<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
<TABLE>
<C> <S>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999.
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER: 0-23379
------------------------
I.C. ISAACS & COMPANY, INC.
(Exact name of Registrant as specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 52-1377061
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3840 BANK STREET 21224-2522
BALTIMORE, MARYLAND (Zip Code)
(Address of principal executive offices)
</TABLE>
(410) 342-8200
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former
fiscal year--if changed since last report)
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
As of November 10, 1999, 7,197,990 shares of common stock ("Common Stock")
of the Registrant were outstanding.
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<PAGE>
PART I--FINANCIAL INFORMATION
I.C. ISAACS & COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
ASSETS
Current
Cash, including temporary investments of $887,845 and
$847,000................................................ $ 1,345,595 $ 1,123,489
Accounts receivable, less allowance for doubtful accounts
of $1,353,000 and $700,000.............................. 14,904,501 18,637,254
Inventories (Note 1)...................................... 23,121,971 19,956,675
Refundable income taxes (Note 4).......................... 1,799,450 361,995
Prepaid expenses and other................................ 882,355 379,732
----------- -----------
Total current assets.................................. 42,053,872 40,459,145
Property, plant and equipment, at cost, less accumulated
depreciation and amortization............................. 3,247,646 3,177,634
Trademark and licenses, less accumulated amortization of
$1,412,500 and $224,884 (Note 7).......................... 10,437,500 1,125,116
Deferred royalty expense (Note 7)........................... -- 2,300,000
Goodwill, less accumulated amortization of $1,412,790 and
$1,598,685................................................ 1,239,310 1,053,415
Other assets................................................ 2,067,815 2,372,899
----------- -----------
$59,046,143 $50,488,209
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Checks issued against future deposits..................... $ 1,298,929 $ 591,861
Current maturities of revolving line of credit (Note 2)... 2,412,235 5,171,229
Current maturities of capital lease obligations........... 179,864 24,808
Accounts payable.......................................... 4,301,707 3,432,355
Accrued expenses and other current liabilities (Note 3)... 2,074,305 7,435,708
Accrued compensation...................................... 209,773 309,620
----------- -----------
Total current liabilities............................. 10,476,813 16,965,581
----------- -----------
Long-term debt
Note payable.............................................. 11,250,000 --
Capital lease obligations................................. 6,258 --
----------- -----------
Total long-term debt.................................. 11,256,258 --
----------- -----------
Commitments and Contingencies (Note 7)
STOCKHOLDERS' EQUITY (NOTES 5 AND 6)
Preferred stock; $.0001 par value; 5,000,000 shares
authorized, none outstanding............................ -- --
Common stock; $.0001 par value; 50,000,000 shares
authorized, 8,344,699 shares issued; 6,782,200 and
7,197,990 shares outstanding............................ 834 834
Additional paid-in capital................................ 38,924,998 38,674,998
Retained earnings......................................... 1,597,270 (2,843,174)
Treasury stock, at cost (1,562,499 and 1,146,709
shares)................................................. (3,210,030) (2,310,030)
----------- -----------
Total stockholders' equity............................ 37,313,072 33,522,628
----------- -----------
$59,046,143 $50,488,209
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
I.C. ISAACS & COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales................................. $32,890,127 $24,884,949 $93,995,412 $68,169,645
Cost of Sales............................. 26,969,140 16,999,481 71,298,925 47,507,367
----------- ----------- ----------- -----------
Gross profit.............................. 5,920,987 7,885,468 22,696,487 20,662,278
----------- ----------- ----------- -----------
Operating Expenses
Selling................................. 4,725,073 3,254,190 13,390,127 10,232,758
License fees (Note 7)................... 1,735,999 941,695 4,973,487 4,612,503
Distribution and shipping............... 1,000,318 696,871 3,022,785 2,232,030
General and administrative.............. 2,672,428 2,034,337 7,616,117 6,297,347
Provision for severance (Note 7)........ -- -- -- 750,000
Provision for plant closing............. -- -- 226,326 --
----------- ----------- ----------- -----------
Total operating expenses............ 10,133,818 6,927,093 29,228,842 24,124,638
----------- ----------- ----------- -----------
Operating Income (loss)................... (4,212,831) 958,375 (6,532,355) (3,462,360)
----------- ----------- ----------- -----------
Other Income (expense)
Interest, net........................... (489,198) (582,033) (1,033,002) (1,431,679)
Other, net.............................. (68,663) 227,710 261,484 453,595
----------- ----------- ----------- -----------
Total other income (expense).............. (557,861) (354,323) (771,518) (978,084)
----------- ----------- ----------- -----------
Income (loss) before income taxes......... (4,770,692) 604,052 (7,303,873) (4,440,444)
Income tax benefit........................ -- -- 154,000 --
----------- ----------- ----------- -----------
Net Income (loss)......................... $(4,770,692) $ 604,052 $(7,149,873) $(4,440,444)
=========== =========== =========== ===========
Basic earnings (loss) per share........... $ (0.62) $ 0.09 $ (0.88) $ (0.65)
Weighted average shares outstanding....... 7,733,214 6,980,599 8,080,994 6,848,751
=========== =========== =========== ===========
Diluted earnings (loss) per share......... $ (0.62) $ 0.09 $ (0.88) $ (0.65)
Weighted average shares outstanding....... 7,733,214 7,035,917 8,080,994 6,848,751
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
I.C. ISAACS & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1999
------------ -----------
<S> <C> <C>
Operating Activities
Net loss.................................................. $ (7,149,873) $(4,440,444)
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for doubtful accounts......................... 1,229,952 698,635
Write off of accounts receivable........................ (1,064,952) (1,282,292)
Provision for sales returns and discounts............... 4,509,674 3,139,876
Sales returns and discounts............................. (4,549,674) (3,004,637)
Depreciation and amortization........................... 2,099,021 1,700,951
Gain on sale of assets.................................. -- (288,788)
Gain on restructuring of licensing arrangement.......... -- (156,250)
Compensation expense on stock options................... 30,000 3,938
Other................................................... (2,506) --
(Increase) decrease in assets
Accounts receivable................................... (343,144) (3,284,335)
Inventories........................................... (2,720,356) 3,165,296
Refundable income taxes............................... (1,694,703) 1,437,455
Prepaid expenses and other............................ (854,692) 502,621
Other assets.......................................... (12,705) (340,796)
Increase (decrease) in liabilities
Accounts payable...................................... (982,744) (869,352)
Accrued expenses and other current liabilities........ 471,678 1,057,467
Accrued compensation.................................. 20,287 99,847
Income taxes payable.................................. (156,000) --
------------ -----------
Cash used in operating activities........................... (11,170,737) (1,860,808)
------------ -----------
Investing Activities
Capital expenditures...................................... (1,375,064) (440,698)
Acquisition of Girbaud license............................ (600,000) --
Proceeds from sale of assets.............................. -- 288,788
------------ -----------
Cash used in investing activities........................... (1,975,064) (151,910)
------------ -----------
Financing Activities
Checks issued against future deposits..................... 1,748,008 (707,068)
Issuance of common stock.................................. 4,774,860 --
Principal proceeds from debt.............................. 3,314,359 2,758,994
Principal payments on debt................................ (129,386) (161,314)
Purchase of treasury stock................................ (2,445,162) (100,000)
------------ -----------
Cash provided by financing activities....................... 7,262,679 1,790,612
------------ -----------
Decrease in cash and cash equivalents....................... (5,883,122) (222,106)
Cash and Cash Equivalents, at beginning of period........... 7,422,067 1,345,595
------------ -----------
Cash and Cash Equivalents, at end of period................. $ 1,538,945 $ 1,123,489
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<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"), I.C. Isaacs &
Company L.P. (the "Partnership"), Isaacs Design, Inc. ("Design") and I. C.
Isaacs Far East (collectively, the "Company"). ICI operates as the general
partner of the Partnership and has a 99.0% ownership interest. Design operates
as the limited partner of the Partnership and has a 1.0% ownership interest. The
Company established Isaacs Europe in July 1996 as the exclusive licensee of
Beverly Hills Polo Club-Registered Trademark- sportswear in Europe. Isaacs
Europe did not have any significant revenue or expenses in 1998 or thus far in
1999. All intercompany balances and transactions have been eliminated.
BUSINESS DESCRIPTION
The Company, which operates in one business segment, is a designer,
manufacturer and marketer of branded sportswear based in New York City and
Baltimore. The Company offers full lines of sportswear for men and women under
the Marithe and Francois Girbaud-Registered Trademark- brand in the United
States and Puerto Rico, for young men, women and boys under the
BOSS-Registered Trademark- brand in the United States and Puerto Rico, and for
men and boys under the Beverly Hills Polo Club-Registered Trademark- brand in
the United States, Puerto Rico and Europe. The Company also markets women's
pants and jeans under various other Company-owned brand names and under
third-party private labels and recently announced the launch of a new Urban
Expedition (UBX) brand, which it plans to roll out in early 2000.
INTERIM FINANCIAL INFORMATION
In the opinion of management, the interim financial information as of
September 30, 1999 and for the nine months ended September 30, 1998 and 1999
includes normal recurring adjustments and all other 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.
RISKS AND UNCERTAINTIES
The apparel industry is highly competitive. The Company competes primarily
with larger, well capitalized companies which have sought to increase market
share through massive consumer advertising and price reductions. The Company has
continued to experience increased competition from a number of competitors,
including the Tommy Jeans division of Tommy Hilfiger and the Polo Jeans division
of Polo Ralph Lauren, as well as competitors in the urban jeanswear segment such
as FUBU, Mecca and Phat Farm, at both the department store and specialty store
channels of distribution. The Company continues to redesign its jeanswear and
sportswear lines in an effort to be competitive and compatible with changing
consumer tastes. Also, the Company has developed and implemented new marketing
initiatives to promote each of its brands, including "shop-in-shops" for its
Girbaud-Registered Trademark- brand. The risk to the Company is that such a
strategy may lead to continued pressure on 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 majority 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 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
4
<PAGE>
I.C. ISAACS & COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
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.
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 nine months ended September 30,
1998, sales to the Company's largest customer were $24,740,706. This amount
constituted 26.3% of total sales. For the nine months ended September 30, 1999
sales to the Company's two largest customers were $9,288,127 and $6,915,539,
respectively. These amounts constituted 13.6% and 10.1% of total sales,
respectively. The largest customer was the same during both periods. 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 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.
GOODWILL
The Company has recorded goodwill based on the excess of the purchase price
over the value of net assets acquired. The Company analyzes the operating income
of the women's Company-owned and third party private label lines in relation to
the amortization of goodwill associated with those assets on a quarterly basis
for evidence of impairment of the goodwill. During the year ended December 31,
1998, management determined that a reduction in sales had significantly impacted
the operating income of the women's Company-owned and third party private label
lines and that an impairment of the goodwill associated with the lines had
occurred. In response, management recorded a one-time write down of $435,000 and
reduced the estimated life of the goodwill from 40 years to 20 years. Effective
October 1, 1998, the remaining goodwill is being amortized over 63 months.
Management will continue to analyze the profitability of the women's third party
private label lines on a quarterly basis for any additional impairment.
ASSET IMPAIRMENT
Effective January 1, 1996, ICI adopted Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets"
("SFAS 121"). In accordance with SFAS 121, ICI periodically evaluates the
carrying value of long-lived assets when events and circumstances warrant such a
review. The carrying value of a long-lived asset is considered impaired when the
anticipated undiscounted cash flow from such asset is separately identifiable
and is less than the carrying value. In that event, a loss is recognized based
on the amount by which the carrying value exceeds the fair market value of the
long-lived
5
<PAGE>
I.C. ISAACS & COMPANY, INC.
SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
asset. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved.
INCOME TAXES
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 basis using presently
enacted tax rates.
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.
There is no difference in basic and diluted earnings per share in the first
three quarters of 1998 or for the first two quarters of 1999. Since the Company
generated net income for the quarter ended September 30, 1999, it considered
whether any outstanding stock options had a dilutive effect on earnings per
share for the period. The dilutive effect of the stock options is reflected in
the weighted average shares outstanding for the period ended September 30, 1999.
Even after considering the dilutive effect of stock options for the period ended
September 30, 1999, there was no difference between basic and fully diluted
earnings per share.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities and measure
those instruments at fair market value. Under certain circumstances, a portion
of the derivative's gain or loss is initially reported as a component of other
comprehensive income and subsequently reclassified into income when the
transaction affects earnings. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
Presently, the Company does not use derivative instruments either in hedging
activities or as investments. Accordingly, the Company believes that adoption of
SFAS 133 will have no impact on its financial position or results of operations.
6
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Raw Materials...................................... $ 4,790,634 $ 2,312,834
Work-in-process.................................... 1,531,424 1,364,374
Finished Goods..................................... 16,799,913 16,279,467
----------- -----------
$23,121,971 $19,956,675
=========== ===========
</TABLE>
2. LONG-TERM DEBT
In March 1999, the Company amended its revolving line of credit agreement to
extend the term of the agreement through December 31, 2000. The line of credit
agreement had been set to expire on June 30, 1999. The amended agreement
provides that the Company may borrow up to 80.0% of net eligible accounts
receivable and a portion of imported inventory, as defined in the agreement.
Borrowings under the agreement may not exceed $25.0 million including
outstanding letters of credit, which are limited to $8.0 million, and bear
interest at the lender's prime rate of interest plus 1.0%. In connection with
amending the agreement the Company will pay Congress a financing fee of
$125,000, one half of which was paid at the time of closing and the other half
of which will be paid on June 30, 2000. The financing fee will be amortized over
21 months. Under the terms of the credit agreement, as amended, the Company is
required to maintain minimum levels of working capital and tangible net worth.
The Company was in compliance with these restrictive covenants as of
September 30, 1999.
3. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
Non-cash liability due under licensing
arrangement....................................... $ -- $4,300,000
Royalties........................................... 912,657 1,208,932
Reserve for severance............................... 300,000 612,502
Accrued interest.................................... 189,816 562,000
Customer credit balances............................ 226,479 166,535
Payroll tax withholdings............................ 111,725 132,253
Bonus accrual....................................... -- 63,000
Deferred fees....................................... -- 62,500
Payable to salesmen................................. 2,519 54,343
Accrued professional fees........................... 150,000 50,000
Other............................................... 85,109 171,443
Franchise taxes payable............................. 96,000 52,200
---------- ----------
$2,074,305 $7,435,708
========== ==========
</TABLE>
7
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES
The Company has estimated its annual effective tax rate at 0% due to the
uncertainty over the level of earnings in 1999. Also, the Company has net
operating loss carryforwards of approximately $17.0 million for income tax
reporting purposes for which no income benefit has been recorded due to the
uncertainty over the generation of taxable income in 1999.
5. STOCKHOLDERS' EQUITY
In June 1998, the Company's Board of Directors authorized a stock repurchase
program. Under this program the Company may repurchase up to $4.0 million of its
common stock. From inception through September 30, 1999, the Company had
purchased 1,622,011 shares at a cost of $3,295,162. In August 1999, the Company
issued 500,000 shares of restricted common stock out of its treasury shares, in
connection with an amendment of the Girbaud-Registered Trademark- women's
license agreement. In November 1999, the Company issued 2.0 million shares of
restricted Series A Convertible Preferred Stock in connection with a
restructuring of the licensing arrangement for the use of the
Boss-Registered Trademark- trademark. Also in connection with such
restructuring, the Company agreed to issue an additional 1.3 million restricted
shares of the same series of convertible preferred stock and 666,667 shares of
restricted common stock on April 30, 2000. The preferred stock is convertible
into a promissory note in a principal amount equal to $1.00 multiplied by the
number of shares converted in 2003. Common Stock issued to Ambra is subject to
certain piggyback registration rights and, beginning December 15, 2000, certain
demand registration rights.
6. STOCK OPTIONS
In May 1997, ICI adopted the 1997 Omnibus Stock Plan. Under the 1997 Omnibus
Stock Plan, ICI 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 is
administered by the Board of Directors. The Company reserved 500,000 shares of
common stock for issuance under the 1997 Omnibus Stock Plan. In August 1998 the
Company granted options to purchase 351,000 shares of the Company's common stock
at an exercise price of $2.125 per share. In January 1999 the Company granted
options to purchase 244,000 shares of the Company's common stock at an exercise
price of $1.56 per share. The shares will become fully vested on the second
anniversary of the grant date.
In 1999, the Board of Directors and the Company's stockholders approved an
increase in the number of shares of common stock that may be issued with respect
to awards granted under the Plan to an aggregate of 1.1 million shares.
The following table relates to option activity in the first nine months of
1999, under the Plan:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- --------------
<S> <C> <C>
Outstanding at December 31, 1998................... 346,000 $2.13
Granted............................................ 663,250 $1.19 to $1.56
Cancelled.......................................... (110,000) $2.13
Outstanding at September 30, 1999.................. 899,250 $1.19 to $2.13
</TABLE>
ICI has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation"
("SFAS 124"), but applies the intrinsic value method set forth in Accounting
Principles Board Opinion No. 25. For stock options granted to employees,
8
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCK OPTIONS (CONTINUED)
ICI has estimated the fair value of each option granted using the Black-Scholes
option-pricing model with the following assumptions: risk-free interest rate of
6.08%, expected volatility of 90%, expected option life of 4.5 years and no
dividend payment expected. Using these assumptions, the fair value of the stock
options granted is $0.84. There were no adjustments made in calculating the fair
value to account for vesting provisions or for non-transferability or risk of
forfeiture. The weighted average remaining life for options outstanding at
September 30, 1999 is nine years.
If ICI had elected to recognize compensation expense based on the fair value
at the grant dates, consistent with the method prescribed by SFAS No. 123, net
loss per share would have been changed to the pro forma amount indicated below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1999
------------------
<S> <C>
Net loss:
As reported.............................................. $(4,440,444)
Pro forma................................................ (4,579,726)
Basic and diluted loss per share:
As reported.............................................. $ (0.65)
Pro forma................................................ (0.67)
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
In November 1997, the Company, Ambra Inc. (Ambra) and Hugo Boss AG (Hugo
Boss) executed certain agreements including an agreement whereby the Company
borrowed $11.25 million from Ambra to finance the acquisition of certain
BOSS-Registered Trademark- trademark rights. This obligation was evidenced by a
note scheduled to mature on December 31, 2007, which bore interest at 10% per
annum, payable quarterly, with principal payable in full upon maturity. As part
of the same transaction, the Company sold its foreign BOSS-Registered Trademark-
trademark rights and related assets to Ambra and entered into a foreign rights
manufacturing agreement (the "Foreign Rights Manufacturing Agreement") with
Ambra, which allowed the Company to manufacture apparel in certain foreign
countries for sale in the United States using the BOSS-Registered Trademark-
brand and image in exchange for an annual royalty payment. The Company retained
ownership of its domestic BOSS-Registered Trademark- trademark rights subject to
a concurrent use agreement with Hugo Boss (the "Concurrent Use Agreement").
On October 22, 1999, the Company, Ambra and Hugo Boss entered into an
agreement to restructure the licensing arrangement for the use of the
BOSS-Registered Trademark- trademark. Pursuant to this agreement, the Company
transferred to Ambra substantially all of its rights in the marks containing the
term "BOSS-Registered Trademark-" throughout the world and agreed to issue, on
November 6, 1999, 2.0 million shares of a newly designated Series A Convertible
Preferred Stock having an estimated fair market of $2.0 million in exchange for
the cancellation of the $11.25 million note. As a result of this transaction,
the Company recognized a gain of $156,250 in the quarter ended September 30,
1999. In the same agreement, the Company, Ambra and Hugo Boss agreed to
terminate the Foreign Rights Manufacturing Agreement, the Concurrent Use
Agreement and an option on the part of Ambra to purchase the Company's domestic
BOSS-Registered Trademark- trademark rights, which was originally entered into
in November 1997. The Company, Ambra and Hugo Boss also agreed to enter into a
license agreement granting the Company rights to use various trademarks
including the word "Boss-Registered Trademark-" in the manufacture and domestic
sale of specified types of apparel. Except for the initial term and the minimum
annual royalties, the Company's rights under the new license agreement are
substantially similar
9
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
to those it previously had. As consideration, together with the royalties
discussed below, for the new license agreement, the Company will issue to Ambra,
on April 30, 2000, 1.3 million shares of the same series of convertible
preferred stock having an estimated fair market value of $1.3 million and
666,667 shares of common stock, which had an aggregate value of $1.0 million
based on the market price of $1.50 at the time the parties agreed to this
transaction. The total of $2.3 million has been recorded as deferred royalty
expense and will be amortized over the period beginning October 1, 1999 and
ending December 31, 2003. The new license agreement extends through
December 31, 2003, with renewal options, at the option of Isaacs, through
December 31, 2007. The minimum annual royalties under the new license agreement
are as follows:
<TABLE>
<S> <C>
1999 $2,800,000
2000 $3,200,000
2001 $3,200,000
2002 $2,600,000
2003 $2,100,000
</TABLE>
The minimum annual royalties under the initial term of the previous license
agreement were as follows:
<TABLE>
<S> <C>
1999 $4,000,000
2000 $4,000,000
2001 $4,000,000
</TABLE>
Based on the terms of the new license agreement, the Company recorded a
reduction in royalty expense of $1,004,000 in the quarter ended September 30,
1999.
Except as set forth below, the Series A Convertible Preferred Stock to be
issued by the Company to Ambra in November 1999 and April 2000, will have all of
the same preferences, rights and voting powers as the common stock. The
preferred stock shall not be entitled to vote on any matters to be voted upon by
the stockholders' of the Company, except that the holders of the preferred stock
will be entitled to vote as a separate class, with a majority required for the
creation of an equity security senior to the preferred stock. The preferred
stock shall have a liquidation preference of $1.00. The Company, at any time,
may redeem any or all of the preferred stock at a redemption price of $1.00 per
share. Upon the occurrence of certain acceleration events, as defined in its
license agreement with the Company, the licensor of the
Boss-Registered Trademark- mark may demand redemption of the preferred stock at
a redemption price equal to $1.00 per share. Any or all of the unredeemed shares
of preferred stock will be convertible, at the option of the holder, for a 60
day period beginning October 31, 2003 into a promissory note of the Company in a
principal amount equal to $1.00 multiplied by the total number of preferred
shares being converted. Interest will accrue at an annual rate of 12%, with
principle and interest payable in four quarterly installments beginning
January 1, 2004. For financial reporting purposes, the preferred stock will be
considered redeemable preferred stock and will be classified outside of
stockholders' equity.
In November 1997 and as further amended in March 1998, the Company entered
into an exclusive license agreement with Girbaud Design, Inc. and its affiliate
to manufacture and market men's jeanswear, casual wear, outerwear and active
influenced sportswear under the Girbaud-Registered Trademark- 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 up to a total of ten years. Under
10
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 of $1,500,000 in 1999.
Beginning with the first quarter of 1998, the Company became obligated to
pay the greater of actual royalties earned or the minimum guaranteed royalties
for that year. The Company was required to spend at least $350,000 in
advertising for the men's Girbaud-Registered Trademark- brand in 1998 and is
required to spend at least $500,000 each year thereafter while the agreement is
in effect.
In March 1998, the Company entered into an exclusive license agreement with
Latitude Licensing Corp. to manufacture and market women's jeanswear, casual
wear and active influenced sportswear under the Girbaud-Registered Trademark-
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 up to a total of ten years. The
Company paid an initial license fee of $600,000. Under the agreement, if 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>
1999........................................................ $700,000
2000........................................................ $800,000
</TABLE>
Beginning with the first quarter of 1999, the Company is obligated to pay
the greater of actual royalties earned or the minimum guaranteed royalties for
that year. The Company was required to spend at least $550,000 in advertising
for the women's Girbaud-Registered Trademark- brand in 1998 and is required to
spend at least $400,000 each year thereafter while the agreement is in effect.
In addition, while the agreement is in effect the Company is required to pay
$190,000 per year to the licensor for advertising and promotional expenditures
related to the Girbaud-Registered Trademark- brand. In December 1998, the
Girbaud-Registered Trademark- women's license agreement was amended to provide
that the Company would spend an additional $1.8 million on sales and marketing
in 1999 in conjunction with a one year deferral of the requirement that the
Company open a Girbaud retail store in New York City. In August 1999, the
Company issued 500,000 shares of restricted common stock to Latitude Licensing
Corp. in connection with an amendment of the Girbaud women's license agreement
to further defer the obligation to open a Girbaud retail store. The market value
of the shares issued, as of the date of issuance, was $750,000 and, together
with the initial license fee of $600,000, is being amortized over the remaining
life of the agreement. Under the new agreement, if the Company has not signed a
lease agreement for a Girbaud retail store by July 31, 2002 it will become
obligated to pay Latitude Licensing Corp. an additional $500,000 in royalties.
In May 1998, the Company entered into a license agreement with BHPC
Marketing, Inc., to manufacture and market boys knitted and woven shirts, cotton
pants, jeanswear, shorts, swimwear and outerwear under the Beverly Hills Polo
Club-Registered Trademark- brand in the United States and Puerto Rico. The
initial term of the agreement is three years, commencing January 1, 1999, with
renewal options for a total of six years. Under the agreement the Company is
required to make payments to the licensor in an amount equal to 5.0% of net
sales. Payments are subject to guaranteed minimum annual royalties as follows:
<TABLE>
<S> <C>
1999........................................................ $636,000
2000........................................................ $661,000
2001........................................................ $736,000
</TABLE>
11
<PAGE>
I.C. ISAACS & COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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
Beverly Hills Polo Club-Registered Trademark- Trademark in Europe. The
International Agreements, as amended, provide certain exclusive rights to use
the Beverly Hills Polo Club-Registered Trademark- Trademark in all countries in
Europe for an initial term of three years ending December 31, 1999, renewable at
the Company's option, provided the Company is not in breach thereof at the time
the renewal notice is given, through three consecutive extensions ending
December 31, 2004. The International Agreements are subject to substantially the
same terms and conditions as the Beverly Hills Polo Club-Registered Trademark-
Agreements described above. Effective March 1, 1999, BHPC Marketing, Inc.
amended the international agreements to eliminate all royalties through
December 31, 1999 and all of 2000.
In June 1999, the Company's President and Chief Operating Officer resigned.
As part of this resignation, the Company will pay a total of $700,000 over the
next two years. The Company also transferred a life insurance policy with a cash
surrender value of $50,000 to the former President and Chief Operating Officer.
Also in connection with this resignation, the Company purchased 84,211 shares of
the common stock of the Company held by this individual at the market price of
$1.19 per share, for a total of $100,000. This individual's options vested
immediately upon his resignation and are exercisable up to the tenth anniversary
of the grant date.
On November 11, 1999, the Company learned of a putative class action lawsuit
filed on November 10, 1999 in the United States District Court for the District
of Maryland by Leo Bial and Robert W. Hampton, which purports to have been
brought on behalf of purchasers of the Company's common stock between December
17, 1997 and November 11, 1998. The complaint alleges that the registration
statement and prospectus issued in connection with the Company's initial public
offering, completed in December 1997, contained materially false and misleading
statements concerning the Company's products, business operations and prospects
and that the Company issued a series of materially false and misleading
statements, which artificially inflated the price of the Company's common stock
during the class period. Specifically, it alleges violations of Sections 11,
12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the
Company and certain of its current and former officers and directors. The
plaintiffs seek recission, damages, costs and expenses, including attorneys'
fees and experts' fees, and such other relief as may be just and proper. The
Company believes that the allegations set forth in the complaint are without
merit and intends to vigorously contest the allegations contained therein.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those statements
include indications regarding the intent, belief or current expectations of the
Company and its management, including the Company's plans with respect to the
manufacturing, marketing and distribution of its products, its expectations with
respect to risks of its investments and the performance of the counterparties to
its letter of credit agreement, its plans not to invest in derivative
instruments, its expectations regarding future capital expenditures and its
beliefs and intent with respect to the pending class action lawsuit. Such
statements are subject to a variety of 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" in the
Company's Prospectus which include, among other things, (i) changes in the
marketplace for the Company's products, including customer 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-Registered Trademark-, Beverly Hills Polo
Club-Registered Trademark- and Girbaud-Registered Trademark- brand names and
images in the manufacture and sale of the Company's products. Existing and
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 update or revise the information contained in this
Quarterly Report on Form 10-Q, whether as a result of new information, future
events or circumstances or otherwise.
"I.C. Isaacs-Registered Trademark-" is a trademark of the Company. The
Company has filed a federal trademark application for the mark "Urban Expedition
(UBX)." All other trademarks or service marks, including
"Girbaud-Registered Trademark-" and "Marithe and Francois
Girbaud-Registered Trademark-" (collectively, "Girbaud"),
"BOSS-Registered Trademark-" and "Beverly Hills Polo Club-Registered Trademark-"
appearing in this Form 10-Q are the property of their respective owners and are
not the property of the Company.
RESTRUCTURING OF THE BOSS LICENSE AGREEMENT
In November 1997, the Company, Ambra Inc. (Ambra) and Hugo Boss AG (Hugo
Boss) executed certain agreements including an agreement whereby the Company
borrowed $11.25 million from Ambra to finance the acquisition of certain
BOSS-Registered Trademark- trademark rights. This obligation was evidenced by a
note scheduled to mature on December 31, 2007, which bore interest at 10% per
annum, payable quarterly, with principal payable in full upon maturity. As part
of the same transaction, the Company sold its foreign BOSS-Registered Trademark-
trademark rights and related assets to Ambra and entered into a foreign rights
manufacturing agreement (the "Foreign Rights Manufacturing Agreement") with
Ambra, which allowed the Company to manufacture apparel in certain foreign
countries for sale in the United States using the BOSS-Registered Trademark-
brand and image in exchange for annual royalty payment. The Company retained its
ownership of its domestic BOSS-Registered Trademark- trademark rights subject to
a concurrent use agreement with Hugo Boss (the "Concurrent Use Agreement").
On October 22, 1999, the Company, Ambra and Hugo Boss entered into an
agreement to restructure the licensing arrangement for the use of the
BOSS-Registered Trademark- trademark. Pursuant to this agreement, the Company
transferred to Ambra substantially all of its rights in the marks containing the
term "BOSS-Registered Trademark-" throughout the world and issued, on
November 6, 1999, 2.0 million shares of a newly designated Series A Convertible
Preferred Stock having an estimated fair market of $2.0 million in exchange for
the cancellation of the $11.25 million note. As a result of this transaction,
the Company recognized a gain of $156,250 in the quarter ended September 30,
1999. In the same agreement, the Company, Ambra and Hugo Boss agreed to
terminate the Foreign Rights Manufacturing Agreement, the Concurrent Use
Agreement and an option on the part of Ambra to purchase the Company's domestic
BOSS-Registered Trademark- trademark rights, which was originally
13
<PAGE>
entered into in November 1997. The Company, Ambra and Hugo Boss also agreed to
enter into a license agreement granting the Company rights to use various
trademarks including the word "Boss-Registered Trademark-" in the manufacture
and domestic sale of specified types of apparel. Except for the initial term and
the minimum annual royalties, the Company's rights under the new license
agreement are substantially similar to those it previously had. As
consideration, together with the royalties discussed below, for the
restructuring of the license arrangement, the Company will issue to Ambra, on
April 30, 2000, 1.3 million shares of the same convertible preferred stock
having an estimated fair market value of $1.3 million and 666,667 shares of
common stock, which had an aggregate value of $1.0 million based on the market
price of $1.50 at the time the parties agreed to this transaction. The total of
$2.3 million has been recorded as deferred royalty expense and will be amortized
over the period beginning October 1, 1999 and ending December 31, 2003. The new
license agreement extends through December 31, 2003, with renewal options, at
the option of Isaacs, through December 31, 2007. The minimum annual royalties
under the new licensing arrangement are as follows:
<TABLE>
<S> <C>
1999 $2,800,000
2000 $3,200,000
2001 $3,200,000
2002 $2,600,000
2003 $2,100,000
</TABLE>
The minimum annual royalties under the initial term of the previous license
agreement were as follows:
<TABLE>
<S> <C>
1999 $4,000,000
2000 $4,000,000
2001 $4,000,000
</TABLE>
Based on the terms of the new license agreement, the Company recorded a
reduction in royalty expense of $1,004,000 in the quarter ended September 30,
1999.
Except as set forth below, the Series A Convertible Preferred Stock issued
by the Company to Ambra in November 1999 and to be issued in April 2000, will
have all of the same preferences, rights and voting powers as the common stock.
The preferred stock shall not be entitled to vote on any matters to be voted
upon by the stockholders' of the Company, except that the holders of the
preferred stock will be entitled to vote as a separate class, with a majority
required for the creation of an equity security senior to the preferred stock.
The preferred stock shall have a liquidation preference of $1.00. The Company,
at any time, may redeem any or all of the preferred stock at a redemption price
of $1.00 per share. Upon the occurrence of certain acceleration events, as
defined in the agreement, Ambra may demand redemption of the preferred stock at
a redemption price equal to $1.00 per share. Any or all of the unredeemed shares
of preferred stock will be convertible, at the option of the holder, for a 60
day period beginning October 31, 2003 into a promissory note of the Company in a
principal amount equal to $1.00 multiplied by the total number of preferred
shares being converted. Interest will accrue at an annual rate of 12%, with
principle and interest payable in four quarterly installments beginning
January 1, 2004. For financial reporting purposes, the preferred stock will be
considered redeemable preferred stock and will be classified outside of
stockholders' equity.
14
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to net sales of
certain items in the Company's consolidated financial statements for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30
---------------------
1998 1999
-------- --------
<S> <C> <C>
Net sales................................................... 100.0% 100.0%
Cost of sales............................................... 75.9 69.7
----- -----
Gross profit................................................ 24.1 30.3
Selling expenses............................................ 14.2 15.0
License fees................................................ 5.3 6.8
Distribution and shipping expenses.......................... 3.2 3.3
General and administrative expenses......................... 8.3 10.3
----- -----
Operating loss.............................................. (6.9)% (5.1)%
===== =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
NET SALES.
Net sales decreased 24.3% to $24.9 million in the three months ended
September 30, 1999 from $32.9 million in the three months ended September 30,
1998. The decrease was primarily due to lower volume shipments of
BOSS-Registered Trademark- and women's private label lines. These decreases were
partially offset by increases in sales of both the men's and women's
Girbaud-Registered Trademark- brand. Net sales of Girbaud-Registered Trademark-
sportswear were $12.2 million in the three months ended September 30, 1999. The
Company began to recognize revenue from shipments of
Girbaud-Registered Trademark- men's sportswear in the second quarter of 1998.
Those sales totaled $1.6 million in the three months ended September 30, 1998
compared to $9.4 million in the three months ended September 30, 1999. The
Company began to recognize revenue from shipments of
Girbaud-Registered Trademark- women's sportswear in the fourth quarter of 1998.
Those sales totaled $2.8 million in the three months ended September 30, 1999.
In November 1998, the Company entered into exclusive international license
agreements to manufacture and market men's and women's sportswear under the
Girbaud-Registered Trademark- brand in selected countries in Central and South
America and in the Caribbean. International sales were insignificant for the
three months ended September 30, 1998 and 1999. Net sales of
BOSS-Registered Trademark- sportswear decreased $17.7 million or 71.1% to $7.2
million due to intense competition in the jeanswear market, particularly with
respect to the BOSS-Registered Trademark- brand. Net sales of Beverly Hills Polo
Club-Registered Trademark- increased $0.3 million to $4.5 million for the three
months ended September 30, 1999. Also, during the three months ended September
30, 1999, the Company had sales of $0.5 million of boys' sportswear under the
Beverly Hills Polo Club-Registered Trademark- brand, which the Company began to
market in the first quarter of 1999. The Company's women's private label sales
decreased $1.1 million or 50.0% to $1.1 million for the three months ended
September 30, 1999.
GROSS PROFIT.
Gross profit increased 33.9% to $7.9 million in the three months ended
September 30, 1999 from $5.9 million in the three months ended September 30,
1998. Gross profit as a percentage of net sales increased from 18.0% to 31.7%
over the same period. The increase in gross profit was primarily due to
increased sales of Girbaud-Registered Trademark- sportswear at higher margins
and cost savings from the continued shift of production of denim bottoms from
the United States to Mexico to take advantage of lower labor and overhead costs.
15
<PAGE>
SELLING, DISTRIBUTION, GENERAL AND ADMINISTRATIVE EXPENSES.
Selling, distribution, general and administrative expenses ("SG&A")
decreased 28.6% to $6.0 million in the three months ended September 30, 1999
from $8.4 million in the three months ended September 30, 1998. As a percentage
of net sales, SG&A expenses decreased to 24.1% from 25.5% over the same period
due to decreases in advertising expenditures, lower selling expenses and lower
commissions to the Company's sales persons. Advertising expenditures decreased
$1.0 million to $0.5 million as the Company focused more on local targeted
advertising campaigns for BOSS-Registered Trademark- and Beverly Hills Polo
Club-Registered Trademark- with less use of national print and television. Also,
the Company is required to spend $0.9 million in advertising for the women's and
men's Girbaud-Registered Trademark- brands as well as $1.8 million on sales and
marketing in 1999. To date, expenditures on the Company's Urban Expedition (UBX)
line have been immaterial. Distribution and shipping expenses decreased $0.3
million to $0.7 million for the three months ended September 30, 1999 due
primarily to a reduction in personnel and wages at the Company's Milford,
Delaware distribution facility. General and administrative expenses decreased
$0.7 million to $2.0 million for the three months ended September 30, 1999. The
Company reduced personnel during the second half of 1998. The Company reduced
personnel during the second half of 1998, which resulted in decreased salary
expense for the three months ended September 30, 1999. Also, the Company
experienced a reduction in bad debt expense from the comparable period a year
ago.
LICENSE FEES.
License fees decreased $0.8 million to $0.9 million in the three months
ended September 30, 1999 from $1.7 million in the three months ended
September 30, 1998. As a percentage of net sales, license fees decreased from
5.3% to 3.8%. The license fees decreased due to the restructuring of the
licensing arrangement for use of the BOSS-Registered Trademark- mark, which was
partially offset by an increase in royalties under the
Girbaud-Registered Trademark- agreement due to increased sales of its
Girbaud-Registered Trademark- line
OPERATING INCOME (LOSS).
Operating income was $1.0 million in the three months ended September 30,
1999 compared to an operating loss of $(4.2) million in the three months ended
September 30, 1998. The improvement was due to increased sales of the
Girbaud-Registered Trademark- line and reduced operating expenses, particularly
in selling expenses and licensing fees relating to the
BOSS-Registered Trademark- mark.
INTEREST EXPENSE.
Interest expense increased $0.1 million to $0.6 million in the three months
ended September 30, 1999. The Company has incurred interest expense related to
its line of credit and in the past incurred interest on the $11.25 million note
payable associated with its purchase of the BOSS-Registered Trademark-
trademark, which was cancelled on October 22, 1999. During the three months
ended September 30, 1999, the Company's borrowings under its line of credit were
generally higher than the comparable period one year earlier.
INCOME TAXES.
The Company recorded an income tax benefit in the three months ended
September 30, 1998 to recognize a tax benefit for the carryback of net operating
losses to recover income taxes paid during 1997, and estimated tax payments made
in the first three months of 1999. There was no comparable item in the three
months ended September 30, 1999.
16
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
NET SALES.
Net sales decreased 27.4% to $68.2 million in the nine months ended
September 30, 1999 from $94.0 million in the nine months ended September 30,
1998. The decrease was primarily due to lower volume shipments of
BOSS-Registered Trademark- and Beverly Hills Polo Club-Registered Trademark-
men's sportswear and women's private label lines. These decreases were partially
offset by increases in sales of both the men's and women's products under the
Girbaud-Registered Trademark- brand. Net sales of Girbaud-Registered Trademark-
sportswear were $19.8 million in the nine months ended September 30, 1999. The
Company began to recognize revenue from shipments of
Girbaud-Registered Trademark- men's sportswear in the second quarter of 1998.
Those sales totaled $2.4 million in the nine months ended September 30, 1998
compared to $16.5 million for the nine months ended September 30, 1999. The
Company began to recognize revenue from shipments of
Girbaud-Registered Trademark- women's sportswear in the fourth quarter of 1998.
Those sales totaled $3.3 million for the nine months ended September 30, 1999.
In November 1998, the Company entered into exclusive international license
agreements to manufacture and market men's and women's sportswear under the
Girbaud-Registered Trademark- brand in selected countries in Central and South
America and in the Caribbean. International sales were insignificant for the
nine months ended September 30, 1999. Net sales of BOSS-Registered Trademark-
sportswear decreased $39.1 million or 55.0% to $32.0 million due to intense
competition in the jeanswear market, particularly with respect to the
BOSS-Registered Trademark- brand. Net sales of Beverly Hills Polo
Club-Registered Trademark- decreased $0.8 million. During the nine months ended
September 30, 1999, the Company had sales of $1.0 million of boys' sportswear
under the Beverly Hills Polo Club-Registered Trademark- brand, which the Company
began to market in the first quarter of 1999. The Company's women's private
label sales decreased $3.2 million or 42.1% to $4.4 million for the nine months
ended September 30, 1999.
GROSS PROFIT.
Gross profit decreased 8.8% to $20.7 million in the nine months ended
September 30, 1999. Gross profit as a percentage of net sales increased from
24.1% to 30.3% over the same period. The increase in gross profit as a
percentage of sales was primarily due to increased sales of
Girbaud-Registered Trademark- jeanswear and sportswear at higher margins and
cost savings from the continued shift of production of denim bottoms from the
United States to Mexico to take advantage of lower labor and overhead costs.
SELLING, DISTRIBUTION, GENERAL AND ADMINISTRATIVE EXPENSES.
SG&A decreased 19.8% to $19.5 million in the nine months ended
September 30, 1999 from $24.3 million in the nine months ended September 30,
1998. As a percentage of net sales, SG&A expenses increased to 28.6% from 25.7%
over the same period due to lower net sales and a provision for severance offset
somewhat by decreases in advertising expenditures, lower selling expenses and
lower commissions to the Company's sales persons. Advertising expenditures
decreased $1.8 million to $2.4 million as the Company focused more on local
targeted advertising campaigns for BOSS-Registered Trademark- and Beverly Hills
Polo Club-Registered Trademark- with less use of national print and television.
Also, the Company is required to spend $0.9 million in advertising as well as
$1.8 million on sales and marketing for the women's and men's
Girbaud-Registered Trademark- brands in 1999. To date, expenditures on the
Company's Urban Expedition (UBX) line have been immaterial. Distribution and
shipping expenses decreased $0.8 million to $2.2 million for the nine months
ended September 30, 1999 due primarily to a reduction in personnel and wages at
the Company's Milford, Delaware distribution facility due to decreased
merchandise shipments. General and administrative expenses decreased $0.8
million to $7.0 million for the nine months ended September 30, 1999. The
Company reduced personnel during the second half of 1998. The Company reduced
personnel during the second half of 1998, which resulted in decreased salary
expense for the nine months ended September 30, 1999. Also, the Company
experienced a reduction in bad debt expense from the comparable period a year
ago. In the second quarter of 1999 the Company's President and Chief Operating
Officer resigned. In connection with this resignation the Company recorded a
provision for severance of $0.8 million.
17
<PAGE>
LICENSE FEES.
License fees decreased $0.4 million to $4.6 million in the nine months ended
September 30, 1999 from $5.0 million in the nine months ended September 30,
1998. As a percentage of net sales, license fees increased from 5.3% to 6.8%.
The license fees as a percent of net sales increased in a period of declining
sales due to minimum royalty payments with respect to BOSS-Registered Trademark-
products under the Foreign Manufacturing Rights Agreement in the first quarter
of 1999, and minimum royalties of $125,000 and $58,000 per month paid under the
Girbaud-Registered Trademark- men's and women's license agreements. These higher
royalties were offset by the restructuring of the licensing arrangement for use
of the BOSS-Registered Trademark- mark in the third quarter of 1999.
OPERATING LOSS.
Operating loss decreased 46.2% to $(3.5) million in the nine months ended
September 30, 1999 from $(6.5) million in the nine months ended September 30,
1998. The improvement was due to a higher gross margin and reduced operating
expenses, particularly selling expenses and licensing fees relating to the use
of the BOSS-Registered Trademark- mark, offset somewhat by a provision for
severance in the second quarter of 1999.
INTEREST EXPENSE.
Interest expense increased $0.4 million to $1.4 million in the nine months
ended September 30, 1999. The Company repaid its asset-based line of credit with
a portion of the proceeds of its initial public offering completed in December
1997. Borrowings under the line of credit were insignificant in the first nine
months of 1998. However, the Company incurred interest expense related to the
$11.25 million note payable associated with its purchase of the
BOSS-Registered Trademark- trademark in November 1997, which was cancelled on
October 22, 1999. The Company invests its excess cash in short-term investments.
During the nine months ended September 30, 1999, the Company's borrowings under
its line of credit were generally higher than the comparable period one year
earlier. The Company did not have significant excess cash during the nine months
ended September 30, 1999.
OTHER INCOME.
The Company recognized $0.3 million of income in the nine months ended
September 30, 1998 related to a refund of excess premiums paid on its employee
health insurance plan. There was no comparable refund in 1999.
INCOME TAXES.
The Company recorded an income tax benefit in the first nine months of 1998
to recognize a tax benefit for the carryback of net operating losses to recover
income taxes paid during 1997, and estimated tax payments made in the first
three months of 1998. There was no such comparable item in the nine months ended
September 30, 1999.
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 to
support increases in inventory and accounts receivable. The Company's working
capital declined significantly during the first nine months of 1999 compared to
the first nine months of 1998, primarily due to cumulative net losses of $14.1
million for the twelve months ended September 30, 1999. As of September 30,
1999, the Company had cash, including temporary investments of $1.1 million and
working capital of $23.5 million compared to $1.5 and $41.8 million,
respectively as of September 30, 1998.
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<PAGE>
OPERATING CASH FLOW.
Cash used by operations totaled $1.9 million for the first nine months of
1999 due to increases in accounts receivable and accrued expenses. These
increases were partially offset by decreases in inventories, and refundable
income taxes. Cash used for investing activities for the first nine months of
1999 were insignificant. Cash provided by financing activities totaled $1.8
million for the first nine months of 1999, resulting primarily from borrowings
on its revolving line of credit.
Inventory decreased $3.2 million from December 31, 1998 to September 30,
1999, compared to an increase of $2.7 million from December 31, 1997 to
September 30, 1998. The increase in 1998 was due to the buildup of finished
goods because of the decline in net sales of BOSS-Registered Trademark- men's
and Beverly Hills Polo Club-Registered Trademark- sportswear coupled with $1.0
million in Girbaud-Registered Trademark- inventory recently manufactured but not
yet sold. The decrease in 1999 was due to the reduction of excess inventory at
significant markdowns as well as tighter controls on existing inventory levels.
Accounts receivable increased due to a slow down in cash collections.
The decrease in refundable income taxes results from the return, in 1999, of
estimated income taxes paid in the first quarter of 1998 and a refund of income
taxes paid in 1997. The refunds result from the planned carryback of net
operating losses to 1997.
Capital expenditures were $0.4 million for the first nine months of 1999
compared to $1.4 million for the first nine months of 1998. The Company does not
expect to incur significant capital expenditures during the rest of 1999.
In connection with the transfer of the $11.25 million promissory note to
Ambra, effective September 30, 1999 the Company will save approximately $1.1
million in interest expense per full calendar year.
CREDIT FACILITIES.
The Company has an asset-based revolving line of credit with Congress
Financial Corporation that allowed it to borrow up to $30.0 million based on a
percentage of eligible accounts receivable and inventory. Borrowings under the
revolving line of credit bore interest at the lender's prime rate less 0.25%. In
March 1999, the Company amended the Agreement to extend the date of termination
of the Agreement from June 30, 1999 to December 31, 2000. The amended Agreement
provides that the Company may borrow up to 80.0% of net eligible accounts
receivable and a portion of imported inventory, as defined in the Agreement.
Borrowings under the Agreement may not exceed $25.0 million including
outstanding letters of credit, which are limited to $8.0 million, and bear
interest at the lender's prime rate of interest plus 1.0%. In connection with
amending the Agreement the Company will pay Congress a financing fee of
$125,000, one half of which was paid at the time of closing and the other half
of which will be paid on June 30, 2000. The financing fee will be amortized over
21 months. Under the terms of the credit agreement, as amended, the Company is
required to maintain minimum levels of working capital and tangible net worth.
The Company was in compliance with these restrictive covenants as of
September 30, 1999.
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 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. Timely contact with customers by collection personnel has been
effective in reducing credit losses to an immaterial amount. For the nine months
ended September 30, 1998 and 1999, the Company's credit losses were
$1.1 million and $1.3 million, respectively. The Company's actual credit losses
as a percentage of net sales were 1.1% and 1.9% respectively.
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<PAGE>
The Company believes that current levels of cash and cash equivalents ($1.2
million at September 30, 1999) together with cash from operations and existing
credit facilities, will be sufficient to meet its capital requirements for the
next 12 months.
YEAR 2000 COMPLIANCE AND EXPENDITURES
The Company determined that it needs to modify or replace portions of its
information technology systems, both hardware and software, so that they will
properly recognize and utilize dates beyond December 31, 1999 (the "Year 2000
issue"). As a result, the Company has developed a plan to review and, as
appropriate, modify or replace the software (and replace some hardware) in its
computer systems. The Company presently believes that with modifications to
existing software, conversions to new software and replacement of some hardware,
the Year 2000 issue will be satisfactorily resolved in its own systems. The
Company has established an internal auditing process to track and verify the
results of its plan and tests. The Company has substantially completed the
renovation, validation and implementation phases of its plan with respect to its
mission-critical systems. The Company is also working with key external parties
with whom it has important financial and operational relationships, including
banks, utilities and other vendors and third party payors, to assess the
remediation efforts made by these parties with respect to their own systems and
to determine the extent to which such systems are vulnerable to the Year 2000
issue. The Company has not yet received sufficient information from these
parties about their remediation plans to predict the outcome of their efforts.
The Company is also developing a contingency plan that is expected to address
financial and operational problems that might arise on and around January 1,
2000. This contingency plan would include identifying back-up processes that do
not rely on computers whenever possible. The Company has incurred and expects to
continue to incur expenses allocable to internal staff, as well as costs for
outside consultants, and computer systems remediation and replacement in order
to achieve Year 2000 compliance. The Company completed the conversion of its
primary software programs in November 1998 and testing occurred in the first
quarter of 1999. The Company currently estimates that these costs will total
approximately $0.5 million, $0.2 million of which was incurred in 1998. The
costs of the year 2000 program and the date on which the Company plans to
complete Year 2000 modifications are based on current estimates, which reflect
numerous assumptions about future events, including the continued availability
of certain resources, the timing and effectiveness of third-party remediation
plans and other factors. The Company can give no assurance that these estimates
will be achieved, and actual results could differ materially from the Company's
plans. Specific factors that might cause such material differences include, but
are not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct relevant computer source codes and embedded
technology, the results of internal and external testing and the timelessness
and the effectiveness of remediation efforts of third parties.
If the modifications and conversions referred to above are not made or are
not completed on a timely basis, the Year 2000 issue could have a material
adverse effect on the Company's business, financial condition and results of
operations. Moreover, even if these changes are successful, failure of third
parties to which the Company is financially or operationally linked to address
their own system problems could have a material adverse effect on the Company.
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. Historically, the Company has taken greater markdowns in the second
and fourth 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, 1999, the Company had unfilled orders of approximately $23
million, compared to approximately $29 million of such orders as of
September 30, 1998. The backlog of orders at any given time is affected by a
number of factors, including seasonality,
20
<PAGE>
weather conditions, scheduling of manufacturing and shipment of products. 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 the results for the full year.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting For Derivative Instruments"
("SFAS 133"). SFAS 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities and measure
those instruments at fair market value. Under certain circumstances, a portion
of the derivative's gain or loss is initially reported as a component of other
comprehensive income and subsequently reclassified into income when the
transaction affects earnings. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
Presently, the Company does not use derivative instruments either in hedging
activities or as investments. Accordingly, the Company believes that adoption of
SFAS 133 will have no impact on its financial position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's principal market risk results from changes in floating
interest rates on short-term debt. The Company does not use interest rate swap
agreements to mitigate the risk of adverse changes in the prime interest rate.
However, the impact of a 100 basis point change in interest rates affecting the
Company's short-term debt would not be material to the net loss, cash flow or
working capital. The Company does not hold long-term interest sensitive assets
and therefore is not exposed to interest rate fluctuations for its assets. The
Company does not hold or purchase any derivative financial instruments for
trading purposes.
21
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On November 11, 1999, the Company learned of a putative class action lawsuit
filed on November 10, 1999 in the United States District Court for the District
of Maryland by Leo Bial and Robert W. Hampton, which purports to have been
brought on behalf of purchasers of the Company's common stock between December
17, 1997 and November 11, 1998. The complaint alleges that the registration
statement and prospectus issued in connection with the Company's initial public
offering, completed in December 1997, contained materially false and misleading
statements concerning the Company's products, business operations and prospects
and that the Company issued a series of materially false and misleading
statements, which artificially inflated the price of the Company's common stock
during the class period. Specifically, it alleges violations of Sections 11,
12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the
Company and certain of its current and former officers and directors. The
plaintiffs seek recission, damages, costs expenses, including attorneys' fees
and experts' fees, and such other relief as may be just and proper. The Company
believes that the allegations set forth in the complaint are without merit and
intends to vigorously contest the allegations contained therein.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) On November 5, 1999, the Company filed a Certificate of Designation with
the Secretary of State of the State of Delaware designating a new class of
preferred stock denominated the Series A Convertible Preferred Stock (the
"Preferred Stock"). Except as set forth below, the Preferred Stock will have all
of the same preferences, rights and voting powers as the Common Stock. The
Preferred Stock shall not be entitled to vote on any matters to be voted upon by
the stockholders of the Company except that the holders of the Preferred Stock
will be entitled to vote as a separate class, and the affirmative vote of
stockholders holding, in the aggregate, a majority of the outstanding shares of
Preferred Stock shall be required, for the creation of an equity security senior
to the Preferred Stock or the amendment of the Certificate of Incorporation or
By-laws of the Company to the detriment of the holders of the Preferred Stock.
The Preferred Stock shall have a liquidation preference of $1.00 per share plus
the amount of any declared but unpaid dividends on the Preferred Stock. The
Company may from time to time and at any time redeem any or all of the Preferred
Stock at a redemption price equal to $1.00 per share. Upon the occurrence of
certain acceleration events under its license agreement with the Company, the
licensor of the Boss-Registered Trademark- mark to the Company may demand a
redemption of the Preferred Stock at a redemption price equal to $1.00 per
share. Any or all of the unredeemed shares of Preferred Stock will be
convertible, at the option of the holder, for a 60 day period beginning
October 1, 2003 into a promissory note of the Company in a principal amount
equal to $1.00 multiplied by the total number of shares of Preferred Stock being
converted, with interest thereafter at an annual interest rate of 12%, payable
in four quarterly installments beginning January 1, 2004.
(b) The Preferred Stock has a liquidation preference of $1.00 per share plus
the amount of any declared but unpaid dividends on the Preferred Stock.
(c) The following is a description of securities issued during the
three-month period ended September 30, 1999 that were not registered under the
Securities Act of 1933, as amended:
(i) On August 6, 1999 the Company issued 500,000 shares of restricted common
stock, par value $.0001, of the Company (the "Restricted Shares").
(ii) The Restricted Shares were sold to Latitude License Corp. ("Latitude").
(iii) The Restricted Shares were issued in consideration of an amendment to
the Company's women's Girbaud-Registered Trademark- license agreement
between the Company and Latitude to defer the Company's obligation to
open a Girbaud retail store in New York City.
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<PAGE>
(iv) The Restricted Shares were issued in a private placement pursuant to
Section 4(2) of the Securities Act of 1933, as amended. The Restricted
Shares were not offered in the form of general solicitation or
advertisement, but rather to one party, Latitude, which is an accredited
investor and the licensor, since 1997, of the
Girbaud-Registered Trademark- mark to the Company. The Company made
available to Latitude all materials and information relating to the
investment that were requested by Latitude.
(iv) There were no cash proceeds from the offering of the Restricted Shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C> <C>
(a) Exhibits
3.03 Certificate of Designation dated November 5, 1999.
10.62 Agreement dated October 22, 1999 by and among I.C. Isaacs &
Company, Inc., I.C. Isaacs & Company L.P., Ambra Inc. and
Hugo Boss Inc.
10.63 Restated and Amended License Rights Agreement dated
October 22, 1999 by and among Ambra Inc., Hugo Boss AG and
I.C. Isaacs & Company L.P.
10.64 Shareholders' Agreement dated November 5, 1999 by and
between I.C. Isaacs & Company, Inc. and Ambra Inc.
10.65 Bill of Sale and Assignment of Trademark Rights dated
October 22, 1999 by and between I.C. Isaacs & Company L.P.
and Ambra Inc.
10.66 Assumption of Assumed Agreements dated October 22, 1999 by
and between I.C. Isaacs & Company L.P. and Ambra Inc.
(b) Reports on Form 8-K
</TABLE>
On November 5, 1999, the Company filed a Report on Form 8-K reporting the
restructuring of its licensing arrangement with Ambra Inc. and Hugo Boss AG.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
I.C. ISAACS & COMPANY, INC.
By: /s/ ROBERT J. ARNOT
-----------------------------------------
Robert J. Arnot
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
</TABLE>
Dated: November 15, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME CAPACITY DATE
---- -------- ----
<C> <S> <C>
Chairman of the Board,
/s/ ROBERT J. ARNOT Chief Executive Officer
------------------------------------------- and Director (Principal November 15, 1999
Robert J. Arnot Executive Officer)
Vice President and Chief
/s/ EUGENE C. WIELEPSKI Financial Officer and
------------------------------------------- Director (Principal November 15, 1999
Eugene C. Wielepski Financial and Accounting
Officer)
</TABLE>
24
<PAGE>
Exhibit 3.03
CERTIFICATE OF DESIGNATION, NUMBER, VOTING POWERS,
PREFERENCES AND RIGHTS OF THE SERIES OF
THE PREFERRED STOCK OF
I.C. ISAACS & COMPANY, INC.
TO BE DESIGNATED
SERIES A CONVERTIBLE PREFERRED STOCK
I.C. Isaacs & Company, Inc., a Delaware corporation (the
"Corporation"), pursuant to authority conferred on the Board of Directors of the
Corporation by the Amended and Restated Certificate of Incorporation, as
amended, of the Corporation (the "Certificate of Incorporation") and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, certifies that the Board of Directors of the Corporation,
by unanimous consent of directors dated November 1, 1999, duly adopted the
following resolution providing for the establishment and issuance of a series of
Preferred Stock to be designated "Series A Convertible Preferred Stock" and to
consist of 3,300,000 shares, as follows:
WHEREAS, under Article Fourth of the Amended and Restated Certificate
of Incorporation of the Corporation, the Board of Directors of the Corporation
is permitted to authorize the issuance of one or more classes of its preferred
stock with the designations, preferences, and relative participating, optional,
or other rights and qualifications, limitations, or restrictions as may be fixed
by the board of directors;
WHEREAS, the directors deem it advisable to issue a new series of the
preferred stock at this time, and have determined to give the new series, to be
denominated Series A Convertible Preferred Stock (the "Preferred Stock"), the
attributes set forth in the following resolution:
RESOLVED, that the number of shares of Preferred Stock of the
Corporation is 3,300,000 shares.
RESOLVED, that except as expressly set forth herein, shares of
Preferred Stock and shares of Common Stock shall have all of the same
preferences, rights (including rights to dividends) and voting powers, shall be
identical in all respects and will entitle the holders thereof to the same
rights and privileges. The following is a description of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the
Preferred Stock:
(1) The shares of Preferred Stock shall not be entitled to
vote on any matters to be voted upon by the stockholders of the
Corporation except as specifically set forth herein. The holders of the
Preferred Stock shall vote as a separate class and the affirmative
votes of shareholders holding, in the aggregate, a majority of the
outstanding Preferred Stock shall be required for (i) the creation of
an equity security senior to the Preferred Stock or (ii) the amendment
of the
1
<PAGE>
Certificate of Incorporation or Bylaws of the Corporation to the
material detriment of the Preferred Stock.
(2) The Corporation may redeem at any time and from time to
time any or all of the Preferred Stock at a redemption price of $1.00
per share.
(3) Unredeemed shares of Preferred Stock shall be convertible,
at the option of the holder, for a sixty (60) day period beginning on
October 1, 2003, into a promissory note of the Corporation in a
principal amount equal to $1.00 multiplied by the total number of
shares of Preferred Stock converted by such holder, with interest
thereafter at an annual rate of interest of 12%, payable in four (4)
equal quarterly installments of principal and interest beginning
January 1, 2004.
(4) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, distribution of
the net assets of the Corporation remaining after payment or provision
for payment of the debts and other liabilities of the Corporation shall
be made as follows: (i) first pro rata to each holder of Preferred
Stock an amount up to $1.00 per share of Preferred Stock held by such
holder plus any declared but unpaid dividends with respect to shares of
Preferred Stock held by such holder and (ii) then pro rata to the
holders of the Common Stock.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned does make, file and record this
Certificate of Designation and does hereby certify that the facts herein stated
are true, and accordingly hereto sets his hand this 5th day of November, 1999.
/s/ Robert J. Arnot
----------------------------------
Robert J. Arnot, President and CEO
3
<PAGE>
Exhibit 10.62
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT
BETWEEN
I.C. ISAACS & COMPANY, INC.
(THE "CORPORATION")
AND
I.C. ISAACS & COMPANY L.P.
(ISAACS)
AND
AMBRA INC.
(AMBRA)
AND
HUGO BOSS AG
(HUGO BOSS)
DATED AS OF OCTOBER 22, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT
This Agreement made as of the 22nd day of October, 1999, (the "FIRST
SETTLEMENT DATE") between I.C. ISAACS & COMPANY, INC., a Delaware corporation
(the "CORPORATION"), I.C. ISAACS & COMPANY L.P., a Delaware limited partnership
("ISAACS"), AMBRA INC., a Delaware corporation ("AMBRA"), and HUGO BOSS AG, a
German corporation ("HUGO BOSS").
In consideration of the premises and the mutual promises herein
contained, the sufficiency and adequacy of which are acknowledged and agreed to
be fair and adequate, the parties intending to be legally bound agree as
follows:
ARTICLE I
CONSTRUCTION AND DEFINED TERMS
Unless otherwise expressly stated in this Agreement, capitalized terms used in
this Agreement shall have the following meanings:
"1997 DOCUMENTS" The Option Agreement, the Concurrent Use Agreement,
the Foreign Manufacturing Rights Agreement, the Boss Golf License Agreement.
"BOSS BUSINESS" The assets, properties and rights set forth in
Subsections (a), (b) and (c) of Section 2.01.
"BOSS GOLF LICENSE AGREEMENT" The Trademark License Agreement Relating
to Boss Golf and Other Marks dated as of November 5, l997 by and between
Isaacs and Ambra.
"BROOKHURST TRADEMARK ASSETS" All rights and related assets referred to
as "Trademark Assets" in the Worldwide Rights Acquisition Agreement and
acquired by Isaacs under the Worldwide Rights Acquisition Agreement, excepting
and excluding therefrom the "Trademark Assets" referred to in the Foreign Boss
Rights Acquisition Agreement and acquired by Ambra under the Foreign Boss
Rights Acquisition Agreement.
"COMMON STOCK" The common stock, par value $.0001, of the Corporation.
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<PAGE>
"CONCURRENT USE AGREEMENT" The Concurrent Use Agreement dated November
5, 1997 between Hugo Boss and Isaacs.
"CORPORATE 10-K" The Corporation's annual report on Form 10-K for the
fiscal year ended December 31, 1998.
"CORPORATE 10-Q" The Corporation's quarterly report on Form 10-Q for
the fiscal quarter ended June 30, 1999.
"DOLLARS" The lawful currency of the United States of America.
"FIRST SETTLEMENT DATE" The date as set forth on the first page of this
Agreement.
"FOREIGN BOSS RIGHTS ACQUISITION AGREEMENT" The Foreign Boss Rights
Acquisition Agreement dated September 30, 1997 between Ambra and Isaacs.
"FOREIGN MANUFACTURING RIGHTS AGREEMENT" The Foreign Manufacturing
Rights Agreement dated November 5, 1997 between Ambra and Isaacs.
"INITIAL STOCK" The Preferred Stock issued to Ambra pursuant to Section
2.06 hereof.
"OPTION AGREEMENT" The Option Agreement dated November 5, 1997 between
Ambra and Isaacs.
"PREFERRED STOCK" The Series A Convertible Preferred Stock, par value
$.0001, of the Corporation, which shall have the rights and preferences set
forth in EXHIBIT A hereto.
"REGISTRATION STATEMENT" The Corporation's Registration Statement on
Form S-1, as declared effective by the SEC on December 17, 1997.
"SEC" The Securities and Exchange Commission.
"SECOND SETTLEMENT DATE" November 6, 1999.
"SECURED LIMITED RECOURSE PROMISSORY NOTE" The Secured Limited Recourse
Promissory Note in the original principal sum of Eleven Million Two Hundred
Fifty Thousand Dollars ($11,250,000) dated November 5, 1997 made by Isaacs and
payable to Ambra.
"SETTLEMENT DATES" The First Settlement Date, the Second Settlement
Date and the Third Settlement Date.
-2-
<PAGE>
"SUBSEQUENTLY ISSUED STOCK" The Common Stock and Preferred Stock issued
to Ambra pursuant to Section 2.08 hereof.
"STOCK" The Initial Stock and the Subsequently Issued Stock.
"THIRD SETTLEMENT DATE" April 30, 2000.
"TRADEMARKS" The meaning set forth in Section 2.01(a) hereof.
"TRADEMARK ASSETS" The meaning set forth in Section 2.01 hereof.
"WORLDWIDE RIGHTS ACQUISITION AGREEMENT" The Worldwide Rights
Acquisition Agreement dated as of September 30, l997 by and among Isaacs,
Brookhurst, Inc. and William Ott.
ARTICLE II
DESCRIPTION OF THE TRANSACTION
SECTION 2.01 TRANSFER OF THE TRADEMARK ASSETS TO AMBRA. Concurrently
with the execution of this Agreement, Isaacs shall convey, transfer, assign and
deliver to Ambra, and Ambra shall acquire from Isaacs, the following assets,
properties and rights of Isaacs throughout the world (the "Trademark Assets"),
including, without limitation, the Brookhurst Trademark Assets, representing the
BOSS Business of Isaacs operating under the BOSS marks:
(a) Any and all right, title and interest of Isaacs 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, 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, including those trademark
registrations and applications listed on SCHEDULE 2.01(a) (the "Trademarks"),
and the goodwill symbolized by the Trademarks, together with all causes of
action and the proceeds thereof in favor of Isaacs heretofore accrued or
hereafter accruing with respect to the Trademarks; provided however, that Isaacs
shall retain all causes of action and proceeds thereof, and bear all costs and
expenses, including attorneys fees, with respect to the pending litigation
involving Oh Trading in the Southern District of New York and the parties agree
to cooperate in good faith and to make reasonable efforts to achieve an
expeditious resolution of that matter to the benefit of all parties hereto;
-3-
<PAGE>
(b) All rights of Isaacs under the Worldwide Rights Acquisition
Agreement, the Uniform License Agreement between Isaacs and Brookhurst, Inc.
dated November 5, 1997 and all license agreements, concurrent use agreements and
other agreements listed on SCHEDULE 2.01(b) (the "Assumed Agreements") and all
files relating thereto which were acquired by Isaacs pursuant to the Worldwide
Rights Acquisition Agreement, including, without limitation, an assignment of
all copyrights, if any, that Isaacs may own as a result of use of Property, as
such term is defined in the Foreign Rights Manufacturing Agreement; and
(c) All right, title and interest in and to all files that
Isaacs has within its possession or control relating to the Trademarks provided,
however, that Isaacs 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.
Simultaneously herewith Isaacs is executing and delivering to Ambra a
Bill of Sale and Assignment of Trademark Assets in the form attached hereto as
EXHIBIT B and any and all of the items described in Section 2.01(c) above in its
possession and control. To the extent any pending application for the Trademarks
is not assignable under applicable law, the parties agree that, such pending
application shall either be abandoned by Isaacs or Isaacs shall continue to
pursue such pending application, at the sole cost, expense and direction of
Ambra, until it becomes assignable or otherwise is abandoned.
Simultaneously herewith Ambra is also executing and delivering to
Isaacs an Assumption of Assumed Agreements in the form attached hereto as
EXHIBIT C.
SECTION 2.02. CANCELLATION OF NOTE. Concurrently with the execution of
this Agreement, the Secured Limited Recourse Promissory Note shall be marked
"paid and cancelled" and delivered to Isaacs and Isaacs shall have no further
obligation with respect thereto.
SECTION 2.03. LICENSING OF TRADEMARKS TO ISAACS. Concurrently with the
execution of this Agreement, Ambra and Isaacs shall enter into a License
Agreement in the form attached hereto as EXHIBIT D (the "License Agreement"),
which License Agreement shall not be deemed to be part of this Agreement,
granting to Isaacs certain rights to use the Trademarks.
SECTION 2.04. DISMISSAL OF ARBITRATION DISPUTE. The parties agree to
withdraw any and all claims submitted to Jonathan Marks as arbitrator formerly
with J.A.M.S./Endispute now with Marks ADR Inc. and further agree not to
resubmit any such claims or other claims relating to the 1997-1998 royalty
payments under the Foreign Rights Manufacturing Agreement in any forum.
-4-
<PAGE>
SECTION 2.05. TERMINATION OF 1997 DOCUMENTS. Immediately upon execution
and delivery of this Agreement and the License Agreement, and without further
action on the part of the parties hereto, each of the 1997 Documents shall be
terminated in its entirety.
SECTION 2.06. INITIAL STOCK ISSUANCE. Subject to the conditions set
forth in Section 2.07 below, on the Second Settlement Date the Corporation will
issue to Ambra 2,000,000 shares of Preferred Stock (the "Initial Stock").
SECTION 2.07. CONDITIONS TO ISSUANCE OF INITIAL STOCK. The obligation
of the Corporation to issue the Initial Stock shall be subject to the
satisfaction by Ambra of the following conditions:
(a) Prior to the issuance of the Initial Stock, Ambra and the
Corporation shall enter into a Shareholders' Agreement in the form attached
hereto as EXHIBIT E (the "Shareholders' Agreement").
(b) Issuance of the Initial Stock to Ambra in the manner
contemplated herein shall not violate any state or federal securities laws.
(c) Each of the investor representations of Ambra set forth in
Sections 6.01 hereof shall be true and correct as of the Second Settlement Date.
SECTION 2.08. SECOND STOCK ISSUANCE. Subject to the conditions set
forth in Section 2.09 below, on the Third Settlement Date the Corporation will
issue to Ambra (a) One Million Three Hundred Thousand (1,300,000) shares of
Preferred Stock and (b) a number of shares of Common Stock equal to the quotient
of One Million Dollars ($1,000,000) divided by One Dollar and Fifty Cents
($1.50) (collectively, the "Subsequently Issued Stock"), provided that the
number of shares of Common Stock issued pursuant to Subsection (b) above shall
be adjusted proportionately with the other outstanding Common Stock for any
stock splits or stock dividends that occur after the Second Settlement Date.
SECTION 2.09. CONDITIONS TO ISSUANCE OF SUBSEQUENTLY ISSUED STOCK. The
obligation of the Corporation to issue the Subsequently Issued Stock shall be
subject to the satisfaction by Ambra of the following conditions:
(a) Issuance of the Subsequently Issued Stock to Ambra in the
manner contemplated herein shall not violate any state or federal securities
laws.
(b) Each of the representations of Ambra set forth in Section
6.01 hereof shall be true and correct as of the Third Settlement Date.
-5-
<PAGE>
ARTICLE III
NO WARRANTIES WITH RESPECT TO TRADEMARK ASSETS
THE TRADEMARK ASSETS ARE TRANSFERRED ON AN AS IS BASIS, AND ISAACS MAKES NO
WARRANTY, AND HEREBY DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT
THERETO INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT EXCEPT THAT THE TRADEMARK
ASSETS SHALL BE TRANSFERRED FREE AND CLEAR OF ALL PLEDGES, SECURITY INTERESTS,
MORTGAGES AND LIENS CREATED BY ISAACS OR THE CORPORATION EXCEPT FOR ANY LIENS OF
AMBRA.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The representations and warranties of the Corporation as set out in
Sections 4.01 through 4.04 below shall be true, complete and correct as of the
date hereof and as of each of the Settlement Dates and the representations and
warranties of the Corporation as set forth in Sections 4.05 and 4.06 below shall
be true, complete and accurate as of the date hereof. The Corporation
acknowledges that each of the representations and warranties contained in this
Article IV are material to Ambra and Hugo Boss and Ambra and Hugo Boss are
entering into this Agreement in reliance on such representations and warranties.
SECTION 4.01 ORGANIZATION AND STANDING. The Corporation is duly
organized and validly existing under the laws of the State of Delaware.
SECTION 4.02. REQUISITE POWER; NO CONFLICTS. The Corporation has all
requisite power and authority to enter into this Agreement and to carry out and
perform its obligations hereunder and the performance by it of its obligations
under this Agreement does not, and at each of the Settlement Dates will not,
violate any applicable law or breach the provisions of any contract by which it
is bound. This Agreement is a valid and binding obligation of the Corporation,
enforceable in accordance with its terms.
SECTION 4.03 AUTHORIZATION. All action on the part of the Corporation
necessary for the performance of each of its obligations hereunder has been
taken or will be taken prior to the First Settlement Date, the Second Settlement
Date and the Third Settlement Date, as appropriate.
-6-
<PAGE>
SECTION 4.04 OFFERING. Subject to the accuracy of Ambra's
representations set forth in Section 6.01 hereof, the offer, sale and issuance
of the Initial Stock and the Subsequently Issued Stock in conformity with the
terms of this Agreement will not result in a violation of the requirements of
Section 5 of the Securities Act.
SECTION 4.05 FINANCIAL CONDITION. The Corporation is not insolvent and
will not be rendered insolvent by the transactions contemplated herein, it will
not be left with insufficient working capital to meet its capital requirements
as a result of the transactions contemplated herein, and the transactions
contemplated herein are not, and will not, hinder, delay or defraud any
creditors of the Corporation. For purposes of this Section 4.05, insolvency
shall be determined on a balance sheet and cash flow basis as of the First
Settlement Date.
SECTION 4.06. FINANCIAL STATEMENTS AND OTHER INFORMATION. None of the
Registration Statement, as of the date it became effective, nor the Corporation
10-K as of its filing date, nor the Corporation 10-Q as of its filing date,
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Except as
disclosed in the Registration Statement, the Corporation 10-K and the
Corporation 10-Q, there are no material liabilities of the Corporation or any of
its subsidiaries, including Isaacs, of any kind whatsoever, whether or not
accrued and whether or not contingent or absolute, except current liabilities
incurred in the ordinary course of business since June 30, 1999. Except as
disclosed in the Corporation 10-Q, since June 30, 1999:
(i) there has been no material adverse change in the assets or
liabilities or in the business or condition, financial or
otherwise, or in the operations of the Corporation;
(ii) to the knowledge of the Corporation, no event has
occurred which would entitle any third party (with or without
notice) to accelerate any material indebtedness of the
Corporation or Isaacs prior to its maturity date;
(iii) the business of the Corporation and Isaacs has been
carried on in the ordinary and usual course;
(iv) the Corporation has not issued any stock, bond or other
corporate security, including without limitation securities
convertible into or rights to acquire capital stock of the
Corporation;
-7-
<PAGE>
(v) neither the Corporation nor Isaacs has discharged or
satisfied any lien or encumbrance or incurred or paid any
obligation or liability other than current liabilities in the
ordinary course of business;
(vi) neither the Corporation nor Isaacs has declared or made
any payment or distribution to stockholders or purchased or
redeemed any shares of its capital stock or other securities.
If any representation or warranty stated in Sections 4.01 through 4.04
above is not true and accurate at any time prior to or on the Third Settlement
Date, the Corporation will give written notice of such fact to the Ambra and
Hugo Boss promptly.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ISAACS
The representations and warranties of Isaacs as set out below shall be
true, complete and correct as of the date hereof. Isaacs acknowledges that each
of the representations and warranties contained in this Article V are material
to Ambra and Hugo Boss and Ambra and Hugo Boss are entering into this Agreement
in reliance on such representations and warranties.
SECTION 5.01 ORGANIZATION AND STANDING. Isaacs is duly organized and
validly existing under the laws of the State of Delaware.
SECTION 5.02. REQUISITE POWER; NO CONFLICTS. Isaacs has all requisite
power and authority to enter into this Agreement and to carry out and perform
its obligations hereunder and the performance by it of its obligations under
this Agreement does not violate any applicable law or breach the provisions of
any contract by which it is bound. This Agreement is a valid and binding
obligation of Isaacs, enforceable in accordance with its terms.
SECTION 5.03 AUTHORIZATION. All action on the part of Isaacs necessary
for the performance of its obligations hereunder has been taken or will be taken
prior to the First Settlement Date.
SECTION 5.04. FINANCIAL CONDITION. Isaacs is not insolvent and will not
be rendered insolvent by the transactions contemplated herein, it will not be
left with insufficient working capital to meet its capital requirements as a
result of the transactions contemplated herein, and the transactions
contemplated herein are not, and will not, hinder, delay or defraud any
creditors of Isaacs. For purposes of this Section 5.04, insolvency shall be
determined on a balance sheet and cash flow basis as of the First Settlement
Date.
-8-
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF AMBRA
The representations and warranties of Ambra as set out in Section 6.01
below shall be true, complete and accurate as of the date hereof and as of each
of the Settlement Dates and the representations and warranties of Ambra as set
out in Sections 6.02 through Section 6.05 below shall be true, complete and
correct as of the date hereof. Ambra acknowledges that each of the
representations and warranties contained in this Article VI are material to the
Corporation and Isaacs and the Corporation and Isaacs are entering into this
Agreement in reliance on such representations and warranties.
SECTION 6.01. INVESTOR REPRESENTATIONS.
(a) Ambra is a Delaware corporation not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of Five Million Dollars ($5,000,000).
(b) Ambra is acquiring the Stock for its own account for
investment and not with any view to resale or distribution thereof.
(c) Ambra is an "accredited investor" as such term is defined
in Rule 501 of Regulation D under the Securities Act.
(d) The taxpayer identification number of Ambra is 13-397-4089
Ambra is not subject to backup withholding either because it has not been
notified by the Internal Revenue Service that it is subject to backup
withholding as a result of a failure to report all interest or dividends, or the
Internal Revenue Service has notified Ambra that it is no longer subject to
backup withholding. Ambra certifies that Ambra is not a "foreign person" within
the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986 and
agrees to so notify the Corporation prior to becoming a foreign person as so
defined.
(e) If any representation or warranty stated above is not true
and accurate at any time prior to the Third Settlement Date, Ambra will give
written notice of such fact to the Corporation promptly.
SECTION 6.02. NO DEFAULT. Ambra hereby agrees that all royalties due
under the Foreign Manufacturing Rights Agreement and all interest payments due
under the Secured Limited Recourse Note on or before the First Settlement Date
have been fully satisfied and that Isaacs is not in default under the royalty or
interest provisions of any of its agreements with
-9-
<PAGE>
Ambra. To Ambra's knowledge, Isaacs is not in default under any of its
agreements with Ambra. Notwithstanding the foregoing, nothing in this Section
6.02 shall relieve Isaacs of its obligations under the License Agreement.
SECTION 6.03. ORGANIZATION AND STANDING. Ambra is duly organized and
validly existing under the laws of the State of Delaware.
SECTION 6.04. REQUISITE POWER; NO CONFLICTS. Ambra has all requisite
power and authority to enter into this Agreement and to carry out and perform
its obligations hereunder and the performance by it of its obligations under
this Agreement do not, and at each of the Settlement Dates will not, violate any
applicable law or breach the provisions of any contract by which it is bound.
This Agreement is a valid and binding obligation of Ambra, enforceable in
accordance with its terms.
SECTION 6.05. AUTHORIZATION. All action on the part of Ambra necessary
for the performance of Ambra's obligations hereunder has been taken or will be
taken prior to the First Settlement Date.
ARTICLE VII
ACKNOWLEDGEMENTS OF AMBRA
Ambra acknowledges each of the following:
(a) The Stock has not been registered under the Securities Act
of 1933, as amended (the "Securities Act") and except as specifically provided
in Section 3 of the Shareholders' Agreement, Ambra will not have any
registration rights with respect to the Stock;
(b) No federal or state agency has made any finding or
determination as to the fairness of the offering for investment, or made any
recommendation or endorsement of the Stock. The Stock has not been registered
under the securities laws of any state and the offering of the Stock has not
been reviewed for accuracy or completeness by any state securities commissioner
or agency;
(c) Ambra has read the information set forth below regarding
its state of residence:
THE STOCK HAS NOT BEEN REGISTERED UNDER THE DELAWARE SECURITIES ACT, AS
AMENDED, AND MAY NOT BE TRANSFERRED OR SOLD
-10-
<PAGE>
EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT, OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR IN A TRANSACTION WHICH IS
OTHERWISE IN COMPLIANCE WITH SUCH ACT.
(d) Any subsequent assignment, sale, transfer, exchange or
other disposition of the Stock may be made only in compliance with applicable
federal and state securities laws;
(e) Ambra is acquiring the Stock without being furnished any
offering literature or prospectus. The Corporation has made available to Ambra
all material that has been requested relating to an investment in the
Corporation and has provided answers to all questions concerning the offering
addressed by the undersigned. In evaluating the suitability of an investment in
the Corporation, Ambra has not relied upon any representations or other
information (oral or written) other than as contained in any documents or
answers to questions furnished by the Corporation;
(f) Ambra has discussed with its professional legal, tax and
financial advisors the suitability of any investment in the Corporation for its
particular tax and financial situation; and
(g) Ambra has not been offered the Stock by any form of
general solicitation or general advertising, including but not limited to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF HUGO BOSS
The representations and warranties of Hugo Boss as set out below shall
be true, complete and correct as of the date hereof. Hugo Boss acknowledges that
each of the representations and warranties contained in this Article VIII are
material to the Corporation and Isaacs and the Corporation and Isaacs are
entering into this Agreement in reliance on such representations and warranties.
SECTION 8.01. To Hugo Boss's knowledge, Isaacs is not in default under
any of its agreements with Hugo Boss.
-11-
<PAGE>
SECTION 8.02. ORGANIZATION AND STANDING. Hugo Boss is duly organized
and validly existing under the laws of the place of its organization.
SECTION 8.03. REQUISITE POWER; NO CONFLICTS. Hugo Boss has all
requisite power and authority to enter into this Agreement and to carry out and
perform its obligations hereunder and the performance by it of its obligations
under this Agreement does not violate any applicable law or breach the
provisions of any contract by which it is bound. This Agreement is a valid and
binding obligation of Hugo Boss, enforceable in accordance with its terms.
SECTION 8.04. AUTHORIZATION. All action on the part of Hugo Boss
necessary for the performance of Hugo Boss's obligations hereunder has been
taken or will be taken prior to the First Settlement Date.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors and
assigns.
SECTION 9.02. SEVERABILITY. Any provision of this Agreement prohibited
by the laws of any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, or modified to conform with such laws,
without invalidating the remaining provisions of this Agreement, and any such
prohibition in any jurisdiction shall not invalidate such provisions in any
other jurisdiction.
SECTION 9.03. ALLOCATION OF PROCEEDS. Each party may allocate the
consideration described in Article II of this Agreement as it deems appropriate
to its business, provided that any such allocation is not inconsistent with the
provisions of this Agreement. Any allocation by one party shall not affect the
other party or parties or be indicative of the parties' intent.
SECTION 9.04. FURTHER ACTIONS. Isaacs will execute any documents
reasonably requested by Ambra or Hugo Boss to effect and confirm the assignment
to Ambra of, and to reduce to Ambra's possession, ownership and use, the
Trademark Assets, and Ambra and Hugo Boss will execute any documents and take
any further actions reasonably requested by Isaacs to effect the withdrawal of
any and all claims submitted to Jonathan Marks as arbitrator
-12-
<PAGE>
formerly with J.A.M.S./Endispute now with Marks ADR Inc. Isaacs will deliver to
Ambra such other records, documentation and information in Isaacs' possession or
control as may be reasonably requested by Ambra to assist Ambra in the use and
protection of the Trademark Assets. From and after the date hereof Isaacs shall
promptly remit or refer to Ambra any mail or other communications including,
without limitation, any written inquiries, relating to the Trademark Assets
which are clearly identified as such and received by Isaacs during the period
beginning the date hereof and ending November 5, 2003.
SECTION 9.05. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
SECTION 9.06. NOTICES. Any notice required or permitted by or in
connection with this Agreement shall be in writing and shall be made by
telecopy, or by hand delivery, or by overnight delivery service, or by certified
mail, return receipt requested, postage prepaid, addressed to the parties at the
appropriate address set forth below or to such other address as may be hereafter
specified by written notice by the parties to each other. Notice shall be
considered given as of the earlier of the date of actual receipt, or the date of
the telecopy or hand delivery, one (1) calendar day after delivery to an
overnight delivery service, or three (3) calendar days after the date of
mailing, independent of the date of actual delivery or whether delivery is ever
in fact made, as the case may be, provided the giver of notice can establish
that notice was given as provided herein. Notwithstanding the aforesaid
procedures, any notice or demand upon any party, in fact received by such party,
shall be sufficient notice or demand.
If to Corporation/Isaacs: I.C. Isaacs & Company, Inc.
350 Fifth Avenue, Suite 1029
New York, New York 10118
Attn: Mr. Robert J. Arnot, Chairman and CEO
Telecopy No.: 212-695-7579
With copy to: I.C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attn: Mr. Eugene C. Wielepski
Telecopy No.: 410-563-1512
-13-
<PAGE>
And copy to: Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attn: Robert J. Mathias, Esquire
Telecopy No.: 410-576-1604
If to Hugo Boss/Ambra: Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attn: General Counsel
Telecopy No.: 49-7123-942018
With copy to: Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attn: Chief Financial Officer
Telecopy No.: 212-940-0619
And copy to: Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attn: Pamela T. Church, Esq.
Telecopy No.: (212) 626-4120
SECTION 9.07. AMENDMENTS, WAIVERS AND CONSENTS. This Agreement shall
not be amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing signed by all parties
hereto.
SECTION 9.08. NO THIRD PARTY BENEFICIARIES. There shall be no
third-party beneficiaries of this Agreement.
-14-
<PAGE>
SECTION 9.09. ARTICLES AND SECTIONS. The Article and Section headings
and captions in this Agreement are for convenience only and shall not affect the
construction or interpretation of this Agreement. The references in this
Agreement to Articles and Sections shall be read as Articles or Sections of this
Agreement unless otherwise specifically provided.
SECTION 9.10. EXHIBITS AND SCHEDULES. The references in this Agreement
to specific Exhibits shall be read as references to such specific Exhibits
attached, or intended to be attached, to this Agreement and any counterpart of
this Agreement and regardless of whether they are in fact attached to this
Agreement, and including any amendments, supplements, and replacements thereto
from time to time.
SECTION 9.11. ENTIRE AGREEMENT. The parties hereto agree that this
Agreement is a complete and exclusive expression of all the terms hereof.
SECTION 9.12. 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. All disputes
arising out of or in connection with this Agreement or the interpretation
thereof shall be submitted to the United States District Court for the Southern
District of New York and the parties hereby submit to the jurisdiction of such
court.
-15-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties, intending to be legally
bound hereby, have caused this Agreement to be duly executed and delivered under
seal as of the date first above written.
WITNESS: I.C. ISAACS & COMPANY, INC.
By: /s/ Robert J. Arnot
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc.
By: /s/ Robert J. Arnot
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: HUGO BOSS AG
By:
- -------------------------- ----------------------------
Name:
Title:
WITNESS: AMBRA INC.
By:
- -------------------------- ----------------------------
Name:
Title:
-16-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties, intending to be legally
bound hereby, have caused this Agreement to be duly executed and delivered under
seal as of the date first above written.
WITNESS: I.C. ISAACS & COMPANY, INC.
By:
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc.
By:
- -------------------------- ----------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
WITNESS: HUGO BOSS AG
/s/ Geof F. Keisch By: /s/ W. Baldessarini
- -------------------------- ----------------------------
Name: W. Baldessarini
Title: Chairman a. CEO
By: /s/ Jorg-V. Muller
----------------------------
Name: Jorg-V. Muller
Title: CFO
WITNESS: AMBRA INC.
By: /s/ Vincent Ottomaselli
- -------------------------- ----------------------------
Name: Vincent Ottomaselli
Title: CFO/VP of Finance
-16-
<PAGE>
SCHEDULE 2.01(a) TO AGREEMENT
TRADEMARKS, REGISTRATIONS AND APPLICATIONS
<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 3/9/93
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 1,023,305 work clothes (25) USA registered/renewed
10/21/95
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 1,933,326 golf clubs (28) USA registered 11/7/95
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
LADY BOSS 1,214,960 work clothes for women (25) USA registered 11/2/92
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 101509 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/NOA issued
lace and embroidery (26) 9/7/99
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
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)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</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
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
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)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/074,962 mugs (21); USA applied/NOA issued
towels (24); 6/15/99
socks and sweatbands (25);
golf bags (28)
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
BOSS 74/801,552 linens (24); USA applied/opposition
lace and embroidery (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
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/opposition
lace and embroidery (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</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
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
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/opposition
hair ornaments (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
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/NOA issued
lace and embroidery (26) 9/7/99
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</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
<TABLE>
<CAPTION>
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
<S> <C> <C> <C> <C>
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/opposition
lace and embroidery (26) dismissed
- ------------------------------ ----------------------- ---------------------------------- ---------------- -------------------------
</TABLE>
* For ease of reference the description of goods in this chart is generalized.
(See registrations and applications for specific goods covered.)
<PAGE>
SCHEDULE 2.01(b) TO AGREEMENT
ASSUMED AGREEMENTS.
1. Trademark License Agreement by and between Brookhurst, Inc. and ProGroup,
Inc. dated February 1, 1993.
2. Settlement Agreement by and between Brookhurst, Inc. and Bravo Corporation
dated January 21, 1997.
3. Agreement by and between Brookhurst, Inc. and Hi-Tech Golf, Inc. dated July
20, 1994.
4. Settlement Agreement by and between Brookhurst, Inc. and Le Boss Sports
Wear, Inc. dated August 9, 1994.
5. Settlement Agreement by and between Brookhurst, Inc. and Hassan Nijem
d.b.a. W-Two Tees dated March 31, 1995.
6. Agreement by and between Brookhurst, Inc. and Cooper Industries, Inc. dated
July 19, 1993.
7. Agreement by and between Brookhurst, Inc. and Dayang International, Inc.
dated February 28, 1994.
8. Agreement by and between Brookhurst, Inc. and Dong Jin Trading Co., Inc.
dated February 28, 1994.
9. Agreement by and between The Boss Group Companies and Millie and Sol
Friedman dated June 9, 1983.
10. Stipulation Terminating Opposition by and between Boss Group Companies,
Inc. and Levi Strauss & Co. dated June, 1976.
11. Agreement by and between Brookhurst, Inc., Yogi Enterprises, Inc. and New
York Wholesale dated February 21, 1994.
12. Worldwide Rights Acquisition Agreement by and between Brookhurst, Inc. and
I.C. Isaacs & Company L.P. dated September 30, 1997; provided that Ambra's
assumption of the obligations under the Worldwide Rights Acquisition
Agreement relates solely to those obligations arising thereunder from and
after the date hereof insofar as they relate to the use of the Trademark
Assets from and after the date hereof.
13. Escrow Agreement by and among Brookhurst, Inc., I.C. Isaacs & Company L.P.
and Paine Webber, Inc., dated November 5, 1997.
<PAGE>
EXHIBIT A TO AGREEMENT
DESCRIPTION OF SERIES A CONVERTIBLE PREFERRED STOCK
Except as expressly set forth herein, shares of Preferred Stock and
shares of Common Stock shall have all of the same preferences, rights (including
rights to dividends) and voting powers, shall be identical in all respects and
will entitle the holders thereof to the same rights and privileges. The
following is a description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of the Preferred Stock:
(1) The shares of Preferred Stock shall not be entitled to vote on any
matters to be voted upon by the stockholders of the Corporation except as
specifically set forth in this paragraph (1). The holders of the Preferred Stock
shall be entitled to vote as a separate class, and the affirmative vote of
stockholders holding, in the aggregate, a majority of the outstanding shares of
Preferred Stock shall be required, for (i) the creation of an equity security
senior to the Preferred Stock or (ii) the amendment of the Certificate of
Incorporation or Bylaws of the Corporation to the material detriment of the
holders of the Preferred Stock.
(2) The Corporation may redeem at any time and from time to time any or
all of the Preferred Stock at a redemption price of One Dollar ($1) per share.
(3) Unredeemed Shares of Preferred Stock will be convertible, at the
option of the holder, for a sixty (60) day period beginning on October 1, 2003,
into a promissory note of the Corporation substantially in the form attached as
EXHIBIT F to the Agreement in a principal amount equal to One Dollar ($1)
multiplied by the total number of shares of Preferred Stock converted by such
holder, with interest thereafter at an annual interest rate of 12%, payable in
four (4) equal quarterly installments of principal and interest beginning
January 1, 2004.
(4) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, distribution of the net assets of
the Corporation remaining after payment or provision for payment of the debts
and other liabilities of the Corporation (the "Remaining Net Assets") shall be
made as follows: (i) first pro rata to each holder of Preferred Stock an amount
up to One Dollar ($1) per share of Preferred Stock held by such holder plus any
declared but unpaid dividends with respect of shares of Preferred Stock held by
such holder and (ii) then pro rata to the holders of the Common Stock.
A-1
<PAGE>
EXHIBIT B TO AGREEMENT
BILL OF SALE AND ASSIGNMENT OF TRADEMARK ASSETS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, I.C. ISAACS &
COMPANY L.P., a Delaware limited partnership ("Isaacs"), for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
received from AMBRA INC., a Delaware corporation ("Ambra"), pursuant to that
certain Agreement dated October 22, 1999 by and between Isaacs, I.C. Isaacs &
Company, Inc., Ambra and Hugo Boss AG (the "Agreement"), does hereby assign,
transfer, deliver and set over to Ambra and Ambra's successors and assigns
forever, and Ambra hereby acquires from Isaacs, all of Isaacs' right, title and
interest in and to all of the following assets, properties and rights of Isaacs
throughout the world (the "Trademark Assets"), including, without limitation,
the Brookhurst Trademark Assets, representing the BOSS Business of Isaacs
operating under the BOSS marks, as set forth below, the same to be held and
enjoyed by Ambra 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:
(a) Any and all right, title and interest of Isaacs 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, including, without
limitation, all registrations and applications for registration therefor
throughout the world, including those trademark registrations and
applications listed on EXHIBIT A hereto together with the good will
associated therewith, (the "Trademarks") and including all causes of action
and the proceeds thereof in favor of Isaacs heretofore accrued or hereafter
accruing with respect to the Trademarks; provided, however, that Isaacs shall
retain all causes of action and proceeds thereof, and bear all costs and
expenses, including attorneys fees, with respect to the pending litigation
involving Oh Trading in the Southern District of New York;
(b) All rights of Isaacs under the Worldwide Rights Acquisition
Agreement, as that term is defined in the Agreement, the Uniform License
Agreement between Isaacs and Brookhurst, Inc. dated November 5, 1997 and all
license agreements, concurrent use agreements and other agreements listed on
SCHEDULE 2.01(B) to the Agreement and all files relating thereto which were
acquired by Isaacs pursuant to the Worldwide Rights Acquisition Agreement,
including, without limitation, an assignment of all copyrights, if any, that
Isaacs may own as a result of the use of Property, as such term is defined in
the Foreign Rights Manufacturing Agreement; and
(c) All right, title, interest in and to all files that Isaacs has
within its possession or control relating to the Trademarks provided,
however, that Isaacs 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.
From and after the date hereof, Isaacs shall, upon request and at the
expense of Ambra but without further consideration, do, execute, acknowledge,
deliver and file, or shall cause to be
B-1
<PAGE>
done, executed, acknowledged, delivered and filed, all such further acts, deeds,
transfers, conveyances, assignments or assurances as may be reasonably requested
by Ambra to transfer, convey and assign to Ambra possession and use of the
Trademark Assets and to comply with all applicable legal requirements to effect
such transfers, conveyances and assignments.
Anything contained in this Bill of Sale and Assignment of Trademark
Assets to the contrary notwithstanding, this Bill of Sale and Assignment of
Trademark Assets shall not constitute an agreement to assign any contract, or
any claim or right or any benefit arising thereunder or resulting therefrom, if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach of or be in violation of any such contract, claim,
right or benefit.
Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
In the event of any conflict or inconsistency between this Bill of Sale
and Assignment of Trademark Assets and the Agreement, the terms of the Agreement
shall prevail.
IN TESTIMONY WHEREOF, Isaacs has caused these presents to be executed.
I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc., its
General Partner
By:
---------------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
B-2
<PAGE>
EXHIBIT A TO BILL OF SALE AND
ASSIGNMENT OF TRADEMARK ASSETS
<PAGE>
EXHIBIT C TO AGREEMENT
ASSUMPTION OF ASSUMED AGREEMENTS
This ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into this
22nd day of October, 1999, 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 assign, transfer and deliver to Ambra,
and Ambra has agreed to acquire and accept from Isaacs certain assets of Isaacs
pursuant to an Agreement entered into on October 22, 1999, between Isaacs, I.C.
Isaacs & Company, Inc., Ambra and Hugo Boss AG (the "Agreement");
WHEREAS, Ambra 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 Agreement.
2. Isaacs hereby assigns to Ambra all its rights under the agreements
identified on SCHEDULE 2.01(b) to the Agreement, constituting the Assumed
Agreements as defined in the Agreement.
3. Ambra hereby assumes all obligations of Isaacs arising from and
after the date hereof under the Assumed Agreements solely insofar as they arise
after the date hereof.
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.
By: I.C. Isaacs & Company, Inc., its
General Partner
By:
------------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
C-1
<PAGE>
AMBRA INC.
By:
-------------------------------
Name:
Title:
C-2
<PAGE>
EXHIBIT D TO AGREEMENT
LICENSE AGREEMENT
<PAGE>
RESTATED AND AMENDED
LICENSE RIGHTS AGREEMENT
This Agreement (the "License Agreement"), effective as of this 22nd day of
October, 1999 (the "Effective Date") restates, amends and renames the FOREIGN
MANUFACTURING RIGHTS AGREEMENT (the "FMRA") entered into as of the 5th day of
November, 1997 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, directly or through its related entity Hugo Boss AG ("Hugo
Boss"), is the owner of or has rights to license various trademarks including
the word "BOSS" throughout the world and in the United States (collectively,
"Hugo Boss Marks"). Licensor and/or its related companies have used for many
years the mark BOSS and Hugo Boss Marks and have developed certain intellectual
property rights in connection therewith.
B. Licensee, as the successor in interest of Brookhurst, Inc., was the
owner of certain United States trademark rights in and registrations of the word
BOSS. Licensee and its predecessors in interest used the mark BOSS on certain
products in the United States and developed certain intellectual property rights
in connection therewith. Licensee has, simultaneously with the execution of this
Agreement, sold and assigned those trademark and related proprietary rights in
the United States to Licensor without reservation of rights.
C. Licensee is a party to the FMRA pursuant to which Licensee has certain
rights to use certain Hugo Boss Marks for manufacturing and marking of apparel
outside the United States as set forth therein, and desires to obtain a license
to be able to continue to distribute, promote and sell products in the United
States under certain of the Hugo Boss Marks, and Licensor is willing to license
such trademarks to Licensee for such purpose in accordance with the terms
hereof.
D. In countries where necessary and appropriate, Licensor desires that
Licensee be recorded as a registered user of the Licensed Marks (as hereinafter
defined) in relation to the manufacture of the Licensed Products.
<PAGE>
E. In connection with the transactions described above, the parties hereby
wish to restate and amend, and do restate and amend, the FMRA which, as of the
Effective Date of this Agreement, shall cease to be in effect.
NOW, THEREFORE, in consideration of the mutual agreements set forth in this
Agreement and other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
a. "Licensed Mark" or "Licensed 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. "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 Licensed 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 Licensed
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.
c. "Licensed Product" or "Licensed Products" shall mean solely the products
specified in Exhibit B attached hereto bearing Licensed Marks in compliance with
Exhibit A.
d. "Manufacturing Territory" shall mean any and all countries listed on
Exhibit C.
e. "Sales Territory" means the United States and certain military locations
as set forth in this Agreement.
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<PAGE>
f. "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.
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.
2. RIGHTS GRANTED
(I) LICENSE FOR THE SALES TERRITORY.
a. Licensor hereby grants to Licensee, and Licensee accepts, upon the terms
and conditions set forth herein, the right and license, under the Hugo Boss
Marks, to use the Licensed Marks in connection with, and for the purpose of, the
design, advertising, marketing, sale and other distribution of Licensed Products
in the Sales Territory. Subject to the restrictions and limitations, and
modifications thereto, contained in subsections 2(I)(d), 2(I)(e), 2(I)(f),
2(I)(g), 2(II)(f), 3(b), and 3(c) below, the license granted to Licensee is
non-exclusive. Unless otherwise agreed to by the parties in writing, Licensee
agrees to sell the Licensed Products solely in accordance with Exhibits A, A1
and B. Nothing in this paragraph is intended to prohibit Licensee from using
third party suppliers, service providers and agents in connection with the
designing, advertising, marketing, sale and other distribution of the Licensed
Products in compliance with the terms of this Agreement.
b. Unless otherwise agreed to by the parties in writing, Licensee agrees
that it shall not use the Licensed Marks in connection with the design,
advertisement, marketing,
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<PAGE>
promotion, distribution or sale of any products other
than Licensed Products.
c. Unless otherwise agreed to by the parties in writing, Licensee agrees
that it will not distribute or sell any Licensed Products bearing the Licensed
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 Licensor. The foregoing shall not prevent Licensee from selling
Licensed Products to general sporting goods stores selling multiple lines of
products for a variety of sports (E.G., Modell's and Sports Authority).
d. On those products listed on Exhibit A1, Licensor, for itself and for its
affiliates (including Hugo Boss) agrees to use the word BOSS alone or the words
BOSS HUGO BOSS, whether used only as those words or in combination with any
symbols, on such products in the Sales Territory solely in accordance with the
price points contained in Exhibit A1; provided, however, that such Exhibit A1
shall not apply to such products used or distributed by Licensor, its affiliates
or their licensees for promotional purposes.
e. Licensor, for itself and for its affiliates (including Hugo Boss) agrees
that without Licensee's prior written consent, which consent may be withheld in
Licensee's sole discretion, Licensor and its affiliates shall not license any
nonaffiliated third party to use the word BOSS alone or the words BOSS HUGO
BOSS, whether used only as those words or in combination with any symbols, in
connection with the sale in the Sales Territory of the sportswear products
listed in Exhibit A1 at or below Licensee's maximum wholesale prices listed
therein.
f. Nothing herein is intended to or shall prevent or otherwise restrict
Licensor or its affiliates (including Hugo Boss) from designing, manufacturing,
advertising, promoting, distributing or selling or licensing others to design,
manufacture, distribute, advertise, promote or sell in the Sales Territory any
product, whether or not bearing a mark with the word BOSS alone or the words
BOSS HUGO BOSS, listed in and consistent with Exhibit A1, or any other product
not listed in Exhibit A1, provided that such products do not use the Microgramma
typestyle shown in Exhibit A.
g. Neither Licensor or its affiliates (including Hugo Boss) nor Licensee
shall use on or in connection with apparel bearing the word "BOSS" sold in the
Sales Territory, 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.
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<PAGE>
h. Notwithstanding any other provision of this Agreement, Licensee may,
during 1999 and 2000, use the Licensed Marks on a non-exclusive basis 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
Licensed Products in the Sales Territory: compact discs, videos, stickers,
stick-on-tattoos, photographs and posters, whistles, notebooks, lanyards,
non-leather I.D. tags, basketballs, cassette tapes, sweatbands and visors,
banners and key chains; provided further that Licensee shall not contest, and
agrees that such non-exclusive right to use shall not restrict or limit, in any
way the manufacturing, distributing or selling by Licensor or its affiliates, or
any of their licensees, of any of the above items with the Hugo Boss Marks. For
each year of this Agreement after 2000, Licensee shall submit for approval a
list of goods it intends to use (subject to the terms and conditions of this
Section 2(I)(h), for promotional purposes. Licensor shall consider the request
in good faith and advise Licensee within ten (10) business days of receipt of
such list which of the goods Licensor, in the exercise of its sole discretion,
approves; provided however, that notwithstanding the provision of Section 26(c),
Licensee may seek arbitration solely as to whether Licensor has acted in good
faith in considering Licensee's request. Absent such approval, Licensee shall
not use Licensed Marks on such goods.
i. Licensee acknowledges the legal and beneficial ownership interests of
Licensor and its affiliates in and to the Licensed Marks and the Hugo Boss Marks
and undertakes that it will not take any action which may in any way impair
their rights in the 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 Licensed Marks or the
Hugo Boss Marks. Licensee further acknowledges that Licensor and its affiliates
own extensive trademark rights relating to the word BOSS both within and outside
of the United States. Licensee does not and shall not own, or purport to own,
any trademark rights relating to the word BOSS within or outside of the United
States.
j. Licensee agrees that it will not sell or offer for sale or resale
Licensed Products anywhere in the world other than in the United States.
Licensee shall not sell or cause to be sold, directly or indirectly, any
Licensed Products to any party which Licensee knows, or has reason to know, has
resold or distributed, is reselling or distributing, or is likely to resell or
distribute such Licensed Products (i) outside of the United States; or (ii) as
duty free merchandise. After the execution of this Agreement as is reasonable,
Licensee shall advise each of its customers (other than consumers or other end
users) in writing of the restrictions on such sales.
k. The parties agree that Licensee may sell Licensed Products to the United
States military solely for resale on United States military installations in the
United States. In making such sales, Licensee shall seek to obtain agreement
from its United States military customers
5
<PAGE>
that Licensed Products will not be sold in United States military installations
outside the United States ("Military Agreement").
(i) If Licensee is unable to obtain a Military Agreement with any
military customer, or if the obtaining of any such Military Agreement
substantially adversely affects Licensee's ability to make military sales
in the United States, then Licensee shall promptly notify Licensor. Any
such notice by Licensee shall include a written explanation and
documentation of all efforts by Licensee to obtain such agreement and shall
include (1) data disclosing Licensee's sales of Licensed Products to the
military customer(s) at issue during the immediate prior 12-month period,
(2) projected sales of Licensed Products over the next 12-month period, (3)
the basis for Licensee's belief that obtaining such an agreement will
substantially adversely affect Licensee's military sales, and (4) all
information known or reasonably available to Licensee about sales of
Licensed Products by the military customer(s) at U.S. military
installations outside the United States.
(ii) Upon receipt of such notice and at Licensor's request, the
parties shall meet and confer within five (5) business days, to agree upon
any further steps to be taken by Licensee 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 Licensee does not agree to discontinue sales of Licensed
Products to any such military customer, Licensor may initiate arbitration
under the principles set forth in Exhibit H. In any such proceeding, the
arbiter shall decide whether Licensee shall be permitted to continue
selling Licensed Products to the military customer(s), absent a 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 Licensee's efforts to obtain a Military Agreement, the
extent to which Licensee's military sales are affected), the extent to
which the absence of a Military Agreement has, is or will contribute to the
sale of Licensed Products outside the United States, and the actual or
threatened harm to Licensor from such sales. Pending the resolution of such
arbitration, Licensee may continue to make sales of Licensed 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 Licensor of any rights it may have under this Agreement, or (2)
Licensor's consent to such sales.
Notwithstanding the foregoing or the decision of any arbitration, nothing
in this agreement shall prevent Licensor from fully enforcing all of its
rights to prevent the
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<PAGE>
unauthorized sale of products bearing Hugo Boss Marks at any U.S. military
installation outside the United States or elsewhere outside the United
States.
(II) LICENSE FOR THE MANUFACTURING TERRITORY.
a. In addition to the rights granted to Licensee above, Licensor hereby
grants to Licensee, and Licensee accepts, upon the terms and conditions set
forth herein, a limited, nonexclusive right and license to itself use, and to
cause and permit third-party foreign manufacturers ("Foreign Manufacturers") and
third-party manufacturers in the United States ("US Manufacturers")
(collectively, "Designated Manufacturer(s)") to use, the Licensed Marks solely
in connection with the manufacture of Licensed Products, labels, displays,
promotional items permitted by this Agreement and other materials used in
connection with the Licensed Products within the Manufacturing Territory for
sale or distribution solely to Licensee.
b. 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(II)(b)(i-xxii), and shall, within sixty (60) days of the effective date of
this Agreement and if not already in place, 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 provided, however,
that, notwithstanding any other provision of this Agreement, with respect to the
US Manufacturers Licensee, in its sole discretion, may determine the means by
which any of its US Manufacturers is advised of the following obligations
(including without limitation by way of letter or terms and conditions included
in any invoice or purchase order):
(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 Licensed Marks or any trademarks confusingly similar to the
Licensed 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 Licensed Marks if requested to do so by Licensee pursuant to Section
2(II)(f) herein.
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<PAGE>
(v) The Designated Manufacturer(s) shall not use the Licensed Marks in
the Manufacturing 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 Licensed
Marks in the Manufacturing Territory.
(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. With respect to US Manufacturers, Licensee shall always have
the right to participate in any inspection by Licensor and Licensor agrees
to coordinate the inspection through Licensee.
(viii) The Designated Manufacturer(s) shall comply with all applicable
labeling and other laws to the extent 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 any agreement in place with Licensee with
respect thereto. With respect to US Manufacturers, Licensee shall always
have the right to participate in any audit by Licensor and Licensor agrees
to coordinate the audit through Licensee.
(x) The Designated Manufacturer(s) shall use the trademark and
copyright notices required by Licensee in connection with the Licensed
Marks.
(xi) The Designated Manufacturer(s) shall acknowledge (or in the case
of US Manufacturers, be advised) that the Licensed Marks are owned solely
and exclusively by Licensor and Hugo Boss and will not at any time
represent that it has any title or right of ownership in the Licensed
Marks.
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(xii) The Designated Manufacturer(s) shall acknowledge (or in the case
of US Manufacturers, be advised) that materials related to its agreement
with Licensee and uniquely and specifically associated with the Licensed
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 (or in the case of US Manufacturers,
be advised) 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 not seek or obtain any
registration of the Licensed 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.
(xiv) In the event the Designated Manufacturer(s) has obtained or
obtains in the future in the Manufacturing Territory, any right, title or
interest in the Licensed 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 Licensed 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 Licensed 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 Marks
including, without limitation, by providing information regarding the
Licensed Marks and samples of the Licensed Products.
(xvii) The Foreign 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
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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 Licensed Marks, and shall promptly
notify Licensee in writing of any infringements, claims or actions by
others in derogation of the Licensed Marks in the applicable country within
the Manufacturing 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 Marks, the Designated Manufacturer(s) shall cooperate with
and assist Licensor to the extent reasonably necessary to protect the
Licensed Marks 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 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
applicable country in the Manufacturing Territory as a result of the
Designated Manufacturer(s) activities in connection with the Licensed
Products 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.
c. Licensee shall not authorize any third party to manufacture Licensed
Products in the Manufacturing Territory outside the United States unless and
until such third party executes a binding written agreement (by purchase order
or otherwise) with Licensee containing all of the
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obligations listed above in Section 2(II)(b)(i-xxii). Licensee shall take
reasonable steps to monitor
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each Designated Manufacturer's compliance with its obligations under its
agreement with Licensee or otherwise. If any such Designated Manufacturer(s)
fails to comply with any of the foregoing obligations listed above in Section
2(II)(b)(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(II)(b)(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.
d. Licensee shall bear all costs and expenses associated with or incurred
by it in carrying out its obligations under Sections 2(II)(b) and 2(II)(c)
above.
e. Notwithstanding Section 2(II)(a) above, Licensee may manufacture or
cause others to manufacture the Licensed Products within the Manufacturing
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, 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 presently has no trademark
application(s) pending, Licensor agrees, upon the written request of Licensee,
to cause Hugo Boss to make such application, and to take appropriate steps to
prosecute such application and Licensee agrees to reimburse Hugo Boss 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 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 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
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countries listed in Exhibit C. If Licensor agrees to any such request, Licensor
and Licensee will amend this Agreement. The parties agree to execute individual
agreements with respect to manufacturing rights for any country on Exhibit C
outside the United States, if required by the laws or regulations of that
country or to protect the Licensed Marks. 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.
f. Notwithstanding Section 2(II)(a) hereof, neither Licensee nor the
Designated Manufacturer(s) shall have the right to use the Licensed Marks in the
Manufacturing Territory in any manner that conflicts with the rights of any
third party. For purposes of this Section 2(II)(f), 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 Licensed 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 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 the Licensed Marks.
g. Whenever Licensee itself manufactures Licensed Products anywhere in the
Manufacturing Territory, Licensee agrees to and undertakes the same obligations
set forth in Section 2(II)(b)(i-xxii) for the Designated Manufacturers including
without limitation the following.
(i) To manufacture Licensed Products only for Licensee;
(ii) Not to manufacture any product bearing the Licensed Marks or any
trademarks confusingly similar to the Licensed Marks, other that Licensed
Products and promotional items permitted by this Agreement;
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(iii) Not to use the name BOSS on any corporate, partnership or other
trade name or as a form of entity identification;
(iv) Not to seek or obtain any registration of the Licensed 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
(v) Not to employ children under fourteen (14) years of age.
(III) OTHER PROVISIONS REGARDING THE LICENSE FOR THE SALES AND
MANUFACTURING TERRITORY.
a. Licensee acknowledges that Licensor owns, pursuant to that certain
Foreign Boss Rights Acquisition Agreement between Licensor and Licensee dated
September 30, 1997 and that certain Agreement between Licensor, Hugo Boss AG,
I.C. Isaacs & Company, Inc. and I.C. Isaacs & Company L.P. dated October __,
1999 (the "Agreement"), any and all trademark rights relating to the word BOSS
within the Sales and Manufacturing Territories 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 Sales Territory or the Manufacturing Territory.
b. 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
or the 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 which impose or may impose restrictions on Licensee's
ability to manufacture Licensed Products in the Manufacturing Territory.
c. Licensor shall obtain from Hugo Boss throughout the term of this
Agreement a license of such of its rights (if any) relating to the exercise by
Licensee of its rights under this Agreement such that Licensor may sublicense
said rights to Licensee to the extent described in the grant of rights set forth
in Sections 2(I) and 2(II), as modified by Section 2(III) hereof, and Licensor
hereby acknowledges that it is sublicensing said rights to Licensee under said
Sections 2(I) and 2(II), as modified by Section 2(III).
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d. Licensee makes no representations and warranties to Licensor hereunder
with respect to the Licensed Marks, including, without limitation, any matter
relating to the existence, validity or enforceability of the marks acquired by
Licensee from Brookhurst Inc.
e. Except as expressly stated in this Agreement, 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.
3. ADVERTISING AND PROMOTION; TRANSFER AND OWNERSHIP OF PROPERTY
a. Licensee agrees that any and all of its advertising and sales promotion
activities regarding Licensed Products (including cooperative advertising) shall
be subject to the provisions established by Exhibit A2. Licensee shall not
create, or cause to be created, any advertising or promotional materials that do
not comply with Exhibit A2 and shall use reasonable efforts, including
termination of relationships, to cause third parties who advertise or otherwise
promote Licensed Products to comply with the standards of Exhibit A2. Licensee
shall use reasonable efforts to cause its retail customers to use signage
materials conforming to the requirements of this Section 3(a), but Licensee
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
which has been in use since 1998 or before.
b. Licensor, for itself and its affiliated entities (including Hugo Boss)
agrees that any and all of their 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 A3.
c. Licensee shall have exclusive rights as between the parties to use the
Licensed Marks with respect to boxing sports sponsorship in the United States,
except Licensor 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, Licensor shall have exclusive 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,
Licensor and Licensee agree to cooperate with each other to avoid interference
with the other party's sports sponsorships in the United States. If either
Licensor or Licensee notifies the other party of the existence of sports
sponsorship relationships in other sports, the party receiving such notice will
then avoid
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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 Licensee may use the Licensed Marks in the United States in
connection with the sponsorship of United States Olympic Athletes and United
States Olympic Teams; provided, however, that the Licensed 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 the
Licensed Marks outside the United States. Nothing in this Agreement entitles
either Licensor or Licensee 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. Licensee may submit to Licensor 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 Licensed Marks, so that Licensor
can ensure that such items comply with the terms of this Agreement. If Licensee
does not submit such items to Licensor for approval, and items are determined to
materially breach the terms of this Agreement on two occasions within a twelve
(12) month period, Licensee must thereafter submit all such items for approval
by Licensor. Under these circumstances, Licensee shall not use any item in that
category until corresponding samples have been approved by Licensor in writing,
and Licensee shall not depart therefrom in any respect without again obtaining
Licensor's 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), Licensor shall either approve or set
forth in writing its reasons for withholding approval within twenty (20) days of
receipt of such samples. Failure by Licensor to so respond within twenty (20)
days shall be deemed as approval.
e. Licensee agrees that all goodwill derived by it or its licensees from
the use of the Licensed Marks after the Effective Date shall inure to the
benefit of Licensor.
f. 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 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.
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g. 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.
h. Licensee agrees that, during the term of this Agreement, it shall not
use the Licensed Marks in any manner other than as expressly set forth in this
Agreement.
i. 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 A1,
and Exhibit B 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 rights licensed
to Licensee hereunder and previously under the FRMA.
j. Following termination of this Agreement, Licensee agrees that it will
terminate any and all use of the Licensed Marks in the Manufacturing Territory
and in the United States, except as otherwise expressly provided in this
Agreement.
4. QUALITY STANDARDS AND INSPECTION
a. The parties acknowledge and agree that great value is placed on the
Licensed Marks and the goodwill associated therewith, that the consuming public
and the industry now associate the Licensed 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 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.
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b. Licensee agrees to use, in connection with the Licensed 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 A2. Licensee agrees that it shall not use the name BOSS in
any corporate, partnership or other trade name or as a form of entity
identification. Licensee 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 shall be construed as
prohibiting use of the Licensed Marks in shop-within-a-shop situations. Licensee
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.
Licensee agrees to provide Licensor with written notice of any change in the
location of such factory outlet. To the extent Licensee 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 other licensees, except
those which are traditional or standard in the industry.
c. For each Designated Manufacturer not previously disclosed to Licensor
under the FMRA, 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
Manufacturing 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 Manufacturing 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 Manufacturing 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.
d. 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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e. 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
Manufacturing Territory or otherwise interfere in each other's lawful
relationships with any manufacturers in the Manufacturing Territory.
f. In order to ensure that Licensor is fully aware of all products Licensee
may manufacture in the Manufacturing Territory, 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 Licensed Marks 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.
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g. 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
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.
h. 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' business that would
materially affect the rights, obligations and/or benefits of Licensee under this
Agreement. The parties acknowledge and agree that any and all information made
available in any form to the other party under this Section 4(h) shall be
subject in all respects to Section 24(a) hereof concerning confidentiality and
that neither party will trade in violation of applicable U.S. securities laws on
any such information which has not been publicly disclosed.
i. Licensee agrees not to manufacture, export, import, ship or distribute
from or to any country in the Manufacturing Territory, nor give its permission
to any third party to manufacture, export, import, ship or distribute from or to
any country in the Manufacturing 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.
j. 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.
k. Licensee shall submit to Licensor any trademark, service mark, logo or
name which is to be used in connection with the Licensed Products 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.
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l. 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.
m. 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, 2003, 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 its sole option, renew this Agreement for a period of
two (2) additional years commencing on January 1, 2004, and ending December 31,
2005, if Licensee provides written notice of its intention to extend by no later
than June 30, 2003. Licensee may, at its sole option, extend the term of this
Agreement for an additional two (2) year period commencing on January 1, 2006,
and ending on December 31, 2007, if Licensee provides written notice of its
intention to extend by no later than June 30, 2005.
6. LICENSE FEE AND ROYALTIES
a. Licensee agrees to pay to Licensor a royalty on Licensed Products as
follows:
(i) For the calendar quarter ending June 30, 1999, Licensee will pay
to Licensor on the date hereof Four Hundred Eighty Thousand Dollars
($480,000) as a Minimum Quarterly Royalty Payment and Two Hundred
Eighty-One Thousand Dollars ($281,000) in interest in respect of amounts
due on the Secured Limited Recourse Promissory Note dated November 5, 1997
issued by Licensee to Licensor and which will be cancelled (the "1997
Note").
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(ii) For the calendar quarter ending September 30, 1999, Licensee will
pay to Licensor on or before October 31, 1999 Five Hundred Twenty-Four
Thousand Dollars ($524,000) as a Minimum Quarterly Royalty Payment and Two
Hundred Eighty-One Thousand Dollars ($281,000) in interest in respect of
amounts due on the 1997 Note.
(iii) For the calendar quarter ending December 31, 1999, Licensee will
pay to Licensor within thirty (30) days after December 31, 1999 Seven
Hundred Sixty-One Thousand Dollars ($761,000) as a Minimum Quarterly
Royalty Payment.
(iv) Commencing with calendar year 1999, and for each calendar year of
the initial term and either extension term of this Agreement thereafter
(year 1999 and each calendar year of the initial term and each extension
term of the Agreement thereafter being referred to as "Applicable Years"),
Licensee will pay to Licensor an annual royalty equal to the "Annual
Royalty Amount" (herein defined) for the Applicable Year. "Annual Royalty
Amount" means the amount equal to the greater of (A) for Applicable Year
1999, the total of the Minimum Quarterly Royalty Payments required during
the Applicable Year in accordance with clauses (i), (ii) and (iii) above
and the amount paid for the first calendar quarter in 1999 in the amount of
One Million Dollars ($ 1,000,000.00), and for Applicable Years 2000 through
2003, the total of the Minimum Royalty Payments set forth for such
Applicable Year on the Minimum Royalty Table (2000-2003) attached hereto as
Exhibit F-1 (the "Minimum Annual Royalty" ), or (B) an amount equal to six
percent (6%) of Total Net Sales during the Applicable Year (the "Percentage
Annual Royalty"). The Annual Royalty Amount for any Applicable Year will be
paid quarterly (in arrears) within thirty (30) days after each Quarterly
Payment Date in installments equal to the Minimum Quarterly Royalty
Payments for such Quarterly Payment Dates as set forth in clauses (i), (ii)
and (iii) above and on the Minimum Royalty Table (2000-2003). "Quarterly
Payment Dates" means March 31, June 30, September 30 and December 31. For
any Applicable Year in which the Percentage Annual Royalty is greater than
the Minimum Annual Royalty, Licensee will pay to Licensor the Royalty
Adjustment Amount (herein defined) within thirty (30) days after the end of
the Applicable Year. "Royalty Adjustment Amount" means, for any Applicable
Year in which the Percentage Annual Royalty exceeds the Minimum Annual
Royalty, the amount by which the Percentage Annual Royalty exceeds the
Minimum Annual Royalty for such Applicable Year.
(v) The Minimum Annual Royalty during each year of either extension
term will be the same amount as, and will be paid in the same manner as,
the Minimum Annual Royalty for the year 2002 ($2,580,000) on the Minimum
Royalty Table (2000-2003).
b. 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
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accounting of the aggregate amount of 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.
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 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, shipped, distributed and sold and of Licensee's
activities under this Agreement, and shall make the same readily available to
Licensor and its agents and representatives at such
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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, Licensee shall immediately pay all 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, plus, if payments due to
Licensor under this Agreement exceed the amounts of payments actually paid by an
amount greater than three percent (3%) of the payments made, Licensee shall
immediately pay the cost of the audit, as well. 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 audited period, Licensor shall be
entitled, in addition to an additional payment equal to twenty-five percent
(25%) of the full amount of the unpaid royalties 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.
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9. LABELING
Licensee agrees to use the proper trademark and copyright notices in
connection with the Licensed Marks. Upon the execution of this Agreement,
Licensee shall no longer place orders for Licensed Products bearing any
trademark and copyright notices used prior to execution of the FMRA and will
take reasonable steps to ensure that such goods are no longer manufactured in
the Manufacturing 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. 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 Licensed Marks
and, in furtherance thereof, hereby transfers and conveys all rights, title and
interest, if any, in the Licensed Marks to Licensor, 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
Licensed Marks except the limited license granted to Licensee herein, that such
Licensed Marks are the sole and exclusive property of Licensor and that all such
uses by Licensee or the Designated Manufacturer(s) of the Licensed Marks shall
inure only to the benefit of Licensor.
c. Licensee agrees that it will not seek or obtain any registration of the
Licensed 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 any right, title or interest in
the Licensed Marks, or in any marks which contain the word BOSS whether used
alone or in combination with other words or symbols or which are confusingly
similar to the Licensed Marks, 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.
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d. Licensee agrees not to take any action which may in any way impair
Licensor's rights in and to the Licensed 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 Licensed 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 Marks including, without limitation,
by providing information regarding the Licensed Marks and samples of the
Licensed Products.
f. Licensee acknowledges that materials related to this Agreement and
uniquely and specifically associated with the Licensed 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 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
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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.
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.
c. 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.
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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 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 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 in efforts to stop the manufacture, distribution or sale of
unauthorized product bearing the Licensed 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
Manufacturing Territory or the Sales 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 Licensed 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.
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b. Licensor may terminate this Agreement as it pertains to any country
included in the Manufacturing Territory only upon any of the following events in
that country:
(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(II)(b)(vii)(A) or Section 4(c) 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(II)(b)(vii)(A) and 4(c) 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(II)(b)(vii)(A) or Section 4(c), 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(II)(b)(xxii). For purposes of a breach of Licensee's obligations under
Section 2(II)(b)(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(II)(b)(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.
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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 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, (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
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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 pursuant
to Section 6 above during the initial term 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 $13,423,000: (i) a breach by Licensee of its
obligations to make the payments required by Sections 6 and 7 of this Agreement
for any year in accordance with the terms of such Sections, which breach, after
due written notice of same from Licensor, remains uncured for a period of five
(5) days; (ii) Licensee's failure to manufacture any Licensed Products; (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 except those which constitute Licensed Marks 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 to register or otherwise create
or establish trademark rights in the word BOSS in its own name after the
Effective Date of this Agreement (but excluding any activities undertaken by
Licensee in connection with claims against third-parties for past
infringements); 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,
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
$5,160,000. 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, 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 $5,160,000. The parties agree
that this provision is not a liquidated damages provision, but a quantification
of the benefit of the bargain to Licensor. In the event Licensee fails to make
immediate payment as required by
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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. 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 Manufacturing Territory (other than the
United States) 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.
h. 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: either (a) 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, or (b) by direction of Licensor from using the word BOSS in
the Microgramma typestyle and every variation thereof on a substantial portion
(by sales volume) of the Licensed Products with respect to sales in the United
States pursuant to Section 2(II)(f); and (iii) there is no reasonable
alternative available; provided, however, that if such court order is based upon
Licensee's use of the Licensed 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(h),
royalties due shall be based on amounts due to the date of termination as
provided for in Section 6 above, which shall be calculated on a pro rata basis
for any applicable portion of a calendar quarter.
i. 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 to, and distribute and sell in, the Sales
Territory, such completed Licensed Products and any Licensed 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 the expiration of such nine
(9) month period, Licensee shall completely remove the Licensed
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Marks and any and all marks including the word BOSS from any and all 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(i) above, all rights relating to the Licensed Products 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 rights licensed under this Agreement;
(iii) within thirty (30) days of termination, delete and henceforth
cease from making any reference to the Licensed 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, Licensee shall be liable to
Licensor for actual royalties accrued prior to termination and royalties on any
goods manufactured after termination under Section 15(i), which royalties shall
be calculated on a pro rata basis for any applicable portion of a calendar year.
Upon any termination other than termination resulting from a breach by Licensee
of this Agreement, Licensee shall be liable to Licensor only for such
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royalties; provided, however, that nothing in this Section shall affect
Licensor's rights or remedies for any post-termination breach by Licensee.
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 Licensed Marks with Licensor
bearing all reasonable out of pocket expenses of Licensee and the Designated
Manufacturers thereof (other than as stated below) and shall promptly notify
Licensor in writing of any infringements, counterfeiting, claims or actions by
others in derogation of the Licensed Marks in the Manufacturing 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, counterfeiting, claims or actions. Licensee shall not take any
action on account of any such infringement, counterfeiting, 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, counterfeiting,
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, counterfeiting, 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
34
<PAGE>
the licensed rights hereunder 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, counterfeiting, 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.
d. Licensor shall have the right to record, or continue the recordation of,
the Hugo Boss Marks and the Licensed Marks with the Customs Service of the
United States. Upon written request from Licensee for Licensor's reasonable
cooperation, Licensor shall promptly cooperate with Licensee in its efforts to
gain entry into the United States of Licensed Products or components thereof
which are manufactured under authority of and in compliance with this Agreement
(or previously under the FMRA) in the event the Customs Service detains any such
products or components, or raises any question.
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: Chief Financial Officer
Telecopier: 212/940-0619
35
<PAGE>
Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attention: General Counsel
Telecopier: 49-7123-942018
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attention: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
If to Licensee, to:
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and 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.
21. FOREIGN AND DOMESTIC TAXES AND GOVERNMENT APPROVALS
a. Licensee agrees to obtain all government approvals and registrations
which are
36
<PAGE>
required under the laws of the Manufacturing 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 or domestic 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.
c. Notwithstanding any other provision of this Agreement, 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 which were not
otherwise caused by activities of Licensee in connection with this Agreement.
22. 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. Subject to the provisions of Section 26 below, 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 from enforcing any of its rights in any jurisdiction anywhere
in the world to prevent the unauthorized manufacture, sale or distribution of
Licensed Products or of products bearing Hugo Boss Marks.
37
<PAGE>
23. 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.
24. 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 Licensed 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' ability to make all disclosures required by law pursuant to
offering and selling stock to the public. Notwithstanding the provision of this
Section 24(a), in the event of published reports regarding the Agreement or
Licensee's relationship with Licensor or Hugo Boss, Licensor, Hugo Boss 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 24(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 24(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.
38
<PAGE>
25. 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 with respect to the
subject matter herein. 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(e)
through (j), 8, 10, 14, 15(i) 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.
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.
26. 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
39
<PAGE>
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 26(a),
Licensor or Hugo Boss 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(f), 4(g), and 4(j) herein, and under
Sections 2(I)(a) and 4(b) solely with respect to Licensee's compliance vel non
with the terms of Exhibit A as referenced in said Sections, 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 26 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.
27. HUGO BOSS AG GUARANTY
Hugo Boss hereby irrevocably and unconditionally guaranties to Licensee the
full and timely performance of Licensor's obligations to Licensee under this
Agreement.
40
<PAGE>
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:
Name: Vincent Ottomanelli
Title: CFO / VP
By:
Name: Jorg-Viggo Muller
Title: Chairman
HUGO BOSS AG, a corporation of the Federal
Republic of Germany
By:
Name: Werner Beldessarini
Title: Chairman and CEO
By:
Name: Jorg-Viggo Muller
Title: CFO
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: I.C. ISAACS & COMPANY, INC., a Delaware
corporation, its general partner
By:
Name: Robert J. Arnot
Title: Chairman and Chief
Executive Officer
41
<PAGE>
EXHIBIT F1
MINIMUM ROYALTY TABLE (2000-2003)
MINIMUM ROYALTY PAYMENTS FOR
APPLICABLE YEARS 2000-2003
<TABLE>
<CAPTION>
QUARTERLY MINIMUM TOTAL
PAYMENT QUARTERLY MINIMUM
DATE ROYALTY ANNUAL
PAYMENT ROYALTY
(U.S. $) (U.S. $)
- -----------------------------------------------------------------------------
<S> <C> <C>
March 31, 2000 $810,000
- -----------------------------------------------------------------------------
June 30, 2000 $810,000
- -----------------------------------------------------------------------------
September 30, 2000 $810,000
- -----------------------------------------------------------------------------
December 31, 2000 $810,000 $3,240,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
March 31, 2001 $810,000
- -----------------------------------------------------------------------------
June 30, 2001 $810,000
- -----------------------------------------------------------------------------
September 30, 2001 $810,000
- -----------------------------------------------------------------------------
December 31, 2001 $810,000 $3,240,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
March 31, 2002 $645,000
- -----------------------------------------------------------------------------
June 30, 2002 $645,000
- -----------------------------------------------------------------------------
September 30, 2002 $645,000
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------
<S> <C> <C>
December 31, 2002 $645,000 $2,580,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
March 31, 2003 $520,000
- -----------------------------------------------------------------------------
June 30, 2003 $520,000
- -----------------------------------------------------------------------------
September 30, 2003 $520,000
- -----------------------------------------------------------------------------
December 31, 2003 $520,000 $2,080,000
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E TO AGREEMENT
I.C. ISAACS & COMPANY, INC.
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (the "Agreement") dated November [ ], 1999
is by and among I.C. Isaacs & Company, Inc., a Delaware corporation having its
principal office and place of business at 3840 Bank Street, Baltimore, Maryland
21224-2522 (the "Corporation"), and the shareholders whose names are set forth
in SCHEDULE A hereto (the "Shareholders" and each a "Shareholder").
WHEREAS, Ambra Inc. (the "Initial Shareholder") is the beneficial owner
of 2,000,000 shares of the Preferred Stock of the Corporation (collectively, the
"Initial Shares");
WHEREAS, the Initial Shareholder, the Corporation, Hugo Boss AG and
I.C. Isaacs & Company L.P. ("Isaacs") are parties to an Agreement dated October
[ ], 1999 (the "Agreement"), pursuant to which the Initial Shareholder shall
acquire (i) an additional 1,300,000 shares of Preferred Stock and (ii) a number
of shares of Common Stock of the Corporation equal to the quotient of $1,000,000
divided by One Dollar and Fifty Cents ($1.50) ((i) and (ii) referred to
collectively herein as the "Subsequently Issued Shares"); and
WHEREAS, the Initial Shareholder and the Corporation wish to provide
for the disposition of the capital stock of the Corporation upon the occurrence
of certain events, and to that end, have agreed to execute this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the sufficiency and
adequacy of which is acknowledged, and of the mutual covenants and agreements
hereinafter provided, the parties to this Agreement, on behalf of themselves and
their successors and assigns, agree as follows:
1. DEFINITIONS
The following terms shall have the meanings set forth in this Section
1:
AFFILIATE. Affiliate of a person or entity shall mean any person or
entity, whether now or hereafter existing, which controls, is controlled by, or
is under common control with, such person (including, but not limited to, joint
ventures, limited liability companies, and partnerships). For this purpose,
"control" shall mean ownership of 50% or more of the total combined voting power
of all classes of stock or interests of the entity.
BOARD. Board means the Board of Directors of the Corporation.
COMMON STOCK. Common Stock shall mean the issued and outstanding common
stock, par value $.0001, of the Corporation.
<PAGE>
INVOLUNTARY TRANSFER. Involuntary Transfer shall mean any transfer,
proceeding or action by or in which a Shareholder shall be deprived or divested
of any right, title or interest in or to any of the Stock, including, without
limitation, any seizure under levy of attachment or execution, any transfer in
connection with bankruptcy (whether pursuant to the filing of a voluntary or an
involuntary petition under the United States Bankruptcy Code, as amended, or any
modifications or revisions thereto) or other court proceeding to a debtor in
possession, trustee in bankruptcy or receiver or other officer or agency or any
transfer to a state or to a public officer or agency pursuant to any statute
pertaining to escheat or abandoned property.
MARKET VALUE. Market Value shall have the following meaning:
(i) In the event that, as of the date of the Transfer Notice
or the Corporation Purchase Notice, as the case may be, the Corporation is a
Reporting Company, the Market Value of the Common Stock for any purpose shall
mean the last reported sale price per share of Common Stock, on the date of the
Transfer Notice or the Corporation Purchase Notice, as the case may be, or, in
case no such sale takes place on such date, the average of the closing bid and
asked prices in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on a national securities exchange or included for quotation on the
Nasdaq-National Market, or if the Common Stock is not so listed or admitted to
trading or included for quotation, the last quoted price, or if the Common Stock
is not so quoted, the average of the high bid and low asked prices, in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotations system that may then be in use or, if
the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices, as furnished by a professional market maker making
a market in the Common Stock as selected in good faith by the Board and the
Initial Shareholder by mutual agreement or by such other source or sources as
shall be selected in good faith by the Board and the Initial Shareholder by
mutual agreement. If, as the case may be, the relevant date is not a trading
day, the determination shall be made as of the next preceding trading day. As
used herein, the term "trading day" shall mean a day on which public trading of
securities occurs and is reported in the principal consolidated reporting system
referred to above, or if the Common Stock is not listed or admitted to trading
on a national securities exchange or included for quotation on the
Nasdaq-National Market, any business day.
(ii) If, as of the date of the Transfer Notice or the
Corporation Purchase Notice, as the case may be, the Corporation is not a
Reporting Company, the Market Value shall be the appraised fair market value as
of the date of the Transfer Notice or the Corporation Purchase Notice, as the
case may be, as determined by an independent appraiser of recognized standing
and appraisal method selected by mutual agreement of the Corporation and the
Initial Shareholder.
PREFERRED STOCK. Preferred Stock shall mean the issued and outstanding
Series A Convertible Preferred Stock, par value $.0001, of the Corporation.
-2-
<PAGE>
REGISTRABLE SHARES. Registrable Shares means Common Stock, except
that Common Stock shall cease to be Registrable Shares when such Common Stock
shall have become eligible for resale pursuant to Rule 144(k) of the
Securities Act.
REGISTRATION STATEMENT. Registration Statement shall mean a
registration statement filed by the Corporation with the SEC under which
Registrable Shares are registered pursuant to Section 3 hereof.
REPORTING COMPANY. Reporting Company shall mean a company the common
stock of which is registered under Section 12 of the Securities Exchange Act.
SEC. SEC means the Securities and Exchange Commission.
SECURITIES ACT. Securities Act means the Securities Act of 1933, as
amended.
SECURITIES EXCHANGE ACT. Securities Exchange Act means the Securities
Exchange Act of 1934, as amended.
STOCK. Stock shall mean (a) the Initial Shares and the Subsequently
Issued Shares; and (b) any capital stock of the Corporation or any of its
successors or assigns issued in respect of or pursuant to a stock split, stock
dividend or reclassification.
2. RESTRICTIONS ON DISPOSITION
A. LIMITATIONS ON TRANSFERS. No Shareholder shall, whether voluntarily
or pursuant to an Involuntary Transfer, transfer, sell, assign, pledge,
encumber, grant any option with respect to, or otherwise create any legal or
equitable interest in any Stock held by such Shareholder except in accordance
with this Section 2.
B. RIGHTS OF FIRST REFUSAL OF COMMON STOCK. (i) Except as otherwise
provided in Subsections C. and F. below, before any Stock may be voluntarily
sold or transferred by a Shareholder (a "Transferring Shareholder"), such
Transferring Shareholder shall first provide written notice of the proposed sale
or transfer to the Corporation, which notice shall include the number of shares
of Stock proposed for transfer (the "Offered Shares"), the price per share of
Stock to be transferred (the "Offer Price"), the name of the proposed transferee
(the "Proposed Transferee"), a representation that the agreement to sell or
transfer constitutes a bona-fide offer to purchase and all other material terms
and conditions of the transfer (the "Transfer Notice");
(ii) The Corporation shall then have the right to purchase all
(and not less than all) of the Offered Shares at the Offer Price of the Stock
proposed to be transferred. Such right of first refusal shall be exercisable
upon written notice to the Transferring Shareholder within fifteen (15) days
following the date of the Transfer Notice (the "First Refusal Period");
(iii) If, upon termination of the First Refusal Period, the
Corporation has not exercised its right of first refusal with respect to all of
the Offered Shares, the Transferring Shareholder may sell such Offered Shares to
the Proposed Transferee at any
-3-
<PAGE>
time within six months after termination of the Right of First Refusal Period
without again complying with this Section 2.
C. TRANSFERS PURSUANT TO RULE 144(k). A Shareholder holding Stock
eligible to be transferred pursuant to Rule 144(k) promulgated under the
Securities Act ("Rule 144(k)") may transfer such Stock in a Rule 144(k)
transaction in accordance with the procedures set forth in this Section 2.C.:
(i) Such Shareholder (the "Qualifying Shareholder") shall
first provide written notice of its intention to transfer stock in a Rule 144(k)
transaction (the "144(k) Transfer Notice"), which notice shall include the
number of shares eligible for transfer pursuant to Rule 144(k) and proposed for
transfer (the "144(k) Shares") and the name of the proposed broker, if any, in
the 144(k) transaction (the "Proposed Broker");
(ii) The Corporation shall then have the right to purchase all
(and not less than all) of the 144(k) Shares at the Market Value of the 144(k)
Shares proposed to be transferred (the "144(k) Purchase Rights"). The
Corporation may exercise its 144(k) Purchase Rights by providing written notice
(the "Corporation Purchase Notice") to the Qualifying Shareholder within five
(5) days following the date of the 144(k) Transfer Notice (the "144(k) Notice
Period");
(iii) If, upon termination of the 144(k) Notice Period, the
Corporation has not notified the Qualifying Shareholder of its desire to
exercise its 144(k) Purchase Rights, the Qualifying Shareholder may sell the
144(k) Shares at any time within six months after termination of the 144(k)
Notice Period without again complying with this Section 2.
D. INVOLUNTARY TRANSFERS. Any Involuntary Transfer of Common Stock by a
Shareholder (an "Involuntary Transferor") shall be subject to the rights of
first refusal set forth in Section 2.B. as if the Involuntary Transfer had been
a proposed voluntary transfer of Common Stock except that:
(i) The provisions of Subsection 2.B.(i) shall not apply, but
the Involuntary Transferor shall notify the Shareholders and the Corporation as
soon as practicable upon obtaining knowledge of the Involuntary Transfer (such
notification to be deemed a "Transfer Notice");
(ii) The First Refusal Period shall run from the date of
receipt by the Corporation of the notice of Involuntary Transfer;
(iii) Such right of first refusal shall be exercised by notice
to the Involuntary Transferee rather than to the Shareholders who suffered or
will suffer the Involuntary Transfer; and
(iv) The purchase price per Offered Share shall be Market
Value.
E. SETTLEMENT. If the Corporation elects to exercise its right of first
refusal pursuant to Section 2.B. or 2.D. hereof or its 144(k) Purchase Rights
pursuant to Section
-4-
<PAGE>
2.C. hereof, settlement shall be made within twenty (20) days of the Transfer
Notice or the 144(k) Transfer Notice, whichever is applicable.
F. PERMITTED TRANSFERS. Nothing in this Section 2 shall impede or
prohibit the transfer by a Shareholder of Stock (a) to an Affiliate of the
Shareholder, (b) to the Corporation, (c) to any third party in a broker's
transaction pursuant to Rule 144(b) promulgated under the Securities Act or (d)
pursuant to a Registration Statement. Any successor or transferee who receives
Stock pursuant to an event described in clause (a) above shall, as a condition
of such transfer, enter into an agreement to be bound by the provisions of this
Agreement in its entirety and shall be deemed to be a "Shareholder" hereunder
and SCHEDULE A hereto shall be amended to include the name of such successor or
transferee.
3. REGISTRATION RIGHTS
A. DEMAND REGISTRATION.
(i) At any time on or after December 15, 2000, a Shareholder
may offer Registrable Shares held by such Shareholder to the Corporation at the
then-prevailing market price. If the Corporation does not purchase such
Registrable Shares within 30 days, it will, subject to the provisions of
Subsections (ii) and (iii) below, use its best efforts to promptly register the
Registrable Shares held by such Shareholder under the Securities Act and shall
maintain the effectiveness of such Registration Statement for a period of 90
days.
(ii) The Corporation shall not be required to effect more than
one registration pursuant to Section 3.A(i) above.
(iii) If (a) at the time of any request to register
Registrable Shares pursuant to this Section 3.A or during the registration
process there is a material development with respect to the Corporation and (b)
the Board concludes in good faith that the registration would have a material
adverse effect on the Corporation or the price of the Common Stock, the Board
may at its option direct that such registration be delayed for a period not in
excess of 90 days from the effective date of the offering by Shareholder to the
Corporation.
B. PIGGYBACK REGISTRATION RIGHTS.
(i) Whenever the Corporation proposes to register any Common
Stock of the Corporation for its own account or the account of others under the
Securities Act for an underwritten public offering (other than registrations for
acquisitions or benefit plans on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), the Corporation shall give the
Shareholders prior written notice of its intent to do so and the Shareholders
may offer any Registrable Shares held by such Shareholders to the Corporation at
the then-prevailing market price. If the Corporation does not purchase such
Registrable Shares within 30 days, it will, subject to the provisions of
subsection (ii) below, use its reasonable efforts to effect the registration
under the Securities Act of the Registrable Shares that the Corporation has been
so
-5-
<PAGE>
requested to register by the requesting Shareholders, such registration to be
effected on the same terms and conditions as the Corporation Common Stock
otherwise being sold in such registration.
(ii) If the managing underwriter in an underwritten public
offering by the Corporation of Common Stock of the Corporation advises the
Corporation that the inclusion of all or some of the Common Stock (including
Registrable Shares) proposed to be included in such Registration Statement would
interfere with the successful marketing (including pricing) of such Common
Stock, then the Common Stock to be issued by the Corporation in such offering
(the "Corporation Shares"), the Registrable Shares of Shareholders proposed by
the Shareholders to be included in such offering (the "Shareholder Shares") and
the Common Stock of other shareholders proposed to be offered in such offering
("Other Shares") shall be included in the following order of priority until the
total number of shares recommended by the managing underwriters has been
reached:
(A) FIRST, the Corporation Shares;
(B) SECOND, the Shareholder Shares and the Other
Shares of the Corporation, pro rata based upon the number of shares of Common
Stock held by the Shareholders and the holders of the Other Shares;
C. REGISTRATION PROCEDURES. If and whenever the Corporation
is required to use its reasonable efforts to effect the registration of any
Registrable Shares as provided pursuant to Sections 3.A or 3.B, the Corporation
will, as expeditiously as practicable:
(i) After a Registration Statement is filed with the SEC,
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period not in excess of ninety (90) days (or such
earlier date by which all securities that have been requested to be registered
are sold) and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during such period;
(ii) Furnish to the Shareholders and to each underwriter, if
any, of such Registrable Shares, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements of the
Securities Act, and such other documents, as such person may reasonably request,
in order to facilitate the public sale or other disposition of the Common Stock;
(iii) Use its reasonable efforts to cause such Registrable
Shares covered by such Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be reasonably
necessary to enable the Shareholders to consummate the disposition of such
Registrable Shares in accordance with any plan of distribution described in such
Registration Statement;
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(iv) Promptly notify the Shareholders, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 3.C(i), if the Corporation
becomes aware that the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and at the request of the Shareholders, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(v) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC; and
(vi) Execute and deliver all instruments and documents
(including in an underwritten offering an underwriting agreement in customary
form) and take such other actions and obtain such certificates and opinions as
are customary in underwritten public offerings.
Any Shareholder will, upon the receipt of any notice from the Corporation of the
occurrence of an event of the kind described in Section 3.C(iv), immediately
discontinue disposition of the Registrable Shares pursuant to the Registration
Statement covering such Registrable Shares until the Shareholders receive copies
of a supplemental or amended prospectus from the Corporation.
D. UNDERWRITING AGREEMENT. In connection with any registration pursuant
to Section 3.A or Section 3.B covering an underwritten public offering, the
Corporation and each Shareholder agree to enter into a written agreement with
the managing underwriters to be negotiated by the Corporation and the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement between such managing underwriters
and companies of the Corporation's size and investment stature, including
indemnification. To the extent that the Corporation and the Shareholders shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in Subsections C, E or F of
this Section 3, the provisions contained in such subsections addressing such
issue or issues shall be of no force or effect with respect to such
registration.
E. HOLDBACK AGREEMENT. If the Corporation at any time shall register
any shares of Corporation Common Stock under the Securities Act (including any
registration of the Common Stock pursuant to Section 3.A or Section 3.B above)
for sale to the public, the Shareholders shall not sell publicly (including any
sale pursuant to Rule 144), make any short sale of, grant any options for the
purchase of, or otherwise dispose publicly of any shares of Common Stock, or of
any security convertible into or exchangeable or exercisable for any Common
Stock (other than those Common Stock included in the registration being effected
pursuant to Section 3.B above) without the prior written consent of the
Corporation and the managing underwriter during a period
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commencing on the effective date of such registration and ending a number of
calendar days thereafter not exceeding one hundred eighty (180) as the
Corporation and the managing underwriter shall reasonably determine is required
to effect a successful offering.
F. EXPENSES. All expenses incurred by the Corporation in connection
with any registration effected under Section 3.A or Section 3.B above (including
all registration, filing qualification, legal, printer and accounting fees, but
excluding underwriting commissions and discounts on the sale of the Common
Stock) shall be borne by the Corporation.
G. INDEMNIFICATION: (a) The Corporation hereby agrees to indemnify and
hold each Shareholder, each person who controls such Shareholder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act) and their respective agents and representatives (each, a "Holder
Indemnitee") harmless from, and to reimburse any Holder Indemnitee for, on an
after-tax basis and to the extent permitted by applicable law, any loss, damage,
deficiency, claim, liability, obligation, suit, proceeding, action, demand, fee,
penalty, fine, interest, surcharge, cost or expense of any nature whatsoever,
including, without limitation, out-of-pocket expenses, investigation costs and
fees and disbursements of counsel (collectively, "Damages"), caused by any
untrue or alleged untrue statement of material fact contained in any
Registration Statement, prospectus or preliminary prospectus relating to the
Registrable Shares or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Corporation by such
Shareholder expressly for use therein; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any Damages arise out of or
are based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said Registration Statement or document incident to
registration or qualification of any Registrable Shares in reliance upon and in
conformity with written information furnished to the Corporation through an
instrument duly executed by such Shareholder or underwriter, or a person duly
acting on their behalf, specifically for use in preparation thereof;
(b) In connection with any Registration Statement, each such
Shareholder will furnish to the Corporation in writing such information as the
Corporation reasonably requests for use in connection with any such Registration
Statement and, to the extent permitted by law, will severally and not jointly
indemnify and hold the Corporation, each person who controls the Corporation
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act) and their respective shareholders, officers, directors,
affiliates, employees, agents and representatives (collectively, for purposes of
this Section 3.G, the "Corporation Indemnitees") harmless from, and reimburse
such Corporation Indemnitees for, on after-tax basis and to the extent permitted
by applicable law, any Damages arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement or prospectus or form of prospectus relating to the Registrable
Shares, or arising out of or based upon any omission or alleged omission of a
material
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<PAGE>
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement is
contained in, or such omission or alleged omission is required to be contained
in, any information so furnished in writing by such Shareholder to the
Corporation expressly for use in such Registration Statement or prospectus and
that such statement or omission was relied upon by the Corporation in
preparation of such Registration Statement, prospectus or form of prospectus;
provided, however, that such Shareholder shall not be liable in any such case to
the extent that the Shareholder has furnished in writing to the Corporation
prior to the filing of any such Registration Statement or prospectus or
amendment or supplement thereto information expressly for use in such
Registration Statement or prospectus or any amendment or supplement thereto
which corrected or made not misleading, information previously furnished to the
Corporation, and the Corporation failed to include such information therein. In
no event shall the liability of any Shareholder hereunder be greater in amount
than the dollar amount of the proceeds (net of payment of all expenses borne by
such Shareholder) received by such Shareholder upon the sale of the Common Stock
giving rise to such indemnification obligation. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such indemnified party;
(c) If any person shall be entitled to indemnity hereunder
such indemnified party shall give prompt notice to the party or parties from
which such indemnity is sought of the commencement of any action, suit,
proceeding, investigation or written threat thereof (a "Proceeding") with
respect to which such indemnified party seeks indemnification or contribution
pursuant hereto; provided, however, that the failure to so notify the
indemnifying parties shall not relieve the indemnifying parties from any
obligation or liability except to the extent that the indemnifying parties have
been prejudiced by such failure. The indemnifying parties shall have the right,
exercisable by giving written notice to an indemnified party promptly after the
receipt of written notice from such indemnified party of such Proceeding, to
assume, at the indemnifying parties' expense, the defense of any such
Proceeding, with counsel reasonably satisfactory to such indemnified party;
provided, however, that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the parties to such Proceeding include
both the indemnified party or parties and the indemnifying party or parties, and
there exists, in the opinion of the parties' counsel, a conflict between one or
more indemnifying parties and one or more indemnified parties, in which case the
indemnifying parties shall, in connection with any one such Proceeding, or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of not more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. If an indemnifying party assumes the defense of such Proceeding, the
indemnifying parties will not be subject to any liability for any settlement
made by the indemnified party without its or their consent (such consent not to
be unreasonably withheld);
(d) If a party shall be entitled to indemnification hereunder
but such indemnification is insufficient to hold such indemnified party harmless
for Damages, then
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each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall have an obligation to contribute to the amount paid or payable by
such indemnified party as a result of such Damages, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Damages as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Damages shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 3.G(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable consideration referred to in the immediately preceding paragraph.
4. MANDATORY REDEMPTION OF PREFERRED STOCK
Upon the occurrence of any Accelerating Acts (as such term is
defined in the Restated and Amended License Agreement dated October 22, 1999 by
and between the Initial Shareholder and Isaacs, the Initial Shareholder may
demand a redemption of any Preferred Stock then held by the Initial Shareholder
at a redemption price equal to One Dollar ($1) per share. Any demand by the
Initial Shareholder for redemption of Preferred Stock pursuant to this Section 4
shall be submitted in writing to the Corporation and effective immediately upon
receipt of such demand the Corporation shall have an obligation to redeem the
Preferred Stock elected to be redeemed by the Initial Shareholder.
5. LEGENDS ON CERTIFICATES
The certificates evidencing the Stock held by the Shareholders shall
bear any legends required by federal or state securities law and the following
legend required by Section 202 (a) of the Delaware General Corporation Law:
"The shares represented by this Certificate are subject to a
Shareholders' Agreement dated as of November ___, 1999, a copy
of which is on file at the office of the Corporation and will
be furnished to any prospective purchaser on request. Such
Shareholders' Agreement provides, among other things, for
certain restrictions on the sale, transfer, pledge,
hypothecation or disposition of the Shares represented by this
Certificate."
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6. BENEFIT
Except upon the occurrence of a termination event as provided in
Section 14, this Agreement shall be binding upon and shall operate for the
benefit of the parties hereto, their respective successors and assigns.
7. INVALIDITY OF ANY PROVISION
The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted, provided that the parties shall negotiate in good faith to replace the
invalid provision with a valid provision reflecting the same balance of economic
interests.
8. MODIFICATION OF AGREEMENT
No modification, amendment or waiver of any of the provisions of this
Agreement shall be valid unless made in writing and signed by the Corporation
and Shareholders owning, in the aggregate, a majority of the Stock subject to
this Agreement.
9. FURTHER ACTION
The Corporation shall not register, and shall instruct any transfer
agent for the Common Stock not to register, on the books of the Corporation any
transfer, pledge or encumbrance of any Stock subject to this Agreement, unless
such transfer, pledge or encumbrance complies with terms of this Agreement and
the Shareholders agree to provide the Corporation (or any such transfer agent)
with such documents, including an opinion of counsel as to compliance with the
applicable securities laws, as the Corporation (or any such transfer agent) may
reasonably request. A copy of this Agreement shall be made a part of the minutes
of the Corporation.
10. ATTORNEY'S FEES AND COSTS
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements, in addition to
any other relief to which he may be entitled.
11. APPLICABLE 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. All disputes arising out of or in
connection with this Agreement or the interpretation thereof shall be submitted
to the United States District Court for the Southern District of New York and
the parties hereby submit to the jurisdiction of such court.
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12. ENTIRE AGREEMENT
This Agreement supersedes all agreements as to the subject matter
hereof among the Shareholders and the Corporation including in each case
amendments thereto, previously executed by the Shareholders and the Corporation.
This Agreement sets forth all of the provisions, covenants, agreements,
conditions and undertakings between the parties hereto with respect to the
subject matter hereof, and superseded all prior and contemporaneous agreements
and understandings express or implied, oral or written as to the subject matter
hereof.
13. NOTICES
Unless otherwise specified herein, all notices, requests, demands and
other communications to be given under this Agreement shall be in writing and
shall be deemed given if (i) delivered in person, or by United States mail,
certified or registered, with return receipt requested, (ii) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (i) above, when transmitted and receipt is confirmed by telephone,
or (iii) if otherwise actually delivered:
TO THE CORPORATION: 3840 Bank Street, Baltimore, MD 21224-2522;
TO ANY SHAREHOLDER: As the name and address of such Shareholder
appears on the records of the Corporation;
or at such other address as may have been furnished by such person in writing to
the other parties. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
mailed, as the case may be.
14. TERM OF AGREEMENT
This Agreement shall be effective for a period of ten years from the
date hereof.
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IN WITNESS WHEREOF, the parties hereto have executed and sealed this
Agreement as of the day and year first above written.
I.C. ISAACS & COMPANY, INC.
By:
---------------------------
Robert J. Arnot, Chief Executive Officer
AMBRA INC.
By:
--------------------------
Name:
Title:
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SCHEDULE A
Ambra Inc.
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EXHIBIT F TO AGREEMENT
SUBORDINATED PROMISSORY NOTE
$____________ [October _, 2003]
FOR VALUE RECEIVED, the sufficiency and adequacy of which is
hereby acknowledged, I.C. ISAACS & COMPANY, Inc. a Delaware corporation
("MAKER"), promises to pay to the order of AMBRA INC., a Delaware corporation
("PAYEE"), the principal sum of [__________________ Dollars ($____________)],
together with interest until paid, as set forth in this Note.
1. INTEREST RATE. Interest shall accrue and be payable on the
outstanding unpaid principal balance of this Note at the fixed interest rate of
twelve percent (12.0%) per annum computed on the basis of the actual number of
days elapsed over a year of 360 days.
2. PRINCIPAL AND INTEREST PAYMENTS. Maker shall make four equal
quarterly installment payments of principal and interest in the amount of
[_________ Dollars ($_________)] each to Payee on January 1, 2004, April 1,
2004, July 1, 2004 and October 1, 2004. Unless sooner paid in full, the entire
unpaid principal balance of this Note, together with all outstanding and unpaid
accrued interest, shall be due and payable on October 1, 2004. All payments
shall be made in U.S. dollars by wire transfer of immediately available funds to
Payee 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: COBAUS3XXXX, Contact: ________________ [Ambra to confirm
and complete], or to such other account as Payee shall have previously
designated to Maker in writing not later than 14 days prior to the date on which
such payment becomes due. All payments (including any prepayments) shall be
applied first to accrued and unpaid interest, and then to the unpaid principal
balance of this Note.
3. PREPAYMENT. Maker shall be privileged to prepay this Note in
whole or in part, together with all interest accrued through the date of
payment, at any time without premium or penalty. All partial prepayments shall
be applied in inverse order of maturity.
4. DEFAULT; ACCELERATION; COSTS OF COLLECTION. The occurrence of
any of the following events shall be an "EVENT OF DEFAULT": (a) failure of Maker
to make any payment of principal or interest under this Note within ten (10)
days after the due date thereof; or (b) the occurrence of an Insolvency Event
(as defined in Section 10 below). Upon the occurrence of an Event of Default,
the unpaid principal with interest and all other sums evidenced by this Note
shall, at the option of Payee and in Payee's discretion, become immediately due
and payable. Upon and during the continuance of an Event of Default, Maker shall
pay Payee's reasonable costs and expenses (including reasonable attorneys fees
and expenses) incurred in collecting the principal and interest due under this
Note, including, but not limited to, any reasonable attorneys fees and expenses
incurred by Payee in connection with asserting, enforcing or pursuing its claim
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in any bankruptcy proceeding.
5. CERTAIN WAIVERS. As to this Note, Maker waives all applicable
exemption rights, whether under any state constitution or otherwise, and also
waives valuation and appraisement, diligence, presentment, protest, demand for
payment, notice of default, dishonor or nonpayment of this Note, and notice of
acceleration and expressly agrees that the maturity of this Note, or any payment
under this Note, may be extended from time to time without in any way affecting
the liability of Maker.
6. PRESERVATION OF PAYEE RIGHTS. No failure on the part of Payee
to exercise any right or remedy hereunder, whether before or after the happening
of an Event of Default shall constitute a waiver thereof, and no waiver of any
past Event of Default shall constitute waiver of any future default or of any
other Event of Default. No failure to accelerate the indebtedness evidenced
hereby by reason of any Event of Default hereunder, or acceptance of a past due
installment, or indulgence granted from time to time, shall be construed to be a
waiver of the right to insist upon prompt payment thereafter, or shall be deemed
to be a novation of this Note or as a waiver of such right or acceleration or
any other right, or be construed so as to preclude the exercise of any right
that Payee may have, whether by the laws of the State of New York, by agreement,
or otherwise. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom such agreement is sought to be
enforced.
7. NOTICES. Any notice required or permitted by or in connection
with this Note shall be in writing and shall be made by telecopy, or by hand
delivery, or by overnight delivery service, or by certified mail, return receipt
requested, postage prepaid, addressed to the parties at the appropriate address
set forth below or to such other address as may be hereafter specified by
written notice by the parties to each other. Notice shall be considered given as
of the earlier of the date of actual receipt, or the date of the telecopy or
hand delivery, or one (1) business day after delivery to an overnight delivery
service (marked for next business day delivery), or three (3) calendar days
after the date of mailing, independent of the date of actual delivery or whether
delivery is ever in fact made, as the case may be, provided the giver of notice
can establish that notice was given as provided herein. Notwithstanding the
aforesaid procedures, any notice or demand upon any party, in fact received by
such party, shall be sufficient notice or demand.
<TABLE>
<S> <C>
If to Maker: I.C. Isaacs & Company, Inc.
350 Fifth Avenue, Suite 1029
New York, New York 10118
Attn: Mr. Robert J. Arnot, President and CEO
Telecopy No.: 212-695-7579
With copy to: I.C. Isaacs & Company L.P.
3840 Bank Street
Baltimore, Maryland 21224
Attn: Mr. Eugene C. Wielepski
Telecopy No.: 410-563-1512
</TABLE>
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<TABLE>
<S> <C>
And copy to: Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3010
Attn: Robert J. Mathias, Esquire
Telecopy No.: 410-576-1604
If to Payee: Ambra Inc.
c/o Hugo Boss USA Inc.
645 Fifth Avenue
New York, New York 10022
Attn: Chief Financial Officer
Telecopy No.: 212-940-0619
With copy to: Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attn: General Counsel
Telecopy No.: 49-7123-942018
And copy to: Coudert Brothers
1114 Avenue of the Americas
New York, N.Y. 10036-7703
Attn: Pamela T. Church, Esquire
Telecopy No.: 212-626-4120
</TABLE>
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 Note, the parties agree that such action
may be brought in the Supreme Court of the State of New York, County of New
York, or in the U.S. District Court for the Southern District of New York, and
the parties hereby submit to the jurisdiction of such courts.
9. SEVERABILITY. In case any provision or any part of any
provision contained in this Note shall for any reason be held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision or remaining part of the
affected provision of this Note, but this Note shall be construed as if such
invalid, illegal, or unenforceable provision or part thereof had never been
contained herein but only to the extent such provision or part thereof is
invalid, illegal, or unenforceable.
10. NOTE ISSUED IN EXCHANGE FOR CONVERTED SHARES; SUBORDINATION.
This Note has
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been issued in exchange for shares of Maker's Series A Convertible Preferred
Stock ("CONVERTED SHARES"), which shares were convertible into this Note in a
principal amount equal to One Dollar ($1) multiplied by the total number of
shares converted, in accordance with the terms of that certain Agreement dated
as of October 22, 1999 between Maker, Payee, I.C. Isaacs & CompanyL.P,, and Hugo
Boss AG. Payee, by accepting delivery of this Note in exchange for the Converted
Shares, covenants and agrees, for itself and each and every subsequent holder of
this Note, that upon and during the continuance of any Insolvency Event, the
indebtedness evidenced by this Note shall be subordinate and junior in right of
payment to Maker's indebtedness to Congress Financial Corporation, its
successors and assigns (and to Maker's indebtedness to any lender, and its
successors and assigns, that may provide financing to Maker in replacement of
Maker's credit facility from Congress Financial Corporation) (Congress Financial
Corporation and any other lender that may provide such replacement financing,
and their respective successors and assigns, are referred to herein as
"LENDER"), such that upon and during the continuance of any Insolvency Event,
(i) no part of the indebtedness evidenced by this Note shall have any claim to
the assets of Maker on parity with or prior to any claims of Lender to such
assets; and (ii) unless and until Maker's indebtedness to Lender shall have been
indefeasibly paid in full, Payee shall not without the express prior written
consent of Lender, take or receive from Maker, and Maker shall not make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in any other
manner, any payment of any nature or type for the whole or any part of the
indebtedness evidenced by this Note, provided that no such subordination shall
be effective if all indebtedness owed by Maker to Lender has been equitably
subordinated to the claims of all other general unsecured creditors of Maker by
virtue of Lender's acts or conduct by a court of competent jurisdiction under a
final and non-appealable order, judgment or decree (a "SUBORDINATION EVENT").
Payee, by accepting delivery of this Note in exchange for the Converted Shares,
further covenants and agrees, for itself and each and every subsequent holder of
this Note, that if any payment or distribution, whether consisting of money,
property or securities, be collected or received by Payee, or any such
subsequent holder of this Note, in respect of the indebtedness evidenced by this
Note, upon or during the continuance of an Insolvency Event, provided a
Subordination Event has not occurred, then Payee or such subsequent holder of
this Note immediately shall deliver the same to Lender, in the form received,
duly endorsed to Lender, if required, to be applied to the payment of Maker's
indebtedness to Lender until Maker's indebtedness to Lender is paid in full.
Until so delivered, such payment or distribution shall be held in trust by
Payee, or such subsequent holder of this Note, as property of Lender, segregated
from other funds and property held by Payee, or such other holder of this Note.
The provisions of this Section 10 are, and are intended solely, for the purpose
of defining the relative rights of Payee (and any subsequent holder of this
Note), on the one hand, and Lender, on the other, upon and during the
continuance of an Insolvency Event. Lender is an intended beneficiary of the
subordination provided by the terms of this Section 10. Notwithstanding anything
to the contrary in this paragraph, such subordination of the indebtedness
evidenced by this Note shall not prevent or limit Payee's right or ability to
assert, enforce or otherwise pursue its claim during any Insolvency Event
provided any payments to Payee are treated in accordance with this Section.
As used in this Note, "INSOLVENCY EVENT" means any of the
following: (i)
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Maker commencing any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, administration, reorganization, conservatorship, or relief from
debtors, seeking to have any order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, administration, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of an administrator or receiver for it or for all or any substantial
part of its assets, or Maker making a general assignment for the benefit of its
creditors, or (ii) there being commenced against Maker any case, proceeding or
other action of a nature referred to in clause (A) hereof, or (iii) there being
commenced against Maker any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of any order for
any such relief that is not satisfied within 90 days, or (iv) Maker taking any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above,
or (v) Maker admitting in writing its inability to pay its debts as they become
due.
11. MUTUAL WAIVER OF JURY TRIAL. MAKER AND PAYEE WAIVE ALL RIGHTS
TO TRIAL BY JURY OF ANY CLAIMS OF ANY KIND ARISING UNDER OR RELATING IN ANY WAY
TO THIS NOTE. MAKER AND PAYEE ACKNOWLEDGE THAT THIS IS A WAIVER OF A LEGAL RIGHT
AND REPRESENT TO EACH OTHER THAT THESE WAIVERS ARE MADE KNOWINGLY AND
VOLUNTARILY AFTER CONSULTATION WITH COUNSEL OF THEIR CHOICE. MAKER AND PAYEE
AGREE THAT ALL SUCH CLAIMS SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING
JURISDICTION WITHOUT A JURY.
IN WITNESS WHEREOF, and intending to be legally bound hereby Maker
executes this Note under seal as of the date first written above.
WITNESS: I.C. ISAACS & COMPANY, INC.
By: (SEAL)
- ----------------------------- --------------------------------
Name:
Title:
-5-
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RESTATED AND AMENDED
LICENSE RIGHTS AGREEMENT
This Agreement (the "License Agreement"), effective as of this 22nd day of
October, 1999 (the "Effective Date") restates, amends and renames the FOREIGN
MANUFACTURING RIGHTS AGREEMENT (the "FMRA") entered into as of the 5th day of
November, 1997 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, directly or through its related entity Hugo Boss AG ("Hugo
Boss"), is the owner of or has rights to license various trademarks including
the word "BOSS" throughout the world and in the United States (collectively,
"Hugo Boss Marks"). Licensor and/or its related companies have used for many
years the mark BOSS and Hugo Boss Marks and have developed certain intellectual
property rights in connection therewith.
B. Licensee, as the successor in interest of Brookhurst, Inc., was the
owner of certain United States trademark rights in and registrations of the word
BOSS. Licensee and its predecessors in interest used the mark BOSS on certain
products in the United States and developed certain intellectual property rights
in connection therewith. Licensee has, simultaneously with the execution of this
Agreement, sold and assigned those trademark and related proprietary rights in
the United States to Licensor without reservation of rights.
C. Licensee is a party to the FMRA pursuant to which Licensee has certain
rights to use certain Hugo Boss Marks for manufacturing and marking of apparel
outside the United States as set forth therein, and desires to obtain a license
to be able to continue to distribute, promote and sell products in the United
States under certain of the Hugo Boss Marks, and Licensor is willing to license
such trademarks to Licensee for such purpose in accordance with the terms
hereof.
D. In countries where necessary and appropriate, Licensor desires that
Licensee be recorded as a registered user of the Licensed Marks (as hereinafter
defined) in relation to the manufacture of the Licensed Products.
<PAGE>
E. In connection with the transactions described above, the parties hereby
wish to restate and amend, and do restate and amend, the FMRA which, as of the
Effective Date of this Agreement, shall cease to be in effect.
NOW, THEREFORE, in consideration of the mutual agreements set forth in this
Agreement and other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set forth below:
a. "Licensed Mark" or "Licensed 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. "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 Licensed 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 Licensed
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.
c. "Licensed Product" or "Licensed Products" shall mean solely the products
specified in Exhibit B attached hereto bearing Licensed Marks in compliance with
Exhibit A.
d. "Manufacturing Territory" shall mean any and all countries listed on
Exhibit C.
e. "Sales Territory" means the United States and certain military locations
as set forth in this Agreement.
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f. "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.
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.
2. RIGHTS GRANTED
(I) LICENSE FOR THE SALES TERRITORY.
a. Licensor hereby grants to Licensee, and Licensee accepts, upon the terms
and conditions set forth herein, the right and license, under the Hugo Boss
Marks, to use the Licensed Marks in connection with, and for the purpose of, the
design, advertising, marketing, sale and other distribution of Licensed Products
in the Sales Territory. Subject to the restrictions and limitations, and
modifications thereto, contained in subsections 2(I)(d), 2(I)(e), 2(I)(f),
2(I)(g), 2(II)(f), 3(b), and 3(c) below, the license granted to Licensee is
non-exclusive. Unless otherwise agreed to by the parties in writing, Licensee
agrees to sell the Licensed Products solely in accordance with Exhibits A, A1
and B. Nothing in this paragraph is intended to prohibit Licensee from using
third party suppliers, service providers and agents in connection with the
designing, advertising, marketing, sale and other distribution of the Licensed
Products in compliance with the terms of this Agreement.
b. Unless otherwise agreed to by the parties in writing, Licensee agrees
that it shall not use the Licensed Marks in connection with the design,
advertisement, marketing,
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promotion, distribution or sale of any products other
than Licensed Products.
c. Unless otherwise agreed to by the parties in writing, Licensee agrees
that it will not distribute or sell any Licensed Products bearing the Licensed
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 Licensor. The foregoing shall not prevent Licensee from selling
Licensed Products to general sporting goods stores selling multiple lines of
products for a variety of sports (E.G., Modell's and Sports Authority).
d. On those products listed on Exhibit A1, Licensor, for itself and for its
affiliates (including Hugo Boss) agrees to use the word BOSS alone or the words
BOSS HUGO BOSS, whether used only as those words or in combination with any
symbols, on such products in the Sales Territory solely in accordance with the
price points contained in Exhibit A1; provided, however, that such Exhibit A1
shall not apply to such products used or distributed by Licensor, its affiliates
or their licensees for promotional purposes.
e. Licensor, for itself and for its affiliates (including Hugo Boss) agrees
that without Licensee's prior written consent, which consent may be withheld in
Licensee's sole discretion, Licensor and its affiliates shall not license any
nonaffiliated third party to use the word BOSS alone or the words BOSS HUGO
BOSS, whether used only as those words or in combination with any symbols, in
connection with the sale in the Sales Territory of the sportswear products
listed in Exhibit A1 at or below Licensee's maximum wholesale prices listed
therein.
f. Nothing herein is intended to or shall prevent or otherwise restrict
Licensor or its affiliates (including Hugo Boss) from designing, manufacturing,
advertising, promoting, distributing or selling or licensing others to design,
manufacture, distribute, advertise, promote or sell in the Sales Territory any
product, whether or not bearing a mark with the word BOSS alone or the words
BOSS HUGO BOSS, listed in and consistent with Exhibit A1, or any other product
not listed in Exhibit A1, provided that such products do not use the Microgramma
typestyle shown in Exhibit A.
g. Neither Licensor or its affiliates (including Hugo Boss) nor Licensee
shall use on or in connection with apparel bearing the word "BOSS" sold in the
Sales Territory, 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.
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h. Notwithstanding any other provision of this Agreement, Licensee may,
during 1999 and 2000, use the Licensed Marks on a non-exclusive basis 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
Licensed Products in the Sales Territory: compact discs, videos, stickers,
stick-on-tattoos, photographs and posters, whistles, notebooks, lanyards,
non-leather I.D. tags, basketballs, cassette tapes, sweatbands and visors,
banners and key chains; provided further that Licensee shall not contest, and
agrees that such non-exclusive right to use shall not restrict or limit, in any
way the manufacturing, distributing or selling by Licensor or its affiliates, or
any of their licensees, of any of the above items with the Hugo Boss Marks. For
each year of this Agreement after 2000, Licensee shall submit for approval a
list of goods it intends to use (subject to the terms and conditions of this
Section 2(I)(h), for promotional purposes. Licensor shall consider the request
in good faith and advise Licensee within ten (10) business days of receipt of
such list which of the goods Licensor, in the exercise of its sole discretion,
approves; provided however, that notwithstanding the provision of Section 26(c),
Licensee may seek arbitration solely as to whether Licensor has acted in good
faith in considering Licensee's request. Absent such approval, Licensee shall
not use Licensed Marks on such goods.
i. Licensee acknowledges the legal and beneficial ownership interests of
Licensor and its affiliates in and to the Licensed Marks and the Hugo Boss Marks
and undertakes that it will not take any action which may in any way impair
their rights in the 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 Licensed Marks or the
Hugo Boss Marks. Licensee further acknowledges that Licensor and its affiliates
own extensive trademark rights relating to the word BOSS both within and outside
of the United States. Licensee does not and shall not own, or purport to own,
any trademark rights relating to the word BOSS within or outside of the United
States.
j. Licensee agrees that it will not sell or offer for sale or resale
Licensed Products anywhere in the world other than in the United States.
Licensee shall not sell or cause to be sold, directly or indirectly, any
Licensed Products to any party which Licensee knows, or has reason to know, has
resold or distributed, is reselling or distributing, or is likely to resell or
distribute such Licensed Products (i) outside of the United States; or (ii) as
duty free merchandise. After the execution of this Agreement as is reasonable,
Licensee shall advise each of its customers (other than consumers or other end
users) in writing of the restrictions on such sales.
k. The parties agree that Licensee may sell Licensed Products to the United
States military solely for resale on United States military installations in the
United States. In making such sales, Licensee shall seek to obtain agreement
from its United States military customers
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that Licensed Products will not be sold in United States military installations
outside the United States ("Military Agreement").
(i) If Licensee is unable to obtain a Military Agreement with any
military customer, or if the obtaining of any such Military Agreement
substantially adversely affects Licensee's ability to make military sales
in the United States, then Licensee shall promptly notify Licensor. Any
such notice by Licensee shall include a written explanation and
documentation of all efforts by Licensee to obtain such agreement and shall
include (1) data disclosing Licensee's sales of Licensed Products to the
military customer(s) at issue during the immediate prior 12-month period,
(2) projected sales of Licensed Products over the next 12-month period, (3)
the basis for Licensee's belief that obtaining such an agreement will
substantially adversely affect Licensee's military sales, and (4) all
information known or reasonably available to Licensee about sales of
Licensed Products by the military customer(s) at U.S. military
installations outside the United States.
(ii) Upon receipt of such notice and at Licensor's request, the
parties shall meet and confer within five (5) business days, to agree upon
any further steps to be taken by Licensee 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 Licensee does not agree to discontinue sales of Licensed
Products to any such military customer, Licensor may initiate arbitration
under the principles set forth in Exhibit H. In any such proceeding, the
arbiter shall decide whether Licensee shall be permitted to continue
selling Licensed Products to the military customer(s), absent a 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 Licensee's efforts to obtain a Military Agreement, the
extent to which Licensee's military sales are affected), the extent to
which the absence of a Military Agreement has, is or will contribute to the
sale of Licensed Products outside the United States, and the actual or
threatened harm to Licensor from such sales. Pending the resolution of such
arbitration, Licensee may continue to make sales of Licensed 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 Licensor of any rights it may have under this Agreement, or (2)
Licensor's consent to such sales.
Notwithstanding the foregoing or the decision of any arbitration, nothing
in this agreement shall prevent Licensor from fully enforcing all of its
rights to prevent the
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<PAGE>
unauthorized sale of products bearing Hugo Boss Marks at any U.S. military
installation outside the United States or elsewhere outside the United
States.
(II) LICENSE FOR THE MANUFACTURING TERRITORY.
a. In addition to the rights granted to Licensee above, Licensor hereby
grants to Licensee, and Licensee accepts, upon the terms and conditions set
forth herein, a limited, nonexclusive right and license to itself use, and to
cause and permit third-party foreign manufacturers ("Foreign Manufacturers") and
third-party manufacturers in the United States ("US Manufacturers")
(collectively, "Designated Manufacturer(s)") to use, the Licensed Marks solely
in connection with the manufacture of Licensed Products, labels, displays,
promotional items permitted by this Agreement and other materials used in
connection with the Licensed Products within the Manufacturing Territory for
sale or distribution solely to Licensee.
b. 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(II)(b)(i-xxii), and shall, within sixty (60) days of the effective date of
this Agreement and if not already in place, 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 provided, however,
that, notwithstanding any other provision of this Agreement, with respect to the
US Manufacturers Licensee, in its sole discretion, may determine the means by
which any of its US Manufacturers is advised of the following obligations
(including without limitation by way of letter or terms and conditions included
in any invoice or purchase order):
(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 Licensed Marks or any trademarks confusingly similar to the
Licensed 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 Licensed Marks if requested to do so by Licensee pursuant to Section
2(II)(f) herein.
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(v) The Designated Manufacturer(s) shall not use the Licensed Marks in
the Manufacturing 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 Licensed
Marks in the Manufacturing Territory.
(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. With respect to US Manufacturers, Licensee shall always have
the right to participate in any inspection by Licensor and Licensor agrees
to coordinate the inspection through Licensee.
(viii) The Designated Manufacturer(s) shall comply with all applicable
labeling and other laws to the extent 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 any agreement in place with Licensee with
respect thereto. With respect to US Manufacturers, Licensee shall always
have the right to participate in any audit by Licensor and Licensor agrees
to coordinate the audit through Licensee.
(x) The Designated Manufacturer(s) shall use the trademark and
copyright notices required by Licensee in connection with the Licensed
Marks.
(xi) The Designated Manufacturer(s) shall acknowledge (or in the case
of US Manufacturers, be advised) that the Licensed Marks are owned solely
and exclusively by Licensor and Hugo Boss and will not at any time
represent that it has any title or right of ownership in the Licensed
Marks.
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(xii) The Designated Manufacturer(s) shall acknowledge (or in the case
of US Manufacturers, be advised) that materials related to its agreement
with Licensee and uniquely and specifically associated with the Licensed
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 (or in the case of US Manufacturers,
be advised) 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 not seek or obtain any
registration of the Licensed 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.
(xiv) In the event the Designated Manufacturer(s) has obtained or
obtains in the future in the Manufacturing Territory, any right, title or
interest in the Licensed 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 Licensed 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 Licensed 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 Marks
including, without limitation, by providing information regarding the
Licensed Marks and samples of the Licensed Products.
(xvii) The Foreign 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
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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 Licensed Marks, and shall promptly
notify Licensee in writing of any infringements, claims or actions by
others in derogation of the Licensed Marks in the applicable country within
the Manufacturing 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 Marks, the Designated Manufacturer(s) shall cooperate with
and assist Licensor to the extent reasonably necessary to protect the
Licensed Marks 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 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
applicable country in the Manufacturing Territory as a result of the
Designated Manufacturer(s) activities in connection with the Licensed
Products 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.
c. Licensee shall not authorize any third party to manufacture Licensed
Products in the Manufacturing Territory outside the United States unless and
until such third party executes a binding written agreement (by purchase order
or otherwise) with Licensee containing all of the
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obligations listed above in Section 2(II)(b)(i-xxii). Licensee shall take
reasonable steps to monitor
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each Designated Manufacturer's compliance with its obligations under its
agreement with Licensee or otherwise. If any such Designated Manufacturer(s)
fails to comply with any of the foregoing obligations listed above in Section
2(II)(b)(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(II)(b)(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.
d. Licensee shall bear all costs and expenses associated with or incurred
by it in carrying out its obligations under Sections 2(II)(b) and 2(II)(c)
above.
e. Notwithstanding Section 2(II)(a) above, Licensee may manufacture or
cause others to manufacture the Licensed Products within the Manufacturing
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, 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 presently has no trademark
application(s) pending, Licensor agrees, upon the written request of Licensee,
to cause Hugo Boss to make such application, and to take appropriate steps to
prosecute such application and Licensee agrees to reimburse Hugo Boss 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 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 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
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countries listed in Exhibit C. If Licensor agrees to any such request, Licensor
and Licensee will amend this Agreement. The parties agree to execute individual
agreements with respect to manufacturing rights for any country on Exhibit C
outside the United States, if required by the laws or regulations of that
country or to protect the Licensed Marks. 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.
f. Notwithstanding Section 2(II)(a) hereof, neither Licensee nor the
Designated Manufacturer(s) shall have the right to use the Licensed Marks in the
Manufacturing Territory in any manner that conflicts with the rights of any
third party. For purposes of this Section 2(II)(f), 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 Licensed 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 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 the Licensed Marks.
g. Whenever Licensee itself manufactures Licensed Products anywhere in the
Manufacturing Territory, Licensee agrees to and undertakes the same obligations
set forth in Section 2(II)(b)(i-xxii) for the Designated Manufacturers including
without limitation the following.
(i) To manufacture Licensed Products only for Licensee;
(ii) Not to manufacture any product bearing the Licensed Marks or any
trademarks confusingly similar to the Licensed Marks, other that Licensed
Products and promotional items permitted by this Agreement;
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(iii) Not to use the name BOSS on any corporate, partnership or other
trade name or as a form of entity identification;
(iv) Not to seek or obtain any registration of the Licensed 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
(v) Not to employ children under fourteen (14) years of age.
(III) OTHER PROVISIONS REGARDING THE LICENSE FOR THE SALES AND
MANUFACTURING TERRITORY.
a. Licensee acknowledges that Licensor owns, pursuant to that certain
Foreign Boss Rights Acquisition Agreement between Licensor and Licensee dated
September 30, 1997 and that certain Agreement between Licensor, Hugo Boss AG,
I.C. Isaacs & Company, Inc. and I.C. Isaacs & Company L.P. dated October __,
1999 (the "Agreement"), any and all trademark rights relating to the word BOSS
within the Sales and Manufacturing Territories 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 Sales Territory or the Manufacturing Territory.
b. 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
or the 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 which impose or may impose restrictions on Licensee's
ability to manufacture Licensed Products in the Manufacturing Territory.
c. Licensor shall obtain from Hugo Boss throughout the term of this
Agreement a license of such of its rights (if any) relating to the exercise by
Licensee of its rights under this Agreement such that Licensor may sublicense
said rights to Licensee to the extent described in the grant of rights set forth
in Sections 2(I) and 2(II), as modified by Section 2(III) hereof, and Licensor
hereby acknowledges that it is sublicensing said rights to Licensee under said
Sections 2(I) and 2(II), as modified by Section 2(III).
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d. Licensee makes no representations and warranties to Licensor hereunder
with respect to the Licensed Marks, including, without limitation, any matter
relating to the existence, validity or enforceability of the marks acquired by
Licensee from Brookhurst Inc.
e. Except as expressly stated in this Agreement, 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.
3. ADVERTISING AND PROMOTION; TRANSFER AND OWNERSHIP OF PROPERTY
a. Licensee agrees that any and all of its advertising and sales promotion
activities regarding Licensed Products (including cooperative advertising) shall
be subject to the provisions established by Exhibit A2. Licensee shall not
create, or cause to be created, any advertising or promotional materials that do
not comply with Exhibit A2 and shall use reasonable efforts, including
termination of relationships, to cause third parties who advertise or otherwise
promote Licensed Products to comply with the standards of Exhibit A2. Licensee
shall use reasonable efforts to cause its retail customers to use signage
materials conforming to the requirements of this Section 3(a), but Licensee
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
which has been in use since 1998 or before.
b. Licensor, for itself and its affiliated entities (including Hugo Boss)
agrees that any and all of their 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 A3.
c. Licensee shall have exclusive rights as between the parties to use the
Licensed Marks with respect to boxing sports sponsorship in the United States,
except Licensor 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, Licensor shall have exclusive 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,
Licensor and Licensee agree to cooperate with each other to avoid interference
with the other party's sports sponsorships in the United States. If either
Licensor or Licensee notifies the other party of the existence of sports
sponsorship relationships in other sports, the party receiving such notice will
then avoid
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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 Licensee may use the Licensed Marks in the United States in
connection with the sponsorship of United States Olympic Athletes and United
States Olympic Teams; provided, however, that the Licensed 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 the
Licensed Marks outside the United States. Nothing in this Agreement entitles
either Licensor or Licensee 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. Licensee may submit to Licensor 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 Licensed Marks, so that Licensor
can ensure that such items comply with the terms of this Agreement. If Licensee
does not submit such items to Licensor for approval, and items are determined to
materially breach the terms of this Agreement on two occasions within a twelve
(12) month period, Licensee must thereafter submit all such items for approval
by Licensor. Under these circumstances, Licensee shall not use any item in that
category until corresponding samples have been approved by Licensor in writing,
and Licensee shall not depart therefrom in any respect without again obtaining
Licensor's 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), Licensor shall either approve or set
forth in writing its reasons for withholding approval within twenty (20) days of
receipt of such samples. Failure by Licensor to so respond within twenty (20)
days shall be deemed as approval.
e. Licensee agrees that all goodwill derived by it or its licensees from
the use of the Licensed Marks after the Effective Date shall inure to the
benefit of Licensor.
f. 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 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.
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g. 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.
h. Licensee agrees that, during the term of this Agreement, it shall not
use the Licensed Marks in any manner other than as expressly set forth in this
Agreement.
i. 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 A1,
and Exhibit B 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 rights licensed
to Licensee hereunder and previously under the FRMA.
j. Following termination of this Agreement, Licensee agrees that it will
terminate any and all use of the Licensed Marks in the Manufacturing Territory
and in the United States, except as otherwise expressly provided in this
Agreement.
4. QUALITY STANDARDS AND INSPECTION
a. The parties acknowledge and agree that great value is placed on the
Licensed Marks and the goodwill associated therewith, that the consuming public
and the industry now associate the Licensed 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 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.
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b. Licensee agrees to use, in connection with the Licensed 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 A2. Licensee agrees that it shall not use the name BOSS in
any corporate, partnership or other trade name or as a form of entity
identification. Licensee 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 shall be construed as
prohibiting use of the Licensed Marks in shop-within-a-shop situations. Licensee
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.
Licensee agrees to provide Licensor with written notice of any change in the
location of such factory outlet. To the extent Licensee 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 other licensees, except
those which are traditional or standard in the industry.
c. For each Designated Manufacturer not previously disclosed to Licensor
under the FMRA, 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
Manufacturing 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 Manufacturing 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 Manufacturing 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.
d. 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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e. 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
Manufacturing Territory or otherwise interfere in each other's lawful
relationships with any manufacturers in the Manufacturing Territory.
f. In order to ensure that Licensor is fully aware of all products Licensee
may manufacture in the Manufacturing Territory, 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 Licensed Marks 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.
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g. 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
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.
h. 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' business that would
materially affect the rights, obligations and/or benefits of Licensee under this
Agreement. The parties acknowledge and agree that any and all information made
available in any form to the other party under this Section 4(h) shall be
subject in all respects to Section 24(a) hereof concerning confidentiality and
that neither party will trade in violation of applicable U.S. securities laws on
any such information which has not been publicly disclosed.
i. Licensee agrees not to manufacture, export, import, ship or distribute
from or to any country in the Manufacturing Territory, nor give its permission
to any third party to manufacture, export, import, ship or distribute from or to
any country in the Manufacturing 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.
j. 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.
k. Licensee shall submit to Licensor any trademark, service mark, logo or
name which is to be used in connection with the Licensed Products 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.
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l. 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.
m. 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, 2003, 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 its sole option, renew this Agreement for a period of
two (2) additional years commencing on January 1, 2004, and ending December 31,
2005, if Licensee provides written notice of its intention to extend by no later
than June 30, 2003. Licensee may, at its sole option, extend the term of this
Agreement for an additional two (2) year period commencing on January 1, 2006,
and ending on December 31, 2007, if Licensee provides written notice of its
intention to extend by no later than June 30, 2005.
6. LICENSE FEE AND ROYALTIES
a. Licensee agrees to pay to Licensor a royalty on Licensed Products as
follows:
(i) For the calendar quarter ending June 30, 1999, Licensee will pay
to Licensor on the date hereof Four Hundred Eighty Thousand Dollars
($480,000) as a Minimum Quarterly Royalty Payment and Two Hundred
Eighty-One Thousand Dollars ($281,000) in interest in respect of amounts
due on the Secured Limited Recourse Promissory Note dated November 5, 1997
issued by Licensee to Licensor and which will be cancelled (the "1997
Note").
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(ii) For the calendar quarter ending September 30, 1999, Licensee will
pay to Licensor on or before October 31, 1999 Five Hundred Twenty-Four
Thousand Dollars ($524,000) as a Minimum Quarterly Royalty Payment and Two
Hundred Eighty-One Thousand Dollars ($281,000) in interest in respect of
amounts due on the 1997 Note.
(iii) For the calendar quarter ending December 31, 1999, Licensee will
pay to Licensor within thirty (30) days after December 31, 1999 Seven
Hundred Sixty-One Thousand Dollars ($761,000) as a Minimum Quarterly
Royalty Payment.
(iv) Commencing with calendar year 1999, and for each calendar year of
the initial term and either extension term of this Agreement thereafter
(year 1999 and each calendar year of the initial term and each extension
term of the Agreement thereafter being referred to as "Applicable Years"),
Licensee will pay to Licensor an annual royalty equal to the "Annual
Royalty Amount" (herein defined) for the Applicable Year. "Annual Royalty
Amount" means the amount equal to the greater of (A) for Applicable Year
1999, the total of the Minimum Quarterly Royalty Payments required during
the Applicable Year in accordance with clauses (i), (ii) and (iii) above
and the amount paid for the first calendar quarter in 1999 in the amount of
One Million Dollars ($ 1,000,000.00), and for Applicable Years 2000 through
2003, the total of the Minimum Royalty Payments set forth for such
Applicable Year on the Minimum Royalty Table (2000-2003) attached hereto as
Exhibit F-1 (the "Minimum Annual Royalty" ), or (B) an amount equal to six
percent (6%) of Total Net Sales during the Applicable Year (the "Percentage
Annual Royalty"). The Annual Royalty Amount for any Applicable Year will be
paid quarterly (in arrears) within thirty (30) days after each Quarterly
Payment Date in installments equal to the Minimum Quarterly Royalty
Payments for such Quarterly Payment Dates as set forth in clauses (i), (ii)
and (iii) above and on the Minimum Royalty Table (2000-2003). "Quarterly
Payment Dates" means March 31, June 30, September 30 and December 31. For
any Applicable Year in which the Percentage Annual Royalty is greater than
the Minimum Annual Royalty, Licensee will pay to Licensor the Royalty
Adjustment Amount (herein defined) within thirty (30) days after the end of
the Applicable Year. "Royalty Adjustment Amount" means, for any Applicable
Year in which the Percentage Annual Royalty exceeds the Minimum Annual
Royalty, the amount by which the Percentage Annual Royalty exceeds the
Minimum Annual Royalty for such Applicable Year.
(v) The Minimum Annual Royalty during each year of either extension
term will be the same amount as, and will be paid in the same manner as,
the Minimum Annual Royalty for the year 2002 ($2,580,000) on the Minimum
Royalty Table (2000-2003).
b. 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
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accounting of the aggregate amount of 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.
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 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, shipped, distributed and sold and of Licensee's
activities under this Agreement, and shall make the same readily available to
Licensor and its agents and representatives at such
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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, Licensee shall immediately pay all 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, plus, if payments due to
Licensor under this Agreement exceed the amounts of payments actually paid by an
amount greater than three percent (3%) of the payments made, Licensee shall
immediately pay the cost of the audit, as well. 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 audited period, Licensor shall be
entitled, in addition to an additional payment equal to twenty-five percent
(25%) of the full amount of the unpaid royalties 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.
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9. LABELING
Licensee agrees to use the proper trademark and copyright notices in
connection with the Licensed Marks. Upon the execution of this Agreement,
Licensee shall no longer place orders for Licensed Products bearing any
trademark and copyright notices used prior to execution of the FMRA and will
take reasonable steps to ensure that such goods are no longer manufactured in
the Manufacturing 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. 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 Licensed Marks
and, in furtherance thereof, hereby transfers and conveys all rights, title and
interest, if any, in the Licensed Marks to Licensor, 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
Licensed Marks except the limited license granted to Licensee herein, that such
Licensed Marks are the sole and exclusive property of Licensor and that all such
uses by Licensee or the Designated Manufacturer(s) of the Licensed Marks shall
inure only to the benefit of Licensor.
c. Licensee agrees that it will not seek or obtain any registration of the
Licensed 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 any right, title or interest in
the Licensed Marks, or in any marks which contain the word BOSS whether used
alone or in combination with other words or symbols or which are confusingly
similar to the Licensed Marks, 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.
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d. Licensee agrees not to take any action which may in any way impair
Licensor's rights in and to the Licensed 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 Licensed 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 Marks including, without limitation,
by providing information regarding the Licensed Marks and samples of the
Licensed Products.
f. Licensee acknowledges that materials related to this Agreement and
uniquely and specifically associated with the Licensed 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 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
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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.
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.
c. 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.
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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 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 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 in efforts to stop the manufacture, distribution or sale of
unauthorized product bearing the Licensed 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
Manufacturing Territory or the Sales 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 Licensed 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.
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b. Licensor may terminate this Agreement as it pertains to any country
included in the Manufacturing Territory only upon any of the following events in
that country:
(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(II)(b)(vii)(A) or Section 4(c) 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(II)(b)(vii)(A) and 4(c) 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(II)(b)(vii)(A) or Section 4(c), 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(II)(b)(xxii). For purposes of a breach of Licensee's obligations under
Section 2(II)(b)(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(II)(b)(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.
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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 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, (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
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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 pursuant
to Section 6 above during the initial term 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 $13,423,000: (i) a breach by Licensee of its
obligations to make the payments required by Sections 6 and 7 of this Agreement
for any year in accordance with the terms of such Sections, which breach, after
due written notice of same from Licensor, remains uncured for a period of five
(5) days; (ii) Licensee's failure to manufacture any Licensed Products; (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 except those which constitute Licensed Marks 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 to register or otherwise create
or establish trademark rights in the word BOSS in its own name after the
Effective Date of this Agreement (but excluding any activities undertaken by
Licensee in connection with claims against third-parties for past
infringements); 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,
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
$5,160,000. 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, 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 $5,160,000. The parties agree
that this provision is not a liquidated damages provision, but a quantification
of the benefit of the bargain to Licensor. In the event Licensee fails to make
immediate payment as required by
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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. 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 Manufacturing Territory (other than the
United States) 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.
h. 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: either (a) 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, or (b) by direction of Licensor from using the word BOSS in
the Microgramma typestyle and every variation thereof on a substantial portion
(by sales volume) of the Licensed Products with respect to sales in the United
States pursuant to Section 2(II)(f); and (iii) there is no reasonable
alternative available; provided, however, that if such court order is based upon
Licensee's use of the Licensed 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(h),
royalties due shall be based on amounts due to the date of termination as
provided for in Section 6 above, which shall be calculated on a pro rata basis
for any applicable portion of a calendar quarter.
i. 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 to, and distribute and sell in, the Sales
Territory, such completed Licensed Products and any Licensed 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 the expiration of such nine
(9) month period, Licensee shall completely remove the Licensed
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Marks and any and all marks including the word BOSS from any and all 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(i) above, all rights relating to the Licensed Products 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 rights licensed under this Agreement;
(iii) within thirty (30) days of termination, delete and henceforth
cease from making any reference to the Licensed 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, Licensee shall be liable to
Licensor for actual royalties accrued prior to termination and royalties on any
goods manufactured after termination under Section 15(i), which royalties shall
be calculated on a pro rata basis for any applicable portion of a calendar year.
Upon any termination other than termination resulting from a breach by Licensee
of this Agreement, Licensee shall be liable to Licensor only for such
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royalties; provided, however, that nothing in this Section shall affect
Licensor's rights or remedies for any post-termination breach by Licensee.
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 Licensed Marks with Licensor
bearing all reasonable out of pocket expenses of Licensee and the Designated
Manufacturers thereof (other than as stated below) and shall promptly notify
Licensor in writing of any infringements, counterfeiting, claims or actions by
others in derogation of the Licensed Marks in the Manufacturing 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, counterfeiting, claims or actions. Licensee shall not take any
action on account of any such infringement, counterfeiting, 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, counterfeiting,
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, counterfeiting, 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
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the licensed rights hereunder 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, counterfeiting, 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.
d. Licensor shall have the right to record, or continue the recordation of,
the Hugo Boss Marks and the Licensed Marks with the Customs Service of the
United States. Upon written request from Licensee for Licensor's reasonable
cooperation, Licensor shall promptly cooperate with Licensee in its efforts to
gain entry into the United States of Licensed Products or components thereof
which are manufactured under authority of and in compliance with this Agreement
(or previously under the FMRA) in the event the Customs Service detains any such
products or components, or raises any question.
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: Chief Financial Officer
Telecopier: 212/940-0619
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Hugo Boss AG
Dieselstrasse 12
D-72555 Metzingen
Federal Republic of Germany
Attention: General Counsel
Telecopier: 49-7123-942018
With a copy to:
Coudert Brothers
1627 I Street, N.W.
Washington, D.C. 20006
Attention: Wendy L. Addiss, Esq.
Telecopier: 202/775-1168
If to Licensee, to:
I. C. Isaacs & Company L.P.
350 Fifth Avenue
Suite 1029
New York, New York 10118
Attention: Chairman and 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.
21. FOREIGN AND DOMESTIC TAXES AND GOVERNMENT APPROVALS
a. Licensee agrees to obtain all government approvals and registrations
which are
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required under the laws of the Manufacturing 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 or domestic 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.
c. Notwithstanding any other provision of this Agreement, 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 which were not
otherwise caused by activities of Licensee in connection with this Agreement.
22. 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. Subject to the provisions of Section 26 below, 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 from enforcing any of its rights in any jurisdiction anywhere
in the world to prevent the unauthorized manufacture, sale or distribution of
Licensed Products or of products bearing Hugo Boss Marks.
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23. 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.
24. 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 Licensed 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' ability to make all disclosures required by law pursuant to
offering and selling stock to the public. Notwithstanding the provision of this
Section 24(a), in the event of published reports regarding the Agreement or
Licensee's relationship with Licensor or Hugo Boss, Licensor, Hugo Boss 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 24(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 24(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.
38
<PAGE>
25. 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 with respect to the
subject matter herein. 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(e)
through (j), 8, 10, 14, 15(i) 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.
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.
26. 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
39
<PAGE>
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 26(a),
Licensor or Hugo Boss 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(f), 4(g), and 4(j) herein, and under
Sections 2(I)(a) and 4(b) solely with respect to Licensee's compliance vel non
with the terms of Exhibit A as referenced in said Sections, 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 26 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.
27. HUGO BOSS AG GUARANTY
Hugo Boss hereby irrevocably and unconditionally guaranties to Licensee the
full and timely performance of Licensor's obligations to Licensee under this
Agreement.
40
<PAGE>
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/ Vincent Ottomanelli
--------------------------------
Name: Vincent Ottomanelli
Title: CFO / VP
By: /s/ Jorg-Viggo Muller
--------------------------------
Name: Jorg-Viggo Muller
Title: Chairman
HUGO BOSS AG, a corporation of the Federal
Republic of Germany
By: /s/ Werner Beldessarini
--------------------------------
Name: Werner Beldessarini
Title: Chairman and CEO
By: /s/ Jorg-Viggo Muller
--------------------------------
Name: Jorg-Viggo Muller
Title: CFO
I.C. ISAACS & COMPANY L.P., a Delaware
limited partnership
By: I.C. ISAACS & COMPANY, INC., a Delaware
corporation, its general partner
By: /s/ Robert J. Arnot
--------------------------------
Name: Robert J. Arnot
Title: Chairman and Chief
Executive Officer
41
<PAGE>
EXHIBIT 10.63
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A: Specifications and limitations on Licensee's use of the Licensed Marks
Exhibit A1: Price Points
Exhibit A2: Licensee's Advertising Rules
Exhibit A3: Licensor's Advertising Rules
Exhibit B: List of products on which Licensee is permitted to use the Licensed 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 F1: Minimum Royalty Table
Exhibit F2: Royalty calculation sheet
Exhibit G: Customs letter
Exhibit H: Non-expedited arbitration provision
Exhibit H1: Expedited arbitration provisions
</TABLE>
<PAGE>
Exhibit A
THE MARKS
BOSS
(the "Microgramma Typestyle")
[Graphic B]
<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
<PAGE>
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 "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-O-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
<PAGE>
"I G Design", (or such other name as approved by Licensor)
where the Mark appears only on the belt buckle; where the 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;
<PAGE>
(ii) The word "BOSS" shall be slanted no less than 24';
(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
- - 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]
22 DEG. ANGLE
6 TO 1 RATIO
THESE EXEMPLARS DO NOT SUPERSEDE THE RATIO REQUIREMENTS AS
OTHERWISE PROVIDED BY THIS EXHIBIT A
<PAGE>
JR. HANG TAG/BJ-537W
FRONT
[Graphic Logo]
THESE EXEMPLARS DO NOT SUPERSEDE THE RATIO REQUIREMENTS AS
OTHERWISE PROVIDED BY THIS EXHIBIT A
<PAGE>
BMA-458
[Graphic Logos]
THESE EXEMPLARS DO NOT SUPERSEDE THE RATIO REQUIREMENTS AS
OTHERWISE PROVIDED BY THIS EXHIBIT A
<PAGE>
JR. HANG TAG/BJ-537
BACK
[Graphic Logos]
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
- - 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]
<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] - Shirt
<PAGE>
[Graphic Logo]
<PAGE>
- - Exemplars of unacceptable graphic environments.
<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] - Shirt
<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>
ATTACHMENT 3
TO EXHIBIT A
- - Exemplars of acceptable distorted colors.
<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
- - Exemplars of 24 deg. slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 5
TO EXHIBIT A
- - Exemplars of 22 deg. slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 6A
TO EXHIBIT A
- - Exemplars of vertical alignment.
<PAGE>
[Graphic Logo] - Shirt
<PAGE>
[Graphic Logo] - Shirt
<PAGE>
[Graphic Logo]
<PAGE>
[Graphic Logo] - Shirt
<PAGE>
[Graphic Logo] - Shirt
<PAGE>
[Graphic Logo] - Shirt
<PAGE>
[Graphic Logo] - Shirt
<PAGE>
[Graphic Logo]
<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
- - Exemplars of 19 deg. slant.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 7A
TO EXHIBIT A
- - 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
- - Exemplars of unacceptable vertical BOSS logos.
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 8
TO EXHIBIT A
- - 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
- - The BOSS Sport Patch
<PAGE>
[Graphic Logo]
<PAGE>
ATTACHMENT 10
TO EXHIBIT A
- - Exemplar 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>
- - Exemplar of unacceptable coloration for "BOSS by I G Design" on polo
shirts.
<PAGE>
[Graphic Logo] - Shirt
<PAGE>
[Graphic Logo]
1
<PAGE>
[Graphic Logo]
2
<PAGE>
[Graphic Logo]
3
<PAGE>
[Graphic Logo]
4
<PAGE>
[Graphic Logo]
5
<PAGE>
[Graphic Logo]
6
<PAGE>
[Graphic Logo]
7
<PAGE>
[Graphic Logo]
8
<PAGE>
[Graphic Logo]
9
<PAGE>
[Graphic Logo]
10
<PAGE>
ATTACHMENT 11
TO EXHIBIT A
Exemplar of acceptable shirts under Exhibit A, Section 9(a).
<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>
Exemplar of acceptable shirts under Exhibit A, Section 9(b).
<PAGE>
[Graphic Logo]-Shirt
<PAGE>
[Graphic Logo]-Shirt
<PAGE>
[Graphic Logo]-Shirt
<PAGE>
[Graphic Logo]-Shirt
<PAGE>
Exemplar of acceptable shirts under Exhibit A, Section 9(c).
<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>
EXHIBIT A1
PRICE POINTS
1. Licensee shall sell products bearing Licensed 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. Licensor and 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:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
LICENSEE'S LICENSOR'S/HUGO
MAXIMUM BOSS' MINIMUM
WHOLESALE WHOLESALE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
All long bottoms except jeans and
warm-up (or jogging) suits
- -----------------------------------------------------------------------------------------------------
Cotton 35.00 25.00
- -----------------------------------------------------------------------------------------------------
Synthetic Blend 40.00 35.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
All short bottoms except jeans and
warm-up (or jogging) suits
- -----------------------------------------------------------------------------------------------------
Cotton 25.00 20.00
- -----------------------------------------------------------------------------------------------------
Synthetic Blend 30.00 25.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Jeans
- -----------------------------------------------------------------------------------------------------
Basic 25.00 25.00
- -----------------------------------------------------------------------------------------------------
Fashion 35.00 35.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Jean Shorts
- -----------------------------------------------------------------------------------------------------
Basic 22.00 20.00
- -----------------------------------------------------------------------------------------------------
Fashion 30.00 25.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Overalls
- -----------------------------------------------------------------------------------------------------
Short 35.00 35.00
- -----------------------------------------------------------------------------------------------------
Long 50.00 50.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Outerwear
- -----------------------------------------------------------------------------------------------------
Filled 80.00 80.00
- -----------------------------------------------------------------------------------------------------
Lined 60.00 60.00
- -----------------------------------------------------------------------------------------------------
Waterproof 80.00 80.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Vest
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
LICENSEE'S LICENSOR'S/HUGO
MAXIMUM BOSS' MINIMUM
WHOLESALE WHOLESALE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Filled 60.00 50.00
- -----------------------------------------------------------------------------------------------------
Lined 40.00 40.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Polo Shirts and Knit Tops
- -----------------------------------------------------------------------------------------------------
Basic Short 25.00 20.00
- -----------------------------------------------------------------------------------------------------
Basic Long 30.00 25.00
- -----------------------------------------------------------------------------------------------------
Fashion Short 35.00 30.00
- -----------------------------------------------------------------------------------------------------
Fashion Long 40.00 35.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Sweatshirts
- -----------------------------------------------------------------------------------------------------
Basic 30.00 25.00
- -----------------------------------------------------------------------------------------------------
Fashion 40.00 30.00
- -----------------------------------------------------------------------------------------------------
Warm-up (or jogging) suits
- -----------------------------------------------------------------------------------------------------
Cotton 50.00 50.00
- -----------------------------------------------------------------------------------------------------
Synthetic 60.00 60.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
T-shirts
- -----------------------------------------------------------------------------------------------------
Basic 11.00 11.00
- -----------------------------------------------------------------------------------------------------
Fashion 15.00 15.00
- -----------------------------------------------------------------------------------------------------
Embroidered 18.00 15.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Sweaters
- -----------------------------------------------------------------------------------------------------
Basic 40.00 30.00
- -----------------------------------------------------------------------------------------------------
Fashion 55.00 50.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Hats
- -----------------------------------------------------------------------------------------------------
Basic 11.00 11.00
- -----------------------------------------------------------------------------------------------------
Fashion 15.00 15.00
- -----------------------------------------------------------------------------------------------------
Baseball Caps 15.00 11.00
- -----------------------------------------------------------------------------------------------------
Golf Caps 15.00 11.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Woven Shirts
- -----------------------------------------------------------------------------------------------------
Basic Short 25.00 25.00
- -----------------------------------------------------------------------------------------------------
Basic Long 30.00 30.00
- -----------------------------------------------------------------------------------------------------
Fashion Short 35.00 35.00
- -----------------------------------------------------------------------------------------------------
Fashion Long 40.00 40.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
LICENSEE'S LICENSOR'S/HUGO
MAXIMUM BOSS' MINIMUM
WHOLESALE WHOLESALE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Children's Apparel
- -----------------------------------------------------------------------------------------------------
Polo Shirts and Knit Tops 20.00 15.00
- -----------------------------------------------------------------------------------------------------
Sweatshirts 22.00 17.00
- -----------------------------------------------------------------------------------------------------
T-shirts 11.00 8.00
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Swimwear
- -----------------------------------------------------------------------------------------------------
Basic 20.00 15.00
- -----------------------------------------------------------------------------------------------------
Fashion 30.00 20.00
- -----------------------------------------------------------------------------------------------------
</TABLE>
2. All price points are expressed in 1997 dollars, except for Children's
Apparel and Baseball and Golf Caps which price points are expressed in 1999
dollars. Licensee's 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. Licensor's and Hugo Boss' price points shall
remain as stated herein.
3. To the extent Licensee 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 A1 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 A1, 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. Likewise, each party agrees to consider,
at the request of the other party, adjustments to the price points applicable
to the requesting party as reasonably agreed to by the parties on a
case-by-case basis.
<PAGE>
EXHIBIT A2
ADVERTISING AND PROMOTION
(LICENSEE)
1. On all advertising and promotional materials for Licensed Products,
Licensee 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 A2.
2. In all print or Internet advertising and promotions for Licensed
Products, whether by Licensee, or by retailers, or by any other entity
authorized by Licensee, 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 A2.
3. In all radio, television and motion picture advertising for Licensed
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 Licensed 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 Licensee, or by retailers, or by any other
entity authorized by Licensee, the size ratio between "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 A2.
5. Licensee shall be entitled to display Licensed Products and people
wearing Licensed Products in all advertising and promotional material,
provided that such Licensed Products comply with Exhibit A and Exhibit B.
6. Nothing in this Agreement is intended to give Licensor 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 Licensee 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. Licensee agrees to take reasonable steps to achieve compliance with this
Exhibit A2 in advertising and promotions by retailers and other entities
authorized by Licensee including, but not limited to, providing such entities
periodically with appropriate guidelines for use of the Licensed Marks
consistent with this Agreement. However, acts of retailers and other entities
which are beyond the control of Licensee will not constitute a breach of this
Agreement.
<PAGE>
ATTACHMENT 1
TO EXHIBIT A2
- - Exemplars of BOSS/I G Design.
For all uses where the word "BOSS" is less than one inch (1"):
(4:1)
<PAGE>
1/2" STRT.WIDE/LOWER CASE 4-1
[Graphic Logo]
<PAGE>
1/2" 22(Degree) NARROW/LOWER CASE 4-1
[Graphic Logo]
<PAGE>
1/2" STRT.NARROW/LOWER CASE 4-1
[Graphic Logo]
<PAGE>
1/2" STRAIGHT NARROW/CAPS 4-1
[Graphic Logo]
<PAGE>
1/2" 22(Degree) NARROW/CAPS 4-1
[Graphic Logo]
<PAGE>
1/2" STRT.WIDE/CAPS 4-1
[Graphic Logo]
<PAGE>
1/2" 22(Degree) WIDE/LOWER CASE 4-1
[Graphic Logo]
<PAGE>
1/2" STRT.WIDE/LOWER CASE 4-1
[Graphic Logo]
<PAGE>
For all uses where the word "Boss" is one inch (1") or larger:
(5:1)
<PAGE>
1" 22(Degree) WIDE/LOWER 5:1
[Graphic Logo]
<PAGE>
1" STRT. WIDE/CAPS 5:1
[Graphic Logo]
<PAGE>
1"STRT. (Degree) WIDE/LOWER CASE 5:1
[Graphic Logo]
<PAGE>
1" 22(Degree) WIDE/CAPS 5:1
[Graphic Logo]
<PAGE>
EXHIBIT A3
ADVERTISING
(LICENSOR AND 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 Licensor, Hugo
Boss, or by retailers, or by any other entity authorized by Licensor or 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 Licensee any right to
approve or disapprove any aspect of the contents of any advertising other
than as set forth above; provided, however, that Licensor and Hugo Boss shall
not use any advertising style or format which is or has been primarily
associated with Licensee's advertising of Licensed Products, other than those
which are traditional or standard in the industry.
4. Licensor and Hugo Boss agree to take reasonable steps to achieve
compliance with this Exhibit A3 in advertising and promotions by retailers
and other entities authorized by Licensor or 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 Licensor
or Hugo Boss will not constitute a breach of this Agreement.
<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 Licensed 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.
<PAGE>
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 Licensed Marks 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 Licensed 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:
<PAGE>
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 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
MANUFACTURING RIGHTS GRANTED
BAHRAIN PAKISTAN
BANGLADESH PERU
BRAZIL PHILIPPINES
CANADA QATAR
COSTA RICA REPUBLIC OF SOUTH KOREA
DOMINICAN REPUBLIC SAIPAN
EGYPT SAUDI ARABIA
ECUADOR SEYCHELLES
HONG KONG SINGAPORE
INDIA SOUTH AFRICA
INDONESIA SRI LANKA
JAMAICA TAIWAN
MACAO THAILAND
MAURITIUS TURKEY
MEXICO VIETNAM
MONGOLIA UNITED ARAB EMIRATES
OMAN UNITED STATES
PEOPLES REPUBLIC OF CHINA
<PAGE>
EXHIBIT C1
APPLICATIONS PENDING* OR NOT FILED**
BOTSWANA* MADAGASCAR*
EL SALVADOR* NEPAL**
GUATEMALA* REPUBLIC OF MALDIVES**
HONDURAS*
LESOTHO*
<PAGE>
EXHIBIT C2
SPECIAL CIRCUMSTANCES
COLOMBIA
MALAYSIA
<PAGE>
EXHIBIT D
LIST OF LICENSOR AGREEMENTS PURSUANT TO PARAGRAPH 2 (III)(b)
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 Heusen
Corporation, dated January 10, 1995
Concurrent Use Agreement - USA between Hugo Boss AG and Boss Manufacturing
Company, dated August 12, 1999
Letter Agreement between Hugo Boss AG and Boss Manufacturing Company, dated
August 12, 1999
<PAGE>
EXHIBIT E
* Prohibited stitching designs.
<PAGE>
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 Logo]-jeans
<PAGE>
[Graphic Logo]-jeans
<PAGE>
EXHIBIT F1
MINIMUM ROYALTY TABLE (2000-2003)
MINIMUM ROYALTY PAYMENTS FOR
APPLICABLE YEARS 2000-2003
<TABLE>
<CAPTION>
QUARTERLY MINIMUM TOTAL
PAYMENT QUARTERLY MINIMUM
DATE ROYALTY ANNUAL
PAYMENT ROYALTY
(U.S.$) (U.S.$)
---------------------------------------------------------
<S> <C> <C>
March 31, 2000 $810,000
June 30, 2000 $810,000
September 30, 2000 $810,000
December 31, 2000 $810,000 $3,240,000
March 31, 2001 $810,000
June 30, 2001 $810,000
September 30, 2001 $810,000
December 31, 2001 $810,000 $3,240,000
March 31, 2002 $645,000
June 30, 2002 $645,000
September 30, 2002 $645,000
<PAGE>
December 31, 2002 $645,000 $2,580,000
March 31, 2003 $520,000
June 30, 2003 $520,000
September 30, 2003 $520,000
December 31, 2003 $520,000 $2,080,000
---------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT F2
CALCULATION OF ANNUAL ROYALTY PAYMENT
CONTRACT YEAR
Territory Net Sales Total Net Sales
TRADEMARKED PRODUCTS
- --------------------
1. Number of Orders Booked
(see attached breakdown)
2. Invoiced Amounts
Less:
3. Sales taxes, cash discounts,
returns and allowances
4. Shipping
5. Bad debts (up to 0.5% of the amount
shown on line 2)
6. Net Sales
ROYALTY PAYMENT DUE
Remittance Enclosed:
Check No._________________
THE UNDERSIGNED, being the _________________ of I.C. Isaacs &
Company L.P., hereby certifies pursuant to Section ______ of the Agreement
dated _______________, 1999, by and between _______________ and I.C. Isaacs &
Company L.P., that the information continued in the attached Verification of
Licensed Products Sold is true and correct in all material respects as of the
date hereof.
SIGNED:________________________________
NAME:__________________________________
Title:_________________________________
Date:__________________________________
<PAGE>
For the period: January 1 to December 31,
<TABLE>
<CAPTION>
ANNUAL
ITEM QUANTITY SOLD SALES FIGURE ($)
---- ------------- ----------------
<S> <C> <C> <C>
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 __________________ ____________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sweatshirts Men __________________ ____________________
Women __________________ ____________________
Children __________________ ____________________
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, including Men __________________ ____________________
swimtanks and Women __________________ ____________________
bathing suits Children __________________ ____________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sports hats, Men __________________ ____________________
including caps Women __________________ ____________________
Children __________________ ____________________
Sports visors, Men __________________ ____________________
including sports Women __________________ ____________________
headbands Children __________________ ____________________
</TABLE>
<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 a trademark licensed rights in the USA granted by Ambra Inc., a
wholly-owned subsidiary of Hugo Boss AG. Ambra, Inc. has authorized I.C.
Isaacs & Company L.P. pursuant to a Restated and Amended License Rights
Agreement, dated as of October __, 1999, 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 ______________________________.
Dated:
----------------------------
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 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 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 H
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
<PAGE>
made.
5. In the event of mediation, the parties agree that Jonathan Marks of
Marks ADR, Inc. or his designee shall select a mediator within five (5)
business days. If Mr. 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 Marks ADR, Inc., or if Marks ADR, Inc. 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 H1 re 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 Marks ADR, Inc. 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, Marks ADR, Inc. 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 Jonathan Marks. In the
event that Mr. Marks is unavailable, Mr. Marks will designate a neutral for
this purpose unless the parties are first able to agree on a substitute
neutral.
c. On the fifth (5th) business day after Marks ADR, Inc. 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 10.64
I.C. ISAACS & COMPANY, INC.
SHAREHOLDERS' AGREEMENT
This SHAREHOLDERS' AGREEMENT (the "Agreement") dated November 5, 1999
is by and among I.C. Isaacs & Company, Inc., a Delaware corporation having its
principal office and place of business at 3840 Bank Street, Baltimore, Maryland
21224-2522 (the "Corporation"), and the shareholders whose names are set forth
in SCHEDULE A hereto (the "Shareholders" and each a "Shareholder").
WHEREAS, Ambra Inc. (the "Initial Shareholder") is the beneficial
owner of 2,000,000 shares of the Preferred Stock of the Corporation
(collectively, the "Initial Shares");
WHEREAS, the Initial Shareholder, the Corporation, Hugo Boss AG and
I.C. Isaacs & Company L.P. ("Isaacs") are parties to an Agreement dated October
22, 1999 (the "Agreement"), pursuant to which the Initial Shareholder shall
acquire (i) an additional 1,300,000 shares of Preferred Stock and (ii) a number
of shares of Common Stock of the Corporation equal to the quotient of $1,000,000
divided by One Dollar and Fifty Cents ($1.50) ((i) and (ii) referred to
collectively herein as the "Subsequently Issued Shares"); and
WHEREAS, the Initial Shareholder and the Corporation wish to provide
for the disposition of the capital stock of the Corporation upon the occurrence
of certain events, and to that end, have agreed to execute this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the sufficiency and
adequacy of which is acknowledged, and of the mutual covenants and agreements
hereinafter provided, the parties to this Agreement, on behalf of themselves and
their successors and assigns, agree as follows:
1. DEFINITIONS
The following terms shall have the meanings set forth in this Section
1:
AFFILIATE. Affiliate of a person or entity shall mean any person or
entity, whether now or hereafter existing, which controls, is controlled by, or
is under common control with, such person (including, but not limited to, joint
ventures, limited liability companies, and partnerships). For this purpose,
"control" shall mean ownership of 50% or more of the total combined voting power
of all classes of stock or interests of the entity.
BOARD. Board means the Board of Directors of the Corporation.
COMMON STOCK. Common Stock shall mean the issued and outstanding
common stock, par value $.0001, of the Corporation.
<PAGE>
INVOLUNTARY TRANSFER. Involuntary Transfer shall mean any transfer,
proceeding or action by or in which a Shareholder shall be deprived or divested
of any right, title or interest in or to any of the Stock, including, without
limitation, any seizure under levy of attachment or execution, any transfer in
connection with bankruptcy (whether pursuant to the filing of a voluntary or an
involuntary petition under the United States Bankruptcy Code, as amended, or any
modifications or revisions thereto) or other court proceeding to a debtor in
possession, trustee in bankruptcy or receiver or other officer or agency or any
transfer to a state or to a public officer or agency pursuant to any statute
pertaining to escheat or abandoned property.
MARKET VALUE. Market Value shall have the following meaning:
(i) In the event that, as of the date of the Transfer Notice
or the Corporation Purchase Notice, as the case may be, the Corporation is a
Reporting Company, the Market Value of the Common Stock for any purpose shall
mean the last reported sale price per share of Common Stock, on the date of the
Transfer Notice or the Corporation Purchase Notice, as the case may be, or, in
case no such sale takes place on such date, the average of the closing bid and
asked prices in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on a national securities exchange or included for quotation on the
Nasdaq-National Market, or if the Common Stock is not so listed or admitted to
trading or included for quotation, the last quoted price, or if the Common Stock
is not so quoted, the average of the high bid and low asked prices, in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotations system that may then be in use or, if
the Common Stock is not quoted by any such organization, the average of the
closing bid and asked prices, as furnished by a professional market maker making
a market in the Common Stock as selected in good faith by the Board and the
Initial Shareholder by mutual agreement or by such other source or sources as
shall be selected in good faith by the Board and the Initial Shareholder by
mutual agreement. If, as the case may be, the relevant date is not a trading
day, the determination shall be made as of the next preceding trading day. As
used herein, the term "trading day" shall mean a day on which public trading of
securities occurs and is reported in the principal consolidated reporting system
referred to above, or if the Common Stock is not listed or admitted to trading
on a national securities exchange or included for quotation on the
Nasdaq-National Market, any business day.
(ii) If, as of the date of the Transfer Notice or the
Corporation Purchase Notice, as the case may be, the Corporation is not a
Reporting Company, the Market Value shall be the appraised fair market value as
of the date of the Transfer Notice or the Corporation Purchase Notice, as the
case may be, as determined by an independent appraiser of recognized standing
and appraisal method selected by mutual agreement of the Corporation and the
Initial Shareholder.
PREFERRED STOCK. Preferred Stock shall mean the issued and outstanding
Series A Convertible Preferred Stock, par value $.0001, of the Corporation.
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<PAGE>
REGISTRABLE SHARES. Registrable Shares means Common Stock, except that
Common Stock shall cease to be Registrable Shares when such Common Stock shall
have become eligible for resale pursuant to Rule 144(k) of the Securities Act.
REGISTRATION STATEMENT. Registration Statement shall mean a
registration statement filed by the Corporation with the SEC under which
Registrable Shares are registered pursuant to Section 3 hereof.
REPORTING COMPANY. Reporting Company shall mean a company the common
stock of which is registered under Section 12 of the Securities Exchange Act.
SEC. SEC means the Securities and Exchange Commission.
SECURITIES ACT. Securities Act means the Securities Act of 1933, as
amended.
SECURITIES EXCHANGE ACT. Securities Exchange Act means the Securities
Exchange Act of 1934, as amended.
STOCK. Stock shall mean (a) the Initial Shares and the Subsequently
Issued Shares; and (b) any capital stock of the Corporation or any of its
successors or assigns issued in respect of or pursuant to a stock split, stock
dividend or reclassification.
2. RESTRICTIONS ON DISPOSITION
A. LIMITATIONS ON TRANSFERS. No Shareholder shall, whether voluntarily
or pursuant to an Involuntary Transfer, transfer, sell, assign, pledge,
encumber, grant any option with respect to, or otherwise create any legal or
equitable interest in any Stock held by such Shareholder except in accordance
with this Section 2.
B. RIGHTS OF FIRST REFUSAL OF STOCK. (i) Except as otherwise provided
in Subsections C. and F. below, before any Stock may be voluntarily sold or
transferred by a Shareholder (a "Transferring Shareholder"), such Transferring
Shareholder shall first provide written notice of the proposed sale or transfer
to the Corporation, which notice shall include the number of shares of Stock
proposed for transfer (the "Offered Shares"), the price per share of Stock to be
transferred (the "Offer Price"), the name of the proposed transferee (the
"Proposed Transferee"), a representation that the agreement to sell or transfer
constitutes a bona-fide offer to purchase and all other material terms and
conditions of the transfer (the "Transfer Notice");
(ii) The Corporation shall then have the right to purchase all
(and not less than all) of the Offered Shares at the Offer Price of the Stock
proposed to be transferred. Such right of first refusal shall be exercisable
upon written notice to the Transferring Shareholder within fifteen (15) days
following the date of the Transfer Notice (the "First Refusal Period");
(iii) If, upon termination of the First Refusal Period, the
Corporation has not exercised its right of first refusal with respect to all of
the Offered Shares, the Transferring Shareholder may sell such Offered Shares to
the Proposed Transferee at any
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<PAGE>
time within six months after termination of the Right of First Refusal Period
without again complying with this Section 2.
C. TRANSFERS PURSUANT TO RULE 144(k). A Shareholder holding Stock
eligible to be transferred pursuant to Rule 144(k) promulgated under the
Securities Act ("Rule 144(k)") may transfer such Stock in a Rule 144(k)
transaction in accordance with the procedures set forth in this Section 2.C.:
(i) Such Shareholder (the "Qualifying Shareholder") shall
first provide written notice of its intention to transfer stock in a Rule 144(k)
transaction (the "144(k) Transfer Notice"), which notice shall include the
number of shares eligible for transfer pursuant to Rule 144(k) and proposed for
transfer (the "144(k) Shares") and the name of the proposed broker, if any, in
the 144(k) transaction (the "Proposed Broker");
(ii) The Corporation shall then have the right to purchase all
(and not less than all) of the 144(k) Shares at the Market Value of the 144(k)
Shares proposed to be transferred (the "144(k) Purchase Rights"). The
Corporation may exercise its 144(k) Purchase Rights by providing written notice
(the "Corporation Purchase Notice") to the Qualifying Shareholder within five
(5) days following the date of the 144(k) Transfer Notice (the "144(k) Notice
Period");
(iii) If, upon termination of the 144(k) Notice Period, the
Corporation has not notified the Qualifying Shareholder of its desire to
exercise its 144(k) Purchase Rights, the Qualifying Shareholder may sell the
144(k) Shares at any time within six months after termination of the 144(k)
Notice Period without again complying with this Section 2.
D. INVOLUNTARY TRANSFERS. Any Involuntary Transfer of Stock by a
Shareholder (an "Involuntary Transferor") shall be subject to the rights of
first refusal set forth in Section 2.B. as if the Involuntary Transfer had been
a proposed voluntary transfer of Stock except that:
(i) The provisions of Subsection 2.B.(i) shall not apply, but
the Involuntary Transferor shall notify the Shareholders and the Corporation as
soon as practicable upon obtaining knowledge of the Involuntary Transfer (such
notification to be deemed a "Transfer Notice");
(ii) The First Refusal Period shall run from the date of
receipt by the Corporation of the notice of Involuntary Transfer;
(iii) Such right of first refusal shall be exercised by notice
to the Involuntary Transferee rather than to the Shareholders who suffered or
will suffer the Involuntary Transfer; and
(iv) The purchase price per Offered Share shall be Market
Value.
E. SETTLEMENT. If the Corporation elects to exercise its right of first
refusal pursuant to Section 2.B. or 2.D. hereof or its 144(k) Purchase Rights
pursuant to Section
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<PAGE>
2.C. hereof, settlement shall be made within twenty (20) days of the Transfer
Notice or the 144(k) Transfer Notice, whichever is applicable.
F. PERMITTED TRANSFERS. Nothing in this Section 2 shall impede or
prohibit the transfer by a Shareholder of Stock (a) to an Affiliate of the
Shareholder, (b) to the Corporation, (c) to any third party in a broker's
transaction pursuant to Rule 144(b) promulgated under the Securities Act or (d)
pursuant to a Registration Statement. Any successor or transferee who receives
Stock pursuant to an event described in clause (a) above shall, as a condition
of such transfer, enter into an agreement to be bound by the provisions of this
Agreement in its entirety and shall be deemed to be a "Shareholder" hereunder
and SCHEDULE A hereto shall be amended to include the name of such successor or
transferee.
3. REGISTRATION RIGHTS
A. DEMAND REGISTRATION.
(i) At any time on or after December 15, 2000, a Shareholder
may offer Registrable Shares held by such Shareholder to the Corporation at the
then-prevailing market price. If the Corporation does not purchase such
Registrable Shares within 30 days, it will, subject to the provisions of
Subsections (ii) and (iii) below, use its best efforts to promptly register the
Registrable Shares held by such Shareholder under the Securities Act and shall
maintain the effectiveness of such Registration Statement for a period of 90
days.
(ii) The Corporation shall not be required to effect more than
one registration pursuant to Section 3.A(i) above.
(iii) If (a) at the time of any request to register
Registrable Shares pursuant to this Section 3.A or during the registration
process there is a material development with respect to the Corporation and (b)
the Board concludes in good faith that the registration would have a material
adverse effect on the Corporation or the price of the Common Stock, the Board
may at its option direct that such registration be delayed for a period not in
excess of 90 days from the effective date of the offering by Shareholder to the
Corporation.
B. PIGGYBACK REGISTRATION RIGHTS.
(i) Whenever the Corporation proposes to register any Common
Stock of the Corporation for its own account or the account of others under the
Securities Act for an underwritten public offering (other than registrations for
acquisitions or benefit plans on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), the Corporation shall give the
Shareholders prior written notice of its intent to do so and the Shareholders
may offer any Registrable Shares held by such Shareholders to the Corporation at
the then-prevailing market price. If the Corporation does not purchase such
Registrable Shares within 30 days, it will, subject to the provisions of
subsection (ii) below, use its reasonable efforts to effect the registration
under the Securities Act of the Registrable Shares that the Corporation has been
so
5
<PAGE>
requested to register by the requesting Shareholders, such registration to be
effected on the same terms and conditions as the Corporation Common Stock
otherwise being sold in such registration.
(ii) If the managing underwriter in an underwritten public
offering by the Corporation of Common Stock of the Corporation advises the
Corporation that the inclusion of all or some of the Common Stock (including
Registrable Shares) proposed to be included in such Registration Statement would
interfere with the successful marketing (including pricing) of such Common
Stock, then the Common Stock to be issued by the Corporation in such offering
(the "Corporation Shares"), the Registrable Shares of Shareholders proposed by
the Shareholders to be included in such offering (the "Shareholder Shares") and
the Common Stock of other shareholders proposed to be offered in such offering
("Other Shares") shall be included in the following order of priority until the
total number of shares recommended by the managing underwriters has been
reached:
(A) FIRST, the Corporation Shares;
(B) SECOND, the Shareholder Shares and the Other
Shares of the Corporation, pro rata based upon the number of shares of Common
Stock held by the Shareholders and the holders of the Other Shares;
C. REGISTRATION PROCEDURES. If and whenever the Corporation is
required to use its reasonable efforts to effect the registration of any
Registrable Shares as provided pursuant to Sections 3.A or 3.B, the Corporation
will, as expeditiously as practicable:
(i) After a Registration Statement is filed with the SEC,
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for a period not in excess of ninety (90) days (or such
earlier date by which all securities that have been requested to be registered
are sold) and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during such period;
(ii) Furnish to the Shareholders and to each underwriter, if
any, of such Registrable Shares, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements of the
Securities Act, and such other documents, as such person may reasonably request,
in order to facilitate the public sale or other disposition of the Common Stock;
(iii) Use its reasonable efforts to cause such Registrable
Shares covered by such Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be reasonably
necessary to enable the Shareholders to consummate the disposition of such
Registrable Shares in accordance with any plan of distribution described in such
Registration Statement;
6
<PAGE>
(iv) Promptly notify the Shareholders, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 3.C(i), if the Corporation
becomes aware that the prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and at the request of the Shareholders, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(v) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC; and
(vi) Execute and deliver all instruments and documents
(including in an underwritten offering an underwriting agreement in customary
form) and take such other actions and obtain such certificates and opinions as
are customary in underwritten public offerings.
Any Shareholder will, upon the receipt of any notice from the Corporation of the
occurrence of an event of the kind described in Section 3.C(iv), immediately
discontinue disposition of the Registrable Shares pursuant to the Registration
Statement covering such Registrable Shares until the Shareholders receive copies
of a supplemental or amended prospectus from the Corporation.
D. UNDERWRITING AGREEMENT. In connection with any registration pursuant
to Section 3.A or Section 3.B covering an underwritten public offering, the
Corporation and each Shareholder agree to enter into a written agreement with
the managing underwriters to be negotiated by the Corporation and the managing
underwriters in such form and containing such provisions as are customary in the
securities business for such an arrangement between such managing underwriters
and companies of the Corporation's size and investment stature, including
indemnification. To the extent that the Corporation and the Shareholders shall
enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in Subsections C, E or F of
this Section 3, the provisions contained in such subsections addressing such
issue or issues shall be of no force or effect with respect to such
registration.
E. HOLDBACK AGREEMENT. If the Corporation at any time shall register
any shares of Corporation Common Stock under the Securities Act (including any
registration of the Common Stock pursuant to Section 3.A or Section 3.B above)
for sale to the public, the Shareholders shall not sell publicly (including any
sale pursuant to Rule 144), make any short sale of, grant any options for the
purchase of, or otherwise dispose publicly of any shares of Common Stock, or of
any security convertible into or exchangeable or exercisable for any Common
Stock (other than those Common Stock included in the registration being effected
pursuant to Section 3.B above) without the prior written consent of the
Corporation and the managing underwriter during a period
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<PAGE>
commencing on the effective date of such registration and ending a number of
calendar days thereafter not exceeding one hundred eighty (180) as the
Corporation and the managing underwriter shall reasonably determine is required
to effect a successful offering.
F. EXPENSES. All expenses incurred by the Corporation in connection
with any registration effected under Section 3.A or Section 3.B above (including
all registration, filing qualification, legal, printer and accounting fees, but
excluding underwriting commissions and discounts on the sale of the Common
Stock) shall be borne by the Corporation.
G. INDEMNIFICATION: (a) The Corporation hereby agrees to indemnify and
hold each Shareholder, each person who controls such Shareholder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act) and their respective agents and representatives (each, a "Holder
Indemnitee") harmless from, and to reimburse any Holder Indemnitee for, on an
after-tax basis and to the extent permitted by applicable law, any loss, damage,
deficiency, claim, liability, obligation, suit, proceeding, action, demand, fee,
penalty, fine, interest, surcharge, cost or expense of any nature whatsoever,
including, without limitation, out-of-pocket expenses, investigation costs and
fees and disbursements of counsel (collectively, "Damages"), caused by any
untrue or alleged untrue statement of material fact contained in any
Registration Statement, prospectus or preliminary prospectus relating to the
Registrable Shares or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Corporation by such
Shareholder expressly for use therein; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any Damages arise out of or
are based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said Registration Statement or document incident to
registration or qualification of any Registrable Shares in reliance upon and in
conformity with written information furnished to the Corporation through an
instrument duly executed by such Shareholder or underwriter, or a person duly
acting on their behalf, specifically for use in preparation thereof;
(b) In connection with any Registration Statement, each such
Shareholder will furnish to the Corporation in writing such information as the
Corporation reasonably requests for use in connection with any such Registration
Statement and, to the extent permitted by law, will severally and not jointly
indemnify and hold the Corporation, each person who controls the Corporation
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act) and their respective shareholders, officers, directors,
affiliates, employees, agents and representatives (collectively, for purposes of
this Section 3.G, the "Corporation Indemnitees") harmless from, and reimburse
such Corporation Indemnitees for, on after-tax basis and to the extent permitted
by applicable law, any Damages arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement or prospectus or form of prospectus relating to the Registrable
Shares, or arising out of or based upon any omission or alleged omission of a
material
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<PAGE>
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, to the
extent, but only to the extent, that such untrue or alleged untrue statement is
contained in, or such omission or alleged omission is required to be contained
in, any information so furnished in writing by such Shareholder to the
Corporation expressly for use in such Registration Statement or prospectus and
that such statement or omission was relied upon by the Corporation in
preparation of such Registration Statement, prospectus or form of prospectus;
provided, however, that such Shareholder shall not be liable in any such case to
the extent that the Shareholder has furnished in writing to the Corporation
prior to the filing of any such Registration Statement or prospectus or
amendment or supplement thereto information expressly for use in such
Registration Statement or prospectus or any amendment or supplement thereto
which corrected or made not misleading, information previously furnished to the
Corporation, and the Corporation failed to include such information therein. In
no event shall the liability of any Shareholder hereunder be greater in amount
than the dollar amount of the proceeds (net of payment of all expenses borne by
such Shareholder) received by such Shareholder upon the sale of the Common Stock
giving rise to such indemnification obligation. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such indemnified party;
(c) If any person shall be entitled to indemnity hereunder
such indemnified party shall give prompt notice to the party or parties from
which such indemnity is sought of the commencement of any action, suit,
proceeding, investigation or written threat thereof (a "Proceeding") with
respect to which such indemnified party seeks indemnification or contribution
pursuant hereto; provided, however, that the failure to so notify the
indemnifying parties shall not relieve the indemnifying parties from any
obligation or liability except to the extent that the indemnifying parties have
been prejudiced by such failure. The indemnifying parties shall have the right,
exercisable by giving written notice to an indemnified party promptly after the
receipt of written notice from such indemnified party of such Proceeding, to
assume, at the indemnifying parties' expense, the defense of any such
Proceeding, with counsel reasonably satisfactory to such indemnified party;
provided, however, that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the parties to such Proceeding include
both the indemnified party or parties and the indemnifying party or parties, and
there exists, in the opinion of the parties' counsel, a conflict between one or
more indemnifying parties and one or more indemnified parties, in which case the
indemnifying parties shall, in connection with any one such Proceeding, or
separate but substantially similar or related Proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of not more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. If an indemnifying party assumes the defense of such Proceeding, the
indemnifying parties will not be subject to any liability for any settlement
made by the indemnified party without its or their consent (such consent not to
be unreasonably withheld);
(d) If a party shall be entitled to indemnification hereunder
but such indemnification is insufficient to hold such indemnified party harmless
for Damages, then
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<PAGE>
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall have an obligation to contribute to the amount paid or payable by
such indemnified party as a result of such Damages, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such Damages as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Damages shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
Proceeding. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 3.G(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable consideration referred to in the immediately preceding paragraph.
4. MANDATORY REDEMPTION OF PREFERRED STOCK
Upon the occurrence of any Accelerating Acts (as such term is
defined in the Restated and Amended License Agreement dated October 22, 1999 by
and between the Initial Shareholder and Isaacs, the Initial Shareholder may
demand a redemption of any Preferred Stock then held by the Initial Shareholder
at a redemption price equal to One Dollar ($1) per share. Any demand by the
Initial Shareholder for redemption of Preferred Stock pursuant to this Section 4
shall be submitted in writing to the Corporation and effective immediately upon
receipt of such demand the Corporation shall have an obligation to redeem the
Preferred Stock elected to be redeemed by the Initial Shareholder.
5. LEGENDS ON CERTIFICATES
The certificates evidencing the Stock held by the Shareholders shall
bear any legends required by federal or state securities law and the following
legend required by Section 202 (a) of the Delaware General Corporation Law:
"The shares represented by this Certificate are subject to a
Shareholders' Agreement dated as of November 5, 1999, a copy
of which is on file at the office of the Corporation and will
be furnished to any prospective purchaser on request. Such
Shareholders' Agreement provides, among other things, for
certain restrictions on the sale, transfer, pledge,
hypothecation or disposition of the Shares represented by this
Certificate."
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6. BENEFIT
Except upon the occurrence of a termination event as provided in
Section 14, this Agreement shall be binding upon and shall operate for the
benefit of the parties hereto, their respective successors and assigns.
7. INVALIDITY OF ANY PROVISION
The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted, provided that the parties shall negotiate in good faith to replace the
invalid provision with a valid provision reflecting the same balance of economic
interests.
8. MODIFICATION OF AGREEMENT
No modification, amendment or waiver of any of the provisions of this
Agreement shall be valid unless made in writing and signed by the Corporation
and Shareholders owning, in the aggregate, a majority of the Stock subject to
this Agreement.
9. FURTHER ACTION
The Corporation shall not register, and shall instruct any transfer
agent for the Common Stock not to register, on the books of the Corporation any
transfer, pledge or encumbrance of any Stock subject to this Agreement, unless
such transfer, pledge or encumbrance complies with terms of this Agreement and
the Shareholders agree to provide the Corporation (or any such transfer agent)
with such documents, including an opinion of counsel as to compliance with the
applicable securities laws, as the Corporation (or any such transfer agent) may
reasonably request. A copy of this Agreement shall be made a part of the minutes
of the Corporation.
10. ATTORNEY'S FEES AND COSTS
If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and necessary disbursements, in addition to
any other relief to which he may be entitled.
11. APPLICABLE 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. All disputes arising out of or in
connection with this Agreement or the interpretation thereof shall be submitted
to the United States District Court for the Southern District of New York and
the parties hereby submit to the jurisdiction of such court.
11
<PAGE>
12. ENTIRE AGREEMENT
This Agreement supersedes all agreements as to the subject matter
hereof among the Shareholders and the Corporation including in each case
amendments thereto, previously executed by the Shareholders and the Corporation.
This Agreement sets forth all of the provisions, covenants, agreements,
conditions and undertakings between the parties hereto with respect to the
subject matter hereof, and superseded all prior and contemporaneous agreements
and understandings express or implied, oral or written as to the subject matter
hereof.
13. NOTICES
Unless otherwise specified herein, all notices, requests, demands and
other communications to be given under this Agreement shall be in writing and
shall be deemed given if (i) delivered in person, or by United States mail,
certified or registered, with return receipt requested, (ii) if sent by
facsimile transmission, with a copy mailed on the same day in the manner
provided in (i) above, when transmitted and receipt is confirmed by telephone,
or (iii) if otherwise actually delivered:
TO THE CORPORATION: 3840 Bank Street, Baltimore, MD 21224-2522;
TO ANY SHAREHOLDER: As the name and address of such Shareholder
appears on the records of the Corporation;
or at such other address as may have been furnished by such person in writing to
the other parties. Any such notice, demand or other communication shall be
deemed to have been given on the date actually delivered or as of the date
mailed, as the case may be.
14. TERM OF AGREEMENT
This Agreement shall be effective for a period of ten years from the
date hereof.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and sealed this
Agreement as of the day and year first above written.
I.C. ISAACS & COMPANY, INC.
By: /s/ Robert J. Arnot
-------------------------------------
Robert J. Arnot, Chief Executive Officer
AMBRA INC.
By: /s/ Jorg-Viggo Muller/Gert-Jurgen Frisch
-------------------------------------
Name: Jorg-Viggo Muller/Gert-Jurgen Frisch
Title: Chairman/Vice President
13
<PAGE>
SCHEDULE A
Ambra Inc.
14
<PAGE>
Exhibit 10.65
BILL OF SALE AND ASSIGNMENT OF TRADEMARK ASSETS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, I.C. ISAACS &
COMPANY L.P., a Delaware limited partnership ("Isaacs"), for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, received from AMBRA INC., a Delaware corporation ("Ambra") on
this October 22, 1999, pursuant to that certain Agreement dated October 22,
1999 by and between Isaacs, I.C. Isaacs & Company, Inc., Ambra and Hugo Boss
AG (the "Agreement"), does hereby assign, transfer, deliver and set over to
Ambra and Ambra's successors and assigns forever, and Ambra hereby acquires
from Isaacs, all of Isaacs' right, title and interest in and to all of the
following assets, properties and rights of Isaacs throughout the world (the
"Trademark Assets"), including, without limitation, the Brookhurst Trademark
Assets, representing the BOSS Business of Isaacs operating under the BOSS
marks, as set forth below, the same to be held and enjoyed by Ambra 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:
(a) Any and all right, title and interest of Isaacs 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, including, without limitation,
all registrations and applications for registration therefor throughout the
world, including those trademark registrations and applications listed on
EXHIBIT A hereto together with the good will associated therewith, (the
"Trademarks") and including all causes of action and the proceeds thereof in
favor of Isaacs heretofore accrued or hereafter accruing with respect to the
Trademarks; provided however, that Isaacs shall retain all causes of action and
proceeds thereof, and bear all costs and expenses, including attorneys fees,
with respect to the pending litigation involving Oh Trading in the Southern
District of New York;
(b) All rights of Isaacs under the Worldwide Rights Acquisition
Agreement, as that term is defined in the Agreement, the Uniform License
Agreement between Isaacs and Brookhurst, Inc. dated November 5, 1997 and all
license agreements, concurrent use agreements and other agreements listed on
SCHEDULE 2.01(b) to the Agreement and all files relating thereto which were
acquired by Isaacs pursuant to the Worldwide Rights Acquisition Agreement,
including, without limitation, an assignment of all copyrights, if any, that
Isaacs may own as a result of the use of Property, as such term is defined in
the Foreign Rights Manufacturing Agreement; and
(c) All right, title, interest in and to all files that Isaacs has
within its possession or control relating to the Trademarks provided, however,
that Isaacs 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.
From and after the date hereof, Isaacs shall, upon request and at the
expense of Ambra but without further consideration, do, execute, acknowledge,
deliver and file, or shall cause to be done, executed, acknowledged, delivered
and filed, all such further acts, deeds, transfers,
1
<PAGE>
conveyances, assignments or assurances as may be reasonably requested by Ambra
to transfer, convey and assign to Ambra possession and use of the Trademark
Assets and to comply with all applicable legal requirements to effect such
transfers, conveyances and assignments.
Anything contained in this Bill of Sale and Assignment of Trademark
Assets to the contrary notwithstanding, this Bill of Sale and Assignment of
Trademark Assets shall not constitute an agreement to assign any contract, or
any claim or right or any benefit arising thereunder or resulting therefrom, if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach of or be in violation of any such contract, claim,
right or benefit.
Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
2
<PAGE>
In the event of any conflict or inconsistency between this Bill of Sale
and Assignment of Trademark Assets and the Agreement, the terms of the Agreement
shall prevail.
IN TESTIMONY WHEREOF, Isaacs has caused these presents to be executed.
I.C. ISAACS & COMPANY L.P.
By: I.C. Isaacs & Company, Inc., its
General Partner
By: /s/ Robert J. Arnot
---------------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
3
<PAGE>
EXHIBIT A TO BILL OF SALE AND
ASSIGNMENT OF TRADEMARK ASSETS
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 3/9/93
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
BOSS 1,023,305 work clothes (25) USA registered/renewed
10/21/95
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
BOSS 1,933,326 golf clubs (28) USA registered 11/7/95
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
LADY BOSS 1,214,960 work clothes for women (25) USA registered 11/2/92
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
BOSS 101509 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/NOA issued
lace and embroidery (26) 9/7/99
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
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)
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
</TABLE>
* For ease of reference the description of goods in this chart is
generalized. (See registrations and applications for specific goods
covered.)
<PAGE>
<TABLE>
<CAPTION>
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
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)
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
BOSS 74/074,962 mugs (21); USA applied/NOA issued
towels (24); 6/15/99
socks and sweatbands (25);
golf bags (28)
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
BOSS 74/801,552 linens (24); USA applied/opposition
lace and embroidery (26) dismissed
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
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/opposition
lace and embroidery (26) dismissed
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
</TABLE>
* For ease of reference the description of goods in this chart is
generalized. (See registrations and applications for specific goods
covered.)
<PAGE>
<TABLE>
<CAPTION>
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
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/opposition
hair ornaments (26) dismissed
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
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/NOA issued
lace and embroidery (26) 9/7/99
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
</TABLE>
* For ease of reference the description of goods in this chart is
generalized. (See registrations and applications for specific goods
covered.)
<PAGE>
<TABLE>
<CAPTION>
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
TRADEMARK REG. NO. GOODS* COUNTRY/ STATUS
APP NO. (CLASS) STATE
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
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/opposition
lace and embroidery (26) dismissed
- --------------------------- ----------------- --------------------------------- ---------------- ----------------------
</TABLE>
* For ease of reference the description of goods in this chart is
generalized. (See registrations and applications for specific goods
covered.)
<PAGE>
Exhibit 10.66
ASSUMPTION OF ASSUMED AGREEMENTS
This ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered into this
22nd day of October, 1999, 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 assign, transfer and deliver to Ambra,
and Ambra has agreed to acquire and accept from Isaacs certain assets of Isaacs
pursuant to an Agreement entered into on October 22, 1999, between Isaacs, I.C.
Isaacs & Company, Inc., Ambra and Hugo Boss AG (the "Agreement");
WHEREAS, Ambra 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 Agreement.
2. Isaacs hereby assigns to Ambra all its rights under the agreements
identified on SCHEDULE 2.01(b) to the Agreement, constituting the Assumed
Agreements as defined in the Agreement.
3. Ambra hereby assumes all obligations of Isaacs arising from and
after the date hereof under the Assumed Agreements solely insofar as they arise
after the date hereof.
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.
By: I.C. Isaacs & Company, Inc., its
General Partner
By: /s/ Robert J. Arnot
--------------------------------
Name: Robert J. Arnot
Title: Chairman and CEO
C-1
<PAGE>
AMBRA INC.
By: /s/ Vincent J. Ottomanelli
--------------------------------
Name: Vincent Ottomanelli
Title: CFO/VP
C-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Statement of
Operations of IC. Isaacs & Company, Inc. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999 DEC-31-1998 DEC-31-1999
<PERIOD-START> JUL-01-1998 JUL-01-1999 JAN-01-1998 JAN-01-1999
<PERIOD-END> SEP-30-1998 SEP-30-1999 SEP-30-1998 SEP-30-1999
<CASH> 0 0 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 0 0 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 0 0 0 0
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 0 0 0 0
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 0 0 0 0
<OTHER-SE> 0 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0 0 0
<SALES> 32,890,127 24,884,949 93,995,412 68,169,645
<TOTAL-REVENUES> 32,890,127 24,884,949 93,995,412 68,169,645
<CGS> 26,969,140 16,999,481 71,298,925 47,507,367
<TOTAL-COSTS> 10,133,818 6,927,093 29,228,842 24,124,638
<OTHER-EXPENSES> 68,663 (227,710) (261,484) (453,595)
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 489,198 582,033 1,033,002 1,431,679
<INCOME-PRETAX> (4,770,692) 604,052 (7,303,873) (4,440,444)
<INCOME-TAX> 0 0 (154,000) 0
<INCOME-CONTINUING> (4,770,692) 604,052 (7,149,873) (4,440,444)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (4,770,692) 604,052 (7,149,873) (4,440,444)
<EPS-BASIC> (0.62) 0.09 (0.88) (0.65)
<EPS-DILUTED> (0.62) 0.09 (0.88) (0.65)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> OTHER OTHER
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 1,345,595 1,123,489
<SECURITIES> 0 0
<RECEIVABLES> 16,257,701 19,337,254
<ALLOWANCES> (1,353,000) (700,000)
<INVENTORY> 23,121,971 19,956,675
<CURRENT-ASSETS> 42,053,872 40,459,145
<PP&E> 16,608,462 14,803,910
<DEPRECIATION> (13,360,816) (11,626,276)
<TOTAL-ASSETS> 59,046,143 50,488,209
<CURRENT-LIABILITIES> 10,476,813 16,965,581
<BONDS> 0 0
0 0
0 0
<COMMON> 834 834
<OTHER-SE> 37,312,238 33,521,794
<TOTAL-LIABILITY-AND-EQUITY> 59,046,143 50,488,209
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
