UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________________to_______________________
Commission File Number: 0-15817
THE TOPPS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2849283
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Whitehall Street, New York, NY 10004
(Address of principal executive offices, including zip code)
(212) 376-0300
(Registrant's telephone number, including area code)
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 .
The number of outstanding shares of Common Stock as of October 6,1997 was
46,400,010.
<PAGE>
THE TOPPS COMPANY, INC.
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
Index Page
Condensed Consolidated Balance Sheets as of
August 30, 1997 and March 1, 1997 3
Condensed Consolidated Statements of Operations
for the thirteen and twenty-six weeks ended
August 30, 1997 and August 31, 1996 4
Condensed Consolidated Statements of Cash Flows
for the twenty-six weeks ended August 30, 1997 and
August 31, 1996 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
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PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
The condensed consolidated financial statements for the twenty-six weeks ended
August 30, 1997 included herein have been reviewed by Deloitte & Touche LLP
independent public accountants, in accordance with established professional
standards for such a review. The report of Deloitte & Touche LLP is included
on page 7.
2
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
August March
30, 1997 1, 1997
---------- -------
(In thousands of dollars, except share data)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 18,215 $ 24,199
Accounts receivable - net 40,494 59,776
Inventories 17,321 19,181
Income tax receivable 5,245 2,901
Deferred tax assets 3,118 3,489
Prepaid expenses and other current assets 7,800 9,012
---------- ---------
TOTAL CURRENT ASSETS 92,193 118,558
---------- ---------
PROPERTY, PLANT, & EQUIPMENT 17,535 16,340
Less: accumulated depreciation 4,265 3,440
---------- ---------
NET PROPERTY, PLANT & EQUIPMENT 13,270 12,900
---------- ---------
INTANGIBLE ASSETS, net of accumulated
amortization of $35,045 and $32,844 64,218 65,456
OTHER ASSETS 4,305 4,264
---------- ---------
TOTAL ASSETS $ 173,986 $ 201,178
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 20,171 $ 35,150
Accrued expenses and other liabilities 49,468 52,701
Current portion of long-term debt 5,000 7,500
Income taxes payable 2,913 4,491
--------- ---------
TOTAL CURRENT LIABILITIES 77,552 99,842
LONG-TERM DEBT, less current portion 22,450 27,450
DEFERRED INCOME TAXES 2,302 379
OTHER LIABILITIES 5,922 5,455
---------- ---------
TOTAL LIABILITIES 108,226 133,126
---------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share authorized
10,000,000 shares, none issued
Common stock, par value $.01 per share, authorized
100,000,000 shares; issued 47,502,510 shares,
less 555,000 shares in Treasury Stock 475 475
Additional paid-in capital 16,812 16,812
Treasury stock, at cost (8,881) (8,358)
Retained earnings 57,835 58,776
Cumulative foreign currency adjustment (481) 347
---------- ---------
TOTAL STOCKHOLDERS' EQUITY 65,760 68,052
---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 173,986 $ 201,178
========== =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants'
Review Report.
3
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
Thirteen weeks ended Twenty-six weeks ended
August August August August
30, 1997 31, 1996 30, 1997 31, 1996
-------- -------- -------- --------
(In thousands of dollars, except share data)
<S> <C> <C> <C> <C>
Net sales $ 55,118 $ 55,025 $ 115,295 $ 134,286
Cost of sales 37,493 34,697 75,207 87,784
--------- --------- ---------- ----------
Gross profit on sales 17,625 20,328 40,088 46,502
Royalties and other income 162 656 610 1,239
--------- --------- ---------- ----------
17,787 20,984 40,698 47,741
Selling, general and administrative expenses 20,721 18,216 41,621 37,610
--------- --------- ---------- ----------
Income (loss) from operations (2,934) 2,768 (923) 10,131
Interest income (expense), net (213) (537) (757) (1,100)
--------- --------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes (3,147) 2,231 (1,680) 9,031
Provision (benefit) for income taxes (1,384) 1,004 (739) 4,064
--------- ---------- ---------- ----------
Net income (loss) $ (1,763) $ 1,227 $ (941) $ 4,967
========= ========= =========== ==========
Net income (loss) per share $ (0.04) $ 0.03 $ (0.02) $ 0.11
Weighted average shares outstanding 46,400,010 47,011,191 46,442,592 47,029,351
</TABLE>
See Notes to Condensed Consolidated Financial Statements and
Accountants' Review Report.
4
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
Twenty-six weeks ended
August August
30, 1997 31, 1996
(In thousands of dollars)
Cash provided by (used for) operations:
<S> <C> <C>
Net income (loss) $ (941) $ 4,967
Adjustments to reconcile net income (loss) to cash flows
Depreciation and amortization 2,021 3,236
Deferred taxes on income 2,295 648
Net effect of changes in:
Receivables 19,282 6,006
Inventories 1,860 4,513
Income tax receivable (2,344) 1,048
Prepaid expenses and other current assets 1,210 3,464
Payables and other current liabilities (19,790) (4,579)
Other ( 611) ( 658)
-------- -------
Cash provided by operations 2,982 18,645
-------- -------
Cash used for investing activities:
Additions to property, plant and equipment, net of disposals ( 944) ( 327)
-------- -------
Cash used for investing activities ( 944) ( 327)
-------- -------
Cash used for financing activities:
Reduction of debt ( 7,500) ( 6,850)
Purchase of treasury stock ( 522) ( 502)
-------- -------
Cash provided by (used for) financing activities ( 8,022) ( 7,352)
-------- -------
Net increase (decrease) in cash ( 5,984) 10,966
Cash at beginning of year 24,199 24,154
-------- -------
Cash at end of quarter $ 18,215 $ 35,120
======== ========
Supplemental information:
Interest paid $ 1,472 $ 1,125
Income taxes paid $ 868 $ 4,981
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants'
Review Report.
5
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TWENTY-SIX WEEKS ENDED AUGUST 30, 1997
1. Basis of Presentation
The accompanying unaudited condensed interim consolidated financial
statements have been prepared by The Topps Company, Inc. and
subsidiaries (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission and reflect all adjustments,
which are, in the opinion of management, considered necessary for a
fair presentation. These statements do not include all information
required by generally accepted accounting principles to be included in
a full set of financial statements. Operating results for the
twenty-six weeks ended August 30, 1997 and August 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ending February 28, 1998. For further information refer to the
consolidated financial statements and notes thereto in the Company's
annual report for the year ended March 1, 1997.
Financial results for the period ended August 30,1997 reflect a change
in Topps Europe's fiscal quarter to include the month of August. The
impact of the extra month on consolidated net sales was approximately
$2,900,000. The impact on net income / (loss) was not material.
2. Quarterly Comparison
Management believes that quarter-to-quarter comparisons of sales and
operating results are affected by a number of factors, including the
timing of product introductions and variations in shipping and factory
scheduling requirements. Thus, annual sales and earnings amounts are
unlikely to consist of equal quarterly portions.
3. Inventories
<TABLE>
<CAPTION>
(Unaudited)
August March
30, 1997 1, 1997
(amounts in thousands)
<S> <C> <C>
Raw materials $ 2,177 $ 6,236
Work in process 3,288 1,874
Finished products 11,856 11,071
-------- -------
Total $ 17,321 $ 19,181
======== =======
</TABLE>
4. Implementation of New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share, which establishes new standards for computing and presenting net
income per share. The statement is effective for periods ending after
December 15, 1997. Accordingly, the Company will adopt the standard
beginning with its fourth quarter of fiscal 1998. For the second
quarter of fiscal 1998, there would have been no material effect on net
income (loss) per share, if this new standard had been in effect.
6
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Stockholders
The Topps Company, Inc.
We have made a review of the accompanying condensed consolidated balance sheet
of The Topps Company, Inc. and subsidiaries, as of August 30, 1997, and the
related condensed consolidated statements of operations and cash flows for the
thirteen and twenty-six week periods ended August 30, 1997 and August 31, 1996,
in accordance with the standards established by the American Institute of
Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of March 1, 1997,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended (not presented herein); and in our report
dated April 1, 1997, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of March 1, 1997 is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
DELOITTE & TOUCHE LLP
September 22,1997
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial results for both the second quarter and the first half ended August
30, 1997 reflect a change in Topps Europe's fiscal quarter to include the month
of August. The impact of the extra month on consolidated net sales was
approximately $2,900,000. The impact on net income/(loss) was not material.
Three Months Ended August 30, 1997 Compared with the Three Months Ended
August 31, 1996
Net sales for the second quarter of fiscal 1998 increased 0.2%, to
$55,118,000 from $55,025,000 for the same period last year. Second quarter
sales reflected continued softness in the sports and entertainment card markets
offset by higher sales than last year of lollipops and the extra month of Topps
Europe results.
Gross profit as a percentage of net sales for the second quarter
decreased to 32.0% from 36.9% for the same period last year. Gross profit was
negatively impacted, in part, by higher royalty payments in the U.S. (due to
timing) and minimum guarantee shortfalls in Brazil. Higher product costs
outside of the U.S. also negatively affected gross profit. The Company
benefited in the quarter from savings related to the December 1996 closure of
the Duryea, Pennsylvania manufacturing facility.
The decrease in royalties and other income from $656,000 to $162,000 in
the second quarter of fiscal 1998 was the result of the assumption of the
Canadian business from our licensee in March 1997.
Selling, general and administrative expenses ("S,G&A") for the second
quarter of fiscal 1998 increased to $20,721,000 or 37.6% of net sales, from
$18,216,000 or 33.1% for the same period last year. This increase occurred
primarily as a result of overhead costs associated with the start-up of
operations in Latin America, costs to close certain European offices and the
absence of a one-time health insurance refund received last year.
The effective tax rate for the second quarter of fiscal 1998 was 44.0%
compared to an effective rate of 45.0% for the same period a year ago.
Net income/(loss) for the second quarter of fiscal 1998 was
$(1,763,000), or $(0.04) per share, as compared with $1,227,000, or $0.03 per
share for the same period last year.
Six Months Ended August 30, 1997 Compared with the Six Months Ended
August 31, 1996
Net sales for the first half of fiscal 1998 decreased 14.1%, to
$115,295,000 from $134,286,000 for the same period last year. The decrease
resulted from lower sales of sports cards, principally baseball in the first
quarter, which in fiscal 1997 had featured a highly popular tribute to Mickey
Mantle, and the Company's decision not to renew its hockey licenses. Revenues
versus a year ago were also affected by softness in the market for entertainment
picture products both in the U.S. and overseas.
Gross profit as a percentage of net sales for the first half of fiscal
1998 increased to 34.8% as compared with 34.6% for the same period last year.
The margin improvement was the result of savings from the closure of the Duryea,
Pennsylvania manufacturing facility and lower obsolescence costs in the U.S.
Higher product costs overseas and royalties in Brazil partially offset these
cost reductions.
The decrease in royalties and other income from $1,239,000 to $610,000
in the first half of fiscal 1998 was the result of the assumption of the
Canadian business from our licensee.
Selling, general and administrative expenses ("S,G&A") for the first
half of fiscal 1998 increased to $41,621,000 or 36.1% of net sales, from
$37,610,000 or 28.0% for the same period a year ago. The percentage increase
8
<PAGE>
was largely the result of lower sales in fiscal 1998 as well as costs associated
with the start-up of Latin American operations and the absence of a one-time
health insurance refund received last year.
The effective tax rate for the first half of fiscal 1997 was 44.0%
compared to an effective rate of 45.0% for the same period a year ago.
Net income/(loss) for the first half of fiscal 1998 was $(941,000), or
$(0.02) per share, as compared with $4,967,000, or $0.11 per share for the same
period last year.
On June 30, 1995, the Company entered into a $65 million credit
agreement ( the "Credit Agreement") with a syndicate of banks which consisted of
a $50 million term loan to finance the Merlin acquisition, a $2 million letter
of credit facility and a $13 million revolving credit facility to be used for
working capital and general corporate purposes. The Credit Agreement is secured
by a pledge of 65% of the stock of Merlin. Beginning April 1996, interest rates
on half of the outstanding principal of the loan were variable and a function of
short-term indices and the Company's consolidated leverage ratio, while interest
rates on the balance of the outstanding loan were fixed for two years as a
result of interest rate swap agreements and were, therefore, a function of
interest rates at the commencement of the swap transactions and the Company's
consolidated leverage ratio. The Credit Agreement contains restrictions and
prohibitions of a nature generally found in loan agreements of this type and
requires the Company, among other things, to comply with certain financial
covenants, limits the Company's ability to sell or acquire assets or borrow
additional money (other than through the revolving facility), and prohibits the
payment of dividends. On June 13, 1997, the Credit Agreement was amended to
reduce the required Fixed Charge Ratio for the fiscal years of 1998 and 1999 in
exchange for certain additional restrictions on the Company's ability to
repurchase stock, and the establishment of a cash balance minimum requirement of
$11,500,000.
As of August 30, 1997, the Company had $18,215,000 in cash and
$27,450,000 in debt as a result of the Merlin acquisition. Management believes,
in light of the Company's borrowing capacity and cash on hand at August 30,
1997, that the Company has adequate means to meet its working capital, capital
expenditure, interest and principal repayment requirements for the foreseeable
future.
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"), the Company is
hereby filing cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in any
forward-looking statements of the Company made by or on behalf of the Company,
whether oral or written. Among the factors that could cause the Company's
actual results to differ materially from those indicated in any such
forward-statements are: (i) the failure of certain of the Company's principal
products, particularly sports cards and sticker and album collections, to
achieve expected sales levels during the third and fourth quarters of fiscal
1998; (ii) the Company's inability to resolve existing Bazooka gum production
problems; (iii) significant and unexpected changes in the costs related to
closure of the Duryea plant and the outsourcing of Bazooka gum and trading card
production; (iv) the result of the labor charge filed by the Union representing
employees that were terminated as a result of the closure of the Duryea plant;
(v) quarterly fluctuations in results; (vi) the Company's loss of important
licensing and supply arrangements with third parties including, without
limitation, its agreement for the manufacture of Bazooka bubble gum; (vii) the
effect of changes in trade terms with certain of the Company's key customers;
(viii) difficulties in the Company's attempts to penetrate new international
markets for its products; (ix) further prolonged and material contraction in the
trading card industry; (x) excessive returns of the Company's products; and
(xi) the effect of restrictions and financial covenants imposed by the
Company's Bank Loan Agreement, as well as other risks detailed from time to
time in the Company's reports and registration statements filed with the
Securities and Exchange Commission.
9
<PAGE>
THE TOPPS COMPANY, INC.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
In August 1996, the Company was named a defendant in a class action in
the United States District Court for the Eastern District of New York (the
"Court") entitled Sullivan, et.al. v. The Topps Company, Inc. No. CV-96-3779
(EDNY) (the Action"). The Action alleged, among other things, that the Company
violated the federal Racketeer Influenced and Corrupt Organizations Act by its
practice of selling sports and entertainment cards with randomly-inserted
"insert" cards, in violation of state and federal anti-gambling statutes. Each
of the Company's principal competitors, as well as several of its principal
licensors, was separately sued in its home state for employing, or participating
in, the same or similar practices. The Action sought treble damages and
attorneys' fees on behalf of all purchasers of packs of cards potentially
including "insert" cards over a four-year period. On August 21, 1997 the Court
entered a judgment granting the Company's motion to dismiss the complaint with
prejudice. The plaintiffs have filed a Motion to Alter, Amend and Vacate
Judgment and for Leave to File Amended Complaint. The Company has opposed the
motion.
In November 1996, Teamsters Local 229 (the "Union") filed an unfair
labor practice charge with the National Labor Relations Board (the "NLRB")
relating to the Duryea plant closing. In April 1997, the NLRB issued a
complaint against the Company based upon the Union's charge, alleging that the
Company refused to bargain over its decision to close the Duryea plant. On
September 28, 1997 the Union membership voted to accept the Company's offer in
settlement (the "Settlement Offer") of the unfair labor practice charge and in
satisfaction of any obligation to bargain concerning the decision and the
effects of the decision to close the Duryea plant. Under the Settlement Offer,
all individuals who worked for the Company in 1996 and were affected by the
closure of Duryea would be paid $450 for each full year of service to the
Company. Individuals who did not work during 1996, but who retained certain
recall rights, would receive a lump sum payment of $1,500. The Settlement
Offer is subject to the execution of final documentation between the parties.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits as required by Item 601 of Regulation S-K
10.31 - Retail Product License Agreement with the Major League Baseball
Properties, Inc. dated September 28, 1995
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE TOPPS COMPANY, INC.
REGISTRANT
/s/ Catherine Jessup
Vice President-Chief Financial
Officer
October 14, 1997
11
As of September 28, 1995
Major League Baseball Properties, Inc.
350 Park Avenue
New York, NY 10022
Gentlemen:
This letter amendment (the "1995 Amendment"), when executed below
shall, with automatic effect on January 1, 1996 (the "Effective Date"), extend
and further amend the license agreement dated as of January 1, 1969 (the "1969
Agreement"), as heretofore amended on April 2, 1974, May 18, 1977, August 23,
1982, August 25, 1983, November 20, 1985, June 25, 1990 and August 16, 1990,
between Major League Baseball Properties, Inc. ("MLBP"), on its own behalf and
as authorized agent of the Office of the Commissioner of Baseball (the "BOC"),
the American and National Leagues of Professional Baseball Clubs (the "Leagues")
and their member clubs (the "Baseball Clubs") and The Topps Company, Inc.
("Topps"), as set forth below. The 1969 Agreement, together with all prior
amendments and this 1995 Amendment is sometimes referred to herein as the
"License Agreement". For ease of reference, certain of the provisions of the
amendments prior to this 1995 Amendment have been restated below without
modification, so that upon the Effective Date, all amendments to the 1969
Agreement that are in effect throughout the term of this 1995 Amendment are
reflected in this 1995 Amendment. The parties hereto do hereby agree as follows:
1. The term of the License Agreement shall be extended through and
including December 31, 2000, unless earlier terminated pursuant to its
terms.
2. The License Agreement is amended by deleting in its entirety paragraph
1 in the 1969 Agreement and replacing it with the following:
"1. MLBP hereby licenses Topps for the term of the 1995 Amendment to
use the Major League Baseball silhouetted batter logo (and any other
logo owned by MLBP during such term), and the names and insignias of
each of the BOC, the Leagues and the Baseball Clubs (collectively, the
"Insignia"):
(a) as a part of the uniforms of baseball players shown
(i) in baseball player picture cards ("Trading Cards") to be
sold either alone or in combination with chewing gum of any
kind ("Topps Products"),
1
<PAGE>
(ii) in baseball player photographs reproduced as pictures on
materials other than Trading Cards, including, but not
limited to, player pictures on conventional (non-glossy)
paper stock, smaller than 5 x 7 inches in size ("Player
Pictures"), to be sold (A) in combination with Topps
Products, and (B) alone if substantial sales are made by
Topps of Topps Products sold in combination with Player
Pictures reflecting a bona fide effort by Topps to market
the Player Pictures in combination with Topps Products and
so long as such efforts and sales continue,
(iii) in baseball player photographs reproduced as posters not
larger than 20 x 12 inches in size (and when folded not
larger than 28 square inches in size) ("Player Posters"), to
be sold in combination with Topps Products,
(iv) in baseball player photographs reproduced as gummed stamps
or stickers, and accompanying albums ("Player Stickers"), to
be sold in combination with Topps Products,
(v) in baseball player photographs reproduced as wax rub-offs,
tattoos and on boxes ("Miscellaneous Reproductions"), to be
sold in combination with Topps Products;
(b) as part of the Topps Products and the packaging of such Topps
Products, other than on the uniform of baseball players shown; and
(c) in advertising and promotional material reasonably connected with
the foregoing uses.
The Trading Cards, Player Pictures, Player Posters, Player Stickers and
Miscellaneous Reproductions are sometimes herein collectively referred
to as the "Baseball Items". This license is not exclusive and does not
constitute and may not be used so as to imply the endorsement by MLBP,
the BOC, the Leagues or the Baseball Clubs of any product of Topps.
Topps acknowledges that, during the term of the 1995 Amendment, it
shall not use the Insignia on any products other than the Baseball
Items and Topps Products and materials related thereto, except as
provided hereunder or as otherwise approved by MLBP in writing. In
addition, Topps shall use its best efforts to ensure that all Baseball
Items and Topps Products will present Major League Baseball in a
positive light among children and young adults, consistent with Topps
prior and current practice."
3. All references in the License Agreement to Major League Baseball
Promotions Corporation shall be changed to Major League Baseball
Properties, Inc. All references in the License Agreement to Topps
Chewing Gum, Incorporated shall be changed to The Topps Company, Inc.
4. The territory shall continue to be worldwide, subject to the remaining
provisions of this paragraph. However, prior to (a) any distribution
or sale by Topps of Baseball Items or Topps Products in a country
other than the United States, its territories and possessions, U.S.
military bases worldwide, Puerto Rico, or Canada (hereinafter, a "New
Foreign Jurisdiction"), or (b) distribution or sale of Baseball Items
or Topps Products by any entity directed by, or under agreement with,
Topps to sell or distribute such items and/or
2
<PAGE>
products in a New Foreign Jurisdiction, Topps shall notify MLBP, in
writing, of the intention of Topps or such other entity to sell or
otherwise distribute into any such New Foreign Jurisdiction, together
with a description of the Baseball Items and/or Topps Products to be
sold or distributed, projected volume of such items to be sold or
distributed into such New Foreign Jurisdiction and the name of the
Topps distributor for such New Foreign Jurisdiction. Topps shall, to
the extent reasonably practicable, provide such notice at least twenty
(20) days prior to such distribution or sale. MLBP shall then notify
Topps, in writing and within fifteen (15) days of its receipt of Topps
notice, as to whether the Insignia have been registered with the
relevant trademark authorities in such New Foreign Jurisdiction. If
the Insignia have not been so registered, neither Topps nor any entity
directed by, or under agreement with, Topps to distribute or sell the
Baseball Items or Topps Products in such New Foreign Jurisdiction shall
sell Baseball Items or Topps Products in such New Foreign Jurisdiction
unless Topps agrees to indemnify MLBP, the BOC, the Leagues and the
Baseball Clubs from any third party trademark or other intellectual
property claims brought as a result of such sales or distribution in
such New Foreign Jurisdiction. MLBP shall provide Topps with a list
of all countries in which the Insignia are currently registered, as
promptly as reasonably practicable after the date hereof.
5. During each calendar year of the term of the 1995 Amendment, Topps
shall pay to MLBP minimum guarantees, against sales of Baseball Items
and Topps Products in the United States, its territories, possessions
and military bases worldwide, Puerto Rico and Canada as set forth on
Schedule A attached hereto. There shall be no minimum guarantees for
any other jurisdiction.
6. During each calendar year of the term of the 1995 Amendment commencing
with the Effective Date, Topps shall pay to MLBP royalties on the net
sales of Baseball Items and Topps Products (as those terms are defined
in paragraph 1 of the License Agreement), as set forth on Schedule A
attached hereto. The term "net sales" shall mean [INFORMATION
SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT]. The minimum
guarantees payable hereunder shall be paid as provided in Schedule A
except to the extent that
3
<PAGE>
cumulative payments of royalties for sales in the United States, its
territories, possessions and military bases worldwide, Puerto Rico
and Canada shall theretofore have offset all or a portion of the total
of such minimum guarantees. [INFORMATION SUBJECT TO REQUEST FOR
CONFIDENTIAL TREATMENT]. Any late payments by Topps shall
require Topps to pay MLBP, in addition to the amounts due, interest at
one percent (1%) per month or the highest prime lending rate of
Chemical Bank (or its successor) during the period such amounts are
delinquent, whichever is greater, on the amounts delinquent for the
period of delinquency, without prejudice to any other rights of MLBP in
connection therewith. All royalties shall be payable on or by March 15
of each year for the immediately preceding calendar year, with a credit
for the minimum guarantee theretofore paid for such preceding calendar
year.
7. Topps shall pay MLBP, upon execution of the 1995 Amendment, $56,343.95
in settlement of all audit disputes between the parties relating to
Topps books and records and royalty payments. In consideration
therefor, MLBP hereby releases Topps from any further claims relating
to Topps books and records and royalty payments for all calendar years
through calendar year 1994. In addition, MLBP waives all claims
against Topps relating to Topps exclusion of items sold together in
retail packs with Baseball Items and/or Topps Products, but which do
not bear the Logos, from the calculation of net sales for periods prior
to the Effective Date.
8. Topps shall provide to MLBP a merchandise credit of $5,000 (wholesale
value) during each year of the term commencing on or after the
Effective Date. Topps shall ship, at MLBP's direction, such
merchandise as MLBP shall request from time to time pursuant to the
merchandise credit.
9. Topps shall provide to Major League Baseball Properties Canada Inc.
("MLBPC") a merchandise credit of $500 (wholesale value) during each
year of the term commencing on or after the Effective Date. Topps shall
ship, at MLBPC's direction, such merchandise as MLBPC shall request
from time to time pursuant to the merchandise credit.
10. During each calendar year of the term commencing on or after the
Effective Date and ending with the calendar year commencing January 1,
1998, Topps shall, subject to the parties agreeing to and executing a
mutually acceptable sponsorship agreement, participate in The Major
League Baseball All-Star FanFest as a participating sponsor. The
sponsorship fee shall be [INFORMATION SUBJECT TO REQUEST FOR
CONFIDENTIAL TREATMENT] for each of 1996 and 1997 and [INFORMATION
SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT] for 1998.
11. During each calendar year of the term commencing on or after the
Effective Date, Topps shall purchase a one page full-color
advertisement in each of the All-Star Game, LCS and World Series
programs, provided that Topps shall not be required to spend in excess
of [INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT]
in any such year for such advertisements. In addition, in
each year of the term of the 1995 Amendment, Topps agrees to consider,
in good faith, purchasing, at the preferred rate for MLBP's licensees,
one page in each edition of MLBP's "Major League Baseball for Kids"
publication. If Topps purchases advertising pages in "Major League
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Baseball for Kids," the cost of such pages shall not count toward the
[INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT]
commitment stated in this paragraph 11.
12. During each calendar year of the term commencing on or after the
Effective Date, Topps shall give good faith consideration to
participating in at least two mutually agreed upon MLBP-sponsored
events (e.g. National Packtime).
13. Topps shall give good faith consideration to participating in,
sponsoring and/or supporting certain youth-oriented MLBP events.
14. The following shall be added to the License Agreement immediately after
the word "giveaways" in paragraph 2 of the 1969 Agreement:
"(except for giveaway programs for sticker albums in a manner designed
to promote and market Major League Baseball sticker collections and
approved by MLBP)."
15. The License Agreement is amended by deleting in its entirety paragraph
5 of the Letter Agreement dated June 25, 1990, and heretofore amended
by that certain Letter Agreement dated August 16, 1990, and replacing
it with the following:
"5. [INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT] .
Such samples (which shall include all advertising, point-of-sale
displays, catalogues, sales sheets and other items produced
in connection with Baseball Items and Topps Products) shall
be submitted to MLBP free of cost and in a timely manner before
their manufacture or distribution. With respect to Trading Cards,
Topps shall be deemed in compliance with the provisions of this
paragraph by submitting for approval, at an appropriate stage of
development (but no later than the final film stage), with copy and
layout all wrappers, packaging and promotional materials, and with the
front and back of each proposed card showing the size, appearance and
location of all Insignia to appear on the Trading Cards; provided,
however, that for good cause (e.g., poor coloration or registration of
production copies) MLBP may require that in the future the foregoing
materials be submitted for additional approval at the color-proof or
chromolin stages. Product quality shall be at least equal to that of
trading cards previously manufactured by Topps under the License
Agreement. In addition, no irregulars, seconds or other Baseball Items
or Topps Products which do not conform in all material respects to the
approved samples may be distributed or sold without the prior written
consent of MLBP. Topps shall also submit to MLBP for its approval, as
to their quality and appropriateness as a Baseball Item or Topps
Product, all new product designs which contain the Logos. In the event
that any item or matter submitted to MLBP for approval pursuant to this
paragraph shall not have been approved or disapproved and returned to
Topps within [INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL
TREATMENT] MLBP business days after receipt thereof by
MLBP, Topps shall notify MLBP that it is still awaiting approval or
disapproval. If, after an additional [INFORMATION SUBJECT TO REQUEST
FOR CONFIDENTIAL TREATMENT] MLBP business days after
such notification, MLBP shall still have failed to give its approval or
disapproval, such items or matters so submitted shall be deemed
[INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT]"
The term "MLBP business days" as used in this paragraph shall mean all
days on which banks are authorized to close in New York State
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and any other MLBP holiday of which MLBP advises Topps at least thirty
days in advance.
16. Topps shall comply with the guidelines set forth on Schedule B in
publishing the Baseball Items and Topps Products.
17. On each September 30 of the term after the Effective Date, Topps shall
submit to MLBP, for MLBP's information, Topps marketing information
required by Schedule C hereto for the next succeeding calendar year of
the term.
18. Topps shall provide MLBP with notice (for informational purposes only),
simultaneously with the submissions in Paragraph 15 hereof and,
whenever practicable, in the marketing plans provided by Topps pursuant
to Schedule C, of any new brand of Baseball Items including without
limitation, Trading Cards, it intends to publish using the Insignia in
accordance with the License Agreement.
19. Topps hereby agrees to indemnify, defend and hold MLBP, the BOC, the
Leagues and the Baseball Clubs and their respective owners,
shareholders, directors, officers, employees, agents, representatives,
successors and assigns harmless from any claims, suits, damages and
costs (including reasonable attorney's fees and expenses) arising out
of any claim by a third party in connection with: (i) any use of or
infringement of any trademark, service mark, copyright, patent,
process, method or device by Topps during the term of the 1995
Amendment in connection with the Baseball Items or Topps Products
covered by the License Agreement, other than a use of the Insignia as
authorized under the License Agreement; (ii) alleged defects or
deficiencies arising during or after the term of the 1995 Amendment (A)
in Baseball Items published by or on behalf of Topps, (B) in Topps
Products or (C) in the wrappings, packaging materials or advertising
materials of Topps used or sold in connection with the Baseball Items
or Topps Products, or in the use thereof, or false advertising, fraud,
misrepresentation or other claims related to the Baseball Items not
involving a claim of right to the Insignia; (iii) use of the Insignia
during the term of the 1995 Amendment, other than as authorized by the
License Agreement, or any breach by Topps of the License Agreement;(iv)
invasion of the right of privacy, publicity or property of, or
violation or misappropriation of any other rights of any third party
during the term of the 1995 Amendment, other than as authorized by the
License Agreement; (v)libel or slander against any third party arising
during the term of the 1995 Amendment; and (vi) agreements or alleged
agreements entered into by Topps with a third party for the
manufacture, distribution or sale of Baseball Items or Topps Products,
provided in each case Topps shall have the option to undertake and
conduct the defense of any suits brought and to engage in settlement
thereof at its sole discretion, provided such settlement does not
impair the legal rights of MLBP. MLBP shall give Topps written notice
of the making of any claim or the institution of any action hereunder
and MLBP may, at its option, participate in any action. The
indemnifications hereunder shall survive the expiration or termination
of the License Agreement.
20. MLBP represents and warrants to Topps that it has all necessary rights
and authority to grant the license granted hereunder, and agrees to
indemnify (subject to any indemnification provided by Topps in
accordance with Paragraph 4 of this 1995 Amendment), defend and hold
Topps and its stockholders, directors, officers, employees,
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agents, representatives, successors and assigns harmless from any
claims, suits, damages and costs (including reasonable attorney's fees
and expenses) arising out of any claim by a third party in connection
with: (i) challenges, during or after the term of this 1995 Amendment,
to MLBP's authority and power as agent for and pursuant to the
authority granted by the BOC, the Leagues and the Baseball Clubs to
license the Insignia in connection with the manufacturing,
distribution, advertisement and sale of the Baseball Items; and (ii)
Topps authorized use of the Insignia as approved by MLBP under the
License Agreement (which includes, but shall not be limited to, any
claims relating to MLBP's failure or alleged failure to have the right
to grant the licenses granted hereunder), provided in each case the
MLBP shall have the option to undertake, review and conduct the
defense of any suit so brought and to engage in settlement thereof at
its sole discretion, provided such settlement does not impair any legal
rights which Topps may have outside of the License Agreement. Topps
shall not institute any suit or action with respect to the Insignia
against any individual or entity that does not own any of the Insignia
without first obtaining MLBP's consent. Topps agrees that it is not
entitled to share in any proceeds received by MLBP (by settlement or
otherwise) in connection with any formal or informal action relating to
the Insignia brought by MLBP or any other owner of any of the Insignia,
provided that nothing contained herein shall limit Topps rights to
prosecute claims to the extent such claims relate to Topps own
trademarks, copyrights and other intellectual property. Topps
shall give MLBP written notice of the making of any claim or the
institution of any action hereunder and Topps may, at its option,
participate in any action. The representations and indemnifications
hereunder shall survive the expiration or termination of the License
Agreement.
21. Topps agrees that, during the term of the 1995 Amendment:
(a) It will not acquire any rights in the Insignia as a result of its
use under Paragraph 1(b) of the License Agreement, and all use of
the Insignia under Paragraph 1(b) of the License Agreement shall
inure to the benefit of MLBP, the BOC, the Leagues and/or the
Baseball Clubs.
(b) It will not directly attack the title of MLBP, the Baseball Clubs,
the Leagues, and/or the BOC in and to the Insignia or any
copyright, trademark or service mark pertaining thereto, nor will
it directly attack the validity of the license granted hereunder.
(c) It will not apply for any registration of any copyright,
trademark, service mark or other designation which would directly
affect the ownership of the Insignia.
(d) It will comply with all laws and regulations applicable to the
manufacture, sale or advertising of the Baseball Items and Topps
Products and shall comply with the applicable requirements of any
governmental agency (including, without limitation, the United
States Consumer Safety Commission) which shall have jurisdiction
over the Baseball Items and Topps Products.
(e) It shall ensure that MLBP, the Baseball Clubs, official Club
and/or MLBP retail stores, Club in-stadium concessionaires and the
Clubs belonging to The National Association of Professional
Baseball Leagues ("NAPBL Clubs") may obtain Baseball Items and
Topps Products, without regard to the relatively small volume
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<PAGE>
their orders may represent, to the extent supplies last. MLBP, the
Clubs and NAPBL Clubs may obtain the Baseball Items and Topps
Products for their use, but not for resale, at the lowest price at
which Topps sells the Baseball Items and Topps Products.
22. The License Agreement is amended by deleting in their entirety
paragraphs 6, 7 and 8 of the 1969 Agreement.
23. Upon MLBP's written request, but not more than twice during any
calendar year, Topps shall provide MLBP with a written list of the name
of each third party (hereinafter, a "Manufacturer"), both domestic and
foreign, that Topps has used to produce any of the Baseball Items or
Topps Products during the preceding 12-month period and those it is
currently using or has plans to use. In the event MLBP notifies Topps
that it has encountered difficulties with respect to the unlawful use
of the Insignias by any such Manufacturer (or any other manufacturer
which MLBP shall so advise Topps with respect to), Topps agrees to give
good faith consideration, using its reasonable business judgment
exercised in its sole discretion, as to whether to continue to do
business with such third party.
24. Topps will not manufacture, or authorize the manufacture of the
Baseball Items or Topps Products, or accumulate inventory, at a rate
greater than its average rate during the term, as the end of the term
approaches.
25. Neither MLBP nor Topps shall disclose any confidential, private,
restricted or otherwise non-public information concerning the other
(including, without limitation, Topps marketing plans and the list of
Manufacturers) which, it acknowledges, it may become privy to during
the term of the 1995 Amendment, except as required by law and except
that MLBP may divulge such information to the BOC, the Leagues and the
Baseball Clubs, provided that the BOC, the Leagues and the Baseball
Clubs are subject to a confidentiality agreement with MLBP, and Topps
is a third-party beneficiary thereof.
26. Topps agrees to obtain, at its own cost and expense, comprehensive
general liability insurance including product liability insurance
providing adequate protection for MLBP, the BOC, the Leagues and the
Baseball Clubs and Topps in an amount not less than $3,000,000.00
(three million dollars) per incident or occurrence (which amount may
include excess umbrella coverage), or Topps standard insurance policy
limits, whichever is greater, and with a reasonable deductible in
relation thereto from an insurance company rated at least A- by A.M.
Best. Such insurance shall remain in force at all times during the
license period and for a period of five (5) years thereafter. Topps
further agrees that, as long as such insurance is available from an
insurance company rated at least A- by A.M. Best, to obtain and
maintain adequate insurance covering claims of third parties against
MLBP, the BOC, the Leagues and the Baseball Clubs and Topps, relating
to the matters described in subparagraphs 19(iv), (v) and (vi), in an
amount equal to the lesser of (a) $1,000,000 per incident or occurrence
and $1,000,000 in the aggregate, and (b) such amount as may be obtained
for an annual premium of $25,000. Within thirty (30) days from the
date hereof, Topps will submit to MLBP a certificate of insurance
naming MLBP and the Baseball Clubs as additional insured parties and
requiring that the insurer
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<PAGE>
shall not terminate or materially modify such policy or certificate of
insurance without written notice to MLBP at least thirty (30) days in
advance thereof.
27. Simultaneous with the delivery of the payments of the guarantee
pursuant to Paragraph 5 hereof and the royalty pursuant to Paragraph 6
hereof Topps shall furnish to MLBP complete and accurate statements,
certified to be accurate by an officer on behalf of Topps, showing the
sales volume of each Baseball Item, gross sales price, itemized
deductions from gross sales price, and net sales price of the Baseball
Items distributed and/or sold by Topps. The report delivered with the
payments of the guarantee shall reflect sales for the reporting period
since Topps previous guarantee payment and the report delivered with
the payment of the royalty shall reflect sales for the preceding
calendar year. Upon the reasonable request of MLBP, Topps shall
provide additional information necessary to clarify the royalty
reports. Such statement shall be furnished to MLBP whether or not any
of the Baseball Items have been sold, or any payment is shown to be due
MLBP. Receipt or acceptance by MLBP of any of the statements
furnished pursuant to the License Agreement or of any sums paid
hereunder shall not preclude MLBP from questioning the correctness
thereof at any time, and in the event that any inconsistencies or
mistakes are discovered in such statements or payments, they shall
immediately be rectified and the appropriate payments made by Topps.
Late payment penalties, if any, shall be made pursuant to Paragraph
6 hereof.
Topps shall account separately for all sales in each country. For
reporting purposes, the United States of America, the District of
Columbia, Puerto Rico and U.S. territories and possessions, including
U.S. military bases worldwide, shall be one country.
28. Topps shall keep, maintain and preserve in its principal place of
business for at least two (2) years following termination or expiration
of the License Agreement or any renewal thereof complete and accurate
records and accounts covering all transactions relating to the License
Agreement. Such records and accounts shall be available for inspection
and audit no more than twice during any year of the term of the License
Agreement during reasonable business hours and upon reasonable notice
by MLBP or its representatives. Except as otherwise required by law,
MLBP shall keep the information derived from any audit in confidence.
If pursuant to its right hereunder to audit and inspect MLBP causes an
audit and inspection to be instituted and thereafter discloses a
deficiency of three percent (3%) or more between the amount found to be
due to MLBP pursuant to Schedule A hereto and the amount actually paid
or credited to MLBP, then Topps shall be responsible for payment of the
entire deficiency together with interest thereon at the then current
prime rate of Chemical Bank (or its successor) from the date such
amount became due until the date of payment, and the costs and expenses
of such audit and inspection.
29. The License Agreement is amended by deleting in its entirety paragraph
6 of the Letter Amendment dated June 25, 1990 and replacing it with the
following:
"6. On the packaging of all Baseball Items and Topps Products shall
appear one of the following two notices: "The Major League Baseball
Club Insignia depicted on this product are trademarks which are the
exclusive property of the respective Major League Clubs and may not be
reproduced without their written consent" or "Major League Baseball
trademarks and copyrights are used with permission of Major League
Baseball
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<PAGE>
Properties, Inc." MLBP shall, in its discretion and in a timely
manner, determine which notice to include in each Baseball Item
and Topps Product. In addition, on all products containing the
Insignia shall appear a label stating "Genuine Merchandise" and
containing the Major League Baseball silhouetted batter logo. Further,
all Topps advertisements and promotional displays featuring the
Insignia and all retailer advertisements featuring Baseball Items or
Topps Products, and of which Topps has knowledge, shall contain the
worlds "Genuine Merchandise" and the silhouetted batter logo, and all
uses of the Insignia shall include either of the following notices as
directed by MLBP: (R) or "TM". MLBP shall have the right to revise the
foregoing notice requirements and to require such other notices as
shall be reasonably necessary to protect the interests of the MLBP, the
Baseball Clubs, the BOC and/or the Leagues and their respective
Insignia. Topps agrees to advise MLBP of the initial date of the
marketing of each Baseball Item and Topps Product and upon request to
deliver to MLBP up to eight (8) retail packages of the Baseball Items
and Topps Products upon which the Insignia are used."
Notwithstanding the foregoing, Topps may continue to comply with the
terms of Paragraph 6 as stated in the Letter Amendment dated June 25,
1990, with respect to all Baseball Items and Topps Products which are
in the production process as of the date hereof.
30. In any case where Topps employs the services of photographers or
artists in connection with the production, promotion, marketing or
distribution of the Baseball Items and Topps Products, it shall use
reasonable efforts to secure the agreement from each such photographer
or artist that the photographic or artistic work he or she produces for
Topps shall be "works made for hire" for the purposes of the copyright
laws, and that to the extent such photographic or artistic works may
not qualify as works made for hire, the copyright in each such work is
assigned to Topps. Nothing contained herein shall prohibit Topps from
using any photographer or artist that does not enter into such an
agreement.
31. (a) MLBP shall have the right to terminate the License Agreement upon
the occurrence of any one or more of the following events (herein
called "defaults"):
(i) If Topps fails to maintain in full force and effect the
insurance referred to in the first sentence of Paragraph 26
hereof and fails to provide for similar protection in form
and manner reasonably acceptable to MLBP (which may
include, if reasonably acceptable to MLBP, self-insurance)
so that there is coverage at all times. The downgrading of
Topps insurer by A.M. Best shall not be deemed a default,
provided that Topps may not sign a new policy with such
down-graded insurer.
(ii) If Topps shall breach any one of the undertakings set forth
in Paragraph 21(a)-(c) hereof or any other material term of
the License Agreement, and shall fail to cure such breach
to the extent reasonably capable of cure, within thirty
(30) days of MLBP's written notice of breach to Topps
thereof. In the event any such breach is not reasonably
capable of cure, MLBP may only terminate the License
Agreement in the event Topps has persisted, notwithstanding
prior
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<PAGE>
written notice of such breaches from MLBP to Topps, to
engage in such conduct. Termination by MLBP under this
subparagraph shall be effective ninety (90) days after the
delivery of written notice of termination by MLBP, which
may be given only upon the expiration of the thirty
(30)-day cure period.
(iii) In the event a majority or controlling interest in Topps is
acquired by a person or entity that was or is connected
with casinos or any other form of legalized gambling
enterprise, or gambling in any manner, MLBP may terminate
the License Agreement immediately by written notice to
Topps.
(iv) If Topps is unable to pay its debts when due, or makes any
assignment for the benefit of creditors or any arrangement
pursuant to any bankruptcy law, or files or has filed
against it any petition under the bankruptcy or insolvency
laws of any jurisdiction, county or place, or shall have or
suffer a receive or trustee to be appointed for its
business property, or be adjudicated a bankrupt or
insolvent. In the event the license granted hereunder is
terminated pursuant to this Paragraph 31(a)(iv), neither
Topps nor its receivers, representatives, trustees, agent,
administrators, successor and/or assigns shall rely on the
terms of the License Agreement for any rights to sell,
exploit or otherwise deal with or in the Baseball Items and
Topps Products without the prior written consent of MLBP.
(v) If Topps fails to pay any royalties or guaranteed minimums
due hereunder and Topps fails to cure such breach within
fifteen (15) days after written notice thereof from MLBP,
unless such failure is due to a good faith dispute between
the parties with respect to such payment.
(b) In the event any of these defaults occur and MLBP desires to
exercise its right of termination under the terms of this
Paragraph 31, MLBP shall give notice of termination in writing to
Topps. Upon termination or expiration of the term hereof, all
rights, licenses and privileges granted to Topps hereunder shall
automatically revert to MLBP and Topps shall execute any and all
documents evidencing such automatic reversion. [INFORMATION
SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT]. Subject to the
limitation of the minimum guarantee termination payments set
forth in the two preceding sentences, MLBP's right to terminate
this Agreement, and the termination payments called for in this
paragraph and the right to seek any remedies related to such
termination, shall be without prejudice to any other rights or
remedies
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<PAGE>
which MLBP may have, whether under the provisions of the License
Agreement, in law or in equity or otherwise.
(c) Topps shall have the right to terminate this Agreement
immediately upon written notice to MLBP in the event MLBP ceases
to have the ability to license to Topps a material portion of the
rights to be licensed to Topps hereunder for the United States or
Canada (unless such rights have been assigned to another entity
which assumes the License Agreement, without substantive
modification).
(d) Topps shall have the right to terminate this Agreement upon
ninety (90) days' written notice to MLBP (which may be given only
upon expiration of the 30-day cure period) if MLBP breaches any
material term of the License Agreement and fails to cure such
breach, to the extent such breach is reasonably capable of cure,
within thirty (30) days after written notice thereof from Topps
to MLBP. In the event any such breach is not reasonably capable
of cure, Topps may only terminate the License Agreement in the
event MLBP has persisted, notwithstanding prior written notice of
such breaches from Topps to MLBP, to engage in such conduct.
Notwithstanding the foregoing, Topps may not terminate this
License Agreement under subparagraph (d) of Section 31 to the
extent subparagraph (c) of Section 31 is applicable to the
breach. Any termination under subparagraphs 31 (c) or (d) shall
be without limitation or prejudice to any other rights Topps may
have, whether under the provisions of the License Agreement, in
law or in equity or otherwise.
32. Topps shall deliver to MLBP, as soon as practicable, following
expiration or termination of the License Agreement, a statement
indicating the number and description of the Baseball Items and Topps
Products on hand. Following expiration or termination, Topps may not
rely on the License Agreement to manufacture, sell or otherwise
distribute any more Baseball Items or Topps Products, but may continue
to distribute its remaining inventory for a period not to exceed sixty
(60) days, subject to the items of Paragraph 24 hereof and payment of
applicable royalties relative thereto; provided, however, that such
royalties shall not be applicable against minimum guarantees hereunder.
MLBP shall have the option to conduct physical inventories before
termination and continuing until the end of the sixty (60)-day sell-off
period in order to ascertain or verify such inventories and/or
statement. Immediately upon expiration of the sell-off period, Topps
shall furnish MLBP a detailed statement certified by an officer on
behalf of Topps showing the number and description of Baseball Items
and Topps Products on hand in its inventory and shall dispose of such
inventory at MLBP's direction and at Topps expense. In the event
Topps refuses to permit MLBP to conduct such physical inventory, Topps
shall forfeit its right hereunder to dispose of such inventory. In
addition to such forfeiture, MLBP shall have recourse to all other
remedies available to it.
32. All notices (other than those referred to in paragraph 15 hereof)
required to be given under the License Agreement to a party shall be in
writing and shall be deemed duly given if personally delivered or
mailed by certified or registered mail, return receipt requested, to
the party concerned as follows:
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If to MLBP:
Ethan Orlinsky
Director, Legal Affairs and Corporate Secretary
Major League Baseball Properties, Inc.
350 Park Avenue
New York, NY 10022
Facsimile: (212) 339-8640
with a copy to:
Thomas Duffy
Vice President,
Finance and Royalty Administration
Major League Baseball Properties, Inc.
350 Park Avenue
New York, NY 10022
Facsimile: (212) 339-8640
If to Topps:
Arthur T. Shorin
Chairman of the Board and
Chief Executive Officer
The Topps Company, Inc.
One Whitehall Street
New York, NY 10004
Facsimile: (212) 376-0627
with copies to:
Scott Silverstein, Esq.
Vice President-Business Affairs and Controller
The Topps Company, Inc. The Topps Company, Inc.
Facsimile: (212) 376-0626 Facsimile: (212) 376-0621
Notice may also be sent by facsimile if followed by another method of
delivery as described above.
34. No waiver, modification or cancellation of any term or condition of the
License Agreement shall be effective unless executed in writing by the
party charged therewith. No written waiver shall excuse the
performance of any act other than those specifically referred to
therein. No waiver by either party hereto of any breach of the License
Agreement shall be deemed to be a waiver of any preceding or
succeeding breach of the
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<PAGE>
same or any other provision hereof. The exercise of any right granted
to either party hereunder shall not operate as a waiver. The normal
expiration of the term of the License Agreement shall not relieve
either party of its respective obligations accruing prior thereto, nor
impair or prejudice the respective rights of either party against the
other, which rights by their nature survive such expiration. Neither
party makes any representations or warranties to the other, except as
expressly set forth herein.
35. The License Agreement does not constitute and shall not be construed as
constituting an agency, partnership or joint venture relationship
between Topps and MLBP. Neither party shall have any right to obligate
or bind the other in any manner whatsoever, and nothing herein
contained shall give or is intended to give any rights of any kind to
any third persons.
36. The License Agreement is amended by deleting in its entirety paragraph
11 of the 1969 Agreement and replacing it with the following:
"The License Agreement shall be construed and enforced in accordance
with the laws of the State of New York, without giving effect to
principles of conflicts of laws, and cannot be changed orally."
37. This 1995 Amendment, including the original 1969 Agreement (dated
January 1, 1969) and all prior amendments, and the attached Schedules,
when fully executed, shall represent the entire understanding between
the parties hereto with respect to the subject matter hereof.
38. Except as expressly amended and extended by this 1995 Amendment, the
License Agreement including, without limitation, Section 9 of the 1969
Agreement, shall remain unamended and in full force and effect.
Please indicate your agreement to the foregoing terms by signing below.
Sincerely,
Scott A. Silverstein
Vice President - Business Affairs
Agreed to and Accepted:
Major League Baseball Properties, Inc.
By:
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SCHEDULE A
1. Minimum Guarantee
The minimum guarantee is [INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL
TREATMENT] per calendar year, [INFORMATION SUBJECT TO REQUEST FOR
CONFIDENTIAL TREATMENT], payable in equal installments of [INFORMATION
SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT] on each April
15, July 15 and October 15 during the term. [INFORMATION SUBJECT TO
REQUEST FOR CONFIDENTIAL TREATMENT]
2. Royalty
The royalty during the term shall be as follows:
(a) For calendar years 1996 and 1997:
[INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT].
(b) For calendar year 1998:
[INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT].
(c) For calendar year 1999:
[INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT]
(d) For calendar year 2000:
[INFORMATION SUBJECT TO REQUEST FOR CONFIDENTIAL TREATMENT].
All royalties shall be paid by March 15 for the immediately
preceding calendar year, with a credit for the minimum
guarantee theretofore paid for such preceding year.
A-1
<PAGE>
SCHEDULE B
1. The team name or Club Logo shall be featured in a prominent and
visible manner, on the front or back of each regular player
Trading Card, separate from any use of the team name in
statistical or editorial information contained on the card.
2. The team name and Club Logo must be separate and distinct from
the player's name and any corporate identification (including,
without limitation, that of Topps) featured on any Baseball Item.
3. The Major League Baseball silhouetted batter logo shall appear in
a visible manner on each Trading Card, in no smaller type size
than the MLBPA logo on such Trading Card.
4. Each pack of trading cards must specify the number of cards
contained therein, if and as required by law.
B-1
<PAGE>
SCHEDULE C
MLBP 1996 MARKETING PLAN REQUEST
================================================================================
Demographics (3-year Trends) Brand Data (1990 - 1995)
HH Penetration; Kid HH Penetration
Baseball Card Brand Trends
-- Unit Volume; Volume Net Sales
Distribution by Brand/Channel
________________________________________________________________________________
Brand Positioning Volume (Unit/Net Sales) 5 Year
--Each Brand's Reasons for History 1995 Estimate (This Being
Target will be provided on a one-time
Attributes basis for this year.) 3 year
Price Point projections (only to the extent
Channel Focus Topps prepares such projections).
-- Brand Segmentation/Pricing Chart
-- Brand's Releases Shipments
Returns
________________________________________________________________________________
1996 Marketing Plan
-- Core Consumer Target
-- Objectives and Strategies for
1996
-- Major Consumer Programs
-- Major Retail Programs
-- New Product Introductions
-- Technological Innovations
-- International Plans
________________________________________________________________________________
C-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000812076
<NAME> Ex-27
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Feb-28-1998
<PERIOD-START> Mar-02-1997
<PERIOD-END> Aug-30-1997
<CASH> 18,215
<SECURITIES> 0
<RECEIVABLES> 40,494
<ALLOWANCES> 1,364
<INVENTORY> 17,321
<CURRENT-ASSETS> 92,193
<PP&E> 17,535
<DEPRECIATION> 4,265
<TOTAL-ASSETS> 173,986
<CURRENT-LIABILITIES> 77,552
<BONDS> 27,450
0
0
<COMMON> 475
<OTHER-SE> 65,285
<TOTAL-LIABILITY-AND-EQUITY> 173,986
<SALES> 115,295
<TOTAL-REVENUES> 116,516
<CGS> 75,207
<TOTAL-COSTS> 116,828
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 58
<INTEREST-EXPENSE> 1,368
<INCOME-PRETAX> (1,680)
<INCOME-TAX> (739)
<INCOME-CONTINUING> (941)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (941)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>