who was a Participant in the Plan on
May 1, 1986 below the amount computed under the terms of the Plan as in
effect as if the Participant had separated from Service on the last day
of the Plan Year which began prior to January 1, 1987. In determining
the amount of the Accrued Benefit, any change in the terms and conditions
of the Plan after May 5, 1986 and any cost of living adjustment occurring
after May 5, 1986 shall be disregarded.
1.03 ANNIVERSARY DATE: January 1st of each Plan Year.
1.04 ANNUAL ADDITIONS: See Section 9.03
1.05 ANNUAL BENEFIT: See Section 9.03
1.06 ANNUITY STARTING DATE: Used in conjunction with the Qualified Joint and
Survivor Annuity requirements, it is the first day of the first period
for which a benefit amount is paid as an annuity or in any other form.
1.07 APPLICABLE LIFE EXPECTANCY: Used in determining the required minimum
distribution. The life expectancy (or joint and last survivor
expectancy) calculated using the attained age of the Participant (or
Beneficiary) as of the Participant's (or Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year which has
elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the Applicable Life Expectancy shall
be the life expectancy as so recalculated.
3
<PAGE>
1.08 AVERAGE ANNUAL COMPENSATION: A Participant's annual Compensation
averaged over the highest 5 consecutive Plan Years ending with his or
her Normal Retirement Age or actual retirement if later, or if earlier
the date on which he or she last ceased to be an active Participant.
For a Participant with less than the required number of consecutive
years the average of the actual number of consecutive years shall be
used. In the event a Participant is employed or is covered under the
Plan for less than the full accounting period for determining
Compensation, Average Annual Compensation shall be counted (without
analyzing) if such Participant qualifies for a Year of Service or a
Year of Credited Service.
1.09 BENEFICIARY: The individual who is designated as the Beneficiary under
the Plan in accordance with Code Section 401(a)(9) and the
regulations thereunder. Subject to Article 7 and Section 7.07, a
Participant may designate, in writing, a Beneficiary to receive the
benefits payable in the event of his or her death, and may designate a
secondary Beneficiary to receive any benefits payable in the event the
primary Beneficiary predeceases the Participant. A Participant's
Surviving Spouse must consent to the designation of the Participant's
primary Beneficiary other than the Surviving Spouse of more than 50% of
the value of any Plan death benefit. In the event a Participant fails
to designate any Beneficiary in writing, or the Beneficiary predeceases
the Participant, the Participant's Surviving Spouse shall be deemed the
Beneficiary. If there is no Surviving Spouse, the benefits shall be
paid pursuant to the intestacy laws of the state in which the
Beneficiary is domiciled. A Participant may change his or her
Beneficiary at any time. All Beneficiary designations and changes
shall be made on an appropriate form and filed with the Plan
Administrator. Any such designation shall become effective only upon
its receipt by the Plan Administrator. The last effective designation
received by the Plan Administrator shall supersede all prior
designations.
1.10 BREAK IN SERVICE: For purposes of determining vesting, a Plan Year during
which an Employee fails to complete more than 500 Hours of Service. In
the event that a Plan Year is less than 12 months, the 500 Hours of
Service requirement shall be proportionately reduced. For purposes of
determining eligibility, the twelve (12) month period commencing on the
date an Employee first completes an Hour of Service and each
anniversary thereof during which an Employee fails to complete more
than 500 Hours of Service.
1.11 CODE: The Internal Revenue Code of 1986 including any amendments thereto.
1.12 COMPENSATION: For all Employees other than truckdrivers and salesmen, the
total wages or salary, overtime, commissions, bonuses, and any other
taxable remuneration from the Employer for the Plan Year in no event
greater than $60,000 maximum per year. For any Owner-Employee or other
self-employed individual covered under the Plan, Compensation will mean
Earned Income. For truckdrivers and salesmen, 75% of the total wages
or salary, overtime, commission, bonuses and any other taxable
remuneration for the employer for the Plan Year and in no event greater
than $60,000 maximum per year. Compensation shall include only
Compensation actually paid to the Participant during the Plan Year.
However, Compensation may include any amount contributed by the
Employer pursuant to a salary reduction agreement which is not
includible in the gross income of the Employee under Code Sections
125, 402(a)(8), 402(h) or 403(b). Except for purposes of determining a
Participant's Accrued Benefit prior to the first Plan Year which began
on or after January 1, 1989 or if earlier the date the Plan became
Top Heavy, in accordance with Code Section 401(a)(17) the annual
Compensation of each Participant taken into account under the Plan for
any Plan Year shall not exceed $200,000, as adjusted beginning with the
first Plan Year which begins in 1990 at the same time and in the same
manner as under Code Section 415(d), prorated for less than a
12-month period.
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For the period prior to the first Plan Year beginning in 1994, the Code
Section 401(a)(17) limit as adjusted under Code Section 415(d) as
in effect for the current year shall be the applicable limit on
Compensation for all Plan Years up to and including the Plan Year of
reference. Beginning with the Plan Year which commences in 1994,
however, the Code Section 401(a)(17) limit on Compensation, as
adjusted under Code Section 415(d), which is in effect for each year
shall be the applicable limit for each such Plan Year, including years
prior to 1994. In addition, for the period prior to the first Plan
Year which commences in 1994, the adjustment for the calendar year
under Code Section 415(d) to the Code Section 401(a)(17) limit on
Compensation shall be applicable for the Plan Year which ends within
the calendar year of reference. In determining the compensation of a
Participant for purposes of this limitation under Code Section
401(a)(17), the rules of Code Section 414(q)(6) shall apply, except in
applying such rules, the term "family" shall include only the
Participant's Spouse and any lineal descendants who have not attained
age 19 before the close of the year. If as a result of the application
of such rules the adjusted $200,000 limitation is exceeded, then
(except for purposes of determining the portion of compensation up to
the Taxable Wage Base or other integration level set forth in Section
5.01) the limitation shall be prorated among the affected individuals
in proportion to each such individual's Compensation as determined
under this Section prior to the application of this limitation, or such
other method as determined by the Plan Administrator, provided such
method is not prohibited by IRS regulations.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the amount of annual
Compensation of each employee taken into account under the Plan shall
not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with Code Section
401(a)(17). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is twelve. For Plan
Years beginning on or after January 1, 1994, any reference in this Plan
to the limitation under Code Section 401(a)(17) shall mean the OBRA '93
annual compensation limit set forth in this provision. If Compensation
for any prior determination period is taken into account in determining
an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA
'93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before
the first day of the first Plan Year beginning on or after January 1,
1994, the OBRA annual compensation limit is $150,000.
1.13 DEFINED BENEFIT PLAN: A Plan under which a Participant's benefit is
determined by a formula contained in the Plan under which no individual
accounts are maintained for Participants.
1.14 DEFINED BENEFIT DOLLAR LIMITATION: See Section 9.03.
1.15 DEFINED BENEFIT (PLAN) FRACTION: See Section 9.03.
1.16 DEFINED CONTRIBUTION PLAN: A Plan under which individual accounts are
maintained to which all contributions, forfeitures, income and gains or
losses, and expenses are credited or deducted and in which a
Participant's benefit is based solely on the fair market value of his
or her account balance.
1.17 DEFINED CONTRIBUTION (PLAN) FRACTION: See Section 9.03.
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1.18 DISABILITY: Disability means a physical or mental condition arising
after an Employee has become a Participant, which totally and
permanently prevents the Participant from engaging in his or her duties
for any Employer. The determination as to whether a Participant is
totally and permanently disabled will be made (1) on medical evidence
by a licensed physician designated by the Administrator; or (2) on
evidence that the Participant is eligible for benefits under any
long-term disability plan sponsored by the Employer, but administered
by an independent third party; or (3) on evidence that the Participant
is eligible for total and permanent disability under the Social
Security Act in effect at the date of disability.
1.19 DISTRIBUTION CALENDAR YEAR: A calendar year for which a minimum
distribution is required.
1.20 EARLIEST RETIREMENT AGE: The earliest date on which, under the Plan,
the Participant could elect to receive retirement benefits.
1.21 EARLY RETIREMENT AGE: The first day of any month coincident with or
next following the Participant's attainment of age 55 and completion of
15 Years of Service.
1.22 EARNED INCOME: Net earnings from self-employment in the trade or
business with respect to which the Plan is established, determined
without regard to items not included in gross income and the deductions
allocable to such items, provided that personal services of the
individual are a material income-producing factor. Earned Income shall
be reduced by contributions made by a taxpayer to a qualified plan to
the extent deductible under Code Section 404. For tax years beginning
after 1989 net earnings shall be determined taking into account the
deduction for one-half of self-employment taxes allowed to the taxpayer
under Code Section 164(f) to the extent deductible.
1.23 EFFECTIVE DATE: January 1, 1989, which is the effective date of this
amendment and restatement.
1.24 ELECTION PERIOD: The period which begins on the first day of the Plan
Year in which the Participant attains age 35 and ends on the date of
the Participant's death. If a Participant separates from Service prior
to the first day of the Plan Year in which age 35 is attained, with
respect to benefits accrued prior to separation, the Election Period
shall begin on the date of separation.
1.25 EMPLOYEE: Any person employed by the Employer, including Self-Employed
Individuals and partners and, except for purposes of determining
eligibility for participation in this Plan, all Employees of a member
of an affiliated service group (as defined in Code Section 414(m)),
Employees of a controlled group of corporations (as defined in Code
414(b)), all Employees of any incorporated or unincorporated trade or
business which is under common control (as defined in Code Section
414(c)), leased Employees (as defined in Code Section 414(n)) and any
other Employees of an entity required to be aggregated with the
Employer pursuant to regulations under Code Section 414(o). All such
Employees shall be treated as employed by a single Employer.
1.26 EMPLOYER: The Sponsor and any Self-Employed Individual, partnership,
corporation or other business entity or organization which with the
consent of the Sponsor adopts this Plan and any business entity which
succeeds the Employer and adopts this Plan (as set forth in Exhibit C
attached hereto and by reference made a part hereof). Except for
determining which business entity or organization adopts this Plan, for
all purposes Employer shall also mean all members of a controlled group
of corporations (as defined in Code Section 414(b) as modified by Code
Section 415(h)), all commonly controlled trades or businesses (as
defined in Code Section 414(c) as modified by Code Section 415(h)) or
affiliated service groups (as defined in Code Section 414(m)) of which
the adopting
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Employer is a part, and other entities required to be aggregated with
the Employer pursuant to Regulations under Code Section 414(o).
1.27 ENTRY DATE: January 1st and July 1st of each Plan Year, which shall be
the dates on which an Employee commences participation in the Plan.
1.28 FAMILY MEMBER: The Employer or former Employee's Spouse, any lineal
descendants and ascendants and the Spouse of such lineal descendants and
ascendants. If, pursuant to the rules under Code Section 401(k) and
(m), an Employee is required to be included as a Family Member of more
than one family group, then all Employees who are included in any such
family group shall be aggregated in determining those who are Family
Members.
1.29 FIRST DISTRIBUTION CALENDAR YEAR: For distributions beginning before
the Participant's death, the calendar year immediately preceding the
calendar year which contains the Participant's Required Beginning Date.
For distributions beginning after death, the First Distribution
Calendar Year is the calendar year in which distributions are required
to begin pursuant to Section 6.07.
1.30 FUND: All contributions received by the Trustees under this Plan and
Trust, investments thereof and earnings and appreciation thereon.
1.31 HIGHEST AVERAGE COMPENSATION: The average Compensation for the three
consecutive Years of Service with the Employer that produces the
highest average.
1.32 HIGHLY COMPENSATED EMPLOYEE: Any active Highly Compensated Employee or
any former Highly Compensated Employee. An active Highly Compensated
Employee includes any Employee who performs Service for the Employer
during the determination year and who, during the look-back year: (i)
received Compensation from the Employer in excess of $75,000 (as
adjusted pursuant to Section 415(d) of the Code); (ii) received
Compensation from the Employer in excess of $50,000 (as adjusted
pursuant to Section 415(d) of the Code) and was a member of the
Top-Paid Group for such year; or (iii) was an officer of the Employer
and received Compensation during such year that is greater than 50% of
the dollar limitation in effect under Section 415 (b)(1)(A) of the
Code. The term Highly Compensated Employee also includes: (i) if the
term "determination year" is substituted for the term "look-back year"
any Employee who is one of the 100 Employees who received the most
Compensation from the Employer during the determination year; and (ii)
Employees who are 5% owners at any time during the look-back year or
determination year. If no officer has satisfied the Compensation
requirement of (iii) above during either a determination year or
look-back year, the highest paid officer for such year shall be treated
as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding
the determination year unless the Employer so elects that the look-back
year shall be the calendar year ending with or within the Plan Year for
which the determination of the group of Highly compensated Employees is
being made. In that event the determination year shall be the period of
time, if any, which extends beyond the look-back year and ends on the
last day of the Plan Year for which the determination is being made
(the lag period). If the lag period is less than twelve months long,
the dollar threshold amounts in (a), (b) and (c) above shall be
prorated based upon the number of months in the lag period.
A former Highly Compensated Employee includes any Employee who
separated from Service (or was deemed to have separated) prior to the
determination year, performs no Service for the Employer
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during the determination year, and was an active Highly Compensated
Employee for either the separation year or any determination year ending
on or after the Employee's 55th birthday. If an Employee is, during the
determination year or look-back year, a Family Member of either a 5%
owner who is an active or former Employee or a Highly Compensated
Employee who is one of the 10 most Highly Compensated Employees ranked
on the basis of Compensation paid during such year, then the Family
Member and the 5% owner or top-ten Highly Compensated Employee shall be
aggregated. If so, the Family Member and 5% owner or top-ten Highly
Compensated Employee shall be treated as a single Employee receiving
Compensation and Plan contributions or benefits equal to the sum of such
Compensation and contributions or benefits of the Family Member and 5%
owner or top-ten Highly Compensated Employee. The determination of who
is a Highly Compensated Employee, including the determinations of the
number and identity of Employees in the top-paid group, the top 100
Employees, the number of Employees treated as officers and the
Compensation that is considered, will be made in accordance with Code
Section 414(q) and the regulations thereunder.
1.33 HOUR OF SERVICE: (a) Each hour for which an Employee is paid, or
entitled to payment, for the performance of duties for the Employer.
These hours shall be credited to the Employee for the computation period
in which the duties are performed; and (b) each hour for which an
Employee is paid, or entitled to payment, by the Employer on account of
a period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence. No more than 501 Hours of Service
shall be credited under this Section for any single continuous period
(whether or not such period occurs in a single computation period).
Hours under this paragraph shall be calculated and credited pursuant to
Section 2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference; and (c) each hour for which back
pay, irrespective of mitigation of damages, is either awarded or agreed
to by the Employer. The same Hours of Service shall not be credited
both under section (a) or section (b) above, as the case may be, and
under this section (c). These hours shall be credited to the Employee
for the computation period or periods to which the award or agreement
pertains rather than the computation period in which the award,
agreement or payment is made.
Hours of Service shall be credited for employment with the Employer and
with other members of an affiliated service group (as defined in Code
Section 414(m)), a controlled group of corporations (as defined in Code
Section 414(b)), or a group of trades or businesses under common control
(as defined in Code Section 414(c)) of which the adopting Employer is a
member, and any other entity required to be aggregated with the Employer
pursuant to Code Section 414(o) and the regulations thereunder. Hours
of Service shall also be credited for any individual considered an
Employee for purposes of this Plan under Code Section 414(n) or Code
Section 414(o) and the regulations thereunder.
Solely for determining whether a Break in Service for participation and
vesting purposes has occurred in a computation period, an individual who
is absent from work or maternity or paternity reasons shall receive
credit for the Hours of Service which would otherwise have been credited
to such individual but for such absence, or in any case in which such
hours cannot be determined, eight Hours of Service per day of such
absence. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence by reason of the
pregnancy of the individual, by reason of a birth of a child of the
individual, by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or for
purposes of caring for such child for a period beginning immediately
following such birth or placement. The Hours of Service credited under
this paragraph shall be credited in the computation period in which
absence begins if the crediting is necessary to prevent a Break in
Service in that period, or in all other cases, in the
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following computation period. No more than 501 hours will be credited
under this paragraph.
1.34 JOINT AND SURVIVOR ANNUITY: An immediate annuity for the life of the
Participant with a survivor annuity for the life of the Participant's
Spouse or other Beneficiary which is not less than 50% nor greater than
100% of the amount of the annuity payable during the joint lives of the
Participant and the Participant's Spouse/or other Beneficiary. The
Joint and Survivor Annuity will be the Actuarial Equivalent of the
Normal Retirement Benefit.
1.35 KEY EMPLOYEE: Any Employee, former Employee or deceased Employee (and
the Beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such individual's
annual Compensation exceeds fifty percent of the dollar limitation under
Code Section 415(b)(1)(a) (the defined benefit maximum annual benefit),
an owner (or considered an owner under Code Section 318) of one of the
ten largest interests in the Employer if such individual's Compensation
exceeds 100% of the dollar limitation under Code Section 415(c)(1)(A),
a five percent owner of the Employer, or a one percent owner of the
Employer who has annual Compensation of more than $150,000. For
purposes of determining who is a Key Employee, annual Compensation shall
include amounts deferred through a salary reduction agreement to a cash
or deferred plan under Code Section 401(k), a Simplified Employee
Pension Plan under Code Section 408(k), a cafeteria plan under Code
Section 125 or a tax-deferred annuity under Code Section 403(b). The
determination period is the Plan Year containing the Top-Heavy
Determination Date and the four preceding Plan Years. The
determination of who is a Key Employee will be made in accordance with
Code Section 416(i)(1) and the regulations thereunder.
1.36 LEASED EMPLOYEE: Any person (other than an Employee of the recipient)
who pursuant to an agreement between the recipient and any other person
("leasing organization") has performed services for the recipient (or
for the recipient and related persons determined in accordance with Code
Section 414(n)(6)) on a substantially full-time basis for a period of
at least one year, and such services are of a type historically
performed by employees in the business field of the recipient Employer.
A leased Employee shall not be considered an Employee of the recipient
if such Employee is covered by a money purchase pension plan providing
(a) a non-integrated employer contribution rate of at least 10% of
Compensation (as defined in Code Section 415(c)(3), but including
amounts contributed by the Employer pursuant to a salary reduction
agreement which are excludible from the Employee's gross income under
a cafeteria plan covered by Code Section 125, a cash or deferred plan
under Code Section 401(k), a Simplified Employee Pension Plan under Code
Section 408(k) or a tax-deferred annuity under Code Section 403(b)); (b)
immediate participation; and (c) full and immediate vesting. This
exclusion is only available if Leased Employees do not constitute more
than twenty percent (20%) of the recipient's non-highly compensated
work force.
1.37 LIMITATION YEAR: A calendar year unless a different 12-consecutive
month period is specified in Section 1.47. If the Limitation Year is
amended to a different 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the
amendment is made.
1.38 MAXIMUM PERMISSIBLE AMOUNT: See Section 9.03.
1.39 NORMAL RETIREMENT AGE: The day of Employee attains age 65 or the 5th
anniversary of his commencement of Plan participation, whichever is
later. There is no mandatory retirement age.
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1.40 NORMAL RETIREMENT BENEFIT: A monthly pension beginning on a
Participant's Normal Retirement Date or actual retirement date if the
Participant works past Normal Retirement Age and does not commence
payment, and ending on the first day of the month in which death occurs.
1.41 NORMAL RETIREMENT DATE: Normal Retirement Date means the first day of the
month coinciding with or next following a Participant's Normal Retirement
Age.
1.42 OWNER-EMPLOYEE: A sole proprietor or partner owning more than 10% of
either the capital or profits interest of the partnership.
1.43 PARTICIPANT: Any Employee who has met the eligibility requirements and
is participating in the Plan. However, any individual who is no longer
employed by the Employer will not be deemed a Participant if his or her
entire benefit rights under the Plan are (a) fully guaranteed by an
insurance company, insurance service, or insurance organization and
are legally enforceable at the sole choice of such individual against
such insurance company, insurance service, or insurance organization,
provided that a contract, policy or certificate describing the benefits
to which such individual is entitled has been issued to such
individual; or (b) such benefits are paid in a lump sum distribution
which represents the entire balance of such individual's interest in
his or her benefits under the Plan.
1.44 PERMISSIVE AGGREGATION GROUP: Used for Top-Heavy testing purposes, it
is the Required Aggregation Group of plans plus any other plan or plans
of the Employer which, when considered as a group with the Required
Aggregation Group, would continue to satisfy the requirements of Code
Sections 401(a)(4) and 410.
1.45 PLAN: The Employer's retirement plan as contained herein.
1.46 PLAN ADMINISTRATOR: The Sponsor unless another Plan Administrator is
appointed by the Sponsor.
1.47 PLAN YEARS: The 12 consecutive month period which begins on January
1st of each year and ends on December 31st of each year. In the event
the Plan Year changes, the computation period for purposes of
determining vesting and Accrued Benefits shall shift to the new 12
months period of the new Plan Year. The first computation period of the
new Plan Year shall begin on the first day of the new Plan Year which
occurs within the most recent old Plan Year.
1.48 PROJECTED ANNUAL BENEFIT: See Section 9.03.
1.49 QUALIFIED DEFERRED COMPENSATION PLAN: Any pension, profit-sharing,
stock bonus, or other plan which meets the requirements of Section 401
of the Code which includes a trust exempt from tax under Section 501(a)
of the Code; any annuity plan described in Section 403(a) of the Code.
1.50 QUALIFIED DOMESTIC RELATIONS ORDER (QDRO): A QDRO is a signed
Domestic Relations Order issued by a State Court which creates,
recognizes or assigns to an alternate payee(s) the right to receive all
or part of a Participant's Plan benefit. An alternate payee is a
Spouse, former Spouse, child, or other dependent who is treated as a
Beneficiary under the Plan as a result of the QDRO.
1.51 QUALIFIED EARLY RETIREMENT AGE: The latest of (a) the earliest date a
Participant may elect to receive retirement benefits under the Plan;(b)
the first day of the 120th month beginning before a Participant reaches
Normal Retirement Age; or (c) the date a Participant begins
participation.
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1.52 QUALIFIED JOINT AND SURVIVOR ANNUITY: An immediate annuity for the
life of the Participant with a survivor annuity for the life of the
Participant's Spouse which is a percentage of the amount of the annuity
which is payable during the joint lives of the Participant and the
Participant's Spouse and which is the Actuarial Equivalent of the
Normal Retirement Benefit. The survivor annuity will be 50% unless a
greater percentage is specified by the Participant in accordance with
Section 5.09. The Qualified Joint and Survivor Annuity should be at
least as valuable as the Acruarial Equivalent of any other optional
form of benefit payable under Section 5.09.
1.53 REQUIRED AGGREGATION GROUP: Used for Top-Heavy testing purposes, it
consists of (a) each Qualified Deferred Compensation Plan of the
Employer in which at least one Key Employee participates or
participated at any time during the determination period (regardless of
whether the plan has terminated), and (b) any other Qualified Deferred
Compensation Plan of the Employer which enables a plan described in (a)
to meet the requirements of Code Sections 401(a)(4) or 410.
1.54 REQUIRED BEGINNING DATE: The date on which a Participant is required
to take his or her first minimum distribution under the Plan.
1.55 ROLLOVER CONTRIBUTION: A contribution made by a Participant of an
amount distributed to such Participant from another Qualified Deferred
Compensation Plan in accordance with Sections 402(a)(5), (6), and (7)
of the Code.
1.56 SELF-EMPLOYED INDIVIDUAL: An individual who has Earned Income for the
taxable year from the trade or business for which the Plan is
established including an individual who would have had Earned Income
but for the fact that the trade or business had no profits for the
taxable year.
1.57 SERVICE: The period of current or prior employment with the Employer.
If the Employer maintains a plan of a predecessor, Service for such
predecessor shall be treated as Service for the Employer.
1.58 SHAREHOLDER-EMPLOYEE: An Employee or officer who owns (or is considered
as owning within the meaning of Code Section 318(a)(i)), on any day
during the taxable year of an electing small business (Subchapter S)
corporation, more than 5% of such corporation's outstanding stock.
1.59 SIMPLIFIED EMPLOYEE PENSION PLAN (SEP): An individual Retirement
Account which meets the requirements of Code Section 408(k), and to
which the Employer makes contributions pursuant to a written formula.
These plans are considered for contribution limitation and Top-Heavy
purposes.
1.60 SOCIAL SECURITY RETIREMENT AGE: For any Plan Year beginning after
December 31, 1986, age 65 in the case of a Participant attaining age 62
before January 1, 2000 (i.e., born before January 1, 1938), age 66 for
a Participant attaining age 62 after December 31, 1999, and before
January 1, 2017 (i.e., born after December 31, 1937, but before
January 1, 1955), and age 67 for a Participant attaining age 62 after
December 31, 2016 (i.e., born after December 31, 1954).
1.61 SPONSOR: I. C. Isaacs & Company, L.P.
1.62 SPOUSE (SURVIVING SPOUSE): The spouse or surviving spouse of the
Participant, provided that, if the Participant dies after benefit
payments have begun, the spouse must have been married to the
Participant on the date benefit payments began. A former spouse will
be treated as the spouse or surviving spouse to the extent provided
under a Qualified Domestic Relations Order as prescribed in Code
Section 414(p).
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1.63 SUPER TOP-HEAVY PLAN: A Top-Heavy Plan under which the Top-Heavy Ratio
exceeds 90%.
1.64 TOP-HEAVY DETERMINATION DATE: For any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first
Plan Year, the last day of that year.
1.65 TOP-HEAVY PLAN: For any Plan Year beginning after 1983,
the Employer's Plan is top-heavy if any of the conditions following
exists: (a) if the Top-Heavy Ratio for the Plan exceeds 60% and this
Plan is not part of any required Aggregation Group or Permissive
Aggregation Group of plans; (b) if the Plan is a part of a Required
Aggregation Group of plans but not part of a Permissive Aggregation
Group and the Top-Heavy Ratio for the group of plans exceeds 60%: or
(c) if the Plan is a part of a Required Aggregation Group and part of a
Permissive Aggregation Group of plans and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
1.66 TOP-HEAVY RATIO: (A) If the Employer maintains one or more Defined
Benefit Plans but has never maintained a Defined Contribution Plan
(including any SEP) which during the 5-year period ending on the
Determination Date(s) has or has had account balances the Top-Heavy
Ratio for this plan alone or for the Required or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator of which is the sum
of the Actuarial Equivalents of Accrued Benefits of all Key Employees
as of the Top-Heavy Determination Date(s) (including any part of any
Accrued Benefit distributed in the 5-year period ending on the
Top-Heavy Determination Date(s)), and the denominator of which is the
sum of the Actuarial Equivalents of the Accrued benefits (including any
part of any Accrued Benefit distributed in the 5-year period ending on
the Top-Heavy Determination Date(s)) determined in accordance with Code
Section 416 and the regulations thereunder.
(b) If the Employer maintains one or more Defined Benefit Plans and
maintained one or more Defined Contribution Plans (including any SEP)
which during the 5-year period ending on the Top-Heavy Determination
Date(s) has or has had any account balances, the top-heavy ratio for
any Required or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the account balances
under the Defined Contribution Plans for all Key Employees as of the
Top-Heavy Determination Date(s) and the Actuarial Equivalent of Accrued
Benefits under the aggregated Defined Benefits Plans for all Key
Employees, determined in accordance with (a) above and the denominator
of which is the sum of the account balances under the aggregated
Defined Contribution Plans for all Participants as of the Top-Heavy
Determination Date(s) and the Actuarial Equivalent of Accrued Benefits
under the Defined Benefit Plans determined in accordance with (a) above
for all Participants as of the Top-Heavy Determination Date(s), all
determined in accordance with Code Section 416 and the regulations
thereunder. Both the numerator and denominator of the Top-Heavy Ratio
are adjusted for any distribution of any account balance made in the
5-year period ending on the Top-Heavy Determination Date.
(c) For purposes of (a) and (b) above, the value of the account
balances and the Actuarial Equivalent of Accrued Benefits will be
determined as of the most recent Valuation Date that falls within or
ends with the 12-month period ending on the Top-Heavy Determination
Date, except as provided in Code Section 416 and the regulations
thereunder for the first and second Plan Years of a Defined Benefit
Plan. The account balances and the Accrued Benefits will be disregarded
for a Participant (1) who is not a Key Employee but who was a Key
Employee in a prior year or (2) who has not been credited with at
least one Hour of Service with any Employer maintaining a Plan at
any time during the 5-year period ending on the Top-Heavy Determination
Date. The calculation of the top-heavy ratio and the extent to which
distributions, rollovers, and transfers are taken into account will be
made in accordance with Code Section 416. When aggregating plans, the
value of the account balances and
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Accrued Benefits will be calculated with reference to the Top-Heavy
Determination Dates that fall within the same calendar year. The
Accrued Benefit of a Participant other than a Key Employee shall be
determined under (1) the method, if any, that uniformly applies for
accrual purposes under all Defined Benefit Plans maintained by the
Employer, or (2) effective as of the first Plan Year beginning after
December 31, 1986, if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
the fractional rule of Code Section 411(b)(1)(C).
1.67 TOP-PAID GROUP: The group consisting of the top 20% of Employees
when ranked on the basis of Compensation paid during such year. In
determining the number of Employees in the group (but not who is in
it), the following employees may be excluded: (a) Employees who have not
completed 6 months of Service; (b) Employees who normally work less
than 17 1/2 hours per week; (c) Employees who normally do not work more
than 6 months during any year; (d) Employees who have not attained age
21; (e) Employees included in a collective bargaining unit covered by
an agreement between Employee Representatives and the Employer, where
retirement benefits were the subject of good faith collective
bargaining provided that 90% or more of the Employer's Employees are
covered by the agreement; and (f) Employees who are nonresident aliens
and who have received no Earned Income or other income or remuneration
which constitutes income from sources within the United States.
1.68 TRANSFER CONTRIBUTION: A non-taxable transfer of a Participant's
benefit directly from a Qualified Deferred Compensation Plan to this
Plan.
1.69 TRUSTEES: The Trustee or Trustees appointed by the Sponsor pursuant to
Articles 10, 11, and 13.
1.70 VALUATION DATE: The Anniversary Date and any other date as selected by
the Sponsor and the Trustees and applied in a non-discriminatory
manner, on which the fair market value of Participant accounts accrued
from Employee contributions and investment earnings and gains and
losses are determined in accordance with Sections 4.05 and 4.10 hereof.
For Top-Heavy purposes, the last day of the Plan Year.
1.71 VESTED ACCRUED BENEFIT: Used to determine the applicability of the
Qualified Joint and Survivor Annuity Rules, it is the value of the
Participant's Vested Accrued Benefit derived from Employer and Employee
contributions (including Rollover and Transfer Contributions). The
provisions of Article 8 shall apply to a Participant who is vested in
amounts attributable to Employer contributions, Employee contributions
or both at the time of death or distribution.
1.72 VOLUNTARY CONTRIBUTION: An Employee contribution which is not
tax-deductible and which is not required as a condition for
participation in the Plan.
1.73 WELFARE BENEFIT FUND: Any fund that is part of a plan of the
Employer, or has the effect of a plan, through which the Employer
provides welfare benefits to Employees or their Beneficiaries. For
these purposes, welfare benefits means any benefit other than those
with respect to which Code Section 83(h) (relating to transfers of
property in connection with the performance of services), Code Section
404 (relating to deductions for contributions to any Employees' trust
or annuity and Compensation under a deferred payment plan) and Code
Section 404(A) (relating to certain foreign deferred compensation
plans). A "Fund" is any social club, voluntary employee beneficiary
association, supplemental unemployment benefit trust or qualified group
legal services organization described in Code Section 501(c)(7), (9),
(17) or (20); any trust, corporation, or other organization not exempt
from income tax, or to the extent provided in regulations, any account
held for an Employer by any person. The provisions of the Plan relating
to Welfare Benefit Funds are applicable
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to tax years beginning after 1985.
1.74 YEAR OF CREDITED SERVICE: To be used for determining an Accrued Benefit
in Section 1.01 and benefit at Normal Retirement Age in Section 5.01;
all Years of Service while a member of an eligible class of Employees
as set forth in Section 2.01 plus all periods credited in accordance
with (a), (b) and (c) of Section 1.01.
1.75 YEAR OF SERVICE: For eligibility purposes, a 12-month period in which
an Employee completes at least 1000 Hours of Service. The initial
eligibility computation period shall commence on the date an
Employee first completed an Hour of Service (hereafter called the
Employment Commencement Date). The succeeding 12-month eligibility
Computation period will begin on the first day of the Plan Year which
begins prior to the first anniversary of the Employee's Employment
Commencement Date regardless of whether the Employee is credited with
1000 Hour of Service during the initial eligibility computation period.
If the Employee is credited with 1000 Hours of Service in both the
initial eligibility computation period and the first Plan Year which
begins prior to the first anniversary of the Employee's initial
eligibility computation period, the Employee will be credited with two
Years of Service for eligibility purposes. For all other purposes, a
Year of Service shall be a Plan Year during which an Employee is credited
with at least 1,000 Hours of Service. In the event that a Plan Year is
less than 12 months, the 1,000 Hours of Service requirement will be
proportionately reduced.
The computation period for determining Years of Service and Breaks in
Service for purposes of Accrued Benefits shall be the Plan Year.
However, to the extent necessary to satisfy the minimum coverage
requirements of Section 410(b) or the minimum participation
requirements of Section 401(a)(26) of the Code for a Plan Year, an
Accrued Benefit shall also be provided to Participants in accordance
with the last paragraph of Section 1.01. When determining Years of
Service, an Employee's Service shall be interrupted only by a Break in
Service. In determining whether an Employee has completed one (1) Year
of Service, the following rules shall apply:
(a) If a Participant terminates Employment but is reemployed by the
Employer before a one (1) year Break in Service occurs, he or she
shall continue to participate in the Plan and earn credit for
Service in the same manner as if such termination had not
occurred.
(b) If a Participant terminates Employment but is reemployed by the
Employer after the 1 year Break in Service occurs, Service before
such break shall be taken into account, subject to the following:
In the case of a Participant who does not have any
nonforfeitable right to the Accrued Benefit derived from Employer
contributions, Service before a Break in Service will not be
taken into account in computing Service if the number of
consecutive one (1) year Breaks in Service equals or exceeds the
greater of five (5) or the aggregate number of Years of Service.
Such aggregate number of Years of Service will not include any
Years of Service previously disregarded pursuant to this
paragraph, such Participant will be treated as a new Employee for
eligibility purposes. If a Participant's Years of Service may
not be disregarded pursuant to this paragraph, such Participant
shall continue to participate in the Plan, or, if terminated,
shall participate immediately upon reemployment.
(c) A former Participant will become a Participant immediately upon
returning as an Employee of the Employer if he or she has a
nonforfeitable right to all or a portion of the Accrued Benefit
derived from Employer contributions at the time of termination
from Service.
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ARTICLE 2
ELIGIBILITY REQUIREMENTS
2.01 PARTICIPATION: An Employee will be eligible to become a Participant in
the Plan in accordance with the following provisions:
(a) Eligibility Requirements: All Employees who were Participants one
day prior to January 1, 1989 shall continue as Participants. All
other Employees who are in the eligible class of Employees shall
be eligible to participate in the Plan on the Entry Date
following the date on which they satisfy the following
eligibility requirements: (1) attainment of age 21, and (2)
completion of 1 Year of Service. The eligible class of Employees
shall include all Employees other than the following:
(1) Those Employees who are covered by a collective bargaining
agreement between the Employer and "Employee
Representatives", if retirement benefits were the subject
of good faith collective bargaining. For this purpose,
"Employee Representatives" does not include any
organization more than one-half of whose members are
Employees who are owners, officers, or executives of the
Employer; and (2) those who are non-resident aliens who do
not receive any earned income form the Employer which
constitutes income from sources within the United States;
(2) Those Employees who are Leased Employees; and
(3) Any Employee who is employed by a division of the Company
with respect to which the Plan has not been adopted.
(b) Participation By Members Of An Ineligible Class: In the event an
Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, such Employee shall
participate immediately if he or she has satisfied the minimum
age and service requirements and would have previously become a
Participant had he or she been a member of the eligible class.
Such Participant and any other Participant who becomes ineligible
to participant because he or she is no longer a member of an
eligible class of Employees shall be entitled to an Accrued
Benefit for the Plan Year only to the extent of Hours of Service
completed while a member of the eligible class of Employees. The
vested interest of a Participant who ceases to be a member of an
eligible class will continue to increase in accordance with the
vesting schedule in Article 8.
(c) Participation By A Former Plan Participant: A former Participant
shall again become a Participant immediately upon returning to
the employ of the Employer as a member of the eligible class of
Employees unless such former Participant's Years of Service may
be disregarded by reason of prior Breaks in Service as provided
in Section 1.75(b).
2.02 EMPLOYMENT RIGHTS: Participation in the Plan shall not confer upon a
Participant any employment rights, nor shall it interfere with the
Employer's right to terminate the Employment of any Employee at any
time.
2.03 SERVICE WITH CONTROLLED GROUPS: All Years of Service with other
members of a controlled group of corporations as defined in Code
Section 414(b), trades or businesses under common control
15
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(as defined in Code Section 414(c), or members of an affiliated service
group as defined in Code Section 414(m) shall be credited for purposes
of determining an Employee's eligibility to participate.
2.04 OWNER-EMPLOYEES: If this Plan provides contribution or benefits for
one or more Owner-Employees who control both the business for which
this Plan is established and one or more other trades or businesses,
this Plan and the plan established for such other trades or businesses
must, when looked at as a single plan, satisfy Code Sections 401(a) and
(d) for the Employees of this and all other such trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
Employees of the other trades or businesses must be included in a plan
which satisfies Code Sections 401(a) and (d) and provides contributions
and benefits not less favorable than provided for Owner-Employees under
this Plan. If an individual is covered as an Owner-Employee under the
plans of 2 or more trades or businesses which are not controlled and
the individual controls a trade or business, the contributions or
benefits of the Employees under the plan of the trade or business which
is controlled must be as favorable as those provided for him or her
under the most favorable plan of the trade or business which is not
controlled. For purposes of the preceding sentences, an
Owner-Employee, or 2 or more Owner-Employees, will be considered to
control a trade or business if the Owner-Employee, or 2 or more
Owner-Employees together (a) own the entire interest in an
unincorporated trade or business or (b) in the case of a partnership,
own more than 50% of either the capital interest or profits interest in
the partnership. For purposes of the preceding sentence, an
Owner-Employee or 2 or more Owner-Employees shall be treated as owning
any interest in a partnership which is owned, directly or indirectly,
by a partnership which such Owner-Employee, or such 2 or more
Owner-Employees are considered to control within the meaning of the
preceding sentence.
2.05 LEASED EMPLOYEES: Any leased Employed shall be treated as an Employee
of the recipient Employer, but contributions or benefits provided by
the leasing organization attributable to services performed for the
recipient Employer shall be treated as provided by the recipient
Employer.
2.06 CESSATION OF PARTICIPATION: Active participation shall cease upon a
Break In Service or on account of death, disability or retirement. Upon
the occurrence of any such event, the benefits of such Participant, if
any, shall be computed and distributed as hereinafter provided.
2.07 WAIVER OF PARTICIPATION: A Participant may elect in writing, subject
to the approval of the Employer and the written consent of his or her
Spouse, to waive participation in the Plan for any Plan Year. Any such
waiver shall be permitted only if it does not adversely affect the
Plan's tax qualified status. The election must be communicated in
writing to the Employer. An election to waive participation for a Plan
Year shall result in no Accrued Benefit being earned for that Plan
Year. If an Employee who has waived his or her right to become a
Participant subsequently elects to become a Participant, the period of
waiver will be considered as a Year(s) of Service under the Plan for
purposes of eligibility to participate, for determining the vested
interest in his or her Accrued Benefit, and for determining eligibility
for Normal Retirement Age or Early Retirement Age, if applicable.
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ARTICLE 3
EMPLOYER CONTRIBUTIONS
3.01 AMOUNT: The Employer intends to make contributions to the Plan in
such amounts as are actuarially required to fund Plan benefits. The
Employer shall pay contributions for a particular Plan Year at such
times as the Employer maybe decide. The valuation for actuarially
determining such amounts shall be based on the method of funding,
actuarial assumptions (as deemed reasonable by an enrolled actuary)
and, if applicable the period of amortization of any unfunded actuarial
liability, and shall reflect the adjustment for experience realized from
the investment of the Fund, mortality, turnover forfeitures, and any
dividends resulting from insurance, if applicable. The Employer does
not, however, guarantee either the making of the contributions
or the payment of the benefits under the Plan. The Employer
reserves the right to reduce, suspend or discontinue its
contributions for any reason at any time, provided, however, that
if the Plan is deemed to be terminated as a result of such
reduction, suspension or discontinuance, the provisions of
Article 14 shall become effective.
3.02 EXPENSES AND FEES: The Employer shall also be authorized to reimburse
the Fund for all expenses and fees incurred in the administration of
the Plan or Trust and paid out of the assets of the Fund, including,
but not limited to, fees for professional services, printing and
postage.
3.03 RESPONSIBILITY FOR CONTRIBUTIONS: Neither the Trustee nor the Sponsor
shall be required to determine if the Employer has made a contribution
or if the amount contributed is in accordance with the Code. The
Employer shall have sole responsibility in this regard.
3.04 RETURN OF CONTRIBUTIONS: Any contribution (without earnings) made by
the Employer because of a mistake of fact must be returned to the
Employer within one year of the contribution. In the event that the
Commissioner of Internal Revenue determines that the Plan is not
initially qualified under the Code, any contribution made incident to
that initial qualification by the Employer must be returned to the
Employer within one year after the date the initial qualification is
denied, but only if the application for determination is made by the
time prescribed by law for filing the Employer's return for the taxable
year in which such Plan was adopted or such later date as the Secretary
of the Treasury may prescribe. It is intended that each contribution
made to the Plan be a deductible contribution. All Employer
contributions are conditioned upon the deductibility of the
contribution under Section 404 of the Internal Revenue Code of 1986.
Any contribution which is determined to be non-deductible must also be
returned to the Employer within one year of the date of the
determination of its non-deductibility or the actual disallowance of
such deduction.
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ARTICLE 4
EMPLOYEE CONTRIBUTIONS, ROLLOVERS AND TRANSFERS
4.01 VOLUNTARY CONTRIBUTIONS: No Voluntary Contributions which are
accounted for separately are accepted under this Plan.
4.02 ROLLOVER CONTRIBUTIONS: With the consent of the Plan Administrator, a
Participant may make a Rollover Contribution to the Plan of all or any
part of an amount distributed or distributable to him or her from a
Qualified Deferred Compensation Plan, provided:
(a) Time For Transfer: The amount distributed to the Participant is
transferred to the Plan no later than the 60th day after such
distribution was received by the Participant.
(b) Rollover Amount Qualifies Under Lump Sum Rules: The distribution
from the Qualified Deferred Compensation Plan constituted the
Participant's entire interest in such plan and was distributed
within one taxable year of the Participant, either (1) on
account of termination of employment, plan termination, or in
the case of a profit sharing or stock bonus plan, a complete
discontinuance of contributions under such plan within meaning of
Section 402(a)(6)(A) of the Code, or (2) in one or more
distributions which constitute a qualified lump sum distribution
within the meaning of Code Section 402(e)(4)(A), determined
without reference to subparagraphs (B)and (H).
(c) Employee Contributions Are Not Included: The amount rolled over
does not include any amounts contributed by the Participant to
the Qualified Deferred Compensation Plan.
(d) Conduit IRA Rollovers Permitted: Such Rollover Contribution may
also be made through an Individual Retirement Account (IRA)
qualified under Section 408 of the Code where the IRA was used as
a conduit from a Qualified Deferred Compensation Plan and the
Rollover Contribution is made in accordance with the rules
provided under paragraphs (a) through (c). The Trustee shall not
be held responsible for determining the tax-free or tax-deferred
status of any Rollover Contributions made hereunder.
4.03 TRANSFER CONTRIBUTIONS: Subject to the consent of the Plan
Administrator, a Participant may also arrange for the direct transfer
of his or her benefit from a qualified Deferred Compensation Plan to
this Plan provided that the transfer is made in accordance with
sections 4.02(b) and 4.02(c) hereof. For accounting and record
keeping purposes, Transfer Contributions shall be identical to Rollover
Contribution. In the event the Plan Administrator accepts a Transfer
Contribution from a Plan in which the Employee was directing the
investments of his or her account, the Plan Administrator shall
continue to permit the Employee to direct his or her investments in
accordance with Section 4.10 with respect only to such Transfer
Contribution.
4.04 SEPARATE ACCOUNTS: The Employer shall establish a separate account for
each Participant showing the total value of his or her Voluntary
Contributions, Rollover Contributions or Transfer Contributions, and
each account shall be separated for bookkeeping purposes into the
following sub-accounts: (a) Rollover Contributions, (b) Transfer
Contributions, and (c) Voluntary Contributions.
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4.05 ADJUSTMENTS TO PARTICIPANT ACCOUNTS: As of each Valuation Date of the
Plan, the Employer shall adjust each account in accordance with the
following:
(a) Additions To Accounts: The Employer shall add to each account
the Participant's proportionate share of any investment earnings
and increase in the fair market value of the Fund since the last
Valuation Date.
(b) Deductions From Accounts: The Employer shall deduct from each
account (1) any withdrawals or payments made from the
Participant's account since the last Valuation Date, and (2) the
Participant's proportionate share of any decrease in the fair
market value of the Fund since the last Valuation Date.
(c) Manner Of Adjustment: Subject to Section 4.10, a Participant's
share of investment earnings and any increase or decrease in the
Fund's fair market value shall be based on the proportionate
value of all active accounts (other than accounts with segregated
investments) as of the last Valuation Date less withdrawals since
the last Valuation Date. Beginning with the Plan Year which
begins in 1989, all Rollover and Transfer Contributions will be
credited with an allocation of the actual investment earnings and
gains and losses from the actual date of deposit of each such
contribution till the end of the valuation period, or a
proportionate share of the investment earnings, gains and losses
for the entire year. All previous contributions will continue to
accrue earnings and losses as specified above. Accounts with
segregated investments shall receive only the income or loss on
such segregated investments.
4.06 NONFORFEITABILITY: A Participant shall always have a 100% vested and
nonforfeitable interest in his or her Rollover Contributions and
Transfer Contributions plus the earnings thereon. No suspension or
forfeiture of Employer related benefit accruals (including any minimum
Top-Heavy accruals made under Section 13.02 hereof) will occur solely
as a result of an Employee's withdrawal of any Rollover Contributions
or Transfer Contributions.
4.07 IN-SERVICE WITHDRAWALS: A Participant may withdraw all or any part of
the fair market value of his or her Rollover Contributions or Transfer
Contributions upon written request to the Plan Administrator, provided
reasonable advance notice is provided, as follows:
(a) Future Accruals: Such distributions shall not be eligible for
redeposit to the Fund. A withdrawal of Rollover Contributions or
Transfer Contributions under this paragraph shall not prohibit
such Participant from accruing any future benefit from Employer
contributions.
(b) Spousal Consent: A request to withdraw amounts pursuant to
this paragraph must, if applicable, be consented to by the
Participant's Spouse. The consent shall comply with the
requirements of Section 5.07 relating to immediate distributions.
Such request shall include the Participant's address, social
security number, birth date, and amount of the withdrawal.
4.08 WITHDRAWAL ON TERMINATION OF EMPLOYMENT: A Participant may withdraw
the fair market value of his or her account accrued from Rollover
Contributions or Transfer Contributions at any time following
termination of employment. However, such benefit must be paid in a
lump sum no later than the time prescribed under Section 5.07 hereof.
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4.09 WITHDRAWAL ON DEATH: Subject to the Joint and Survivor Annuity
Requirements set forth in Article 7, the fair market value of a
Participant's account attributable to Rollover Contributions or Transfer
Contributions may be paid to his or her named Beneficiary in a lump
sum as soon as practical following the Participant's death, but in any
event no later than December 31st of the calendar year containing the
5th anniversary of the Participant's death. If the amount is not so
withdrawn, it will be paid in the same manner as the Participant's
benefits under the Plan.
4.10 EMPLOYEE INVESTMENT DIRECTION: Subject to Section 4.03, if agreed to by
the Trustees and approved by the Sponsor, Participants shall be given
the option to direct the investment of all or a portion of their
Rollover Contributions and/or Transfer Contributions into a directed,
or segregated investment selected by the Participant; or among
alternative investment funds established as part of the overall Fund.
Such alternative investment funds shall be under the full control of the
management of the Trustees. Alternatively, if investments outside the
Trustees' control are allowed, Participants may not direct that
investments be made in collectibles, other than U.S. Government gold
and silver coins. In this connection, a Participant's right to direct
the investment of any Rollover and/or Transfer Contributions shall
apply only to the selection of the desired fund. The following rules
shall apply to the administration of such funds and to the handling of
Participants' investment directions:
(a) Investment Form: Eligible Participants shall complete an
investment designation form stating the percentage to be invested in
or transferred to or from the available funds.
(b) Changes in Elections: A Participant may change his or her
investment election by filing a new investment designation form
with the Sponsor. Such change shall be effective no later than the
first day of the next Election Period. Election Periods shall be
established at the discretion of the Sponsor but in any event
shall occur no less frequently than once in every 12-month period
or, at the discretion of the Sponsor and the Trustees, once in
every 3 -month or 6-month period or at such other more frequent
time which is uniformly available as determined by the Sponsor and
the Trustees.
(c) Transfers Between Funds: A Participant may elect to transfer all
or part of his or her account balance in one or more of the
investment funds from one investment fund to another by filing an
investment designation form with the Sponsor within a reasonable
administrative period prior to the next Election Period. The funds
shall be transferred by the Trustees as soon as practical prior to
or by the start of the new Election Period.
(d) Administrator Responsibility: The Plan Administrator shall be
responsible when transmitting Employee and Employer contributions
to show the dollar amount to be credited to each investment fund
for each Participant.
(e) No Administrator Liability: Except as otherwise provided herein,
neither the Trustees, nor the Employer, nor any Plan fiduciary
shall be liable to the Participant or any of his or her
Beneficiaries for any loss resulting from action taken at the
direction of the Participant.
(f) Adoption Of Procedures: All investment designations by Plan
participants are to be made in accordance with such procedures as
the Sponsor may adopt. At the discretion of the Sponsor and the
Trustees, such procedures shall permit sufficient selection among
investment alternatives to satisfy the provisions of Department of
Labor Regulations 2550.404(c)-1.
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ARTICLE 5
RETIREMENT BENEFITS
5.01 BENEFIT AT NORMAL RETIREMENT: Subject to Articles 9 and 13, each
Participant shall be eligible to retire upon his or her Normal
Retirement Date after attaining his or her Normal Retirement Age and
shall thereafter be entitled to receive a monthly Accrued Benefit
payable as a Normal Retirement Benefit, such benefit to be determined
in accordance with the following provisions:
(a) Determination Of Benefit: Each Participant's monthly Accrued
Benefit at Normal Retirement Age shall be equal to 1/12th of the
amount in (1) and (2) as modified by the amount in (3), as follows:
(1) 0.6667% of the Participant's Average Annual Compensation,
multiplied by his or her Years of Credited Service at retirement or
other termination of employment to a maximum of 30 years: (2) plus
0.65% of the Participant's Average Annual Compensation in excess of
the Participant's Integration Level, multiplied by his or her Years
of Credited Service at retirement or other termination of
employment to a maximum of 30 years; (3) but in no event will the
total benefit on a monthly basis be less than $20. As used herein,
the term Integration Level shall mean $10,000.
(b) Reduction in Excess Percentage: The excess percentage in paragraph
(a)(2) above may not exceed the lesser of 0.75% of the
Participant's Average Annual Compensation in excess of Covered
Compensation or if benefits commence prior to a Participant's
Social Security Retirement Age, the factors set forth in the table
which follows this paragraph, based on the Participant's Normal
Retirement Age or nearest age as of benefit commencement. For
purposes of the table, the headings "SSRA 67", "SSRA 66" and "SSRA
65" refer to the Participant's Social Security Retirement Age.
Further, the factors set forth in the table relating to age 50
through 54 are based on 1971 GAM 5% (male unisex).
SSRA 67 SSRA 66 SSRA 65 Commencement Age
0.750 0.750 0.750 67
0.700 0.750 0.750 66
0.650 0.700 0.750 65
0.600 0.650 0.700 64
0.550 0.600 0.650 63
0.500 0.550 0.600 62
0.475 0.500 0.550 61
0.450 0.475 0.500 60
0.425 0.450 0.475 59
0.400 0.425 0.450 58
0.375 0.400 0.425 57
0.344 0.375 0.400 56
0.316 0.344 0.375 55
0.295 0.321 0.350 54
0.275 0.300 0.327 53
0.257 0.280 0.306 52
0.241 0.262 0.286 51
0.225 0.245 0.268 50
(c) Definition Of Covered Compensation: As used herein, the term
Covered Compensation
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shall mean the average (without indexing) of the Taxable Wage
Bases in effect for each calendar year during the 35-year period
ending with the last day of the calendar year in which the
Participant attains (or will attain) Social Security Retirement
Age as defined in Code Section 415(b)(8). A Participant's Covered
Compensation shall be automatically adjusted each Plan Year. In
determining a Participant's Covered Compensation for a Plan Year,
the Taxable Wage Base for the current Plan Year and all
subsequent Plan Years shall be assumed to be the same as the
Taxable Wage Base in effect at the beginning of the Plan Year for
which the determination is being made. Covered Compensation for
Plan Year after the 35-year period is the Participant's Covered
Compensation for the Plan Year during which the Participant
attained Social Security Retirement Age. For a Plan Year before
the 35-year period Covered Compensation is the Taxable Wage Base
in effect as of the beginning of the Plan Year. A Participant's
Accrued Benefit may not be reduced on account of any change in
such Participant's Covered Compensation. The term Taxable Wage
Base shall mean the maximum amount of earnings which may be
considered wages for such Plan Year under the Social Security Act
(Code Section 230).
(d) Minimum Benefit: Each Participant's monthly benefit shall not be
less than the largest periodic benefit that would have been
payable upon separation from Service at or prior to Normal
Retirement Age under the Plan exclusive of Social Security
supplements, premiums on disability or term insurance, and the
value of Disability benefits not in excess of the Normal
Retirement Benefit. For purposes of comparing periodic benefits
in the same form, commencing prior to and at Normal Retirement
Age, the greater benefit is determined by converting the benefit
payable prior to Normal Retirement Age into the same form of
annuity benefit payable at Normal Retirement Age and comparing
the amount of such annuity payments. Benefits shall be payable in
the form set forth in Section 5.08 or the Actuarial Equivalent
thereof in one of the optional forms of payment described in
Section 5.09 hereof.
5.02 LATE RETIREMENT BENEFIT: In the event a Participant elects to work
beyond his or her Normal Retirement Age, the amount of Accrued Benefit
which such Participant is entitled to receive shall be determined as of
his or her Normal Retirement Age, and recomputed on each annual
anniversary thereof, in accordance with the following provisions:
(a) Determination: The benefit to which the Participant is entitled
will be the greater of (1) the benefit to which he or she is
entitled based upon his Average Annual Compensation and completed
Years of Credited Service as of each such point in time, or (2)
the current Actuarial Equivalent of the Accrued Benefit
determined as of the Normal Retirement Age. Effective for the
first Plan Year which begins in 1988, such adjustment shall be
inclusive of any benefit adjustments in prior years in
subparagraph (1) hereof on the basis of the Plan as in effect on
the Participant's Normal Retirement Age and each annual
anniversary thereof.
(b) Coordination With Other Provisions: Notwithstanding paragraph
(a) above, (1) in the case of a Top-Heavy Plan, the benefit shall
not be smaller than the minimum benefit to which the Employee is
entitled under Section 13.02; and (2) in determining the amount
of Accrued Benefit to which a Participant is entitled, the
Actuarial Equivalent value of amounts previously distributed or
segregated shall be taken into consideration.
5.03 DISABILITY RETIREMENT BENEFIT:
(a) Total and Permanent Disability: Participant who is entitled to a
Vested Accrued Benefit and
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who has completed at least ten Years of Service and who shall be
found to have become totally and permanently disabled while an
Employee, as determined by a physician satisfactory to the
Committee, to such a degree that he or she is unable to perform
his or her duties for any Employer, shall be granted a Disability
Pension in accordance with rules established by and equitably
administered by the Committee. Any Participant who has satisfied
the requirements for Early Retirement shall be entitled to a
benefit under Section 5.05 or under this Section 5.03, as he or
she may elect.
(b) Commencement Date: The Disability Pension normally will commence
as of the first day of the month coinciding with or next
following the Committee's determination of such disability and
will be paid in equal monthly installments while such total and
permanent disability continues.
(c) Amount of Disability Pension:
(1) Single Employee: If the Participant is then unmarried (or
is married and has elected to waive the Spouse's Survivor
Pension) and is ineligible for disability benefits under
Title II of the Federal Social Security Act, the
Participant's Accrued Benefit, based on his or her Years of
Credited Service up to the first day of the month
coinciding with or next following his or her date of
disability, multiplied by the applicable Early Retirement
Reduction Factor. If such Participant is eligible for
disability benefits under Title II of the Federal Social
Security Act, his or her Accrued Benefit, based on his or
her Years of Credited Service up to the first day of the
month coinciding with or next following his or her date of
disability, actuarially reduced for each year that his or
her Annuity Starting Date precedes his or her attainment of
Age 50.
(2) Married Employee: If the Participant is then married (and
the Spouse's Survivor Pension has not been waived), the
benefit shall be as described in (1) above multiplied by the
applicable Spouse's Pension Conversion Factor.
(d) Conditions:
(1) Except as otherwise provided, the determination of the
Committee, after receiving medical advice, as to whether or
not a Participant is or continues to be totally and
permanently disabled shall be final and conclusive. Every
Disabled Participant shall submit to examination as often
as the Committee shall require. A Disabled Participant
shall accrue no additional Years of Service during the
period for which he or she is receiving a Disability
Pension.
(2) The Participant's Disability Pension will be paid on the
assumption that he or she is not eligible for disability
benefits under Title II of the Federal Social Security Act
and shall be adjusted retroactively upon a determination by
the Social Security Administration that he or she is
eligible for such benefits to the later of the date the
benefit commenced or the first day of the month coincident
with or next following the date Social Security determines
to be the date of disability. For purposes hereof, the
phrase disability benefits under Title II of the Federal
Social Security Act shall apply only to such disability
benefits under such Act that are attributable to the same
illness or injury which gave rise to eligibility for a
Disability Pension under this Plan.
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If the Social Security Administration determines that a
Participant receiving a Disability Pension under this Plan, and
who was receiving disability benefits under Title II of the
Federal Social Security Act, is not longer eligible for such
Social Security disability benefits, the benefit payable under
this Plan to such Participant shall be recalculated pursuant
to Section 5.03(c) above.
Such recalculation shall occur when the final determination by
the Social Security Administration concerning the ineligibility
for disability benefits under Title II of the Federal Social
Security Act has been made. The effective date of such
recalculation shall be the first day of the month following the
month in which the last Social Security disability benefit was
received.
(3) If any Disabled Participant returns to work as an Employee,
his or her Disability Pension shall cease, he or she again
shall become a Participant of this Plan, and any Years of
Credited Service and years of service standing to his or her
credit when he or she became disabled shall be restored to him
or her. Any Disabled Participant who ceases to be totally and
permanently disabled prior to his or her Normal Retirement
Date and who fails to return to work for an Employer hereunder
shall receive no further benefit of any kind under this Plan
except to the extent vested.
(4) A Disabled Participant shall not have the right to elect any of
the options provided by Exhibit A, and any such election
previously made shall be null and void.
5.04 DEFINITE BENEFIT REQUIREMENTS: The amount and Actuarial Equivalent of
any benefit under the terms of this Plan will be be the Actuarial
Equivalent of the Normal Retirement Benefit. However, the preceding
sentence shall not apply to the extent it would cause the Plan to fail
to satisfy the requirements of Article 9.
5.05 EARLY RETIREMENT BENEFIT: Any Participant who meets the age and
Service requirements for Early Retirement shall be eligible to retire
and to receive the Actuarial Equivalent of his or her Accrued Benefit.
If a Participant separates from Service before satisfying the age
requirement for Early Retirement, but has satisfied the Service
requirement, the Participant will be entitled to elect an Early
Retirement Benefit upon satisfaction of such age requirement.
5.06 CASH-OUT OF RETIREMENT BENEFITS: If a Participant terminates Service,
and is 100% vested and eligible for Normal Early, or Disability
Retirement and the Actuarial Equivalent of the Participant's vested
Accrued Benefit derived from Employer and Employee contributions is
not greater than $3,500, the Participant will receive a lump sum
distribution of the Actuarial Equivalent of the Accrued Benefit as soon
as administratively feasible, but not later than the end of the second
Plan Year after the Participant ceases to be an Employee.
5.07 IMMEDIATELY DISTRIBUTABLE BENEFITS: If the Actuarial Equivalent of a
Participant's vested Accrued Benefit derived from Employer and Employee
contributions exceeds $3,500 or at the time of any prior distribution
it exceeded $3,500 or the Actuarial Equivalent of any prior
distribution when added to the Actuarial Equivalent of the
Participant's present vested Accrued Benefit exceeds $3,500 and the
Accrued Benefit is immediately distributable in any form, the
Participant and his Spouse (or where either the Participant or the
Spouse has died, the Participant's survivor or Beneficiary) must
consent to any distribution of such Accrued Benefit, in accordance with
the following provisions:
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(a) Time Period For Consent: The consent of the Participant and the
Participant's Spouse shall be obtained in writing within the
90-day period ending on the Annuity Starting Date.
(b) Notification Requirements: The Plan Administrator shall
notify the Participant and the Participant's Spouse of the
right to defer any distribution until the Participant's Early
or Normal Retirement Age, or to receive the distribution in
accordance with Article 7. Such notification shall include a
general description of the material features, and an
explanation of the relative values of the optional forms of
benefit available under the Plan in a manner that would
satisfy the notice requirements of Code Section 417(a)(3), and
shall be provided no less than 30 days and no more than 90
days prior to the Annuity Starting Date.
(c) Only Participant Must Consent To Joint And Survivor Annuity:
Notwithstanding the foregoing, only the Participant need
consent to the commencement of a distribution in the form of a
Qualified Joint and Survivor Annuity while the Accrued
Benefits is immediately distributable. Neither the consent of
the Participant nor the Participant's Spouse shall be required
to the extent that a distribution is required to satisfy Code
Section 401(a)(9).
(d) When Is A Benefit Immediately Distributable: An Accrued
Benefit is immediately distributable if any part of the Accrued
Benefit could be distributed to the Participant (or Surviving
Spouse) before the Participant attains (or would have attained
if not deceased) the later of Normal Retirement Age or age 62.
5.08 FORM OF PAYMENT: The payment of the Normal Retirement Benefit or
any other distributions of benefits shall be subject to the Joint
And Survivor Annuity Requirements of Article 7. The Normal
Retirement Benefit form of payment, as so limited by Article 7
will be automatic unless the Participants files a written
application with the Employer prior to actual retirement or
benefit commencement requesting an optional form of payment.
5.09 OPTIONAL FORMS OF PAYMENT: In lieu of the Normal Retirement
Benefit, a Participant who is eligible for Normal or Early
Retirement may, subject to the requirements of Article 7, make
written application to the Plan Administrator requesting one of the
optional forms of payment which are set forth in Exhibit A
attached hereto and by reference made a part hereof. Each optional
form of payment (1) shall be the Actuarial Equivalent of the
Normal Retirement Benefit, and (2) shall be made directly from the
Fund or, if directed by the Plan Administrator, through the
purchase of a paid-up nontransferable annuity contract. No optional
form which is made available to a Participant may be eliminated in
future Plan amendments, with respect to Accrued Benefits earned
prior to the later of the date the amendment is adopted or
effective or is communicated to Participants.
5.10 COMMENCEMENT OF BENEFITS: Subject to the required commencement of
benefits in Section 6.02, unless a Participant elects otherwise in
writing, distribution of benefits will begin no later than the
60th day (or such other reasonable period as is administratively
feasible) after the close of the Plan Year in which the later of
the following occurs: (a) the Participant attains age 65 (or, if
earlier, Normal (or Early) Retirement Age provided the Participant
completed any Service requirement for Early Retirement Age as of
his or her termination date) (b) the 10th anniversary of the year
in which the Participant commenced participation in the Plan, or
(c) the Participant terminates Service with the Employer. However,
notwithstanding the foregoing, the failure of a Participant and
Spouse to consent to a distribution while a benefit is immediately
distributable within the meaning of Section 5.07 of the Plan,
shall be deemed an election to defer commencement of payment of
any benefit.
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5.11 IN-SERVICE WITHDRAWALS NOT PERMITTED: Benefits accrued from Employer
contributions may not commence to be paid prior to Normal Retirement
Age; or retirement upon Normal or Early Retirement Age, Disability
retirement, termination of employment, Plan termination, or death.
5.12 CLAIMS PROCEDURES: Upon retirement, death, or other termination of
employment, the Participant or representative of such Participant may
make application to the Plan Administrator requesting payment of
benefits due and the manner of payment, in accordance with the
following:
(a) Automatic Payment If No Application Is Made: If no application
for benefits is made, the Plan Administrator shall automatically
pay any vested benefit due hereunder as a Normal Retirement
Benefit (subject to Article 7) no later than the time prescribed
in Section 5.10.
(b) Denial of Claim: If an application for benefits is made, the
Plan Administrator shall accept, reject, or modify such request
and shall notify the Participant in writing setting forth the
response of the Plan Administrator and in the case of a denial or
modification the Plan Administrator shall (1) state the specific
reason or reasons for the denial, (2) provide specific reference
to pertinent Plan provisions on which the denial is based, (3)
provide a description of any additional material or information
necessary for the Participant or his representative to perfect
the claim and an explanation of why such material or information
is necessary, and (4) explain the Plan's claim review procedure
as contained herein.
(c) Review Procedure: In the event the request is rejected or
modified, the Participant or his representative may within 60
days following receipt by the Participant or representative of
such rejection or modification, submit a written request for
review by the Plan Administrator of its initial decision. Within
60 days following such request for review, the Plan Administrator
shall render its final decision in writing to the Participant or
representative stating specific reasons for such decision. If the
Participant or representative is not satisfied with the Plan
Administrator's final decision, the Participant or representative
can institute an action in a federal court of competent
jurisdiction; for this purpose, process would be served on the
Plan Administrator.
5.13 DIRECT ROLLOVERS: This Section 5.13 applies to distributions made on
or after January 1, 1993. Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a distributee's election under
this Article, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
(a) Eligible Rollover Distribution: An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and his or her designated
Beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under
Code Section 401(a)(9); and the portion of any distribution that
is not includible in gross income.
(b) Eligible Retirement Plan: An eligible retirement plan is an
individual retirement account described in Code Section 408(a),
an individual retirement annuity described in Code Section
408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in
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Code Section 401(a), that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible
rollover distribution to the Surviving Spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(c) Distributee: A distributee includes a Participant entitled to
benefits, a Surviving Spouse and the Participant's Spouse or
former Spouse who is an alternate payee under a Qualified
Domestic Relations Order, as defined in Code Section 414(p).
(d) Direct Rollover: A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee.
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ARTICLE 6
DISTRIBUTION REQUIREMENTS
6.01 PAYMENT SUBJECT TO JOINT AND SURVIVOR PROVISIONS: Any benefit payable
under this Article is subject to the Joint and Survivor Annuity
provisions set forth in Article 7. The requirements of this Article
shall apply to any distribution of a Participant's interest and will
take precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this Article apply to calendar
years beginning after 1984.
6.02 MINIMUM DISTRIBUTION REQUIREMENTS: All distributions required under
this Article shall be determined and made in accordance with the
minimum distribution requirements of Code Section 401(a)(9) and the
regulations thereunder, including the minimum distribution incidental
benefit rules found at Regulation Section 1.401(a)(9)-2. The entire
interest of a Participant must be distributed or begin to be
distributed no later than the Participant's Required Beginning Date.
Life expectancy and joint and last survivor life expectancy are
computed by using the expected return multiples found in Tables V and
VI of Regulation Section 1.72-9.
6.03 LIMIT ON DISTRIBUTION PERIODS: As of the First Distribution Calendar
Year, distributions not made in a single-sum may not be made over a
period longer than one of the following periods (or a combination
thereof): (a) the life of the Participant; (b) the life of the
Participant and a Beneficiary; (c) a period certain not extending
beyond the life expectancy of the Participant; or (d) a period certain
not extending beyond the joint and last survivor expectancy of the
Participant and a Beneficiary.
6.04 DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR: If the
Participant's interest in the Plan is to be in the form of an annuity
or periodic distributions under the Plan, payments shall satisfy the
following requirements:
(a) Payments Must Be Periodic: The annuity or periodic distributions
must be paid in periodic payments made at intervals not
longer than one year.
(b) Life Expectancy Requirements: The distribution period must be
over a life (or lives) or over a period certain not longer than a
life expectancy (or joint life and last survivor expectancy)
described in Code Sections 401(a)(9)(A)(ii) or 401(a)(9)(b)(iii)
whichever is applicable; and the life expectancy (or joint life and
last survivor expectancy) for purposes of determining the period
certain shall be determined without recalculation of life
expectancy.
(c) Period Certain Payments: Once payments have begun over a period
certain, the period certain may not be lengthened even if it is
shorter than the maximum permitted.
(d) Increases In Payments: Payments must be either determined on a
nonincreasing basis or increase only as follows: (1) with any
percentage increase in a specified and generally recognized
cost-of-living index; (2) to the extent of the reduction to the
amount of the Participant's payments to provide for a survivor
benefit upon death, but only if the Beneficiary whose life was
being used to determine the distribution period described in
Section 6.03 above dies and the payments continue otherwise in
accordance with that Section over the life of the Participant;
(3) to provide cash refunds of Employee contributions upon the
Participant's death; or (4) because of an increase in benefits
under the Plan.
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(e) Life Annuity Payments: If the annuity or periodic distribution is
in the form of a life annuity (or a life annuity with a period
certain not exceeding 20 years), the amount which must be
distributed on or before the Participant's Required Beginning
Date (or, in the case of distributions after the death of the
Participant, the date distributions are required to begin
pursuant to Section 6.07) shall be the payment which is required
for one payment interval. The second payment need not be made
until the end of the next payment interval even if that payment
interval ends in the next calendar year. Payment intervals are
the periods for which payments are received, e.g., bimonthly,
monthly, semi-annually, or annually.
(f) Payments With No Life Contingency: If the annuity or periodic
distribution is a period certain annuity or installment payments
without a life contingency (or is a life annuity with a period
certain exceeding 20 years) periodic payments for each
distribution calendar year shall be combined and treated as an
annual amount. The amount which must be distributed by the
Participant's Required Beginning Date (or, in the case of
distributions after the death of the Participant, the date
distributions are required to begin pursuant to Section 6.07) is
the annual amount for the First Distribution Calendar Year. The
annual amount for other Distribution Calendar Years, including
the annual amount for the calendar year in which the
Participant's Required Beginning Date (or the date distributions
are required to begin pursuant to Section 6.07 below) occurs,
must be distributed on or before December 31 of the calendar year
for which the distribution is required.
(g) Post-1989 Annuities: Annuities purchased after 1988, are subject
to the following additional conditions: (1) unless the
Participant's Spouse is the Beneficiary, if the Participant's
interest is being distributed in the form of a period certain
annuity without a life contingency, the period certain as of the
beginning of the First Distribution Calendar Year may not exceed
the applicable period determined using the table set forth in Q&A
A-5 of Regulations Section 1.401(a)(9)-2; and (2) if the
Participant's interest is being distributed in the form of a
Joint and Survivor Annuity for the joint lives of the Participant
and a nonspouse Beneficiary, annuity payments to be made on or
after the Participant's Required Beginning Date to the
Beneficiary after the Participant's death must not at any time
exceed the applicable percentage of the annuity payment for such
period that would have been payable to the Participant using the
table set forth in Q&A A-6 of Regulation Section 1.401(a)(9)-2.
(h) Transitional Rule: If payments under an annuity which complies
with sub-paragraph (a) above begin prior to 1989, the minimum
distribution requirements in effect as of July 27, 1987, shall
apply to distributions form this Plan, regardless of whether the
annuity form of payment is irrevocable. This transitional rule
also applies to deferred annuity contracts distributed to or
owned by the Participant prior to 1989, unless additional
contributions are made under the Plan by the Employer with
respect to such contract.
(i) Distribution Of Additional Accrued Benefit: If the form of
distribution is an annuity made in accordance with this Section
6.04, any additional benefits accruing to the Participant after
his or her Required Beginning Date shall be distributed as a
separate and identifiable component of the annuity beginning with
the first payment interval ending in the calendar year
immediately following the calendar year in which such amount
accrues.
(j) Distribution Of Individual Account: Any part of the Participant's
interest which is in the form of an individual account shall be
distributed in a manner satisfying the requirements of Code
Section 401(a)(9) and the regulations thereunder.
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6.05 REQUIRED BEGINNING DATE: Distribution of a Participant's benefits will
begin on the Required Beginning Date in accordance with the following
provisions:
(a) General Rule: The Required Beginning Date of a Participant is
the first day of April of the calendar year following the calendar
year in which the Participant attains age 70 1/2.
(b) Transitional Rules: The Required Beginning Date of a Participant
who is not a 5-percent owner, who attained age 70 1/2 during
1988 and who had not retired as of 1989, is April 1 1990. The
Required Beginning Date of a Participant who attained age 70 1/2
before 1988, shall be determined in accordance with the
following: (1) the Required Beginning Date of a Participant who
is not a 5-percent owner the first day of April of the
calendar year following the calendar year in which the later of
retirement or attainment of age 70 1/2 occurs; and (2) the
Required Beginning Date of a Participant who is a 5-percent
owner during any year beginning after 1979, is the first day of
April following the later of (i) the calendar year in which the
Participant attains age 70 1/2, or (ii) the earlier of the
calendar year with or within which ends the Plan Year in which
the Participant becomes a 5-percent owner, or the calendar year
in which the Participant retires.
(c) Who Is Treated As A 5-Percent Owner: A Participant is treated
as a 5-percent owner for purposes of this paragraph if such
Participant is a 5-percent owner as defined in Code Section
416(i) (determined in accordance with Code Section 416 but
without regard to whether the Plan is Top-Heavy) at any time
during the Plan Year ending with or within calendar year in
which such owner attains age 66 1/2 or any subsequent Plan Year.
(d) Distributions Must Continue Once Begun: Once distributions have
begun to a 5-percent owner under this Section, they must
continue to be distributed, even if the Participant ceases to be
a 5-percent owner in a subsequent year.
6.06 DESIGNATION OF BENEFICIARY FOR DEATH BENEFIT: Each Participant shall
file a written designation of Beneficiary with the Plan Administrator
upon qualifying for participation in the Plan. If the Participant also
is covered by an insurance contract, the Participant's designated
Beneficiary shall be entitled to any death benefits payable under the
terms of such insurance contact.
6.07 DEATH PRIOR TO COMMENCEMENT OF BENEFITS: If a Participant dies after
distribution of his or her benefits has commenced, the remaining
portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Participant's death.
6.08 DEATH PRIOR TO COMMENCEMENT OF BENEFITS: If a Participant dies before
distribution of his or her benefits commences, the Participant's entire
death benefit, if any, will be distributed no later than the December
31 of the calendar year containing the 5th anniversary of the
Participant's death except to the extent that an election is made to
receive distributions in accordance with paragraph (a) or paragraph (b)
below:
(a) Distributions Made To Participant's Beneficiary: If any portion
of the Participant's interest is payable to a Beneficiary,
distributions may be made in substantially equal installments over
the life or over a period certain not greater than the life
expectancy of the Beneficiary commencing on or before December
31 of the calendar year immediately following the calendar year
in which the Participant died.
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(b) Distributions Made To Participant's Surviving Spouse: If the
Beneficiary is the Participant's Surviving Spouse, the date
distributions are required to begin in accordance with (a) above
shall be the later of (1) December 31 of the calendar year
immediately following the calendar year in which the Participant
died, and (2) December 31 of the calendar year in which the
Participant would have attained at 70 1/2. If the Spouse dies
before payments begin, subsequent distributions shall be made
pursuant to this Section 6.08 with the exception of paragraph
(b) as if the Spouse had been the Participant.
6.09 CALCULATION OF LIFE EXPECTANCY: If payout is through other than the
purchase of an immediate annuity, the applicable calendar year shall be
the First Distribution Calendar Year and, if life expectancy is
being recalculated, each succeeding calendar year. If annuity payments
commence before the Required Beginning Date, the applicable calendar
year is the year such payments commence. If distribution is in the
form of an immediate annuity purchased after the Participants's death
with the Participant's remaining interest, the applicable calendar year
is the year of purchase. For purposes of Section 6.08, payments will
be calculated by use of the return multiples specified in Section
1.72-9 of the Income Tax Regulations. Life expectancy of a Surviving
Spouse may be recalculated annually, however, in the case of any other
designated Beneficiary, such life expectancy will be calculated at the
time payment first commences and payments for any 12-consecutive month
period will be based on such life expectancy minus the number of whole
years passed since distribution first commenced.
6.10 BENEFICIARY ELECTION OF DISTRIBUTION METHOD: If the Participant has not
made an election pursuant to Section 6.08 by the time of his or her
death, the Participant's Beneficiary must elect the method of
distribution no later than the earlier of (a) December 31 of the
calendar year in which distributions would be required to begin under
said Section, or (b) December 31 of the calendar year which contains
the fifth anniversary of the date of death of the Participant. If the
Participant has no Beneficiary, or if the Beneficiary does not elect a
method of distribution, distribution of the Participant's entire interest
must be completed by December 31 of the calendar year containing the
fifth anniversary of the Participant's death.
6.11 PAYMENTS TO A CHILD OF A PARTICIPANT: For purpose of this Article, any
amount paid to a child of the Participant will be treated as if it had
been paid to the Surviving Spouse if the amount become payable to the
Surviving Spouse when the child reaches the age of majority.
6.12 DEEMED DISTRIBUTION STARTING DATE: For purposes of this Article 6,
distribution of a Participant's interest is considered to begin on the
Participant's Required Beginning Date (or, if Section 6.08 above is
applicable, the date distribution is required to begin to the Surviving
Spouse pursuant to said Section). If distribution in the form of an
annuity described in Section 6.04(a) above irrevocably commences to the
Participant before the Required Beginning Date, the date distribution is
considered to begin is the date distribution actually commences.
6.13 TRANSITIONAL RULE: Notwithstanding the other requirements of this
Article and subject to the requirements of Article 7, Joint and Survivor
Annuity Requirements, distribution on behalf of any Participant,
including a 5-percent owner, may be made in accordance with all of the
following requirements (regardless of when such distribution commences):
(a) Basic Requirements For Distributions: (1) The distribution by
the Trust is one which would not have disqualified such Trust under
Code Section 401(a)(9) as in effect prior to amendment by the
Deficit Reduction Act of 1984; (2) the distribution is in
accordance with
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a method of distribution designated by the Participant whose
interest in the Trust is being distributed or, if the Participant
is deceased, by a Beneficiary of such Participant; (3) such
designation was in writing, was signed by the Participant or the
Beneficiary, and was made before 1984; (4) the Participant had
accrued a benefit under the Plan as of December 31, 1983; and (5)
the method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and
in the case of any distribution upon the Participant's death, the
Beneficiaries of the Participant listed in order of priority.
(b) Distributions Upon Death: A distribution upon death will not be
covered by this transitional rule unless the information in the
designation contains the required information described above
with respect to the distributions to be made upon the death of
the Participant.
(c) Distribution Made Before January 1, 1984: For any distribution
which commences before 1984, but continues after 1983, the
Participant, or the Beneficiary to whom such distribution is
being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the
method of distribution was specified in writing and the
distribution satisfies the requirements in paragraph (a)(1) and
paragraph (a)(5).
(d) Revocation of Designation: If a designation is revoked any
subsequent distribution must satisfy the requirements of Code
Section 401(a)(9) and the regulations thereunder. If a
designation is revoked subsequent to the date distributions are
required to begin, the Trust must distribute by the end of the
calendar year following the calendar year in which the revocation
occurs the total amount not yet distributed which would have
been required to have been distributed to satisfy Code Section
401(a)(9) and the regulations thereunder, but for the Tax Equity
and Fiscal Responsibility Act Section 242(b)(2) election. For
calendar years beginning after 1988, such distributions must meet
the minimum distribution incidental benefit requirements in
Regulation Section 1.401(a)(9)-2. Any changes in the designation
will be considered to be a revocation of the designation.
However the mere substitution or addition of another Beneficiary
(one not named in the designation) under the designation will not
be considered to be a revocation of the designation, so long as
such substitution or addition does not alter the period over
which distributions are to be made under the designation,
directly or indirectly (for example, by altering the relevant
measuring life). In the case in which an amount is transferred
or rolled over from one plan to another plan, the rules in Q&A
J-21 and Q&A J-3 of Regulation Section 1.401(a)(9)-1 shall apply.
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ARTICLE 7
JOINT AND SURVIVOR AND DEATH BENEFIT REQUIREMENTS
7.01 PRECEDENCE OVER CONFLICTING PROVISIONS: The provisions of this Article
shall take precedence over any conflicting provision in this Plan.
7.02 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY: Unless an optional
form of benefit is selected pursuant to a Qualified Election within the
90-day period ending on the Annuity Starting Date, a married
Participant's vested Accrued Benefit will be paid in the form of a
Qualified Joint and Survivor Annuity, and an unmarried Participant's
vested Accrued Benefit will be paid in the form of the Normal
Retirement Benefit unless an optional form is elected by the
Participant. The Participant may elect to have such annuity
distributed upon attainment of the Earlier Retirement Age under the
Plan.
7.03 DEATH BENEFIT PRIOR TO COMMENCEMENT OF BENEFITS: There shall be no
benefits payable upon the death of a Participant or former Participant
prior to the commencement of benefits other than that provided for in
Section 7.04.
7.04 QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY: If prior to the
commencement of benefits the Participant dies with a Surviving Spouse,
the Surviving Spouse shall receive the following benefits prior to the
payment of any death benefits to a non-Spouse Beneficiary:
(a) Surviving Spouse: The Surviving Spouse will be entitled to (1)
the same benefit that would be payable if the Participant had
retired with an immediate Qualified Joint and Survivor Annuity on
the day before the Participant's date of death, or (2) if the
Participant dies before the Earliest Retirement Age, the same
benefit that would be payable if the Participant had (i)
separated from Service on the date of death, (ii) survived to the
Earliest Retirement Age, (iii) retired with an immediate
Qualified Joint and Survivor Annuity at the Earliest Retirement
Age, and (iv) died on the day after the Earliest Retirement Age.
(b) Commencement Of Benefits: The Surviving Spouse may elect to
commence payment under such annuity within a reasonable period
after the Participants's death in accordance with Article 6. The
Actuarial Equivalent value of benefits which commence later than
the date on which payments would have been made to the Surviving
Spouse under a Qualified Joint and Survivor Annuity in
accordance with this provision shall be adjusted to reflect the
delayed payment. For purposes of paragraph (a)(2) and subject
to Section 6.04 of the Plan, a Surviving Spouse will begin to
receive payments at the Earliest Retirement Age unless such
Surviving Spouse elects a later date. Benefits commencing after
the Earliest Retirement Age will be the Actuarial Equivalent of
the benefit to which the Surviving Spouse would have been
entitled if benefits had commenced at the Earliest Retirement Age
under an immediate Qualified Joint and Survivor Annuity in
accordance with paragraph (a)(2).
(c) Upon death of a Participant who has satisfied the requirements
for Early Retirement or is on Deferred Retirement and who is not
survived by a Spouse, a benefit shall be payable to the
Participant's Beneficiary equal to the excess, if any, of (1) the
Actuarial Equivalent of the Accrued Benefit to which the
Participant would have been entitled had he or she not died, but
had terminated his or her employment or retired on the first day
of the month in which his or her death occurred over (2) one and
one-half times the Participant's annual
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Compensation for the calendar year preceding his or her death (for a
salesman or truckdriver, his or her average annual
Compensation for the three calendar years immediately
preceding his or her death shall be used). Such death benefit
(with no adjustment for interest) shall be assumed payable on
the first day of the following month. If the amount of benefit
paid under the Employer's group life insurance coverage paid
for entirely by the Employer exceeds one and one-half times
the deceased Participant's annual Compensation for the
calendar year preceding his or her death (for a salesman or
truckdriver, his or her average annual Compensation for three
calendar years immediately preceding death shall be used), the
death benefit paid from the plan will be reduced by the excess
group life insurance.
In the event that the Actuarial Equivalent of the Spouse's Survivor
Pension payable under subsection (a) above is less than the
benefit that would otherwise be payable hereunder had the
deceased Participant not qualified for a Spouse's Survivor
Pension, the Spouse's Survivor Pension payable under subsection
(a) above shall be increased to an amount having an Actuarial
Equivalent equal to such greater value.
(d) Named Beneficiary: After satisfaction of the Qualified Pre-Retirement
Survivor Annuity death benefit provided hereunder to the Surviving
Spouse, the balance of the Participant's death benefit in Section
7.03 shall be paid to the Participant's Beneficiary.
(e) Treatment of Employee Contributions: For the purposes of this Section
7.04, the portion of the benefit payable to the Surviving Spouse
which is attributable to Employee Contributions shall be in the same
proportion as the Employee contributions is to the Actuarial
Equivalent of the Accrued Benefit of the Participant.
7.05 QUALIFIED ELECTION: A Qualified Election is an election to waive a
Qualified Joint and Survivor Annuity or a Qualified Pre-retirement Survivor
Annuity, subject to the following:
(a) Spousal Consent: The election shall not be effective unless (1)
the Participant's Spouse consents in writing to the election; (2) the
election designates a specific Beneficiary, including any class of
Beneficiaries or any contingent Beneficiaries, which may not be changed
without spousal consent (or the Spouse expressly permits designations by
the Participant without any further spousal consent); (3) the Spouse's
consent acknowledges the effect of the election; and (4) the Spouse's
consent is witnessed by a Plan representative or notary public.
(b) Additional Requirements: Additionally, a Participant's waiver
of the Qualified Joint and Survivor Annuity shall not be effective unless
the election designates a form of benefit payment which may not be
changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent).
If it is established to the satisfaction of the Plan Administrator that
there is no Spouse or that the Spouse cannot be located, a waiver will
be deemed a Qualified Election. Any consent by a Spouse obtained under
this provision (or establishment that the consent of a Spouse may not be
obtained) shall be effective only with respect to such Spouse. A consent
that permits designations by the Participant without any requirement of
further consent by such Spouse must acknowledge that the Spouse has the
right to limit consent to a specific Beneficiary, and a specific form of
benefit where applicable, and that the Spouse voluntarily elects to
relinquish either or both of such rights. A revocation of a prior
waiver may be made by a Participant without the consent of the Spouse at
any time before the commencement of benefits. The number of revocations
shall not be limited. No consent obtained under this provision shall be
valid
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unless the Participant has received notice as provided in
paragraphs 7.05 and 7.06 below.
7.06 NOTICE REQUIREMENTS FOR JOINT AND SURVIVOR ANNUITY: The Plan
Administrator shall no less than 30 days and no more than 90 days prior
to the Annuity Starting Date provide each Participant a written
explanation of (a) the terms and conditions of a Qualified Joint and
Survivor Annuity; (b) the Participant's right to make and the effect of an
election to waive the qualified Joint and Survivor Annuity form of
benefit; (c) the rights of a Participant's Spouse; (d) the right to make,
and the effect of, a revocation of a previous election to waive the
Qualified Joint and Survivor Annuity; and (e) the relative values of the
various optional forms of benefits under the Plan. Notice shall be
provided not less than 30 days and no more than 90 days prior to the
Annuity Starting date.
7.07 NOTICE REQUIREMENTS FOR PRE-RETIREMENT SURVIVOR ANNUITY: The Plan
Administrator shall provide each Participant a written explanation of the
Qualified Pre-Retirement Survivor Annuity in such terms and in such manner
as would be comparable to the explanation provided for meeting the
requirements of paragraph 7.6 applicable to a Qualified Joint and Survivor
Annuity. The applicable period for a Participant is whichever of the
following periods ends last:
(a) Definition Of Applicable Period: (1) The period beginning with
the first day of the Plan Year in which the Participant attains age
32 and ending with the close of the Plan Year preceding the Plan
Year in which the Participant attains age 35; (2) a reasonable
period ending after the individual becomes a Participant; (3)
a reasonable period ending after this paragraph ceases to apply to
the Participant; or (4) a reasonable period ending after this
Article first applies to the Participant.
(b) Rule For Participants Who Terminate Before Age 35:
Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from Service in the case
of a Participant who separates from Service before attaining age
35. For purposes of applying the above, a reasonable period ending
after the enumerated events described in section (a)(2), (3) and
(4) is the end of the 2-year period beginning 1 year prior to the
date the applicable event occurs, and ending one-year after that
date. In the case of a Participant who separates from Service
before the Plan Year in which age 35 is attained, notice shall be
provided within the 2-year period beginning 1 year prior to
separation and ending 1 year after separation. If such a
Participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
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ARTICLE 8
VESTING OF BENEFITS
8.01 EMPLOYER PAID BENEFITS: A Participant shall acquire a vested
and nonforfeitable interest in his or her Accrued Benefit
attributable to Employer contributions upon attaining Normal
Retirement Age, Early Retirement Age, upon retirement due to
Disability, or upon termination of the Plan. All other
Participants shall acquire a vested interest in their Accrued
Benefits in accordance with either of the following tables:
(a) Non-Top heavy Vesting: For any Plan Year in which the
Plan is not considered a Top-Heavy Plan, a Participant
shall be vested as follows:
Years Of Service Vested Percentage
1 0%
2 0%
3 0%
4 0%
5 100%
(b) Top Heavy Vesting: For any Plan Year in which the Plan is
considered a Top-Heavy Plan, and for each Plan Year
thereafter, a Participant shall be vested as follows:
Years Of Service Vested Percentage
2 20%
3 40%
4 60%
5 80%
6 100%
(c) Amendment To Vesting Schedule: No amendment of the
vesting schedule shall directly or indirectly deprive a
Participant of his or her nonforfeitable right to benefits
accrued to the date of the amendment. If the Plan's vesting
schedule is amended or the Plan is amended in any way that
directly or indirectly affects the computation of a
Participant's nonforfeitable percentage, or if the Plan is
deemed amended by an automatic change to or from a top-heavy
vesting schedule, each Participant with at least 3 Years of
Service with the Employer may elect within a reasonable period
after the adoption of the amendment or change to have his
nonforfeitable percentage computed under the Plan without
regard to such amendment or change. The nonforfeitable
benefit of each Participant of the Plan prior to the date of
amendment or change who has completed an Hour of Service after
the date of amendment or change shall not be less than his or
her nonforfeitable benefit (determined as of such date)
computed under the Plan without regard to such amendment or
change. The period during which the election may be made
shall commence with the date the amendment is adopted or
deemed to be made and shall end on the latest of (1) 60 days
after the amendment is adopted; (2) 60 days after the
amendment becomes effective; or (3) 60 days after the
participant is issued written notice of amendment by the
Employer of Plan Administrator.
8.02 CALCULATING VESTED BENEFIT: A participant's vested benefit shall
be calculated by multiplying his or her Accrued Benefit
attributable to Employer contributions determined as of his or
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her termination date by the vested percentage determined as of
the same date.
8.03 PAYMENT OF VESTED BENEFITS: If a Participant terminates Service
and is not eligible for Normal, Early, or Disability Retirement,
the Actuarial Equivalent of his or her vested Accrued Benefit
derived from Employer and Employee contributions will be
distributed as follows:
(a) Benefit Does Not Exceed $3,500: If the Actuarial
Equivalent of the Participant's vested Accrued Benefit derived
from Employer and Employee contributions is not greater than
$3,500 and has never exceeded $3,500, the Participant will
receive a lump sum distribution of the Actuarial Equivalent of
the entire vested portion of such Accrued Benefit as soon as
administratively feasible, but not later than the end of the
second Plan Year after the Participant ceases to be an
Employee. The nonvested portion, if any, will be treated as a
forfeiture. For purposes of this paragraph, if the Actuarial
Equivalent of a Participant's vested Accrued Benefit is zero,
the terminated Participant shall be deemed to have received a
distribution of such vested Accrued Benefit.
(b) Benefit Exceeds $3,500: If the Actuarial Equivalent of a
terminated Participant's vested Accrued Benefit is in excess
of $3,500, such benefit shall commence to be paid as a Normal
Retirement Benefit or under any optional form of benefit
available in accordance with Section 5.09, no later than the
earlier of the date on which the Participant attains his or
her Normal Retirement Age, or if applicable, and consented to
by the Participant, his or her Early Retirement Age (provided
that such Participant has completed the Service requirement
for Early Retirement as of his or her termination date). If
such benefit is payable prior to Normal Retirement Age, such
benefit shall be the Actuarial Equivalent of the benefit
payable at Normal Retirement Age.
8.04 REINSTATEMENT OF BENEFITS: If a Participant receives or is deemed
to receive a lump sum distribution pursuant to Section 8.03
which is less than the Actuarial Equivalent of his Accrued
Benefit, and the Participant resumes covered employment under
the Plan, he or she shall have the right to have his or her
Employer-derived Accrued Benefit (including all optional forms
of benefits and subsidies relating to such benefit) restored,
to the extend forfeited, upon the repayment to the Plan of the
full amount of the distribution plus interest, compounded
annually from the date of distribution at the rate of 5%.
Repayment must be made before the earlier of 5 years after the
first date on which the Participant is subsequently reemployed
by the Employer, or the date the Participant incurs 5
consecutive 1-year Breaks in Service following the date of
distribution. If a Participant who has received a lump sum
payment requalifies for participation in the Plan, the
Employer shall disregard the Participant's prior Service for
purposes of future benefit accruals unless he or she has
repaid the distribution in accordance with the above. Prior
Service will be considered for purposes of vesting with
respect to future benefit accruals, regardless of whether
there has been a repayment.
8.05 FORFEITURES: If all or any portion of the Accrued Benefit of a
Participant who has separated from Service is forfeited, it
shall be applied to reduce the Employer's contribution for the
Plan Year during which or next following the date on which the
Participant has incurred a Break In Service. If a benefit is
forfeited because the Participant or Beneficiary cannot be
found, such benefit will be reinstated if a claim is made by
the Participant or Beneficiary. If the Plan terminates at any
time prior to the time said benefit would have been
immediately distributable (within the meaning of Code Sections
411(a)(11) and 417(e)(2)), the Plan shall purchase an annuity
or invest the Actuarial Equivalent of such benefit in an IRA
(Individual Retirement Account) on behalf of such Participant
or Beneficiary, or if the law of the jurisdiction provides,
shall escheat such benefit to the state.
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ARTICLE 9
LIMITATIONS ON BENEFITS
9.01 PARTICIPATION IN THIS PLAN: This section, except for paragraph (c)
below, applies regardless of whether any Participant is or has ever been
a participant in another Qualified Deferred Compensation Plan
maintained by the Employer. If any Participant is or has ever been a
participant in another Qualified Deferred Compensation Plan, or a
Welfare Benefit Fund maintained by the Employer or an individual
medical account as defined at Code Section 415(l)(2), which provides an
Annual Addition, Section 9.02 is also applicable to that Participant's
benefits.
(a) Annual Benefit: The Annual Benefit otherwise payable to a
Participant at any time will not exceed the Maximum Permissible
Amount, applied to the Participant's Accrued Benefit or the
actual benefit payable after converting to the desired optional
form of benefit and/or the amount of Annual Benefit payable at
the date benefits commence. If the benefit the Participant would
otherwise accrue in a Limitation Year would produce an Annual
Benefit in excess of the (adjusted) Maximum Permissible Amount, the
rate of accrual will be reduced so that the Annual Benefit will
equal the Maximum Permissible Amount.
(b) Treatment of Non-Deductible Voluntary Contributions: If a
Participant makes non-deductible Voluntary Contributions under
the terms of this Plan, the amount of such contribution is
treated as an Annual Addition to a qualified Defined Contribution
Plan for purposes of Section 9.01(a) and 9.02(b) of this Article.
(c) Minimum $10,000 Annual Benefit: The limitation in Section
9.01(a) is deemed satisfied if the Annual Benefit payable to a
Participant is not more than $1,000 multiplied by the
Participant's number of Years of Service or parts thereof (not to
exceed 10) with the Employer and the Employer has not at any time
maintained a Defined Contribution Plan, a Welfare Benefit Plan,
or an individual medical account as defined in Code Section
415(l)(2) in which such Participant participated.
9.02 PARTICIPATION IN MULTIPLE PLANS: This Section applies if any
Participant is covered, or has ever been covered, by another plan
maintained by the Employer including a Qualified Deferred Compensation
Plan or Welfare Benefit Fund or an individual medical account as
defined in Code Section 415(l)(2) which provides an Annual Addition.
(a) Maximum Annual Addition: If a Participant is, or has ever been,
covered under more than one Defined Benefit Plan maintained by
the Employer, the sum of the Participant's Annual Benefits from
all such plans may not exceed the Maximum Permissible Amount.
(b) Multiple Plan Fraction Cannot Exceed 1.0: If the Employer
maintains, or at any time maintained, one or more qualified
Defined Contribution Plans covering any Participant in this Plan,
a Welfare Benefit Fund, or an individual medical account plan as
defined in Code Section 415(l)(2), the sum of the Participant's
Defined Contribution Fraction and Defined Benefit Fraction will
not exceed 1.0 in any Limitation Year, and the Annual Addition
which may be credited to the Participant's account under the
Defined Contribution plan for a
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Limitation Year will be reduced so that such 1.0 limitation will
not be exceeded. No Participant who is or was a participant in a
Defined Contribution Plan of an Employer shall accrue an Annual
Benefit amount in excess of the amount as adjusted by the Code
Section 415(e) aggregated limitation. For purposes of this
paragraph, the Code Section 415(e) aggregated limitation is one
minus the Defined Contribution Fraction, multiplied by the lesser
of 125% (100% if applicable per Section 13.03) of the adjusted
dollar limitation, or 140% of the Participant's Highest Average
Compensation.
(c) Transition Rule For Plans In Effect Prior To 1987:
Notwithstanding the above, in the case of an individual who was a
Participant in one or more Defined Benefit Plans of the Employer
as of the First day of the first Limitation Year beginning after
1986, the application of the limitations of this Article shall
not cause the adjusted Maximum Permissible Amount for such
individual under all such Defined Benefit Plans to be less than a
Participant's Accrued Benefit determined as if the Participant
had separated from Service as of the close of the last Limitation
Year beginning before 1987, when expressed as an Annual Benefit
within the meaning of Code Section 415(b)(2). In determining such
Accrued Benefit, the following shall be disregarded: (1) any
change in the terms and conditions of the Plan after May 5, 1986;
and (2) any cost of living adjustments occurring after May 5,
1986. The preceding sentence applies only if all such Defined
Benefit Plans meet the requirements of the Code Section 415 for
all Limitation Years beginning before May 6, 1986.
9.03 DEFINITIONS: The following words and phrases shall have the following
meanings for purposes of this Article 9 and for the Plan:
(a) Annual Additions: The sum of the following amounts credited to a
Participant's account for the Limitation year: (1) Employer
Contributions; (2) Employee Contributions pursuant to Article 4;
(3) forfeitures; (4) amounts allocated after March 31, 1984 to an
individual medical account, as defined in Code Section 415(l)(2),
which is part of a pension or annuity plan maintained by the
Employer (these amounts are treated as Annual Additions to a
Defined Contribution Plan though they arise under a Defined
Benefit Plan); and (5) amounts derived from contributions paid or
accrued after 1985, in taxable years ending after 1985, which are
either attributable to post-retirement medical benefits allocated
to the account of an employee who is a Key Employee at any time
during the Plan Year or preceding Plan Year, or under a Welfare
Benefit Fund maintained by the Employer.
(b) Annual Benefit: A retirement benefit under the Plan which is
payable annually in the form of a straight life annuity. Except
as provided below, a benefit payable in a form other than a
straight life annuity must be adjusted to be the Actuarial
Equivalent of a straight life annuity before applying the
limitations of this Article 9. The Annual Benefit does not
include any benefits attributable to Employee contributions or
Rollover Contributions, or the assets transferred from a
qualified plan that was not maintained by the Employer. No
actuarial adjustment to the benefit is required for (1) the value
of a qualified Joint and Survivor Annuity; (2) the value of
benefits that are not directly related to retirement benefits
(such as the qualified disability benefit, pre-retirement death
benefits, and post-retirement medical benefits); and (3) the
value of post-retirement cost-of-living increases made in
accordance with Code Section 415(d) and Federal Income Tax
Regulation Section 1.415 - 3(c)(2)(iii).
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<PAGE>
(c) Defined Benefit Plan Dollar Limitation: The limit is $90,000 as
adjusted as follows: Effective on January 1, 1988, and each January
1st thereafter, the $90,000 limitation above will be automatically
adjusted by multiplying such limit by the cost of living adjustment
factor prescribed by the Secretary of the Treasury under Code
Section 415(d) in such manner as the Secretary shall prescribe. The
new limitation will apply to Limitation Years ending within the
calendar year of the date of the adjustment.
(d) Defined Benefit (Plan) Fraction: A fraction, the numerator of which
is the sum of the Participant's Projected Annual Benefits under all
the Defined Benefit Plans (whether or not terminated) maintained by
the Employer, and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the Limitation Year
under Code Sections 415(b) and (d) or 140 percent of the Highest
Average Compensation, including any adjustments under Code Section
415(b).
(e) Transition Rule For Defined Benefit Fraction: Notwithstanding
paragraph (d), if the Participant was a Participant on the first
Limitation Year beginning after December 31, 1986, in one or more
Defined Benefit Plans maintained by the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not
be less than 125% (100% in any Plan Year in which the Plan is a
Top-Heavy Plan, subject to Article 13) of the sum of the annual
benefits under such plans which the Participant had accrued as of
the close of the last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and conditions of the
plan after May 5, 1986. The preceding sentence applies only if the
Defined Benefit Plan(s) individually and in the aggregate satisfied
the requirements of Code Section 415 for all Limitation Years
beginning before January 1, 1987.
(f) Defined Contribution (Plan) Fraction: A fraction, the numerator of
which is the sum of the Annual Additions to the Participant's
account under all the Defined Contribution Plans (whether or not
terminated) maintained by the Employer for the current and all prior
Limitation Years (including the Annual Additions attributable to the
Participant's Voluntary Contributions to all Defined Benefit Plans,
whether or not terminated, maintained by the Employer, and the
Annual Additions attributable to all Welfare Benefit Funds, and
individual medical accounts, as defined in Code Section 415(1)(2),
maintained by the Employer), and the denominator of which is the sum
of the maximum aggregate amounts for the current and all prior
Limitation Years of Service with the Employer (regardless of whether
a Defined Contribution Plan was maintained by the Employer). The
maximum aggregate amount in the Limitation Year is the lesser of
125% (100% in any Plan Year in which the Plan is a
Top-Heavy Plan, subject to Article 13) of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under Code
Section 415(c)(1)(A) or 35 percent of the Participant's Compensation
for such year.
(g) Transition Rule for Defined Contribution Fraction: Notwithstanding
paragraph (f), if the Employee was a Participant as of the end of
the first Limitation Year beginning after December 31, 1986, in one
or more Defined Contribution Plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction will
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be adjusted if the sum of this fraction and the Defined Benefit
Fraction would otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, and amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
Limitation Year beginning before 1987, and disregarding any changes
in the terms and conditions of the Plan made after May 6, 1986, but
using the Code Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987. The annual
Addition for any Limitation Year beginning before January 1, 1987
shall not be recomputed to treat all Employee contributions as
Annual Additions.
(h) Maximum Permissible Amount: The lesser of the Defined Benefit Dollar
Limitation or 100% of the Participant's Highest Average
Compensation, subject to the following:
(1) If the Participant has less than 10 years of participation with
the Employer, the Defined Benefit Dollar Limitation is reduced
by one-tenth (1/10th) for each Year of Service as a Participant
(or part thereof) less than ten. If the Participant has less
than ten Years of Service with the Employer, the Compensation
limitation is reduced by one-tenth (1/10th) for each Year of
Service as a Participant (or part thereof) less than ten. The
adjustments of this sub-paragraph (1) shall be applied in the
denominator of the Defined Benefit Fraction based on Years of
Service. Years of Service shall include future years occurring
before the Participant's Normal Retirement Age. Such future
years shall include the year which contains the date the
Participant reaches Normal Retirement Age only if it can be
reasonably anticipated that the Participant will receive a Year
of Service for such year.
(2) If the Annual Benefit of the Participant commences before the
Participant's Social Security Retirement Age, but on or after
age 62, the Defined Benefit Dollar Limitation as reduced above,
if necessary, shall be determined as follows: (A) if a
Participant's Social Security Retirement Age is 65, the dollar
limitation for benefits commencing on or after age 62 is
determined by reducing the Defined Benefit Dollar Limitation by
5/9 of 1 % for each month by which benefits commence before the
month in which the Participant attains age 65; (B) if a
Participant's Social Security Retirement Age is greater than
65, the dollar limitation for benefits commencing on or after
age 62 is determined by reducing the Defined Benefit Dollar
Limitation by 5.9 of 1% for each of the first 36 months and 5/12
of 1% for each of the additional months (up to 24 months) by
which benefits commence before the month in which the
Participant attains Social Security Retirement Age.
(3) If the Annual Benefit of a Participant commences prior to age
62, the Defined Benefit Dollar Limitation shall be the
Actuarial Equivalent of an Annual benefit beginning at age 62,
as determined above, adjusted for each month by which benefits
commence before the month in which the Participant attains age
62. To determine Actuarial Equivalence, an interest rate
assumption of not less than 5% shall be used. Any decrease in
the Defined Benefit Dollar Limitation determined in accordance
with this subparagraph shall not reflect the mortality
decrement to the extent that benefits will not be forfeited
upon the death of the Participant.
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(4) If the Annual Benefit of a Participant commences after the
Participant's Social Security Retirement Age, the Defined
Benefit Dollar Limitation as reduced in (2) above, if necessary,
shall be increased so that it is due Actuarial Equivalent of an
Annual benefit of such dollar limitation beginning at the
Participant's Social Security Retirement Age. To determine
Actuarial Equivalence, an interest rate assumption of not
greater than 5% shall be used.
(5) If the Annual Benefit payable to a Participant who has
terminated employment with the Employer but who has not received
complete distribution of his or her nonforfeitable Accrued
Benefit under the Plan is limited by either the Defined benefit
Dollar Limitation or by the Compensation Limitation, such
benefit may, at the discretion of the Sponsor and applied in a
uniform manner, be increased in accordance with cost of living
adjustments as prescribed by the Secretary of the Treasury
under Code Section 415(d).
(i) Project Annual Benefit: The Annual Benefit to which the Participant
would be entitled under the terms of the Plan assuming (1) the
Participant will continue employment until Normal Retirement Age under
the Plan (or current age, if later), and (2) the Participant's
Compensation for the current Limitation Year and all other relevant
factors used to determine benefits under the Plan will remain constant
for all future Limitation Years.
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10.01 PLAN ADMINISTRATOR: The Sponsor shall be named the fiduciary and Plan
Administrator. These duties shall include (a) appointing the Plan's
attorney, accountant, or any other party needed to administer the Plan;
(b) directing the Trustees with respect to payments from the Fund; (c)
communicating with Employees regarding their participation and benefits
under the Plan, including the administration of all claims procedures;
(d) filing any returns and reports with the Internal Revenue Service,
Department of Labor, or any other governmental agency; (e) reviewing
and approving any financial reports, investment reviews, or other
reports prepared by any party under (a) above; (f) establishing a
funding policy and investment objectives consistent with the purposes
of the Plan and the Employee Retirement Income Security Act of 1974;
and (g) construing and resolving any question of Plan interpretation.
The Plan Administrator's interpretation of Plan provisions including
eligibility and benefits under the Plan is final, and unless it can be
shown to be arbitrary and capricious will not be subject to "de novo"
review.
10.02 TRUSTEES: The Trustees shall be appointed by the Sponsor and shall be
responsible for the investment and administration of the
Fund. These duties shall include:
(a) Investment Of Contributions: Receiving contributions under the
terms of the Plan, and investing such contributions in
accordance with Section 10.04 and Article 12.
(b) Making Plan Distributions: Making distributions from the Fund in
accordance with written instructions received from the Plan
Administrator.
(c) Keeping accurate records reflecting its administration of the
Fund and making such records available to the Employer for
review and audit. Within 90 days after each Plan Year, and
within 90 days after its removal or resignation, the Trustees
shall file with the Sponsor an accounting of its administration
of the Fund during such year or from the end of the preceding
Plan Year to the date of removal or resignation. Such accounting
shall include a statement of cash receipts and disbursements
since the date of its last accounting and shall contain an asset
list showing the fair market value of investments held in the
Fund as of the end of the Plan Year. The value of marketable
investments shall be determined using the most recent price
quoted on a national securities exchange or over the counter
market. The value of non-marketable investments shall be
determined in the sole judgment of the Trustees. The value of
investments in securities or obligations of the Employer in
which there is no market shall be determined in the sole
judgment of the Sponsor an the Trustees shall have no
responsibility with respect to the valuation of such assets. The
Sponsor shall review the Trustees accounting and notify the
Trustees in the event of its disapproval of the report within 90
days, providing the Trustees with a written description of the
items in question. The Trustees shall have 60 days to provide
the Sponsor with a written explanation of the items in question.
if the Sponsor again disapproves, the Trustees shall file its
accounting in a court of competent jurisdiction for audit and
adjudication.
(d) Employment Of Advisors: Employing such agents, attorneys, or
other professional as the Trustees may deem necessary or
advisable in the performance of their duties, and with the
consent of the Plan Administrator to pay from the Fund the
reasonable expenses and compensation of such parties.
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(c) Limitation Of Duties And Responsibilities: The Trustee's duties
shall be limited to those described above. The Sponsor shall be
responsible for any other administrative duties required under
the Plan or by applicable law.
10.03 FEES AND EXPENSES: All reasonable costs and expenses incurred by the
Trustees in connection with the administration of the Fund and all
reasonable costs and expenses incurred by the Plan Administrator in
connection with the administration of the Plan (including fees for legal
services rendered to the Trustees or Plan Administrator) may be paid by
the Employer, but if not paid by the Employer when due, shall be paid
from the Fund. Reasonable compensation to the Trustees and may be
agreed upon from time to time between the Sponsor and the Trustees and
reasonable compensation to the Plan Administrator as may be agreed upon
from time to time between the Employer and Plan Administrator may be
paid by the Employer, but if not paid by the Employer when due shall be
paid by the Fund. Notwithstanding the foregoing, no compensation other
than reimbursement for expenses shall be paid to a Plan Administrator
who is the Employer or a full-time Employee of the Employer. In the
event any part of the Trust becomes subject to tax, all taxes incurred
will be paid from the Fund unless the Plan Administrator advises the
Trustees not to pay such tax.
10.04 DIVISION OF DUTIES AND INDEMNIFICATION: The division of duties and
the indemnification of the Trustees of this Plan shall be governed by
the following provisions:
(a) No Guarantee Against Loss: The Trustees shall have the authority
and discretion to manage and control the Fund to the extend
provided in this instrument, but do not guarantee the Fund in any
manner against investment loss or depreciation in asset value, or
guarantee the adequacy of the Fund to meet and discharge all or
any liabilities of the Plan. Furthermore, the Trustees shall
not be liable for the making, retention or sales of any
investment or reinvestment made by it, as herein provided, or for
any loss to or diminution of the Fund, or for any other loss or
damage which may result from the discharge of its duties
hereunder, except to the extent it is judicially determined that
the Trustees have failed to exercise the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and
like aims.
(b) Representations Of The Sponsor: The Sponsor warrants that all
directions issued to the Trustees by it or the Plan Administrator
will be in accordance with the terms of the Plan and not
contrary to the provisions of the Employee Retirement Income
Security Act of 1974 and regulations issued thereunder.
(c) Directions By Others: The Trustees shall not be answerable for
any action taken pursuant to any direction, consent, certificate,
or other paper or document on the belief that the same is
genuine and signed by the proper person. All directions by the
Employer, a Participant or the Plan Administrator shall be in
writing. The Plan Administrator shall deliver to the Trustee
certificates evidencing the individual or individuals authorized
to act as the Plan Administrator and shall deliver to the
Trustees specimens of their signatures.
(d) Duties And Obligations Limited By The Plan: The duties and
obligations of the Trustees shall be limited to those expressly
imposed upon it by this instrument or subsequently agreed upon by
the parties. Responsibility for administrative duties required
under the Plan or applicable law not expressly imposed upon or
agreed to by the Trustees, shall rest solely with the Sponsor and
the Plan Administrator.
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(e) Indemnification Of Trustees: The Trustees shall be indemnified
and saved harmless by the Employer from and against any and all
liability to which the Trustees may be subjected, including all
expenses reasonably incurred in its defense, for any action or
failure to act resulting from compliance with the instructions of
the Sponsor, Employer, the employees or agents of the Employer,
the Plan Administrator, or any other fiduciary to the Plan, and
for any liability arising from the actions or nonactions of any
predecessor Trustees or fiduciary or other fiduciaries of the
Plan.
(f) Trustees Not Responsible For Application of Payments: The
Trustees shall not be responsible in any way for the application
of any payments it is directed to make or for the adequacy of the
Fund to meet and discharge any and all liabilities under the Plan.
(g) Resignation Or Removal Of Trustees: Any Trustee may resign by a
written communication addressed to the Sponsor. The Sponsor
shall have the power to remove a Trustee and fill vacancies in
the membership of the Trustees.
(h) Multiple Trustees: Unless the Plan Trustees have agreed that a
particular act or transaction must be approved by a majority of
their number, any single Trustee may act independently on behalf
of the Trustee and may execute papers on behalf of the Trust.
(i) Limitation of Liability: No Trustee shall be liable for the act
of any other Trustee or fiduciary unless he or she has knowledge
of such act.
(j) Right To Judicial Settlement Of Accounts: The Trustees shall
have the right to judicial settlement of their accounts. In the
event that any dispute shall arise as to any act to be performed
by the Trustees, the Trustees may postpone the performance of
such act until adjudication of such dispute in a court of
competent jurisdiction or until they shall have been indemnified
against loss to their satisfaction.
(k) Trustees As Participants or Beneficiaries: Trustees shall not be
prevented from receiving any benefits to which they may be
entitled as Participants or Beneficiaries in the Plan, so long as
the benefits are computed and paid on a basis which is
consistent with the terms of the Plan as applied to all other
Participants and Beneficiaries.
(l) Prohibition Against Self-Dealing: The Trustees shall not (1)
deal with the assets of the Fund in their own interest or for
their own account; (2) in their individual or in any other
capacity, act in any transaction involving the Fund on behalf of
a party (or represent a party) whose interests are adverse to the
interests of the Plan, the interests of its Participants or
Beneficiaries; or (3) receive any consideration for their own
personal accounts from any party dealing with the Plan in
connection with a transaction involving assets of the Fund.
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ARTICLE 11
TRUST FUND
11.01 THE FUND: The Fund shall consist of all contributions made under
Article 3 and Article 4 of the Plan and the investment thereof and
earnings thereon. All contributions and the earnings thereon less
payments made under the terms of the Plan, shall constitute the
Fund. The Fund shall be administered as provided herein.
11.02 CONTROL OF PLAN ASSETS: The assets of the Fund or evidence of
ownership shall be held by the Trustees under the terms of the
Plan and Trust. If the assets represent amounts transferred from
another trustee or custodian under a former plan, the Trustees
named hereunder shall not be responsible for any actions of the
prior fiduciary including the review of the propriety of any
investment under the former plan.
11.03 EXCLUSIVE BENEFIT RULES: No part of the Fund shall be used for,
or diverted to, purposes other than for the exclusive benefit of
Participant, former Participants with a vested interest, and the
Beneficiary or Beneficiate of deceased Participants having a
vested interested in the Fund upon the death of the Participant or
other payee.
11.04 ASSIGNMENT AND ALIENATION OF BENEFITS: Except with respect to a
Participant's or other payee's indebtedness to the Plan, no right
or claim to or interest in, any part of the Fund, or any payment
therefrom, shall be assignable, transferable, or subject to sale,
mortgage, pledge, hypothecation, communication, anticipation
garnishment, attachment, execution, or levy of any kind, and the
Trustees shall not recognize any attempt to assign, transfer,
sell, mortgage, pledge, hypothecate, commute, or anticipate the
same, except to the extent required by law. The preceding sentence
shall also apply to the creation, assignment, or recognition of a
right to any benefit payable with respect to a Participant under a
domestic relations order, unless such order is determined to be a
Qualified Domestic Relations Order as defined in Section 414(a)
of the Code, or any domestic relations order entered before
January 1, 1985 which the Plan Administrator deems to be qualified.
11.05 QUALIFIED DOMESTIC RELATIONS ORDER: A Qualified Domestic
Relations Order shall be determined in accordance with the
following provisions:
(a) Specific Requirements Of QDRO: A Qualified Domestic Relations
Order shall specifically state all of the following in order
to be deemed a QDRO: (1) the name and last known mailing
address (if any) of the Participant and of each alternate
payee covered by the order. However, if the QDRO does not
specify the current mailing address of the alternate payee,
but the Plan Administrator has independent knowledge of that
address, the QDRO will still e valid; (2) the dollar amount
of percentage of the Participant's benefit to be paid by the
Plan to each alternate payee, or the manner in which the
amount of percentage will be determined; (c) the number of
payments or period for which the order applies; and (4) the
specific plan (by name) to which the order applies. The order
shall not be deemed a QDRO if it requires the Plan to provide
any type or form of benefit, or any option not already
provided for in the plan, or increased benefits, or benefits
in excess of the Participant's vested rights, or payments of
benefits to an alternate payee which are required to be paid
to another alternate payee under another QDRO.
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(b) Administrator Must Seek Opinion Of Counsel: Promptly upon
receipt of a domestic relations order which may or may not be
"Qualified", the Plan Administrator shall notify the
Participant and any alternate payee(s) named in the order of
such receipt, and include a copy of this Section 11.05. The
Plan Administrator shall then forward the order to the Plan's
legal counsel for an opinion as to whether or not the order
is in fact "Qualified" as defined in Section 414(p) of the
Internal Revenue Code. Within a reasonable time after receipt
of the order, not to exceed 60 days, the Plan's legal counsel
shall make a determination as to its "Qualified" status and
so inform the Plan Administrator who shall promptly notify
the Participant and any alternate payee(s) in writing of the
determination.
(c) Disputed Orders: If the "Qualified" status of the order is in
question, there will be a delay in any payout to any payee
including the Participant, until the status is resolved. In
such event, the Plan Administrator shall segregate the amount
that would have been payable to the alternate payee(s) if the
order had been deemed a QDRO. If the order is not Qualified,
or the status is not resolved (for example, it has been sent
back to the court for clarification or modification) within 18
months beginning with the date the first payment would have
to be made under the order, the Plan Administrator shall pay
the segregated amounts plus interest to the person(s) who
would have been entitled to the benefits had there been no
order. If a determination as to the Qualified status of the
order is made after the 18-month period, than the order shall
only be applied on a prospective basis. If the order is
determined to be a QDRO, the Participant and alternate
payee(s) shall again be notified promptly after such
determination. Once an order is deemed a QDRO, the Plan
Administrator shall pay to the alternate payee(s) all the
amounts due under the QDRO, including segregated amounts
plus interest which may have accrued during a dispute as to
the order's qualification.
(d) Payment Prior To Separation From Service: A domestic relations
order may provide for the payment of benefits to an
alternative payee prior to the time a Participant has
separated from Service if such payment is to be made on or
after the date on which the Participant attains or would have
attained the earliest retirement age provided by this Plan.
For purposes of this paragraph, "earliest retirement age"
shall mean the earlier of (1) the date on which the
Participant is entitled to a distribution under this Plan, or
(2) the later of (i) the date the Participant attains age 50,
or (ii) the earliest date on which the Participant could
receive benefits under this Plan if the Participant
terminated employment with the Employer.
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ARTICLE 12
INVESTMENTS
12.01 FIDUCIARY STANDARDS: The Trustee shall invest the Fund in accordance
with the investment objectives established by the Employer, provided
that (a) such investments are prudent under the Employee Retirement
Income Security Act of 1974 and the regulations promulgated thereunder;
(c) such investments are sufficiently diversified or otherwise insured
or guaranteed to minimize the risk of large losses; and (c) such
investments are similar to those which would be purchased by another
professional money manager for a like plan with similar investment
objectives.
12.02 FUNDING ARRANGEMENT: The Sponsor shall appoint an individual,
individuals or institution to serve as Trustees under the Plan.
12.03 INVESTMENT ALTERNATIVES: The Trustees shall implement an investment
program based on the Sponsor's investment objectives and the Employee
Retirement Income Security Act of 1974. In addition to powers given by
law, the Trustees may:
(a) Securities: Invest the Fund in any form of property, including
common and preferred stocks, exchange covered call options,
bonds, money market instruments, mutual funds, savings accounts,
certificates of deposit, Treasury bills, insurance policies and
contracts or in any other property, real or personal, foreign or
domestic, having a ready market including securities issued by an
institutional Trustee and/or affiliate of the institutional
Trustee. An institutional Trustee may invest in its own deposits
which bear a reasonable interest rate.
(b) Pooled Trust Funds: Transfer any assets of the Fund to a group
or collective trust established to permit the pooling of funds of
separate pension and profit-sharing trusts, provided the Internal
Revenue Service has ruled such group or collective trust to be
qualified under Section 401(a) and exempt under Code Section
501(a) (or the applicable corresponding provision of any other
Revenue Act) or to any other common, collective, or commingled
trust fund which has been or may hereafter be established and
maintained by the Trustee and/or affiliates of an institutional
Trustee. Such commingling of assets of the Fund with assets of
other qualified trusts is specifically authorized, and to the
extent of the investment of the Fund in such a group or collective
trust, the terms of the instrument establishing the group or
collective trust shall be a part hereof set forth herein.
(c) Employer Stock: Invest the Fund in the common stock, debt
obligations, or any other security issued by the Employer or by
an affiliate of the Employer within the limitations provided
under Sections 406,407, and 408 of ERISA provided that such
investment does not constitute a prohibited transaction under
Code Section 4975. Any such investment in Employer securities
shall only be made upon written direction of the Employer who
shall be solely responsible for the propriety of such investment.
(d) Cash Held Uninvested: Hold cash and deposit same with any
banking or savings institution, including its own banking
department, or the banking department of an affiliate.
(e) Reorganizations, Etc.: Join in or oppose the reorganization
recapitalization, consolidation, sale or merger of corporations
or properties, upon such terms as it deems wise.
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(f) Registration: Hold investments in nominee or bearer form.
(g) Proxies: Vote proxies and if appropriate pass them on to any
investment manager which may have directed the investment in the
equity giving rise to the proxy.
(h) Ownership Rights: Exercise all ownership rights with respect to
assets held in the Fund.
(i) Loans to Trust: Borrow money, in any amount and upon any terms
and conditions for purposes of this Trust, including but not be
limited to the purchase of securities for purposes of investment;
provided that there shall be no obligation on the part of any
person lending money to the Trustees pursuant to this provisions
to see to the application of any such funds, or to inquire into
the validity, expediency or propriety of any such dispositions.
(j) Agreements with Banks: Enter, with the consent of the Sponsor
and upon such terms as they in their discretion deem necessary,
into an agreement with a bank or trust company providing for (a)
the deposit of all or part of the funds and property of the Trust
with such bank or trust company, (b) the appointment of such bank
or trust company as the agent or custodian of the Trustees for
investment purposes, with such discretion in investing and
reinvesting the funds of the Trust as the Trustees deem it
necessary or desirable to delegate.
(k) Miscellaneous: Do all other acts that the Trustees may deem
necessary or proper to carry out any of the foregoing powers in
the best interests of the Trust.
12.04 PARTICIPANT LOANS: There shall be no Participant loans permitted under
the Plan.
12.05 EMPLOYER INVESTMENT DIRECTION: The Sponsor shall have the right to
direct the Trustees with respect to investments of the Fund, or may
appoint an investment manager to provide discretionary investment
management with respect to all or part of the Fund, and may delegate
investment authority to such investment manager with respect to the
assets in the Fund committed to such manager's discretion, subject to
the following provisions:
(a) When Trustees Have Responsibility: In the absence of any such
direction or appointment, or with respect to the portion of the
Fund not subject to such discretionary investment management the
Trustees shall have sole investment management responsibility.
(b) Sponsor May Direct Trustees: The Sponsor may direct the Trustees
to purchase and sell interests in a registered investment company
(i.e. mutual funds) for which the Plan's actuary, accountant,
attorney or other advisor, or such advisor's parent, affiliates,
or successors, may serve as investment advisor and receive
compensation from the registered investment company for its
services as investment advisor. The Sponsor shall advise the
Trustees in writing regarding the retention of investment powers,
the appointment of an investment manager, or the delegation of
investment powers to the Trustees. Any investment directive
hereunder shall be made in writing by the Sponsor or investment
manager, as the case may be. In the absence of such written
directive, the Trustees shall automatically invest the available
cash in its discretion in an appropriate interim investment
until specific investment directions are received. Such
instructions regarding the delegation of investment
responsibility shall remain in force until revoked or amended in
writing. The Trustees shall not be responsible for the propriety
of any directed investment made hereunder and shall not be
required to consult with or advise the Sponsor regarding the
investment quality of any
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directed investment held hereunder. If the Sponsor fails to
designate an investment manager, the Trustees shall have full
investment authority. If the Sponsor does not issue investment
directions, the Trustees shall have authority to invest the Fund in
its sole discretion. While the Sponsor may direct the Trustees with
respect to Plan investments, no Employer may (1) borrow from the
Fund or pledge any of the assets of the Fund as security for a
loan; (2) buy property or assets from or sell property or assets to
the Fund; or (3) charge any fee for services rendered to the Fund.
(c) Coordination With Participant Direction: To the extent that
Participants have been allowed to direct the investment of their
own contributions pursuant to Section 4.10 they will continue to be
allowed to so direct.
(d) Appointment of Investment Manager: If the Sponsor appoints a
qualified investment manager to manage and control the investment
and reinvestment of the Fund or a portion of the Fund, the
accounts, books, and records of the Trustees shall reflect the
segregation of said portions of the Fund in separate investment
management accounts. Such investment manager shall accept his or
her appointment and acknowledge his or her status as a fiduciary
under the Plan in a signed writing which shall be delivered to the
Trustees and shall be subject to the standard of conduct described
in Section 12.01.
(e) Definition Of Investment Manager: A qualified investment manager
shall be (1) an investment adviser currently registered under the
Investment Advisers Act of 1940, or (2) a bank, as defined in that
Act, or (3) an insurance company qualified to perform investment
management services under the laws or more than one state. A
certificate evidencing such qualification shall be delivered to the
Trustees.
(f) Duties Of Investment Manager: The appointed investment manager
shall direct the Trustees in exercising the powers enumerated in
Section 12.03 with respect to the separate investment management
accounts under its management and control, and the Trustees shall
be under no duty to review such investment directions. The Trustees
shall not be liable for acting pursuant to any direction of, or
failing to act in the absence of any direction from the investment
manager, except as stated in Section 10.04(j).
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13.01 APPLICABILITY OF RULES: If the Plan is becomes Top-Heavy in any Plan
Year beginning after 1983, the provisions of this Article will
supercede any conflicting provisions in the Plan.
13.02 MINIMUM BENEFIT: Notwithstanding any other provision in the Plan, for
any Plan Year in which the Plan is Top Heavy, each Participant who is a
non-Key Employee shall accrue a minimum benefit in accordance with the
provisions of this Section:
(a) Determination of Benefit: The minimum benefit shall be provided
solely by Employer contributions (without regard to any Social
Security contribution) and expressed as a straight life annuity or
the Actuarial Equivalent of a straight life annuity commencing at
Normal Retirement Age. When the Employer maintains one Plan or a
combination of Defined Benefit Plan which are Top-Heavy or Super
Top-Heavy, each eligible Participant who is a non-Key Employee
shall be provided with a minimum non-integrated Accrued Benefit
equal to the Participant's annual Compensation averaged over the
highest 5 consecutive Plan Years, multiplied by 2% for each Year of
Service after the Plan Year which commences after December 31, 1983
during which the Plan is a Top-Heavy Plan, to a maximum of 10
years; provided, however, that no Defined Benefit Plan Top-Heavy
Accrued Benefit shall be provided during such 10 year period if an
Annual Addition attributable to Employer contributions is allocated
to a Participant (other than 401(k) plan employee deferrals or
Employer matching contributions made during any Plan Year which
commences after December 31, 1988 which are used to satisfy the
Average Contribution Percentage test or Average Deferral Percentage
test of Code Section 401(m) or 401(k)) which is equal to at least 5%
of the Participant's Compensation.
(b) Determining Annual Compensation: For purposes of determining annual
Compensation for top-heavy purposes, if a Participant is employed
or is covered under the Plan for less than the full accounting
period for determining Compensation, Average Annual Compensation
shall be counted (without analyzing) if such Participant qualifies
for a Year of Service or a Year of Credited Service.
(c) No additional Accruals: No additional Top-Heavy benefit accruals
attributable to Employer contributions shall be provided for a
Participant to the extent that the total accruals on his behalf
will provide a benefit expressed as the Actuarial Equivalent of a
straight life annuity commencing at Normal Retirement Age which
equals or exceeds 2% multiplied by such Participant's Compensation
as averaged in paragraph (a) above for each applicable Year of
Service as indicated in paragraph (a) above.
(d) Who Receives Top-Heavy Minimum: Each Participant who is a non-key
employee who completes a Year of Service with the Employer after
the Plan Year which commences after December 31, 1983 shall be
eligible for the minimum Top-Heavy Accrued Benefit from Employer
contributions for such Plan Year. The minimum Top-Heavy Accrued
Benefit applies even though under other Plan provisions the
Participant would not otherwise be entitled to an Accrued Benefit,
or would have received a lesser accrual for the year because the
Participant fails to make mandatory contributions to the Plan, the
Participant's Compensation is less than a stated amount, the
Participant is not employed on the last day
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of the accrual computation period, or the Plan is integrated
with Social Security. The Top-Heavy benefit, to the extent
required to be nonforfeitable under Ode Section 416(b), may
not be suspended or forfeited under Code Sections
411(a)(3)(B) or 411(a)(3)(D).
(c) Use Of Non-Top-Heavy Accruals: All accruals of
Employer-derived benefits, whether or not attributable to
years for which the Plan is Top-Heavy, may be used in
computing whether the above minimum accrual requirements of
this Section 13.02 are in the aggregate satisfied.
13.03 LIMITATIONS ON BENEFITS: In any Plan Year in which the Plan is
Top-Heavy the denominators of the Defined Benefit Fraction and
Defined Contribution Fraction shall be computed using 100% of the
dollar limitation instead of 125% unless the Top-Heavy Ratio does
not exceed 90% and the Employer elects to replace either (a) the
2% minimum benefit described in Section 13.02% above with a 3%
minimum benefit, or (b) the 5% minimum Defined Contribution
Annual Addition described in Section 13.02 above with a 71/2%
Annual Addition.
13.04 MINIMUM VESTING: For any Plan Year in which this Plan is
Top-Heavy, the minimum Top-Heavy vesting schedule in Article 8
will automatically apply to any participant who has completed an
Hour of Service after the Plan initially becomes Top-Heavy. The
minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code except those attributable
to Employee contributions, including benefits accrued before the
effective date of Section 416 of the Code and benefits accrued
before the Plan became Top-Heavy. Further, no reduction in vested
benefits may occur in the event the Plan's status as Top-Heavy
changes for any Plan Year.
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ARTICLE 14
AMENDMENT BY SPONSOR
14.01 AMENDMENT BY SPONSOR: The Sponsor, by a vote of the partners in
accordance with their partnership agreement, may amend any or all
provisions of this Plan and Trust at any time without obtaining
the approval or consent of any Employer which has adopted this
Plan and Trust provided that no amendment shall authorize or
permit any part of the corpus or income of the Fund to be used for
or diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries or eliminate an optional form
of benefit distribution. No amendment to the Plan (including a
change in the actuarial basis for determining optional or early
retirement benefits) shall be effective to the extent it has the
effect of decreasing a Participant's Accrued Benefit, except as
permitted under Code Section 412(c)(8). For purposes of this
Section, an amendment which has the effect of (a) eliminating or
reducing an Early Retirement Benefit or a retirement-type subsidy,
or (b) eliminating an optional form of benefit, with respect to
benefits attributable to Service before the amendment, shall be
treated as reducing Accrued Benefits. In the case of a
retirement-type subsidy, the preceding sentence shall apply only
with respect to a Participant who satisfies (either before or
after the amendment) the preamendment conditions for the subsidy.
In general, a retirement-type subsidy is a subsidy that continues
after retirement, but does not include a qualified disability
benefit, a medical benefit, a social security supplement, or a
death benefit (including life insurance).
14.02 AMENDMENT BY EMPLOYER: Each Employer shall automatically be
deemed to be a party to any Plan amendment adopted by the Sponsor.
14.03 TERMINATION: An Employer shall have the right to terminate its
participation in the Plan upon 60 days notice in writing to the
Sponsor and the Trustees. If the Plan is terminated or partially
terminated by an Employer or by the Sponsor the rights of all
affected Employees to benefits accrued to the date of such
termination or partial termination (to the extent funded as of
such date) shall vest and become nonforfeitable. In the event of a
partial termination, only those who who separate from Service
shall be fully vested. In the event of termination the employer
shall direct the Trustees with respect to the distribution of
benefits to or for the exclusive benefit of Participants of their
Beneficiaries. The Trustee shall dispose of the Fund in accordance
with the written directions of the Plan Administrator, provided
that no liquidation of assets and payment of benefits (or
provision therefore), shall actually be made by the Trustee until
after it is established by the Employer in a manner satisfactory
to the Trustee, that the applicable requirements, if any, of the
Employee Retirement Income Security Act of 1974 and the Code
governing the termination of employee benefit plans, have been or
are being complied with, or that appropriate authorizations,
waivers, exemptions, or variances have been or are being obtained.
14.04 ALLOCATION OF ASSETS UPON TERMINATION: If the Plan is terminated,
or if there is partial termination, the Fund shall be allocated on
the basis of the costs of benefits due active, terminated, and
retired Participants, their Spouses or Beneficiaries, with respect
to Service to the date of termination or partial termination,
subject to the following provisions:
(a) Priority Of Payment: If the Fund cannot provide such costs
in full, it shall be allocated in the following order of
priority, with allocations within the last category for which
assets are available being made in proportion to the costs
within that category for each Participants: (1) benefits
accrued for Participants from Employee contributions; (2)
costs for Participants who have been receiving benefits or
who have been eligible to receive Normal Retirement Benefits
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<PAGE>
in accordance with Section 5.01 for more than three years as of
the date of termination; (3) costs for Participants who have been
receiving benefits or who have been eligible to receive Normal
Retirement Benefits in accordance with Section 5.01 for less than
three years as of the date of termination; (4) costs for
Participants who were eligible to receive early retirement
benefits as of the date of termination; (5) costs for all other
benefits insured by the Pension Benefit Guaranty Corporation; and
(6) costs for any other benefits.
(b) Discrimination Not Permitted: If the allocation made pursuant to
paragraph (a)(5) and paragraph (a)(6) above results in
discrimination in favor of Participants who are officers,
shareholders, or Highly Compensated Employees, then the assets
allocated under paragraph (a)(5) and paragraph (a)(6) shall be
reallocated to avoid such discrimination. All amounts allocated
under this paragraph shall be nonforfeitable, to the extent Fund
assets are sufficient. After allocation, the Sponsor shall
determine whether to make lump sum payments of the Actuarial
Equivalent of benefits from the Fund or whether to purchase
immediate or deferred annuities from an insurance company in
whatever amounts the monies so allocated will provide. If the
Fund has sufficient assets to cover the cost of all Accrued
Benefits and full settlement of all such benefits is made by lump
sum payments of the Actuarial Equivalent of benefits or through
the purchase of a group annuity or individual annuity contracts,
then any balance remaining in the Fund shall be refunded to the
Employer.
14.05 EARLY TERMINATION PROVISIONS: Upon termination of this Plan, benefits
which are distributed in full will be subject to the following
provisions:
(a) Assets Are Sufficient To Satisfy Accrued Benefits: If, as of the
date of this Plan terminates and benefits are distributed in
full, the value of Plan assets is not less than the Actuarial
Equivalent of all Accrued Benefits (whatever or not
nonforfeitable), distribution of assets to each Participant equal
to the Actuarial Equivalent of that Participant's Accrued Benefit
will not be discriminatory if the formula for computing benefits
as of the date of termination is not discriminatory under Code
Section 401(a)(4). The benefit payable to a current or former
Participant who is or was a Highly Compensated Employee (as of
the date he or she last completed an hour of Service) shall not
exceed the benefit which is considered nondiscriminatory under
Code Section 401(a)(4). All Actuarial Equivalents and the value
of Plan assets will be computed using assumptions satisfying
Section 4044 of ERISA. Upon the occurrence of the above
situation, the amount by which the value of Plan assets exceeds
the Actuarial Equivalent of Accrued Benefits (whether or not
nonforfeitable) shall revert to the Employer, except if otherwise
provided under Sections 1.01 or 5.01.
(b) Assets Are Insufficient To Satisfy Accrued Benefits:
Notwithstanding paragraph (a) above, if, as of the date this Plan
terminates and benefits are distributed in full, the value of
Plan assets is less than the Actuarial Equivalent of all Accrued
benefits (whether or not nonforfeitable), then the provisions of
paragraph (h), (i) and (j) shall be applicable or, at the
discretion of the Plan Administrator, the provisions of paragraphs
(c), (d), (e) and (f), subject to paragraphs (g) and (h) shall
apply for Plan Years which begin before January 1, 1994.
(c) Restricted benefits For 25 Highest Paid Employees: Employer
contributions on behalf of any of the 25 highest paid Employees
at the time the Plan is established and whose anticipated Annual
benefit exceeds $1,500 will be restricted as provided in Section
14.05(d) upon the occurrence of the following conditions: (1) the
Plan is terminated within 10 years after its establishment; (2)
the benefits of such highest paid Participant become payable
within
54
<PAGE>
10 years after the establishment of the Plan; or (3) if Code
Section 412 (without regard to Code Section 412(h)(2)) does not
apply to this Plan, the benefits of such Participant become
payable after the Plan has been in effect for 10 years, and the
full current costs of the Plan for the first years have not been
funded.
(d) Maximum Distributions Restricted Benefit: Employer contributions
which may be used for the benefit of a Participant described in
section 14.05(d) shall not exceed the greater of $20,000, or 20% of
the first $50,000 of the Participant's Compensation multiplied by
the number of years between the date of the establishment of the
Plan and (1) the date of the termination of the Plan if Section
14.05(c)(1) applies; (2) the date the benefits become payable if
Section 14.05(c)(2) applies; or (3) the date of the failure to
meet the full current costs if Section 14.05(c)(3) applies.
(e) Effect Of Amendment To Increase Benefits: if the Plan is amended
so as to increase the benefit actually payable, in event of the
subsequent termination of the Plan or the subsequent
discontinuance of contributions thereunder, then the provisions
of the above paragraphs shall be applied to the Plan as so
changed as if it were a new Plan established on the date of the
change. The original group of 25 Employees as described in
14.05(c) will continue to have the limitations in 14.05(d) apply
as if the Plan had not been changed. The restrictions relating to
the changes of Plan should apply to benefits or funds for each of
the 25 highest paid Participants on the Effective date of the
changes except that such restrictions need not apply with respect
to any Participant in this group for whom the normal annual
pension or annuity provided by the Employer contributions prior
to that date and during the ensuing 10 years, based on his or her
rate of Compensation on that date, could not exceed $1,500.
(f) Maximum Distributable Restricted Benefits To New Group of 25
Highest Employees: The Employer contributions which may be used
for the benefit of the new group of 25 Participants will be limited
to the greater of (1) the Employer contributions (or funds
attributable thereto) which would have been applied to provide
the benefits for the Employee if the previous Plan had been
continued without change; (2) $20,000; or (3) the sum of (A) the
Employer contributions (or funds attributable thereto) which
would have been applied to provide benefits for the Employee
under the previous plan if it had been terminated the date before
the Effective Date of change, and (B) an amount computed by
multiplying the number of years for which the current costs of
the Plan after that date are met by 20% of his or her annual
Compensation, or $10,000, whichever is smaller.
(g) Modifications To Maximum Distributable Benefits If Greater
Benefit Would Result: Notwithstanding the above limitations, the
following limitations will apply if they would result in a
greater amount of Employer contributions to be used for the
benefits of the restricted Participant: (1) in the case of a
substantial owner (as defined in Section 4022(b)(5) of ERISA), a
dollar amount which equals the Actuarial Equivalent of the benefit
guaranteed for such Participant under Section 4022 of ERISA, or if
the Plan has not terminated, the Actuarial Equivalent of the
benefit that would be guaranteed if the Plan terminated on the
date the benefit commences, determined in accordance with
regulations of the Pension benefit Guaranty Corporation (PBGC);
and (2) in the case of the other restricted Participants, a
dollar amount which equals the present value of the maximum
benefit described in Section 4022(b)(3)(B) of ERISA (determined
on the earlier of the date the Plan terminates or the date
benefits commence, and determined in accordance with regulations
of the PBGC) without regard to any other limitations in Section
4022 of ERISA.
55
<PAGE>
(h) Distributions Upon Receipt Of 125% Deposit: Notwithstanding the
otherwise applicable restrictions on distributions of benefits
incident to early termination or early Plan termination, a
Participant's otherwise restricted benefit may be distributed in
full upon depositing with an acceptable depository property
having a fair market value equal to 125% of the amount which
would be payable had the Plan terminated on the date of the lump
sum distribution. If the market value of the property held by the
depositary falls below 110% of the amount which would be repayable
if the Plan were then to terminate, additional property necessary
to bring the value of the property held by the depository up to
125% of such amount must be deposited and any agreement with a
depository shall so provide. Any provision in this paragraph to
the contrary notwithstanding, any Participant who has deposited
restricted amounts in a depository pursuant to this paragraph,
shall have the right to receive any income from generated by such
property if the market value of the property is otherwise
maintained.
(i) Annual Payments May Not Exceed Those Of A Single Life Annuity:
Benefits distributed to any of the active and former 25 most
highly Compensated Employees who have the greatest compensation
in the current or any prior Plan Year are restricted such that
the annual payments are no greater than an amount equal to the
payment that would be made on behalf of the Participant under a
single life annuity that is the Actuarial Equivalent of the sum
of the Participant's Accrued Benefit and the Participant's other
benefits under the Plan.
(j) When Restrictions Do Not Apply: The above paragraphs (a) through
(j) shall not apply if either (1) after payment of the benefit to
such a Participant, the value of Plan assets equals or exceeds
110% of the current liability (as defined in Code Section 412) as
of the last day of the Plan year during which benefits are
commenced, or (2) the value of the benefits for such a Participant
is less than 1% of the value of current liabilities, or (3) the
value of the Participant's future non restricted limit does not
exceed $3,500. For these purposes the term 'benefit' includes
loans in excess of the amount forth in Code Section 72(p)(2)(A),
any periodic income, any withdrawal values payable to a living
Participant, and any death benefits not provided for by insurance
on the Participant's Life.
56
<PAGE>
15.01 INABILITY TO ACT: All parties to this Plan and Trust and all persons
claiming any interest hereunder shall perform any and all acts and
execute any and all documents and papers which may be necessary or
desirable for carrying out its terms. This agreement and all acts and
decisions taken under it shall be binding upon the heirs, executors,
administrators, successors and assigns of any and all parties hereto
present and future. In the event that it becomes impossible for the
Employer or the Trustees to perform any act in accordance with this
Plan and Trust, the act shall be performed which in the judgment of
the Sponsor, or of the Trustee, shall most nearly carry out the intent
and purpose of the Plan and Trust.
15.02 QUALIFICATION OF EMPLOYER'S PARTICIPATION IN PLAN: If participation in
this Plan by an adopting Employer fails to attain or retain Internal
Revenue Service qualification with respect to the Plan or with respect
solely to such Employer other than the Sponsor, such Employer shall
not participate in this Plan.
15.03 MERGERS AND CONSOLIDATIONS: In the case of any merger or consolidation
of the Employer's Plan with, or transfer of assets or liabilities of
the Employer's Plan, to any other plan, Participants in the Employer's
Plan shall be entitled to receive benefits immediately after the
merger, consolidation, or transfer which are equal to or greater than
the benefits they would have been entitled to receive immediately
before the merger, consolidation, or transfer if the Plan had then
terminated.
15.04 QUALIFICATION OF PLAN: The Sponsor intends that this Plan will meet
the requirements of the Code as a qualified retirement Plan and Trust.
Should the Commissioner of Internal Revenue of any delegate of the
Commissioner at any time determine that the Plan and Trust fails to
meet such requirements, the Sponsor intends to amend the Plan and
Trust to maintain its qualified status.
15.05 GOVERNING LAW: Construction, validity and administration of the Plan
and Trust, shall be governed by Federal law to the extent applicable,
and to the extent not applicable by the laws of the State where the
Sponsor is domiciled.
15.06 HEADINGS AND SUBHEADINGS: Headings and subheadings are inserted in
this Plan and Trust for convenience of reference. However, such
headings and subheadings do not constitute any part of this Plan and
Trust and are not to be considered in its construction.
15.07 PLAN SUBJECT TO SEPARATE TRUST AGREEMENT: Notwithstanding the
provisions of the foregoing Plan document that purport to govern the
rights and obligations of the Trustee with respect to the Trust and
Trust assets, such right and obligations are governed entirely by the
terms of that certain Trust Agreement between I. C. Isaacs & Company,
L. P. and First National Bank of Maryland dated as of November 4,
1976, and the provisions herein concerning rights and obligations of
the Trustee are without effect.
57
<PAGE>
IN WITNESS WHEREOF, this Plan and trust have been executed by the
Employer on the day, month and year first above written.
I. C. ISAACS & COMPANY, L.P.
By /s/ Eugene C. Wielepski
--------------------------
ATTEST:
Donna Derenez
- -----------------------------
58
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EXHIBIT A
PENSION OPTIONS
(1) OPTIONS IN GENERAL:
(a) In lieu of the Normal Retirement Benefit otherwise payable to a
Participant at his Annuity Starting Date, any active, inactive or
suspended Participant, who has not yet reached his Annuity Starting
Date, may elect to receive an appropriately adjusted benefit under
any option provided herein. Each option provided herein shall be the
Actuarial Equivalent of the Participant's Normal Retirement Benefit
determined as of the Annuity Starting Date.
(b) A married Participant's election of an option will be valid only if
the Qualified Joint and Survivor Annuity has been waived under
Section 7.05; however, the election of an option will be valid with
respect to a married Participant who has elected Late Retirement
only if the Qualified Pre-Retirement Survivor Annuity has been
waived under Section 7.05.
(2) ELECTION PROCEDURE: A Participant may elect an option by filing a
Prescribed Form with the Administrator on any date which is (a) at least
90 days prior to the Annuity Starting Date, or (b) less health
satisfactory to the Administrator; but in no event may a Participant file
such election prior to his attainment of Age 52. For purposes of this
Exhibit A, a Prescribed Form means an administrative form prepared and
made available by the Administrator, which is prescribed by the
Administrator for use in applying a benefit or in filing an election
with respect to a benefit under this Plan.
(3) THE OPTIONS THAT MAY BE ELECTED BY A PARTICIPANT ARE:
(a) Joint and Survivor Option: An adjusted Normal Retirement Benefit
payable to the retired Participant during his life, with the
provision that after his death a Normal Retirement Benefit shall
continue during the life of, and shall be paid to, his Contingent
Annuitant (hereinafter defined as the person designated by a
Participant to receive the Actuarial Equivalent of his Normal
Retirement Benefit). The Normal Retirement Benefit payable to the
Contingent Annuitant shall be 100%, 66.66%, or 50% of the
Participant's adjusted Normal Retirement Benefit. Election of this
option is conditional upon (1) designation, as part of the election
of the option filed with the Administrator, of the name and sex of
the Contingent Annuitant, and the particular percentage selected,
and (2) delivery to the Administrator, within 90 days after filing
of such election, of proof satisfactory to the Administrator of the
age of the Contingent Annuitant.
(b) Period Certain And Life Option: An adjusted Normal Retirement
Benefit payable to the Participant during his life, or for a stated
period of years, whichever is longer. After his death within the
stated period of years, the adjusted Normal Retirement Benefit is
payable to the Designated Beneficiary until the expiration of the
stated period. If both the Participant and his Designated
Beneficiary die within the stated period, the remaining payments
shall be commuted at the rate of interest set forth in Exhibit B and
paid at the payee's election in one lump sum or in installments over
a period of 5 years to the estate of the person who received the
last monthly payment as provided in Section 1.14 of the Plan.
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<PAGE>
(c) Social Security Equalization Option: In the event that Normal
Retirement Benefit shall become payable under this Plan before the
date on which primary old age retirement benefits under the Old-Age,
Survivors and Disability Insurance Benefits provisions of the Social
Security Act become payable to the retired Participant, he or she
may elect to have the Normal Retirement Benefit adjusted to provide
level payments, insofar as practicable, including the primary
benefits under the Social Security Act.
(d) Lump Sum Option: A lump sum equal to 100% of the Actuarial
Equivalent of the Accrued Benefit shall be paid to the Participant
upon retirement.
(4) OPTION REQUIREMENTS: Except in respect to the Social Security
Equalization Option, the election of an option shall not result in
monthly payments for life to the Participant or his or her Beneficiary of
less than $10 per month. All payments shall be non-increasing, except
payments (1) made when the Plan is amended to provide increased benefits
to retirees and Beneficiaries, (2) made under a modified cash refund
providing for the refund of employee contributions, and (3) which
increase to the Participant if the Beneficiary predeceases the
Participant.
(5) CHANGE OF OPTION, CONTINGENT ANNUITANT OR BENEFICIARY:
(a) A Participant may elect to change any option previously elected, or
the Contingent Annuitant under the Joint And Survivor Option, by
filing a Prescribed Form with the Administrator on any date which is
(1) at least 90 days prior to the Annuity Starting Date, or (2) less
than 90 days prior to the Annuity Starting Date, provided the
Participant furnishes proof of good health and that the Contingent
Annuitant if the Joint And Survivor Option is effective.
(b) A married Participant may elect to cancel this option at any time
prior to the Annuity Starting Date and convert the benefit to a
Qualified Joint and Survivor Annuity. However, said married
Participant may subsequently waive the Qualified Joint and Survivor
Annuity prior to the Annuity Starting Date, subject to the
provisions of Article 7.
(c) A Participant may designate or change the Beneficiary at any time by
filing a Prescribed Form with the Administrator; provided however if
the Participant is married, the Spouse's consent is required
pursuant to Article 7. The consent of any other Beneficiary is not
required in the event of any change made by a Participant and such
Beneficiary has no rights whatsoever under this Plan except as
specifically provided in this Plan or applicable law.
(d) No change (other than a change in Designated Beneficiary) may be
made or shall become effective with respect to any elected option
after the Annuity Starting Date.
(e) Notwithstanding anything herein to the contrary, a Participant who
retires under the Early Retirement provisions of Section 5.03 or who
terminates employment with a right to a Vested Pension in accordance
with the provisions of Section 8.01, and who thereafter returns as
an Employee and again becomes an Active Participant, shall be
entitled to elect or change an option as if he or she had never
retired or terminated his employment.
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(6) THE FOLLOWING RULES APPLY TO THE JOINT AND SURVIVOR OPTION:
(a) If the Contingent Annuitant under the option dies prior to the
Annuity Starting Date, the election of the Option will be considered
null and void.
(b) If a Participant dies prior to the Annuity Starting Date, no
payments will be made to the Contingent Annuitant.
(c) If the Contingent Annuitant predeceases the Participant after his
retirement, the retired Participant will continue to receive the
adjusted Normal Retirement Benefit without change.
(7) THE FOLLOWING RULES APPLY TO THE PERIOD CERTAIN AND LIFE OPTION AND
THE SOCIAL SECURITY EQUALIZATION OPTION:
(a) If a Beneficiary predeceases the Participant, another Beneficiary may
be designated in accordance with the fourth paragraph of Section 5
above.
(b) If no Designated Beneficiary survives the Retired Participant, or if
the Designated Beneficiary dies before receiving payments in full,
any balance of payments shall be commuted at the applicable rate of
Interest, and paid to the estate of the person who received the last
monthly payment in accordance with Section 1.14 of the Plan.
(c) If a Participant dies prior to the Annuity Starting Date, no
payments will be made to the Designated Beneficiary.
(d) The designation of a Beneficiary under the option shall not
necessarily mean that such a person is a Beneficiary with respect
to any other benefit provided for under this Plan.
(8) OTHER RULES:
(a) Notwithstanding anything herein contained to the contrary, a
Disabled Participant shall not have the right to elect any of the
options described in this Exhibit A, and any such election
previously made shall be null and void.
(b) The rate of Interest and all other Actuarial Assumptions used in
determining Actuarially Equivalent benefits under any option shall b
the Actuarial Assumptions in effect at the time the election of the
option becomes effective. For this purpose, an option may not be
deemed to have become effective until the Annuity Starting Date.
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EXHIBIT B
TABLES AND FACTORS
(1) EARLY RETIREMENT REDUCTION FACTORS: The following Early Retirement
Reduction Factors shall be interpolated on the basis of full months
for a commencement date which falls between any two age brackets.
Age at Annuity Starting Date Reduction Factor
---------------------------- ----------------
64 .93
63 .86
62 .79
61 .72
60 .65
59 .60
58 .55
57 .51
56 .47
55 .44
(2) SPOUSE'S PENSION CONVERSION FACTORS:
(a) A base factor of 0.880
(b) Plus (or minus) 0.004 for each year that the spouse is older (or
younger) than the Participant
(c) Plus (or minus) 0.004 for each year that the Participant's Annuity
Starting Date precedes (or follows) his Normal Retirement Age
(d) Minus 0.100 for a Disabled Participant
(e) But in no event more than 1.00
(3) JOINT AND SURVIVOR OPTION: The formula to determine the factor for the
Joint And Survivor Option shall be as follows:
If the Survivor % is: 50% 66.66% 100%
----- ----- -----
(a) A base factor of 0.880 0.845 0.790
(b) Plus (minus) a factor for each year
that the spouse is older (or younger)
than the Participant equal to 0.004 0.005 0.006
(c) Plus (or minus) a factor for each
year that the Pension Commencement
Date precedes (or follows) the
Participant's Normal Retirement Age 0.004 0.005 0.006
(d) But in no event more than 1.000 1.000 1.000
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(4) 120 MONTHS PERIOD CERTAIN AND LIFE OPTION: The formula to determine the
factor for the Period Certain And Life Option shall be as follows:
(a) A base factor of 0.920
(b) Plus (minus) 0.005 for each of the first five years that the
Participant's Annuity Starting Date precedes (follows) his or her
Normal Retirement Age
(5) SOCIAL SECURITY EQUALIZATION OPTION: The factors for the Social Security
Equalization Option payable at Early Retirement Date shall be determined
taking into account the Early Retirement Reduction Factors set forth
above.
(6) LUMP SUM OPTION: The factors for the determination of lump sums shall be
based on the 1971 Group Annuity Mortality Table for males set back 6
years and 7% annual interest.
(7) OTHER ACTUARIAL CALCULATIONS: All other calculations that require
actuarial equivalence shall be made using the following assumptions:
Pre-retirement: 1971 Group Annuity Mortality Table for males and 7%
interest; Post-retirement: 1971 Group Annuity Mortality Table for males
and 7% interest.
(8) ADJUSTMENT FOR PERIODS LESS THAN A FULL YEAR: Any calculations for
periods of less than a full year shall be determined by reducing the
factor in (b) or (c) if applicable under Sections 2, 3, 4 or 5 above
which would apply if such period were a full year by 1/12th for each
month by which such period is less than a full year.
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EXHIBIT 10.27(b)
FIRST AMENDMENT
TO THE
I.C. ISAACS PENSION PLAN
WHEREAS, I.C. Isaacs and Company, L.P. previously adopted the I.C. Isaacs
Pension Plan; and
WHEREAS, I.C. Isaacs and Company, L.P. wishes to increase the maximum
compensation used in determining accrued benefits from $60,000 to $75,000; and
WHEREAS, I.C. Isaacs, L.P. wishes to permit lump sum distributions of
restricted benefits upon receipt of adequate security;
NOW, THEREFORE, it is resolved that effective January 1, 1997 Section 1.12 is
hereby amended by substituting page 4 attached hereto and marked "First
Amendment"; and
FURTHER RESOLVED that effective January 1, 1997 Sections 14.05(b), (h) and
(j) are hereby amended by substituting pages 54 and 56 attached hereto and
marked "First Amendment"; and
FURTHER RESOLVED that the partners of the I.C. Isaacs & Company, L.P. be and
they hereby are, authorized to execute such documents and to take such they
action as they may deem necessary or appropriate of implement the foregoing
resolutions and amendments.
CERTIFICATION
The undersigned, Secretary of I.C. Isaacs and Company, L.P. hereby certifies
that the foregoing resolutions were duly adopted at a meeting of the partners
held on the Day of 1997.
------ ----------
----------------------------
Secretary
<PAGE>
1.08 AVERAGE ANNUAL COMPENSATION: A Participant's annual Compensation
averaged over the highest 5 consecutive Plan Years ending with his or
her Normal Retirement Age or actual retirement if later, or if earlier,
the date on which he or she last ceased to be an active Participant.
For a Participant with less than the required number of consecutive
years the average of the actual number of consecutive years shall be
used. In the event a Participant is employed or is covered under the
Plan for less than the full accounting period for determining
Compensation, Average Annual Compensation shall be counted (without
analyzing) if such Participant qualifies for a Year of Service or a
Year of Credited Service.
1.09 BENEFICIARY: The individual who is designated as the Beneficiary under
the Plan in accordance with Code Section 401(a)(9) and the regulations
thereunder. Subject to Article 7 and Section 7.07, a Participant may
designate, in writing, a Beneficiary to receive the benefits payable in
the event of his or her death, and may designate a secondary Beneficiary
to receive any benefits payable in the event the primary Beneficiary
predeceases the Participant. A Participant's Surviving Spouse must
consent to the designation of the Participant's primary Beneficiary
other than the Surviving Spouse of more than 50% of the value of any
Plan death benefit. In the event a Participant fails to designate any
Beneficiary in writing, or the Beneficiary predeceases the Participant,
the Participant's Surviving Spouse shall be deemed the Beneficiary. If
there is no Surviving Spouse, the benefits shall be paid to the
Participant's surviving issue per stirpes. If there is no surviving
issue, the benefits shall be paid pursuant to the intestacy laws of the
state in which the Participant is domiciled. A Participant may change
his or her Beneficiary at any time. All Beneficiary designations and
changes shall be made on an appropriate form and filed with the Plan
Administrator. Any such designation shall become effective only upon
its receipt by the Plan Administrator. The last effective designation
received by the Plan Administrator shall supersede all prior
designations.
1.10 BREAK IN SERVICE: For purposes of determining vesting, a Plan Year
during which an Employee fails to complete more than 500 Hours of
Service. In the event that a Plan Year is less than 12 months, the 500
Hours of Service requirement shall be proportionately reduced. For
purposes of determining eligibility, the twelve (12) month period
commencing on the date an Employee first completes an Hour of Service
and each anniversary thereof during which an Employee fails to complete
more than 500 Hours of Service.
1.11 CODE: The Internal Revenue Code of 1986 including any amendments
thereto.
1.12 COMPENSATION: For all Employees other than truckdrivers and salesmen,
the total wages or salary, overtime, commissions, bonuses, and any
other taxable renumeration from the Employer for the Plan Year in no
event greater than $75,000 maximum per year. For any Owner-Employee or
other self-employed individual covered under the Plan, Compensation
will mean Earned Income. For truckdrivers and salesmen, 75% of the
total wages or salary, overtime, commission, bonuses and any other
taxable remuneration for the employer for the Plan Year and in no event
greater than $75,000 maximum per year. Compensation shall include only
Compensation actually paid to the Participant during the Plan Year.
However, Compensation may include any amount contributed by the
Employer pursuant to a salary reduction agreement which is not
includible in the gross income of the Employee under Code Sections 125,
402(a)(8), 402(h) or 403(b). Except for purposes of determining a
Participant's Accrued Benefit prior to the first Plan Year which began on
or after January 1, 1989 or if earlier the date the Plan became Top
Heavy, in accordance with Code Section 401(a)(17) the annual
Compensation of each Participant taken into account under the Plan for
any Plan Year shall not exceed $200,000, as adjusted beginning with the
first Plan Year which begins in 1990 at the same time and in the same
manner as under Code Section 415(d), prorated for less than a 12-month
period.
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in accordance with Section 5.01 for more than three years as of the
date of termination;(3) costs for Participants who have been
receiving benefits or who have been eligible to receive Normal
Retirement Benefits in accordance with Section 5.01 for less than
three years as of the date of termination; (4) costs for
Participants who were eligible to receive early retirement benefits
as of the date of termination; (5) costs for all other benefits
insured by the Pension Benefit Guaranty Corporation; and (6) costs
for any other benefits.
(b) Discrimination Not Permitted: If the allocation made pursuant to
paragraph (a)(5) and paragraph (a)(6) above results in
discrimination in favor of Participants who are officers,
shareholders, or Highly Compensated Employees, then the assets
allocated under paragraph (a)(5) and paragraph (a)(6) shall be
reallocated to avoid such discrimination. All amounts allocated
under this paragraph shall be nonforfeitable, to the extent Fund
assets are sufficient. After allocation, the Sponsor shall determine
whether to make lump sum payments of the Actuarial Equivalent of
benefits from the Fund or whether to purchase immediate or deferred
annuities from an insurance company in whatever amounts the monies
so allocated will provide. If the Fund has sufficient assets to
cover the cost of all Accrued Benefits and full settlement of all
such benefits is made by lump sum payments of the Actuarial
Equivalent of benefits or through the purchase of a group annuity
contract or individual annuity contracts, then any balance remaining
in the Fund shall be refunded to the Employer.
14.05 EARLY TERMINATION PROVISIONS: Upon termination of this Plan, benefits
which are distributed in full will be subject to the following
provisions:
(a) Assets Are Sufficient To Satisfy Accrued Benefits: If, as of the
date this Plan terminates and benefits are distributed in full,
the value of Plan assets is not less than the Actuarial Equivalent
of all Accrued Benefits (whether or not nonforfeitable),
distribution of assets to each Participant equal to the Actuarial
Equivalent of that Participant's Accrued Benefit will not be
discriminatory if the formula for computing benefits as of the
date of termination is not discriminatory under Code Section
401(a)(4). The benefit payable to a current or former Participant
who is or was a Highly Compensated Employee (as of the date he or
she last completed an Hour of Service) shall not exceed the
benefit which is considered nondiscriminatory under Code Section
401(a)(4). All Actuarial Equivalents and the value of Plan assets
will be computed using assumptions satisfying Section 4044 of ERISA.
Upon the occurrence of the above situation, the amount by which the
value of Plan assets exceeds the Actuarial Equivalent of Accrued
Benefits (whether or not nonforfeitable) shall revert to the
Employer, except if otherwise provided under Sections 1.01 or 5.01.
(b) Assets Are Insufficient To Satisfy Accrued Benefits:
Notwithstanding paragraph (a) above, if, as of the date this
Plan terminates and benefits are distributed in full, the value of
Plan assets is less than the Actuarial Equivalent of all Accrued
Benefits (whether or not nonforfeitable), then the provisions of
paragraph (h), (i) and (j) shall be applicable or, at the
discretion of the Plan Administrator, the provisions of paragraphs
(c),(d),(e) and (f), subject to paragraphs (g) and (h) shall apply
for Plan Years which begin before January 1, 1994.
(c) Restricted Benefits For 25 Highest Paid Employees: Employer
contributions on behalf of any of the 25 highest paid Employees at
the time the Plan is established and whose anticipated Annual
Benefit exceeds $1,500 will be restricted as provided in Section
14.05(d) upon the occurrence of the following conditions: (1) the
Plan is terminated within 10 years after its establishment; (2)
the benefits of such highest paid Participant become payable within
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(h) Distributions Upon Receipt Of Adequate Security: Notwithstanding
the otherwise applicable restrictions on distributions of benefits
incident to early termination or early Plan termination, a
Participant's otherwise restricted benefit may be distributed in full
upon depositing with an acceptable depository one of the following:
(1) property having a fair market value equal to 125% of the
restricted amount. If the market value of the property held by the
depository falls below 110% of the restricted amount, additional
property necessary to bring the value of the property held by the
depository up to 125% of such amount must be deposited and any
agreement with a depository pursuant to this subparagraph shall have
the right to receive any income generated by such property if the
market value of the property is otherwise maintained; or (2) a bond
equal to 100% of the amount which would be repayable had the Plan
terminated on the date of the lump sum distribution. Such bond must
be furnished by an insurance company, bonding company, or other
surety approved by the United States Treasury Department as an
acceptable surety on Federal bonds.
(i) Annual Payments May Not Exceed Those Of A Single Life Annuity:
Benefits distributed to any of the active and former 25 most
Highly Compensated Employees who have the greatest compensation in
the current or any prior Plan Year are restricted such that the
annual payments are no greater than an amount equal to the payment
that would be made on behalf of the Participant under a single
life annuity that is the Actuarial Equivalent of the sum of the
Participant's Accrued Benefit and the Participant's other benefits
under the Plan.
(j) When Restrictions Do Not Apply: The above paragraphs (h) and (i)
shall not apply if either (1) after payment of the benefit to such
a Participant, the value of Plan assets equals or exceeds 110% of
the current liability (as defined in Code Section 412) as of the
last day of the Plan Year during which benefits are commenced, or
(2) the value of the benefits for such a Participant is less than
1% of the value of current liabilities, or (3) the value of the
Participant's future non-restricted limit does not exceed $3,500.
For these purposes the term `benefit' includes loans in excess of
the amount forth in Code Section 72(p)(2)(A), any periodic income,
any withdrawal values payable to a living Participant, and any
death benefits not provided for by insurance on the Participant's
life.
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Exhibit 23.01
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
To the Board of Directors
I.C. Isaacs & Company, Inc.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-1 of our reports dated October 31, 1997
relating to the consolidated financial statements and schedule of I.C. Isaacs &
Company, Inc.
We also consent to the reference to our firm under the caption "Experts" in
the Prospectus.
/s/ BDO Seidman, LLP
Washington, D.C.
November 26, 1997
