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 November 28, 1998
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 December 31, 1998 was
46,400,010.
<PAGE>
THE TOPPS COMPANY, INC.
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. FINANCIAL STATEMENTS
Index Page
Condensed Consolidated Balance Sheets as of
November 28, 1998 and February 28, 1998 3
Condensed Consolidated Statements of Operations
for the thirteen and thirty-nine weeks ended
November 28, 1998 and November 29, 1997 4
Condensed Consolidated Statements of Comprehensive
Income for the thirteen and thirty-nine weeks ended
November 28, 1998 and November 29, 1997 5
Condensed Consolidated Statements of Cash Flows
for the thirty-nine weeks ended November 28, 1998
and November 29, 1997 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
- --------------------------------------------------------------------------------
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
The condensed consolidated financial statements for the thirteen and thirty-nine
weeks ended November 28, 1998 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 8.
2
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
(Unaudited)
November February
28, 1998 28, 1998
(amounts in thousands
except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 44,138 $ 22,153
Accounts receivable - net 34,802 49,727
Inventories 15,666 16,613
Income tax receivable 537 6,829
Deferred tax assets 412 2,792
Prepaid expenses and other current assets 3,548 3,821
------ -------
TOTAL CURRENT ASSETS 99,103 101,935
PROPERTY, PLANT, & EQUIPMENT 13,144 14,551
Less: accumulated depreciation 5,458 4,403
------ ------
NET PROPERTY, PLANT & EQUIPMENT 7,686 10,148
INTANGIBLE ASSETS, net of accumulated
amortization of $40,039 and $38,075 60,862 62,825
OTHER ASSETS 3,187 3,498
------- -------
TOTAL ASSETS $170,838 $178,406
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,141 $ 27,752
Accrued expenses and other liabilities 50,094 43,714
Current portion of long-term debt 10,000 8,333
Income taxes payable 1,777 1,165
------ ------
TOTAL CURRENT LIABILITIES 75,012 80,964
LONG-TERM DEBT, less current portion 8,283 22,617
DEFERRED INCOME TAXES 6,913 6,864
OTHER LIABILITIES 7,132 6,352
------ -------
TOTAL LIABILITIES 97,340 116,797
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 1,102,500 shares in Treasury Stock 475 475
Additional paid-in capital 16,812 16,812
Treasury stock, 1,102,500 shares (8,881) (8,881)
Retained earnings 65,847 54,204
Cumulative foreign currency adjustment (755) (1,001)
------ ------
TOTAL STOCKHOLDERS' EQUITY 73,498 61,609
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $170,838 $178,406
</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>
(Unaudited)
Thirteen weeks ended Thirty-nine weeks ended
November November November November
28, 1998 29, 1997 28, 1998 29, 1997
(amounts in thousands, except share data)
<S> <C> <C> <C> <C>
Net sales $ 67,647 $ 54,173 $ 178,842 $ 169,468
Cost of sales 41,102 42,524 105,313 117,731
------ ------ ------- -------
Gross profit on sales 26,545 11,649 73,529 51,737
Royalties and other income (expense) (138) (73) (66) 537
------ ------ ------ ------
26,407 11,576 73,463 52,274
Selling, general and administrative expenses 19,210 21,581 56,380 63,202
Gain on disposition of assets - - 3,876 -
------ ------ ------ ------
Income (loss) from operations 7,197 (10,005) 20,959 (10,928)
Interest income (expense), net 60 (423) (531) (1,180)
------ ------ ------ ------
Income (loss) before provision (benefit) for
income taxes 7,257 (10,428) 20,428 (12,108)
Provision (benefit) for income taxes 3,123 (1,890) 8,785 (2,629)
------ ------ ------ ------
Net income (loss) $ 4,134 $ (8,538) $ 11,643 $ (9,479)
Basic & diluted net income (loss) per share $ 0.09 $ (0.18) $ 0.25 $ (0.20)
Weighted average shares outstanding - Basic 46,400,010 46,400,010 46,400,010 46,428,398
Weighted average shares outstanding - Diluted 46,737,267 46,400,010 46,717,110 46,428,398
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants' Review
Report.
4
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
<TABLE>
(Unaudited) (Unaudited)
Thirteen weeks ended Thirty-nine weeks ended
November November November November
28, 1998 29, 1997 28, 1998 29, 1997
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income (loss) $ 4,134 $ (8,538) $ 11,643 $ (9,479)
Currency translation adjustment (106) (151) 246 (979)
----- ----- ----- -----
Comprehensive income (loss) $ 4,028 $ (8,689) $ 11,889 (10,458)
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants' Review
Report.
5
<PAGE>
TOPPS COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
(Unaudited)
Thirty-nine weeks ended
November November
28, 1998 29, 1997
(amounts in thousands)
<S> <C> <C>
Cash provided by operations:
Net income (loss) $ 11,643 $ (9,479)
Add (subtract) non-cash items included in net income:
Depreciation and amortization 3,472 3,203
Deferred income taxes 2,430 4,064
Gain on dispostion of property, plant and equipment (3,876) -
Change in assets and liabilities:
Receivables 14,925 18,087
Inventories 947 456
Income tax receivable 6,293 (5,625)
Prepaid expenses and other current assets 269 1,996
Payables and other current liabilities (7,618) (10,955)
Other 892 (445)
------ ------
Cash provided by operations 29,377 1,302
Cash provided by (used by) investing activities:
Proceeds from disposition of property, plant and equipment 5,562 -
Additions to property, plant and equipment (287) (1,662)
----- -----
Cash provided by (used by) investing activities 5,275 (1,662)
Cash provided by (used by) financing activities:
Proceeds from borrowing - 6,000
Reduction of debt (12,667) (7,500)
Purchase of treasury stock - (522)
------ -----
Cash (used by) financing activities (12,667) (2,022)
Net increase (decrease) in cash and cash equivalents 21,985 (2,382)
Cash and cash equivalents at beginning of year 22,153 24,199
------ ------
Cash and cash equivalents at end of quarter $44,138 $21,817
Interest paid $ 1,768 $ 2,052
Income taxes paid $ 5,669 $ 3,227
</TABLE>
See Notes to Condensed Consolidated Financial Statements and Accountants' Review
Report.
6
<PAGE>
THE TOPPS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED NOVEMBER 28, 1998
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 in the opinion of the
Company's management, contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the results
of the Company's financial position as of November 28, 1998 and the
results of its operations and its cash flows for the thirteen weeks
and thirty-nine weeks ended November 28, 1998 and November 29, 1997,
respectively. 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 interim periods
are not necessarily indicative of the results that may be expected for
the year ending February 27, 1999. For further information refer to
the consolidated financial statements and notes thereto in the
Company's annual report for the year ended February 28, 1998.
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>
(Unaudited)
November February
28, 1998 28, 1998
(amounts in thousands)
<S> <C> <C>
Raw materials $ 275 $ 1,794
Work in process 3,334 1,619
Finished products 12,057 13,200
------ ------
Total $15,666 $16,613
</TABLE>
7
<PAGE>
INDEPENDENT AUDITORS' 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 (the "Company") as of November 28,
1998 and the related condensed consolidated statements of operations and cash
flows for the thirteen and thirty-nine week periods ended November 28, 1998 and
November 29, 1997, 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 of 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 February 28,
1998, 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 3, 1998 (May 11, 1998 as to Note 9), 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 February 28, 1998 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
December 22, 1998
New York, New York
8
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three Months Ended November 28,1998 Compared with the Three Months Ended
November 29, 1997
Net sales for the third quarter of fiscal 1999 increased 24.9%, to $67,647,000
from $54,173,000 for the same period last year. Net sales of collectible picture
products were up over last year as a result of higher sales of football and
baseball card products, the benefits associated with Topps return to the NHL
hockey card market and the launch of WCW wrestling cards. These increases were
partially offset by the decrease in basketball card sales resulting from the NBA
labor dispute. Despite the recent settlement, it is still anticipated that the
NBA labor dispute will have a more significant impact on fourth quarter net
sales than on third quarter net sales. Confectionery sales also increased,
driven by two new lollipop products, Baby Bottle Pop and Flip Pop, strong
domestic performance by the Company's core lollipop products and the roll out of
Push Pop in Brazil.
Gross profit as a percentage of net sales for the third quarter of fiscal 1999
increased to 39.2% as compared with 21.5% for the same period last year. This
margin improvement was the result of favorable product costs both in the U.S.
and internationally. U.S. product costs benefited this year from the absence of
a payment made last year to Hershey Foods Corporation in connection with the
outsourcing of Bazooka, lower prices from vendors, favorable exchange rates and
improved manufacturing performance. Outside of the U.S., cost improvements were
the result of a number of factors, including reduced returns and close-outs as
well as lower freight and duty expenses.
The decrease in royalties and other income (expense) from $(73,000) to
$(138,000) in the third quarter of fiscal 1999, was primarily the result of a
write-off of computer-related software.
Selling, general and administrative expenses decreased to $19,210,000, or 28.4%
of net sales in the third quarter of fiscal 1999, from $21,581,000, or 39.8% a
year ago. This decrease was primarily the result of this year's higher sales,
the absence this year of a one-time severance charge taken in the third quarter
of fiscal 1998, lower outbound freight costs and reduced headcount and other
overhead expenses.
The increase in interest income (expense), net to $60,000 in the third quarter
of fiscal 1999 from $(423,000) last year was attributable to a reduction in the
Company's outstanding term loan and an increase in cash.
In the third quarter of fiscal 1999, the Company recorded an effective tax rate
on earnings of 43.0% versus an effective rate of 18.1% on losses in the third
quarter a year ago. The less favorable tax rate last year was the result of the
Company's inability to recognize tax benefits on certain foreign losses.
Net income for the third quarter of fiscal 1999 was $4,134,000, or $0.09 per
share, as compared with a net loss of $(8,538,000), or $(0.18) per share, for
the same period last year.
9
<PAGE>
Nine Months Ended November 28,1998 Compared with the Nine Months Ended November
29, 1997
Net sales for the first nine months of fiscal 1999 increased 5.5%, to
$178,842,000 from $169,468,000 for the same period last year. Net sales of
confectionery products increased versus the first nine months of last year due
to the roll out of Push Pop in Brazil, the introduction of Baby Bottle Pop and
Flip Pop and growth of core lollipops in the U.S. and Canada. Sales of sports
card products were also higher for the nine-month period driven by stronger
sales of baseball and football products and the Company's return to the NHL
hockey card market.
Gross profit as a percentage of net sales for the first nine months of fiscal
1999 increased to 41.1% as compared with 30.5% for the same period last year.
The margin improvement was the result of lower product costs (which last year
included a payment in connection with the outsourcing of Bazooka), lower royalty
payments due to an increase in the percentage of non royalty-bearing
confectionery sales and the absence of a Brazilian minimum guarantee shortfall
recorded last year. Lower obsolescence and product development costs also
contributed favorably to gross profit margins in the first nine months of this
year.
The decrease in royalties and other income (expense) from $537,000 to $(66,000)
in the first nine months of fiscal 1999 was largely the result of the impact of
foreign exchange translation losses in Mexico and Brazil and a write-off of
computer-related software.
Selling, general and administrative expenses for the first nine months of fiscal
1999 decreased to $56,380,000 or 31.5% of sales, from $63,202,000 or 37.3% for
the same period a year ago. This decrease was the result of a variety of
factors, including higher fiscal 1999 sales, the absence this year of severance
charges and costs related to the closure of three European offices, a reduction
in domestic marketing expenses previously required by one of the Company's sport
licenses and actions taken by the Company at the end of last year to reduce
headcount and overhead expenses.
Pre-tax income from operations of $20,428,000 in the first nine months of fiscal
1999 includes a gain of $3,876,000 from sales of the Company's former
manufacturing plant in Cork, Ireland and equipment from both the Cork, Ireland
and Duryea, Pennsylvania facilities.
The difference in interest income (expense), net from $(1,180,000) in fiscal
1998 to $(531,000) this year was attributable to a reduction in the Company's
outstanding term loan and an increase in cash.
In the first nine months of fiscal 1999, the Company recorded an effective tax
rate on earnings of 43.0% versus an effective tax rate on losses of 21.7% last
year. The less favorable tax rate last year was the result of the Company's
inability to recognize tax benefits on certain foreign losses.
Net income for the first nine months of fiscal 1999 was $11,643,000, or $0.25
per share, as compared with a loss of $(9,479,000), or $(0.20) per share for the
same period last year.
Liquidity and Capital Resources
In July 1995, the Company entered into a $65 million credit agreement with a
syndicate of eight banks in order to finance the acquisition of Topps Europe,
10
<PAGE>
Ltd., formerly known as Merlin Publishing, Ltd. ("Topps Europe"), and to provide
for working capital and letter of credit needs. In May 1998, the Company
refinanced this facility with Chase Manhattan Bank. The new credit agreement
includes a term loan in the aggregate amount of $24,950,000 (which was used to
repay the prior loan) and a $9,450,000 facility to cover letter of credit and
revolver needs. The facility expires on July 6, 2000. This credit agreement is
secured by a pledge of the Company's domestic trademarks and 65% of the stock of
Topps Europe. Beginning June 1998, interest rates on $10 million of the
outstanding principal of the loan are fixed for one year as a result of an
interest rate swap and are, therefore, a function of interest rates at the
commencement of the swap transaction. Interest rates on the balance of the
outstanding loan are variable and a function of short-term indices. 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 and prohibits the payment of dividends
and the repurchase of stock.
As of November 28, 1998, the Company had $44,138,000 in cash, and $18,283,000 in
debt under the term loan.
For the first nine months of fiscal 1999, the Company's net increase (decrease)
in cash and cash equivalents was $21,985,000 versus $(2,382,000) for the
comparable period last year. Cash provided by operations for the first nine
months of this year was $29,377,000 versus $1,302,000 last year, primarily as a
result of higher net income and an income tax refund received in the first
quarter of this year. Cash provided by investing activities this year reflects
$5,562,000 in proceeds from sales of the plant in Cork, Ireland and equipment
from both the Cork, Ireland and Duryea, Pennsylvania plants. Cash used by
financing activities reflects debt payments of $12,667,000 in the first nine
months of this year versus debt payments net of borrowings of $1,500,000 and
share repurchases of $522,000 in the comparable period last year.
Management believes that, in light of the Company's borrowing capacity, cash on
hand as of November 28, 1998 and expected cash flow from operations, the Company
has adequate means to meet its working capital, capital expenditure, interest
and principal repayment requirements for the foreseeable future.
Year 2000
The Year 2000 issue is the result of computer programs using only two digits to
identify a year in the date field. If not corrected, many systems could fail or
create erroneous results on January 1, 2000 by reading the date as January 1,
1900. Failure to fix this problem could result in systems failures or
miscalculations leading to disruption in the Company's operations.
The Company began work on Year 2000 issues in 1996. As of November 28, 1998, all
of the Company's mainframe programs have been reviewed for compliance. Where
necessary, programs are being fixed, tested and put into production. The Company
is also in the process of addressing the needs of all other systems such as
personal computers, customer and vendor systems, telephone systems and other
electronic hardware.
11
<PAGE>
Year 2000 compliance costs have not and are not expected to significantly affect
the financial condition or results of operations of the Company.
The Company expects that its essential systems and business functions will be
Year 2000 compliant in all material respects in a timely manner. It is in the
process of determining whether there are any risks with regards to the Year 2000
status of key vendors and customers, and will attempt to develop contingency
plans for dealing with these risks, if necessary.
Cautionary Statements
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, lollipops and sticker and album collections, to achieve expected sales
levels; (ii) weakness in sales of basketball products due to the NBA labor
dispute; (iii) the Company's inability to continue to maintain sales generated
from new product introductions; (iv) quarterly fluctuations in results; (v) the
Company's loss of important licensing arrangements; (vi) the Company's loss of
important supply arrangements with third parties; (vii) the effect of changes in
trade terms with certain of the Company's key customers; (viii) the Company's
inability to comply with the financial covenants contained in its credit
facility; (ix) further prolonged and material contraction in the trading card
industry; (x) excessive returns of the Company's products; (xi) an adverse
outcome in the Rodriguez Action (See "Part II - Other Information. Item 1. Legal
Proceedings"); 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.
12
<PAGE>
THE TOPPS COMPANY, INC.
PART II
OTHER INFORMATION
ITEM 1. 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 entitled
Sullivan et al. v. The Topps Company, Inc., No. CV-96-3779 (E.D.N.Y.) (the
"Sullivan Action"). On August 21, 1997, the court entered a judgment granting
the Company's motion to dismiss the complaint with prejudice. On April 28, 1998,
the court entered an order denying plaintiffs' motion to alter, amend or vacate
the judgment, and for leave to file an amended complaint. Plaintiffs filed an
appeal of both orders on June 10, 1998, but withdrew that appeal in October,
1998. Plaintiffs' time to revive the appeal has since expired, and the judgment
dismissing the complaint is now final.
On November 19, 1998, the Company was named a defendant in a class action in the
United States District Court for the Southern District of California entitled
Rodriguez v. The Topps Company, Inc., No. 98-CV-2121 (BTM) JAH (S.D. Cal.) (the
"Rodriguez Action"). The Rodriguez 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, as
well as The California Business and Professions Code. The Rodriguez Action
contains allegations similar to those in the dismissed Sullivan Action, and each
of the Company's principal competitors, as well as several of its principal
licensors, have been separately sued for employing, or participating in, the
practices alleged in Rodriguez and Sullivan. The Rodriguez Action seeks treble
damages and attorneys' fees on behalf of all purchasers of packs of cards
potentially including "insert" cards since 1992. The Company believes it has
meritorious defenses and intends to defend the Rodriguez Action vigorously.
Given the early stage of the litigation, however, the Company is unable to
assess the likelihood of a materially adverse outcome or to estimate the amount
or range, if any, of any probable loss.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits as required by Item 601 of Regulation S-K
10.34 Retail Product License Agreement between the Company and NBA Properties,
Inc., dated November 19, 1998.
10.35 License Agreement between the Company and National Football League Players
Incorporated, dated September 22, 1998.
10.36 Second Amendment to Credit Agreement, dated as of November 6, 1998.
13
<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
January 12, 1999
14
FORM: NBAP
U.S./Non-Apparel
PR
LICENSEE: THE TOPPS COMPANY, INC. RETAIL PRODUCT LICENSE AGREEMENT
ADDRESS: One Whitehall Street
New York, NY 10004
THIS RETAIL PRODUCT LICENSE AGREEMENT is entered into by NBA Properties, Inc.
("NBAP"), with its principal office at 645 Fifth Avenue, New York, New York
10022, and the licensee listed above ("LICENSEE") with regard to the commercial
use of certain names, logos, symbols, emblems, designs and uniforms and all
identifications, labels, insignia or indicia thereof (the "Marks") of the
National Basketball Association (the "NBA") and its Member Teams (collectively,
the "NBA Marks") in combination with the names, nicknames, photographs,
portraits, likenesses, signatures or other identifiable features ("Attributes")
of "Current" (as defined in Paragraph 1 of the attached Standard Terms and
Conditions) NBA players. On the terms of this Agreement and subject to the
attached NBAP Standard Terms and Conditions, NBAP hereby grants to LICENSEE, and
LICENSEE hereby accepts, the non-exclusive (except as otherwise expressly
provided in this Agreement) right and license to use the Marks of the Member
Teams, the silhouetted dribbler logo (the "NBA Logo") and NBA Marks, NBA
All-Star Weekend and NBA Playoffs and Finals (collectively, the "Licensed
Marks") in combination with the names, photographs, likenesses, NBA statistics
and biographical information (and such additional Attributes as NBAP may
specifically approve on a case-by-case basis from time to time) of all Current
NBA Players (on a group basis and to the extent NBAP can convey such rights in
accordance with the Group License Agreement between NBAP and the National
Basketball Players Association ("NBPA") (or its successor) ("Player
Attributes")) in accordance with the terms of this Agreement (the "Licensed
Attributes") (including the usage of multiple player requirements set forth in
Paragraph A below), in either case, solely in connection with the manufacture,
distribution, advertisement, promotion and sale of the products described in
Paragraph A below including one or more of the Licensed Marks ("Licensed
Products"). No license or right is granted for the use of the Licensed Marks for
any purpose other than on the Licensed Products and in the distribution,
advertisement, promotion and sale of the Licensed Products in accordance with
this Agreement.
A. LICENSED PRODUCTS:
Trading Cards: trading card products as approved by NBAP pursuant to this
Agreement. During the Term (as defined below), LICENSEE shall make up to
(Information subject to request for confidential treatment.) "Releases" (as
defined in Paragraph 1 of the attached NBAP Standard Terms and Conditions)
in the 1st Contract Year and up to (Information subject to confidential
treatment.) in each of the 2nd and 3rd Contract Years.
(Information subject to confidential treatment.)
(Information subject to confidential treatment.)
(Information subject to confidential treatment.)
<PAGE>
B. TERM: As of August 1, 1998 to July 31, 2001 (the "Term").
C. TERRITORY: Licensed Products may only be distributed in the United States,
the District of Columbia, U.S. territories and possessions, U.S. military
bases worldwide and Canada (collectively "North America") and Australia and
New Zealand (collectively, the "Territory").
D. ROYALTY RATES: LICENSEE shall pay monthly to NBAP a combined royalty and
advertising and promotion payment (hereinafter referred to as "royalty")
equal to the percentage of "Net Sales" (as defined in Paragraph 1 of the
attached NBAP Standard Terms and Conditions) listed opposite each Licensed
Product category for the territories specified below:
Australia and
North America New Zealand
Trading Cards
Topps Brand (Information subject to confidential treatment.)
All Other Brands (Information subject to confidential treatment.)
Card Art and Replica Jerseys (Information subject to confidential treatment.)
E. MINIMUM GUARANTEES:
(i) Minimum Guarantees: LICENSEE guarantees that its aggregate annual
royalty payments to NBAP for each Contract Year under this Agreement
shall not be less than the amount set forth opposite such Contract
Year:
1st Contract Year: (Information subject to confidential treatment.)
2nd Contract Year: (Information subject to confidential treatment.)
3rd Contract Year: (Information subject to confidential treatment.)
(ii) Monthly Minimum Payments: Notwithstanding anything to the contrary
in Paragraph 6(a) of the NBAP Standard Terms and Conditions attached
hereto, with respect to the 1st Contract Year, the minimum amount of
each monthly royalty payment shall be the amount which, when added to
the payments of royalties previously made for the 1st Contract Year
shall be equal to:
(Information subject to confidential treatment.)
<PAGE>
F. ADVERTISING AND PROMOTION:
(i) Consistent with NBAP's past practice of creating, undertaking or
supporting advertising and promotion activities with respect to
NBAP-licensed products sold at retail, NBAP shall devote up to two
percent (2%) of Net Sales (from the royalties received from LICENSEE
pursuant to this Agreement) to cover the expenses incurred by NBAP in
connection with such advertising and promotion activities.
(ii) LICENSEE shall exhibit, at its sole cost and expense, a fair and
representative selection of Licensed Products at every trade show
LICENSEE attends and where the exhibition of sports trading cards
would be appropriate.
G. SELLING PRACTICES: LICENSEE acknowledges NBAP's legitimate and reasonable
interest in protecting the value of the NBA Marks and maximizing the
effectiveness of its advertising, promotion and distribution efforts by
segmenting the classes of trade into which its licensees sell NBAP-licensed
products. Therefore, LICENSEE acknowledges that a failure to comply with
the selling practices set forth in this Paragraph shall cause significant
harm to NBAP's efforts to effectively and efficiently distribute
NBAP-licensed products.
H. MEDIA AND EVENT SUPPORT:LICENSEE shall expend on NBA media and events during
each Contract Year an amount no less than the amount set forth opposite
such Contract Year:
1st Contract Year: (Information subject to confidential treatment.)
2nd Contract Year: (Information subject to confidential treatment.)
3rd Contract Year: (Information subject to confidential treatment.)
The specific allocation of the funds to be spent pursuant to this Paragraph
H shall be as mutually agreed upon by NBAP and LICENSEE. Notwithstanding
the foregoing, if a Work Stoppage causes the 1998-99 NBA Regular Season to
be delayed, LICENSEE shall receive a credit against LICENSEE's 1st Contract
Year NBA media and event support obligation in an amount equal to
(Information subject to confidential treatment.) for each thirty (30) day
period such Season is delayed (it being understood that the aggregate
amount of any such relief shall be pro-rated for any delay of the 1998-99
NBA Season less than thirty (30) days). In addition, if either of the
1999-2000 or the 2000-2001 NBA Season is delayed as a result of a work
stoppage, LICENSEE shall receive a credit against LICENSEE's NBA media and
event support obligation for the applicable Contract Year (e.g., LICENSEE's
2nd Contract Year NBA media and event support obligation for a delay of the
1999-2000 NBA Season) in an amount equal to (Information subject to
confidential treatment.) for each thirty (30) day period such Season is
delayed (it being understood that the aggregate amount of any such relief
shall be pro-rated for any delay of such Season less than thirty (30)
days).
AGREED TO AND ACCEPTED, subject AGREED TO AND ACCEPTED:
to and incorporating the attached NBAP NBA PROPERTIES, INC.
Standard Terms and Conditions which
the undersigned has read:
THE TOPPS COMPANY, INC. By:________________________
Harvey E. Benjamin
Senior Vice President,
Business Affairs
By:__________________________
Title:_________________________ Dated:_____________________
<PAGE>
NBAP STANDARD TERMS AND CONDITIONS
1. ADDITIONAL DEFINITIONS
For the purposes of this Agreement:
(a) "Contract Year" shall mean a twelve (12) month accounting period
commencing August 1 and concluding July 31.
(b) "Counterfeit Goods" shall mean and include:(i) goods that bear any NBA
Mark that has been reproduced and/or affixed without authorization
from NBAP; (ii) goods that bear any NBA Mark produced by any source in
excess of an amount ordered by an NBAP licensee; and (iii) goods that
bear any NBA Mark that have been rejected by NBAP or an NBAP licensee
and nevertheless enter the stream of commerce.
(c) "Current" (as used with respect to players) shall mean (i) a player on
an NBA team roster as of the time of LICENSEE's submission of its
player list for NBAP approval, or use, (ii) in the event of a
LICENSEE's submission during the "off-season," players that were on an
NBA team roster at the end of the preceding regular season and have
not announced their retirement or an intention to play basketball in a
professional league other than the NBA, and (iii) such other players
as NBAP may approve for use on a case-by-case basis.
(d) "Diverted Goods" shall mean and include any goods produced by someone
acting on behalf of an NBAP licensee, which goods are not delivered by
the producer to such licensee or to a person designated by such
licensee to receive such goods.
(e) (i) "NBA Photo" means any photograph (which shall specifically include
transparencies, negatives and any other photographic property created)
of a current NBA player taken by any party during an NBA game,
competition, event or NBA-coordinated activity (e.g., Pre-Draft Camps,
Rookie Orientation, player appearances, etc.), or in which such a
player is pictured in his NBA team or League issued uniform or
practice wear or NBA-identified merchandise. (ii) "Commissioned Photo"
shall mean any NBA Photo taken by a photographer engaged by LICENSEE
on or after October 1, 1993 and in accordance with Paragraph 2 below.
(f) (i) "Net Sales" shall mean (Information subject to confidential
treatment.)
(g) "Parallel Goods" shall mean and include Licensed Products transferred
outside of the Territory or brought into the Territory in violation of
this Agreement.
(h) "Premium" shall mean anything given free or sold at substantially less
than its usual selling price (but does not include sales made pursuant
to periodic price reductions resulting from "specials," "sales," or
volume pricing discounts) for the purpose of increasing the sale of,
or publicizing, any product or service, or other giveaway or
promotional purpose. Other giveaway or promotional purposes include,
but are not limited to, self-liquidating offers, uses of Licensed
Products as sales force or trade incentives and sales of Licensed
Products through distribution schemes involving earned discounts or
"bonus" points based on the consumer's use of the offeror's product or
service.
(i) "Release" means each series of a Licensed Product issued in series(for
example, Stadium Club Series I and Stadium Club Series II would each
be counted as a release) and each Licensed Product not issued in
series (for example, Bowman's Best would be counted as a release).
(j) "Set" means all the cards in all series of a Licensed Product issued
in series and in each Licensed Product not issued in series.
2. ARENA ACCESS; EXPENSES
(a) (Information subject to confidential treatment.)
(b) Expenses & Responsibilities: All expenses related to assignments
performed by LICENSEE's photographers hereunder shall be paid by
LICENSEE. Such expenses include, but are not limited to: the purchase,
installation and shipping of strobes; all travel expenses; purchase
and shipment of film; building and union fees if applicable; and any
and all other expenses deemed necessary by LICENSEE or NBAP to perform
photographic assignments hereunder. All film exposed by photographers
in connection with assignments performed hereunder shall be shipped,
via overnight delivery, unprocessed to the offices of NBA PHOTOS (450
Harmon Meadow Boulevard, Secaucus, New Jersey 07094) on the next
business day following the day of the assignment. All shipping costs
shall be paid by LICENSEE or its photographers, and NBA PHOTOS shall
pay processing expenses. If permission is granted to LICENSEE or its
photographer to process exposed film, LICENSEE or the photographers
shall pay the cost of processing. On occasion, NBAP may desire to send
originals from a specific game or games to an NBAP client or NBA team
prior to sending them to LICENSEE. (Information subject to
confidential treatment.). In the event LICENSEE does not respond
within two (2) business days, NBA PHOTOS may submit the materials to
its client or team provided that such a submission by NBA PHOTOS does
not knowingly interfere with LICENSEE's ability to meet its production
deadlines and does not violate the provisions of Paragraph 3(b) below.
NBAP shall catalog, label and duplicate all of the Commissioned Photos
selected by NBAP for inclusion in the NBA PHOTOS' archives and shall
send to LICENSEE within five (5) business days after receipt of the
exposed film all originals of Commissioned Photos along with a set of
duplicates. NBAP shall pay all costs associated with duplication.
<PAGE>
LICENSEE shall review all original materials and return to NBA PHOTOS,
within ten (10) business days from its receipt thereof, any originals
not selected by LICENSEE for use on Licensed Product. Commissioned
Photos selected for use on Licensed Product shall be returned by
LICENSEE to NBA PHOTOS upon request. LICENSEE shall make every
reasonable effort to provide NBA PHOTOS with timely access to any
materials being held by LICENSEE.
3. RIGHTS IN COMMISSIONED PHOTOS
All Commissioned Photos shall become and remain the property of NBAP as
provided under Paragraph 10(d) below.
(a) NBAP's rights in Commissioned Photos shall include, but not be limited
to: (i) the unrestricted and exclusive reproduction rights throughout
the world, without name credit, for advertising, trade, or art
purposes or any other lawful purpose; (ii) the exclusive right
throughout the world to protect the Commissioned Photos by copyrights,
in NBAP's name and for its benefit, including the right to secure
extensions and renewals of such copyrights, in NBAP's name and for
NBAP's benefit; (iii) the right to alter, retouch or crop the
Commissioned Photos in any way; (iv) the right to license, distribute,
assign or transfer any right, title, interest or copyright in the
materials or otherwise dispose of the Commissioned Photos or any
portion thereof for any purpose and in any manner except as otherwise
noted in Paragraph 3(b) below; and (v) all subsidiary rights.
(b) NBAP shall have exclusive rights and privileges in, to, and in
connection with the Commissioned Photos during the full terms of any
copyrights relating to the materials and all renewals and extensions
thereof to: (i) create from the Commissioned Photos any form or medium
now known or hereafter to become known, including but not limited to,
all formats of electronic, magnetic, digital, laser or optical based
media (a "Converted Work"); (ii) reproduce any Converted Works; (iii)
prepare and reproduce any audible segments based on the Commissioned
Photos ("Audio Segment"); (iv) prepare and reproduce any video or
motion picture segments based on the Commissioned Photos ("Visual
Segment"); (v) prepare and reproduce any composition which includes
any combination of the Commissioned Photos, a Converted Work, an Audio
Segment or a Visual Segment ("Products"); (vi) prepare and reproduce
any derivative works based on the materials ("Derivative Products");
(vii) prepare and reproduce any compilations which include the
Commissioned Photos, Converted Works, products or Derivative Products
("Product Compilations"); (viii) distribute copies in any form of the
materials, Converted Works, Products, Derivative Products or Product
Compilations by sale, lease, license or lending; (ix) transmit,
download or otherwise transfer or distribute, the Commissioned Photos,
Converted Works, Products, Derivative Products or Product
Compilations; (x) perform the Converted Works, Products, Derivative
Products or Product Compilations; and (xi) display the Commissioned
Photos, the Converted Works, Products, Derivative Products or Product
Compilations. NBAP hereby grants to LICENSEE the right, in perpetuity,
to use any of the Commissioned Photos on any of its Licensed Products
without any usage fees. NBAP shall not license (or otherwise
authorize) the use of any Commissioned Photos to any other entity that
manufactures or distributes trading cards or stickers, nor shall NBAP
or any of its affiliated entities use the Commissioned Photos in
connection with NBAP-produced or manufactured trading cards or
stickers. All Commissioned Photos selected by LICENSEE for use on
Licensed Product shall not be knowingly licensed (or otherwise
authorized) by NBAP to any other individual or entity (excluding the
NBA or any member team) for use in the U.S., Canada, Australia, New
Zealand or any other country or region where LICENSEE is then-licensed
under this Agreement for a period beginning with the date of
LICENSEE's selection of such photo and expiring ninety (90) days after
the first day of shipment by LICENSEE of the product utilizing the
Commissioned Photo. (Information subject to confidential treatment.)
4. SHARED PHOTO LICENSING REVENUES
(Information subject to confidential treatment.)
5. TEAM REPRESENTATION
Unless otherwise approved in writing by NBAP, one NBA Set within LICENSEE's
basic line must include individual cards of a minimum of six (6) players
from each Member Team and utilize the respective team's full logo on a
mutually agreeable location on the card. (Other product lines can have
fewer than 6 players from each team but such minimum player requirement
shall be subject to NBAP's approval.) All designs of the Licensed Products
using the Licensed Marks, including any packages, containers or tags, shall
be subject to NBAP's prior written approval and shall be used solely in
furtherance of this Agreement, and such designs will not be used in any
other respect by LICENSEE nor will LICENSEE authorize any third party to
use such designs. Notwithstanding the foregoing, NBAP acknowledges that
LICENSEE may hold other licenses pursuant to which LICENSEE manufactures,
distributes or sells products similar in design to the Licensed Products
and nothing in this Agreement is intended to prohibit LICENSEE's
manufacture, distribution or sale of such products not bearing or relating
to the Licensed Marks.
6. STATEMENTS AND PAYMENTS; REPORTING
(a) Statement and Payments: By the fifteenth (15th) day following the end
of each month, LICENSEE shall wire transfer to NBAP the "Monthly
Minimum Payment" (as defined below), and within fifteen (15) days
(i.e., by the 30th day following the end of each month) of each such
payment, shall furnish (on forms provided by or approved by NBAP) full
and accurate statements (on a country-by-country and unit basis, if
<PAGE>
more than one country is contained within the definition of the
Territory), certified by an officer of LICENSEE, showing all
information relating to the calculation of Net Sales for the preceding
month. Simultaneously with the submission of such statement, LICENSEE
shall wire transfer to NBAP the overage, if any, with respect to the
Monthly Minimum Payment made and the actual earned royalty required
for the preceding month. The minimum amount of each monthly royalty
payment shall be the amount which, when added to payments of royalties
previously made for the Contract Year, shall be equal to one-twelfth
(8.34%) of the Minimum Guarantee for such Contract Year required under
Paragraph E above, multiplied by the number of calendar months then
elapsed (the minimum payments under this sentence shall be
collectively referred to as the "Monthly Minimum Payment"). Aggregate
royalties paid each Contract Year may exceed the Minimum Guarantee for
such Contract Year. Such monthly statements shall be furnished and the
required payments made by LICENSEE whether or not there are any Net
Sales for that month. All payments made by LICENSEE to NBAP under this
Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any income, stamp or other taxes,
charges, fees, deductions or withholdings. If any such taxes, charges,
fees, deductions or withholdings are required by law to be withheld
from any amounts payable to NBAP hereunder, the amounts so payable
shall be increased to the extent necessary to yield to NBAP the
amounts specified in this Agreement. All payments shall be in U.S.
dollars, from a U.S. source approved by NBAP. All computations and
payments shall be in U.S. dollars, at the spot rate for the local
currency as published in the Wall Street Journal for the last business
day of the preceding month. If LICENSEE shall fail to timely pay any
amount due under this Paragraph, LICENSEE shall pay interest on such
amount at a rate equal to the lesser of (i) three percent (3%) per
annum over the highest prime rate (announced by Chase Bank, New York
branch) prevailing during the period between the date the payment
first became due and the date such payment is actually paid or (ii)
the highest rate permitted by law during the period between the date
the payment first became due and the date such payment is actually
paid. The receipt or acceptance by NBAP of any of the statements
furnished or royalties paid by LICENSEE (including the cashing of any
royalty checks) shall not preclude NBAP from questioning their
accuracy at any time, auditing LICENSEE's books and records pursuant
to Paragraph 15 or claiming any shortfall in royalty payments, or
advertising and promotion payments. In order to assist with NBAP's
annual budget process, upon NBAP's request, each Contract Year,
LICENSEE shall deliver a statement detailing LICENSEE's projections
for sales of each Licensed Product for the following Contract Year,
broken down on a quarterly basis.
(b) No Cross Collateralization: Any royalty payment for a unit of Licensed
Product sold shall only be applied against the Minimum Guarantee for
such Licensed Product for the Contract Year in which the unit of such
Licensed Product was sold (i.e., any shortfall in, or payment in
excess of, the Minimum Guarantee for a Contract Year may not be offset
or credited against the Minimum Guarantees for any other Contract
Year, against any other Licensed Product or against any other NBA
license (including premium license agreements entered into pursuant to
Paragraph 8 hereof) held by LICENSEE).
7. NON-RESTRICTIVE GRANT; RIGHTS RESERVED
Nothing in this Agreement shall prevent NBAP from granting any other
licenses and rights. All rights not specifically granted in this Agreement
are expressly reserved by NBAP. No right of renewal or option to extend is
granted or implied and LICENSEE shall have no right to continue
manufacturing or selling Licensed Products or to continue holding itself
out as a licensee of NBAP after the expiration or termination of this
Agreement except as provided in Paragraph 17.
8. PREMIUMS
Licensed Products shall not be used as a Premium without the prior written
approval of NBAP in each instance and unless specifically authorized
pursuant to a separate agreement with NBAP. Nothing in this Agreement shall
prohibit LICENSEE from marketing Licensed Products using creative
techniques consistent with industry practice, including, but not limited
to, periodic "specials," "sales," or volume discount prices, so long as all
receipts are accounted for in Net Sales and in accordance with this
Agreement.
9. GOODWILL
LICENSEE recognizes that (i) a portion of the value of the NBA Marks is
attributable to goodwill, (ii) the goodwill attached to the NBA Marks
belongs exclusively to NBAP, the NBA and its Member Teams and (iii) that
such NBA Marks have secondary meanings in the minds of the public. LICENSEE
shall not, during the Term or thereafter, challenge (y) the property rights
of the Member Teams, whether severally owned or held in association as the
NBA, or NBAP's property rights, in and to NBA Marks, or (z) the validity,
legality or enforceability of this Agreement.
10. PROTECTION OF RIGHTS
(a) Unauthorized Activities: LICENSEE shall promptly notify NBAP in
writing of any infringements of the Licensed Marks or the Licensed
Products or the sale of any Licensed Products outside the Territory
(e.g., unauthorized importation/exportation of goods) which may come
to LICENSEE's attention. NBAP shall have the sole right to determine
whether or not any action shall be taken on account of any such
infringement or unauthorized importation/exportation. LICENSEE agrees
not to contact any third party, not to make any demands for claims and
not to institute any suit or action on account of such infringement of
<PAGE>
the NBA Marks or unauthorized importation/exportation of Licensed
Product without obtaining the express prior written permission of NBAP
in each instance.
(b) Assistance in Protecting Marks:LICENSEE shall cooperate to the fullest
extent reasonably necessary to assist NBAP in the protection of the
rights of NBAP, the NBA and the Member Teams in and to the Licensed
Marks. LICENSEE shall cooperate with NBAP in its enforcement efforts,
including, subject to LICENSEE's approval (which approval shall not be
unreasonably withheld), being named by NBAP as a complainant in any
action against an infringer. NBAP shall reimburse LICENSEE for any
reasonable out-of-pocket costs actually incurred by LICENSEE in
providing such cooperation and assistance. LICENSEE shall pay to NBAP,
and waives all claims to, all damages or other monetary relief
recovered with respect to the NBA Marks in any such NBAP-initiated
action by reason of a judgment or settlement (other than for
reasonable attorneys' fees and expenses incurred at NBAP's request).
(c) Ownership of Marks: LICENSEE acknowledges that NBAP and/or the Member
Teams are the exclusive owners of the Licensed Marks. Any intellectual
property rights in the Licensed Marks that may accrue to LICENSEE
shall inure to the benefit of NBAP and shall be assigned to NBAP upon
its request. Any copyright, trademark or service mark used or procured
by LICENSEE with respect to or involving the Licensed Marks,
derivations or adaptations of the Licensed Marks, or any word, symbol
or design which is similar to the Licensed Marks so as to suggest
association with or sponsorship by the NBA, one of its Member Teams or
any of their affiliates, shall be procured for the benefit of and in
NBAP's name, but at LICENSEE's expense, notwithstanding their creation
by LICENSEE. LICENSEE shall take all necessary steps to secure an
assignment to NBAP of the copyright from a creator of work that is not
work-for-hire. Any copyright, trademark or service mark affecting or
relating to the Licensed Marks already procured or applied for shall
be assigned to NBAP. LICENSEE shall supply NBAP with any necessary
supporting materials required to obtain copyright or trademark
registrations of any copyrights or trademarks required to be assigned
to NBAP under this Agreement. NBAP acknowledges that nothing in this
Paragraph or Agreement shall be construed as granting or conveying to
NBAP any rights with respect in or to LICENSEE's present, past or
future trademarks or trade names or other intellectual property
rights, and trade names and brand names used across multiple sports
and not incorporating any NBA Marks.
(d) Ownership of Commissioned Photos: All Commissioned Photos shall become
and remain the property of NBAP, and shall be considered
"works-for-hire" for NBAP within the meaning of the United States
Copyrights Law (the "Copyright Law") for all purposes and may, without
delay or restriction, be registered in the name of NBA PHOTOS with the
U.S. Copyright Office of the Library of Congress (the "Copyright
Office") and such other national or multinational registries in which
NBAP may elect to effect such filings. If, for any reason, the
Commissioned Photos are held not to be "works-for-hire", LICENSEE
hereby assigns to NBAP all rights LICENSEE has, throughout the world
and in perpetuity, in the Commissioned Photos. Accordingly, in
consideration of NBAP's obligations under this Agreement, all rights
in the Commissioned Photos shall be owned exclusively by NBAP.
LICENSEE shall not have or claim to have any right of any kind
whatsoever in such materials other than as set forth herein, and
LICENSEE agrees to execute any documents necessary to transfer all
rights and title in the materials to NBAP. NBAP shall be considered to
be the "Author" of any and all such works under applicable
international laws and treaties and have the sole right and
entitlement accorded "Authors" thereunder. LICENSEE hereby appoints
NBAP as "Attorney-In-Fact" for the purpose of executing any documents
reasonably necessary to implement the terms of this Agreement.
LICENSEE shall secure copyright for NBAP (by such means as are
reasonably appropriate, e.g., use of C notice or registration in the
Copyright Office) of all Commissioned Photos. To the extent permitted
by law, all Commissioned Photos shall be commissioned by LICENSEE as
"works-for-hire" for NBAP within the meaning of the Copyright Law, for
all purposes, and may, without delay or restriction, be registered in
the name of NBAP with the Copyright Office and such other national or
multinational registries in which NBAP may elect to effect such
filings. LICENSEE shall require all photographers performing
assignments for LICENSEE in connection with this Agreement to sign a
copy of an agreement in the form of Exhibit A (or in such other form
as LICENSEE may elect to utilize subject to NBAP's prior approval as
to its legal sufficiency and content), which grants and assigns to
NBAP all copyright and ownership of any and all Commissioned Photos
created by the photographers in connection with this Agreement.
LICENSEE shall submit to NBAP fully executed agreements in the form of
Exhibit A, or other NBAP approved form of documentation as provided
above, for each photographer prior to performing assignments in
connection with this Agreement. In the alternative, consistent with
LICENSEE's past practice, LICENSEE can continue to have its
photographers grant and assign to LICENSEE all copyright and ownership
in Commissioned Photos and LICENSEE then in turn conveying same to
NBAP as provided above.
(e) Notices, Labeling and Records: In every instance in which any Licensed
Mark is used free-standing in any Licensed Product or promotional
materials design (i.e., not appearing as embodied in or on a uniform,
equipment, etc.), LICENSEE shall include the notice "TM," "R," "C" or
such other copyright, trademark or service mark notices (including the
form, location and content of such notices) as NBAP may reasonably
designate from time-to-time. In addition, the following general notice
(in the English language, and in the language of any foreign country
<PAGE>
where the Licensed Products will be sold in such foreign language
subject to space limitations and the requirements of local law) must
be included on the packaging of the Licensed Product:
"The NBA and individual NBA member team identifications
reproduced on this product are trademarks and copyrighted
designs, and/or other forms of intellectual property, that are
the exclusive property of NBA Properties, Inc. and the respective
NBA member teams and may not be used, in whole or in part,
without the written consent of NBA Properties, Inc."
LICENSEE shall: (i) cause each card to bear the NBA Logo together with
the NBAP C notice in such place, and in such prominence, as NBAP may
reasonably designate from time-to-time, (ii) include on the product
box and wrapper the "Official Licensed Product" logo and the NBAP C
notice in such place, and in prominence, as NBAP may reasonably
designate from time-to-time, (iii) faithfully comply with and adhere
to NBAP's mandatory hologram "Official Licensed Product"
identification system or such system(s) as NBAP may from time-to-time
require including, but not limited to, identification devices,
shipment tracking, identification and anti-counterfeiting systems,
stickers and labels that NBAP may establish from time-to-time, (iv)
unless approved in writing by NBAP, not cross-license or otherwise use
other licensed properties or other Marks with the Licensed Products or
Licensed Marks, and (v) keep appropriate records, and advise NBAP, of
the date when each of the Licensed Products is first placed on sale or
sold in each country of the Territory and the date of first use in
each country of each different Licensed Mark on the Licensed Products
and any promotional or packaging materials. If NBAP requires the
incorporation of an anti-counterfeiting device on individual cards
that adds a direct manufacturing cost (other than a de minimus cost)
to the Licensed Products, NBAP shall make a reasonable equitable
adjustment to LICENSEE's obligations under this Agreement.
(f) Recordation and Registered User Applications: With respect to those
countries in which LICENSEE may distribute and which require
applications to register LICENSEE as a permitted or registered user of
the Licensed Marks, or which require the recordation of this
Agreement, LICENSEE shall execute and deliver to NBAP such
applications, agreements or other documents as may be necessary. In
such event, this Agreement rather than such agreements will govern any
disputes between LICENSEE and NBAP, and when this Agreement expires or
is terminated, any such other agreement shall also be deemed expired
or terminated.
(g) LICENSEE Trade Names and Trademarks: LICENSEE shall permanently affix
labeling on each Licensed Product or its packaging, indicating its
name, trade name and address so that the public can identify the
supplier of the Licensed Product. Prior to any distribution or sale of
any Licensed Products, LICENSEE shall advise NBAP in writing of
LICENSEE's trade names or trademarks used on Licensed Products and the
proposed placement of such trade names and trademarks on the Licensed
Products. Set forth as Schedule A hereto is a list of all LICENSEE's
trade names and trademarks approved by NBAP as of the date of
execution of this Agreement. LICENSEE shall only sell Licensed
Products under mutually agreed upon trade names or trademarks and with
approved copyrighted designs, shall not incorporate the Licensed Marks
into LICENSEE's corporate or business name or trademark in any manner
whatsoever and shall place its trade names and trademarks on Licensed
Products only as approved by NBAP. NBAP shall not unreasonably
withhold approval as to the trademarks and trade names of LICENSEE
proposed for use by LICENSEE during the Term. As requested by NBAP,
LICENSEE shall supply NBAP, in advance of shipping any Licensed
Products, with at least twelve (12) copies of each type of its
stickers, product boxes, labels and other markings of origin for use
in identifying and authenticating Licensed Products in the
marketplace. LICENSEE shall not use, whether during or after the Term,
any Marks: (i) in connection with the Licensed Marks without NBAP's
authorization, (ii) confusingly-similar to the Licensed Marks, or
(iii) intended to relate or refer to the Licensed Marks, the Member
Teams or events involving Member Teams.
11. INDEMNIFICATIONS
(a) LICENSEE shall be solely responsible for, and shall defend, hold
harmless and indemnify NBAP, NBA Entertainment, Inc. ("NBAE"), the NBA
and its Member Teams and the NBPA and their respective affiliates,
owners, directors, governors, officers, employees and agents
(collectively "NBA Parties") against, any claims, demands, causes of
action or damages, including attorneys' fees (collectively, "Claims"),
arising out of: (i) any breach of this Agreement by LICENSEE, any
Third Party Contributor (as defined in Paragraph 14(b) below) or any
other entity acting on LICENSEE's behalf (whether or not approved by
NBAP pursuant to this Agreement), (ii) the manufacture, distribution,
advertisement, promotion, sale, possession or use of any Licensed
Product (including, but not limited to, claims relating to (w) any
defect (whether obvious or hidden and whether or not present in any
sample approved by NBAP) in a Licensed Product or in any packaging or
other materials (including advertising materials), (x) any alleged
injuries to persons or property, (y) any infringement of any rights of
any other person or entity or (z) the alleged failure by LICENSEE to
comply with applicable laws, regulations and standards or the terms of
the NBAP Code of Conduct, as amended from time to time by NBAP (the
"Code of Conduct"), attached hereto as Exhibit A) or (iii) any claim
(except as to those for which LICENSEE is entitled to indemnification
by NBAP under subparagraph (b) below) that the use of any Commissioned
<PAGE>
Photo violates or infringes upon the copyright or other intellectual
property rights of any third party, or (iv) any claim that any
Licensed Product or element thereof (other than the Licensed Marks)
violates or infringes upon the trademark, copyright or other
intellectual property rights (including trade dress) of a third party,
provided LICENSEE is given prompt written notice of and shall have the
option to undertake and conduct the defense of any such Claim. In any
instance to which the foregoing indemnities pertain, NBAP shall
cooperate fully with and assist LICENSEE in all respects in connection
with any such defense. LICENSEE shall reimburse NBAP for all
reasonable out-of-pocket costs actually incurred by NBAP in connection
with such cooperation and assistance. In any instance to which such
indemnities pertain, LICENSEE shall not enter into a settlement of
such Claim or admit liability or fault with respect in or to the NBA
Marks without NBAP's prior written approval. LICENSEE shall obtain and
maintain product liability insurance providing protection for the NBA
Parties against any Claims arising out of any alleged defects in the
Licensed Products or any use of the Licensed Products, in the amount
of one million dollars ($1,000,000) (including the amount of the
deductible). Such insurance shall be carried by an insurer with a
rating by A.M. Best & Co. of A-7 or other rating satisfactory to NBAP.
Such insurance policy shall also provide that NBAP receive written
notice within thirty (30) days prior to the effective date of the
cancellation, non-renewal or any material change in coverage. In the
event that LICENSEE fails to deliver to NBAP a certificate of such
insurance evidencing satisfactory coverage prior to NBAP's execution
of this Agreement, NBAP shall have the right to terminate this
Agreement at any time. Such insurance obligations shall not limit
LICENSEE's indemnity obligations, except to the extent that LICENSEE's
insurance company actually pays NBAP amounts which LICENSEE would
otherwise be obligated to pay NBAP.
(b) NBAP shall be solely responsible for, and shall defend, hold harmless
and indemnify LICENSEE, its directors, officers, employees and agents
against any Claims arising out of: (i) a claim that the use of the
Licensed Marks as specifically approved by NBAP in accordance with the
terms of this Agreement violates or infringes upon the trademark,
copyright or other intellectual property rights (including trade
dress) of a third party in or to the Licensed Marks, (ii) a claim that
the use of the Licensed Attributes on Licensed Products, or in
advertising or promotional materials, as specifically approved by NBAP
in accordance with the terms of this Agreement violates or infringes
upon the right of privacy or right of publicity or any other common
law right of any NBA player, (iii) a claim arising out of LICENSEE's
compliance with terms and conditions of this Agreement relating to the
procurement of NBA Photos and Commissioned Photos for use on Licensed
Product (and NBA-identified advertising and promotion materials), or
(iv) any breach of this Agreement by NBAP, provided NBAP is given
prompt written notice of and shall have the option to undertake and
conduct the defense of any such Claim. In any instance to which the
foregoing indemnities pertain, LICENSEE shall cooperate fully with and
assist NBAP in all respects in connection with any such defense. NBAP
shall reimburse LICENSEE for all reasonable out-of-pocket expenses
actually incurred by LICENSEE in connection with such cooperation and
assistance. In any instance to which such indemnities pertain, NBAP
shall not enter into a settlement of such Claim or admit liability or
fault without LICENSEE's prior written approval.
12. QUALITY; APPROVALS; SAMPLES
LICENSEE shall cause the Licensed Products to meet and conform to high
standards of style, quality and appearance. In order to assure NBAP that it
is meeting such standards and other provisions of this Agreement, LICENSEE
shall comply with the following:
(a) (Information subject to confidential treatment.)
(b) (Information subject to confidential treatment.)
(c) Use of NBA Photos and Footage:Any NBA Photo or NBA game action footage
that LICENSEE uses in connection with the Licensed Products must be
obtained from NBAE or NBA PHOTOS (as applicable), other than with
respect to Commissioned Photos, and shall be subject to NBAE and NBA
PHOTOS respective usage agreements, and prevailing search and edit
charges for NBAP card licensees (and which charges shall be no greater
than those charged any other NBAP card licensees) and any applicable
use or holding fee. All NBA Photos must be returned to NBA PHOTOS in
their original slide mount or sleeve with the photo identification
number/bar code number intact or a service fee shall be assessed
LICENSEE in accordance with the terms of NBA PHOTOS usage agreement.
(d) Rejections and Non-Compliance: All submissions or samples not approved
by NBAP shall promptly be destroyed by LICENSEE. LICENSEE shall advise
NBAP regarding the time and place of such destruction (in sufficient
time to arrange for an NBAP representative to witness such
destruction, if NBAP so desires) and such destruction shall be
attested to in a certificate signed by one of LICENSEE's officers and
submitted to NBAP within fifteen (15) days of the date on which the
sample was not approved. In the event of LICENSEE's unapproved or
unauthorized manufacture, distribution, use or sale of any products or
materials bearing the Licensed Marks, including promotional materials,
or the failure of LICENSEE to comply with Paragraphs 10(e), 10(g), 12
or 14(c), NBAP shall have the right to: (i) immediately revoke
LICENSEE's rights with respect to such Licensed Product licensed under
this Agreement, and/or (ii) at that LICENSEE's expense, confiscate or
order the destruction of such unapproved, unauthorized or
non-complying products. In the event of LICENSEE's failure to comply
<PAGE>
with the material terms of the aforementioned Paragraphs, within
thirty (30) days after LICENSEE's receipt of notice of such breach,
LICENSEE shall pay in accordance with Paragraph 16 below all royalties
and Minimum Guarantees due NBAP with respect to the Licensed Product
for which rights have been revoked. Such right(s) shall be without
prejudice to any other rights NBAP may have under this Agreement or
otherwise. If NBAP obtains a substitute licensee for the Licensed
Products produced by LICENSEE and rights to which have been revoked
hereunder, NBAP shall credit all revenues received from such
substitute licensee with respect to such Licensed Product against
LICENSEE's obligations for the Minimum Guarantees.
(e) Testing Requirements: LICENSEE shall follow reasonable and proper
procedures for testing the Licensed Products for compliance with laws,
regulations, standards and procedures. Licensed Products that do not
comply with applicable laws, regulations, standards and procedures
shall be deemed unapproved, even if previously approved by NBAP, and
shall not be shipped unless and until LICENSEE can demonstrate to
NBAP's satisfaction that such Licensed Products have been brought into
full compliance.
(f) Revocation of Approval: In the event that: (i) the quality, appearance
or style of any Licensed Product previously approved by NBAP ceases to
be acceptable to NBAP because of a material change in the quality,
appearance or style of the Licensed Product, (ii) LICENSEE uses the
Licensed Marks improperly or violates any material term of this
Paragraph 12 or (iii) there is an event or occurrence relating to any
player depicted in a Licensed Product which, in the good faith opinion
of NBAP, defames or brings into disrepute, or reflects unfavorably
upon NBAP, the NBA or any of its Member Teams, then, in any such
event, NBAP shall have the right, in its sole discretion, to withdraw
its approval of such Licensed Product. In the event of such
withdrawal, NBAP shall provide immediate written notice to LICENSEE
and LICENSEE shall cease the use of the Licensed Marks and Licensed
Attributes in connection with the sale, distribution, advertisement or
use of such Licensed Product and, if practicable, such Licensed
Product shall immediately be withdrawn from the market and destroyed;
provided, however, that in the event of a revocation of approval
pursuant to this Paragraph, NBAP and LICENSEE shall negotiate in good
faith to provide for a reasonable sell-off period for such Licensed
Product and an equitable adjustment to the Minimum Guarantee for such
Licensed Product. If there are other Licensed Products for which
approval has not been withdrawn under this subparagraph, then this
Agreement shall remain in full force and effect as to such other
Licensed Products. LICENSEE shall notify NBAP in writing of any
Licensed Products deleted from its product lines.
13. PROMOTIONAL MATERIAL; LIST GENERATION
LICENSEE shall not use the Licensed Marks or Licensed Attributes, or any
reproduction of the Licensed Marks or Licensed Attributes in any
advertising, promotion or display material or in any other manner
whatsoever without prior written approval from NBAP. LICENSEE shall furnish
to NBAP, free of charge, in a computer readable form or such other format
reasonably acceptable to NBAP, the names, addresses, telephone numbers and
any other consumer information furnished to, and maintained by, LICENSEE
resulting from participation in any NBA-themed sweepstakes, promotion or
direct mail solicitation conducted by LICENSEE (and which information NBAP
shall have the right to use for its marketing and research efforts as it
deems appropriate; provided, however, that such information shall not be
made available to LICENSEE's competitors). NBAP shall furnish to LICENSEE,
free of charge, in computer readable form or such other format reasonably
acceptable to LICENSEE, the names, addresses, telephone numbers and any
other consumer information maintained by NBAP in connection with conducting
marketing tests, surveys or other research available to the category of
products comprising the Licensed Products. Under no circumstance will
"lotteries," "games of chance" or any other type of promotion which NBAP
believes reflects unfavorably upon the NBA or its Member Teams be approved.
All copy and material depicting or using the Licensed Marks or Licensed
Attributes (including display and promotional material, catalogs and press
releases) shall be submitted for approval well in advance of production
(but in no event less than ten (10) business days prior to the start of
commercial production) to allow adequate time for NBAP, in its sole
discretion, to approve, disapprove or comment upon such materials and for
any required changes to be made. By way of example, no television or cinema
advertising containing any Licensed Mark or Licensed Attribute may be used
unless it has been approved in all stages (i.e., creative concept, script,
storyboard, production "rough-cut" and final version). Unless otherwise
approved by NBAP, any NBA Photo or NBA game action footage that LICENSEE
uses in connection with the Licensed Products must be obtained from NBAE or
NBA PHOTOS (as applicable) and shall be subject to NBAE and NBA PHOTOS
respective search and edit charges and any applicable use or holding fee.
Any promotional material submitted that is not approved or disapproved by
NBAP within ten (10) days of its receipt by NBAP shall be deemed approved
by NBAP.
14. DISTRIBUTION; COMPLIANCE
(a) Distribution: LICENSEE shall use its best efforts to distribute and
sell, within and throughout the Territory, the Licensed Products in
such manner as may be required to meet competition by reputable
manufacturers of similar articles. LICENSEE shall make and maintain
adequate arrangements for the distribution and timely delivery of
Licensed Products to retailers within and throughout the Territory. In
the event NBAP advises LICENSEE that a special promotional effort is
to take place in an individual store or chain, LICENSEE shall use
<PAGE>
reasonable efforts to sell the Licensed Products to said store or
chain. In addition, LICENSEE shall give the Licensed Products wide
distribution and shall not, in accordance with the selling practices
set forth in this Agreement and consistent with LICENSEE's customary
criteria and reasonable business judgment, refrain for any reason from
selling Licensed Products to any retail outlet within the Territory
that may desire to purchase Licensed Products and whose credit rating
and marketing image warrants such sale.
(b) Third Party Contributors: If LICENSEE desires to use a third party
manufacturer or distributor (each a "Third Party Contributor") in
connection with the manufacturing of all or any part of, or the
distribution of, any Licensed Product, LICENSEE must first notify NBAP
of the name and address of such proposed Third Party Contributor and
of the Licensed Product LICENSEE desires such Third Party Contributor
to manufacture or distribute. NBAP shall have the right, in its sole
discretion, to withhold approval of any proposed Third Party
Contributor and may predicate its approval on any terms or conditions
NBAP shall determine in its sole discretion. LICENSEE may not use a
Third Party Contributor in connection with the manufacture of all or
any part of, or the distribution of, any Licensed Product prior to
receiving such approval from NBAP. If any of LICENSEE's Third Party
Contributors uses the Licensed Marks or Licensed Attributes for any
unauthorized purpose, LICENSEE shall be responsible for, and shall
cooperate fully and use its best efforts in stopping, such
unauthorized use. Attached as Schedule B is a true and complete list
of all Third Party Contributors currently authorized by NBAP as of the
date of execution of this Agreement.
(c) Counterfeit, Diverted and Parallel Goods: LICENSEE understands and
acknowledges the meanings of "Counterfeit Goods," "Diverted Goods" and
"Parallel Goods" as set forth in Paragraph 1 above and LICENSEE shall
not authorize or knowingly permit the creation of any such goods by
its employees, agents, representatives or any others operating under
its direction, supervision or control and involving the NBA Marks.
LICENSEE shall use commercially reasonable efforts to stamp or imprint
on all its invoices a prominent legend that states that the Licensed
Products are allowed to be sold only within the Territory. In the
event NBAP has good cause to believe that any of LICENSEE's authorized
distributors, agents and customers are not observing territorial
limits, LICENSEE shall, at the request of NBAP, inquire as to whether
such party or parties are observing territorial limits and shall
report in writing to NBAP the results of such inquiries. LICENSEE
shall notify NBAP of all orders from, or on behalf of, a customer who
LICENSEE knows is located outside the Territory or has good cause to
believe intends to resell the Licensed Products outside the Territory.
If LICENSEE sells Licensed Product outside the Territory, or to a
customer that it knows to be reselling the Licensed Product outside
the Territory, LICENSEE shall pay all NBAP's reasonable costs and
expenses, including attorney's fees, required to remove such goods
from the marketplace. Such right of reimbursement shall be in addition
to, and not in lieu of, such other rights and relief (including
injunctive relief) as may be available to NBAP.
(d) Selling and Distributing: In the event any LICENSEE sells or
distributes other major sports league licensed trading cards or
stickers, LICENSEE will not discriminate in its sales and distribution
practices among the products of the various leagues in a manner which
adversely impacts the sale of the Licensed Products. LICENSEE may not
package the Licensed Products in combination with other products,
whether similar or different, without the prior written approval of
NBAP.
(e) Shipping and Anti-Counterfeiting Compliance: LICENSEE shall at all
times conduct all aspects of its business in a fair and reasonable
manner and in compliance with all shipment tracking, identification
and anti-counterfeiting systems and labels that NBAP may reasonably
establish from time-to-time.
(f) Conduct Requirements: LICENSEE represents and warrants to NBAP that
LICENSEE shall faithfully comply with and adhere to, and LICENSEE
shall use commercially reasonable efforts to ensure that all Third
Party Contributors shall faithfully comply with and adhere to, all of
the terms, provisions and policies contained in this Agreement, the
Code of Conduct and all applicable United States and foreign laws,
government rules and regulations, court and administrative decrees and
the highest standard of business ethics then prevailing in the
industry with regard to the conduct of all aspects of LICENSEE's (or
any Third Party Contributor's) business and the manufacture,
distribution, sale, testing and use of all Licensed Products
(collectively, "Conduct Requirements"). NBAP and its authorized
representatives shall have the right, upon reasonable prior notice and
during regular business hours, to examine and audit LICENSEE to ensure
compliance with the Conduct Requirements. LICENSEE shall allow NBAP
access to any of its premises and personnel at all reasonable times
for the purposes of such auditing. LICENSEE shall use commercially
reasonable efforts in negotiating contracts with Third Party
Contributors to provide NBAP and its authorized representatives with a
contractual right to audit such Third Party Contributors to ensure
compliance with the Conduct Requirements, including the right of NBAP
to have access to the premises and personnel of any Third Party
Contributor at all reasonable times for the purposes of such auditing.
(g) Governmental Approvals: It shall be LICENSEE's sole responsibility, at
its sole expense, to obtain all approvals (including, but not limited
to, approvals of advertising materials) of all governmental
authorities which may be necessary in connection with LICENSEE's
performance under this Agreement.
<PAGE>
(h) NBA Store:LICENSEE acknowledges that NBAP intends to offer various NBA
and/or Member Team-identified products for sale in an NBAP-owned
"showcase" retail store ("NBA Store"). LICENSEE further acknowledges
that it will receive a variety of tangible and intangible benefits as
a result of having merchandise manufactured by LICENSEE displayed,
sold and promoted at the NBA Store. Therefore, LICENSEE shall, in
addition to and in consideration for the license granted under this
Agreement and in consideration of the benefits it will receive from
having merchandise displayed, sold and promoted at the NBA Store,
offer Licensed Products to the NBA Store on terms at least as
favorable as those offered to LICENSEE's most preferred high-volume
customers, including price, priority of delivery, discounts,
cooperative or other advertising and promotional allowances and other
benefits (regardless of volume).
15. RECORDS; AUDITS
(a) LICENSEE shall keep accurate books of account and records covering all
transactions relating to the license granted in this Agreement
(including, but not limited to, sales of Licensed Products, purchases
and uses of NBA hologram stickers and compliance with shipment
tracking, identification and anti-counterfeiting systems and labels
that NBAP may reasonably establish from time to time). NBAP and its
authorized representatives shall have the right, at all reasonable
hours of the day and upon reasonable prior notice, to examine and
audit such books of account and records and all other documents and
materials in LICENSEE's possession or under its control (including
records of LICENSEE's parents, subsidiaries, affiliates and third
parties, if they are involved in activities which relate to this
Agreement) relating to this Agreement. NBAP shall have free and full
access for such purposes and for the purpose of making extracts and
copies. Should an audit by NBAP establish a deficiency between the
amount found to be due NBAP and the amount LICENSEE actually paid or
reported, the LICENSEE shall pay the amount of such deficiency, plus
interest at the then current prime rate (as announced by Chase Bank,
New York branch) from the date such amount should have been paid until
the date of payment. Should such audit establish a deficiency of more
than five percent (5%), LICENSEE shall also pay for the cost of the
audit. LICENSEE shall pay such amount within thirty (30) days. All
such books of account and records shall be kept available for at least
two (2) years after the expiration or termination of this Agreement,
or three (3) years after the end of the Contract Year to which they
relate, whichever is earlier. In order to facilitate inspection of its
books and records, LICENSEE shall designate a symbol or number which
will be used exclusively in connection with the Licensed Products on
which royalty payments are payable and shall maintain for inspection
as provided in this Agreement duplicates of all billings to customers
with respect to Licensed Products. LICENSEE shall, within ten (10)
business days of NBAP's request (which shall not be made more than
four (4) times per Contract Year), furnish NBAP with a list of
LICENSEE's top twenty-five (25) retail accounts for Licensed Products
(on a country by country basis) and their monthly purchases of
Licensed Products (broken down by unit sales and in dollar volume by
retailer), provided that such information shall be kept strictly
confidential. LICENSEE shall, promptly upon execution thereof, supply
NBAP with true and complete copies of any agreement it enters into
with any Member Team or any NBA player. In addition, LICENSEE shall,
on a quarterly basis during the Term, provide NBAP with financial
information furnished to the United States Securities and Exchange
Commission (the "SEC"). However, if LICENSEE is no longer required to
furnish such information to the SEC, LICENSEE shall, on a quarterly
basis during the Term, provide NBAP with copies of all financial
statements and other financial information, relevant to its NBA
business, prepared by LICENSEE for distribution to its banks or other
financial lending institutions to whom it reports regularly.
(b) (Information subject to confidential treatment.)
16. EARLY TERMINATION
Without prejudice to any other rights NBAP may have pursuant to this
Agreement or otherwise, NBAP shall have the right to terminate this
Agreement at any time if:
(a) LICENSEE has not begun the bona-fide production of each Licensed
Product within and throughout the Territory in accordance with this
Agreement within three (3) months from the date that this Agreement is
executed on behalf of NBAP with respect to each Licensed Product
(other than Plastic Replica Jersey Licensed Products) and within
twelve (12) months from the date that this Agreement is executed on
behalf of NBAP with respect to Plastic Replica Jersey Licensed
Products.
(b) After two (2) delinquent payments during the Term, LICENSEE shall fail
to timely remit any payment of any nature due to NBAP or any of its
affiliates when due and shall fail to cure such non-payment within
thirty (30) days (ten (10) days for other non-payment defaults under
Paragraphs F or H) after its receipt of written notice from NBAP and
provided the cumulative number of days late (excluding cure period) is
more than twenty-one (21) days. LICENSEE shall have no right to cure
more than three (3) payment defaults.
(c) LICENSEE or any guarantor under this Agreement shall be unable to pay
its liabilities when due, or shall make any assignment for the benefit
of creditors, or under any applicable law admits in writing its
inability to meet its obligations when due or commit any other act of
bankruptcy, institute voluntary proceedings in bankruptcy or
insolvency or permit institution of such proceedings against it.
<PAGE>
(d) LICENSEE shall fail to perform or shall be in breach of any material
term or condition of this Agreement; provided, however, that if such breach
can be cured, termination shall take effect thirty (30) days after written
notice of such breach is sent by NBAP if such breach has not been cured
during such thirty (30) day period.
(e) LICENSEE (i) delivers Licensed Products outside the territory covered
by any retail product license agreement in effect during the Term
between NBAP and LICENSEE; (ii) sells Licensed Products to a third
party who LICENSEE knows, or has reason to know, intends to deliver
the Licensed Products outside the Territory; or (iii) LICENSEE is in
breach of Paragraph 14(c).
(f) LICENSEE sells to any third party that LICENSEE knows, or has reason to
know, is altering or modifying the actual Licensed Products (as
opposed to merely repackaging) prior to sale to the ultimate consumer.
(g) LICENSEE is in breach of Paragraphs 14(b) or 14(f).
In addition to NBAP's other rights and remedies, upon termination of this
Agreement under this Paragraph LICENSEE shall pay NBAP (within thirty (30)
days of such termination) the Minimum Guarantees for each Licensed Product
(Information subject to confidential treatment.)
17. DISPOSAL OF STOCK; EFFECT OF TERMINATION
(a) With respect to trading card Licensed Products,(Information subject to
confidential treatment.) months following the initial ship date of
each series of Licensed Product, except as otherwise approved by NBAP
in writing, LICENSEE shall destroy printing plates and any such
Licensed Product on hand. LICENSEE shall be entitled to retain for its
purposes up to one hundred (100) cases of such Licensed Product each
Contract Year. Any such Licensed Product returned after (Information
subject to confidential treatment.) of its initial ship date shall
also be destroyed within (Information subject to confidential
treatment.) months following the initial ship date of each series of
License Product. Upon request, LICENSEE shall provide NBAP with
evidence of the destruction of such product or components. Upon
expiration or termination, any such Licensed Product on hand at the
end of the sell-off period or subsequently returned to LICENSEE (or
unfinished components of Licensed Products) shall be destroyed by
LICENSEE at its cost, no later than thirty (30) days thereafter.
(b) With respect to all Licensed Products other than trading cards, sixty
(60) days before the expiration of this Agreement and ten (10) days
after any termination under this Agreement, LICENSEE will furnish to
NBAP a certificate showing the number and description of such Licensed
Products on hand or in process of manufacture. After expiration or
termination of this Agreement, LICENSEE shall have no further right to
manufacture, authorize any third party to manufacture, advertise,
distribute, sell, promote or otherwise deal in any such Licensed
Products or use the Licensed Marks or Licensed Attributes except as
provided below. For a period of ninety (90) days following the
expiration (but not after termination) of this Agreement, LICENSEE may
sell-off and deliver completed Licensed Products which are on hand at
the time of such expiration (the "Sell-Off Period"); provided, however
that (i) the total number of units of each such Licensed Product sold
during the Sell-Off Period may not be greater than one hundred ten
percent (110%) of the total number of units of such Licensed Product
on hand on the same date the preceding Contract Year, (ii) such
Licensed Products may only be sold in accordance with this Agreement
and in the normal course of business and at regular selling prices
(i.e., price reductions for such Licensed Products shall not exceed
LICENSEE's historical price reduction levels for similar products),
(iii) all payments then due are first made to NBAP and (iv) statements
and payments with respect to the Sell-Off Period are made in
accordance with this Agreement. NBAP shall have the option to conduct
physical inventories before the expiration of this Agreement until the
end of the Sell-Off Period in order to verify such inventory and/or
statements. If LICENSEE refuses to permit such physical inventory,
LICENSEE shall forfeit its right to dispose of its inventory. After
such Sell-Off Period, all inventory on hand or in process (including
all promotional and packaging materials) will be destroyed.
18. EQUITABLE RELIEF
LICENSEE acknowledges that NBAP is entering into this Agreement not only in
consideration of the royalties to be paid, but also for the promotional
value and intrinsic benefit resulting from the manufacture, advertisement,
distribution, sale and promotion of the Licensed Products by LICENSEE in
the Territory. LICENSEE acknowledges that the Licensed Marks and Player
Attributes possess a special, unique and extraordinary character which
makes difficult the assessment of the monetary damage which NBAP would
sustain as a result of the unauthorized use thereof. LICENSEE further
acknowledges that: (i) its failure to manufacture, advertise, distribute,
sell and promote the Licensed Products in accordance with this Agreement,
including LICENSEE's failure to satisfy its obligation to maintain and not
to detract from the value of the Licensed Marks, and (ii) the unauthorized
use of the Licensed Marks or Licensed Attributes, will, in either case,
cause immediate and irreparable damage to NBAP for which NBAP would not
have an adequate remedy at law. Therefore, LICENSEE agrees that, in the
event of a breach of this Agreement by LICENSEE, in addition to such other
legal and equitable rights and remedies as shall be available to NBAP, NBAP
shall be entitled to injunctive and other equitable relief, without the
necessity of proving damages or furnishing a bond or other security.
19. NOTICES
<PAGE>
All notices and statements to be given and all payments to be made under
this Agreement shall be given or made at the respective address of the
parties as set forth above, unless notification of a change of address is
given in writing. Any notice of breach or default must be in writing and
sent by facsimile (with confirmation copy sent by regular mail) or express
delivery properly addressed (with courtesy copy, attention: General
Counsel, and in the case of LICENSEE, to Scott Silverstein, Vice President
- Business Affairs and also to LICENSEE's controller in instances of
payment default). Any written notice shall be deemed to have been given at
the time it is confirmed received, if sent by facsimile, or next business
day if sent by express delivery.
20. NO JOINT VENTURE
Nothing in this Agreement shall be construed to place the parties in the
relationship of partners or joint venturers. Neither party shall have the
power to obligate or bind the other to a third party in any manner
whatsoever.
21. ARBITRATION OF CERTAIN MATTERS
Any dispute or disagreement between the parties relating solely to the
amount of royalty payments owing under this Agreement shall be settled by
arbitration in New York City under the rules then in effect of the American
Arbitration Association. Judgment upon the award may be entered in any
court having jurisdiction. No other dispute or disagreement between the
parties (including any claim by NBAP that LICENSEE is using the Licensed
Marks in a manner not authorized by this Agreement or is otherwise in
breach of this Agreement) shall be settled by arbitration. All decisions by
NBAP relating to disapproval of any Licensed Product or advertising,
promotion or display material shall be final and binding on LICENSEE and
shall not be subject to review in any proceeding.
22. USE OF PLAYERS
(a) LICENSEE acknowledges that this Agreement does not grant to LICENSEE
any licenses or rights with respect to the use of Player Attributes
except on Licensed Product as expressly provided herein and in
advertising and promotional materials specifically approved by NBAP.
The license granted under this Agreement does not include, and shall
not be used to imply, a testimonial or endorsement of any Licensed
Products by any NBA player. LICENSEE shall not use Player Attributes
in any manner that is a testimonial or endorsement without first
obtaining written authorization from the subject player(s)
("Endorsement Rights"). LICENSEE shall not enter into any agreement
with any NBA player which would require that player to wear any
LICENSEE-identified item in or at any NBA game, competition or event
(either courtside or in any locker room).
(b) LICENSEE may enter into an "exclusive" Endorsement Rights agreement
with a current NBA player but acknowledges that, notwithstanding any
such exclusivity, under the group license agreement between NBAP and
the NBPA, such player has no right to "opt-out" with respect to the
trading card category. Accordingly, LICENSEE further acknowledges that
NBAP shall continue to license to other trading card manufacturers the
right to use the Licensed Attributes of such player. Notwithstanding
the foregoing, NBAP shall not permit any other trading card
manufacturer to use the Licensed Attributes of any player for whom
LICENSEE has secured Endorsement Rights in any manner that is a
testimonial or endorsement of such other manufacturer's product (e.g.,
use with greater prominence than other players depicted in the
materials submitted to NBAP for approval).
(c) In the event any current NBA player retires or becomes inactive (e.g.,
has been waived and is not under contract to any NBA team), upon
receipt of written notice from NBAP that such a player has retired or
become inactive, LICENSEE shall cease and/or cause to cease the use of
such player's Licensed Attributes in the manufacture, distribution,
advertisement, promotion and sale of the Licensed Products within
(Information subject to confidential treatment.) of receipt of NBAP's
notice.
23. WARRANTIES
NBAP represents and warrants that it has the right and authority to enter
into and perform this Agreement and has the right to grant the rights to
use the Licensed Marks and Licensed Attributes as provided under this
Agreement. LICENSEE represents and warrants that it has the right and
authority to enter into and perform this Agreement and has the right to
grant all rights to Commissioned Photos as provided under this Agreement.
LICENSEE further represents and warrants that (i) all advertising and
promotional materials shall comply with all applicable laws, regulations
and standards, and (ii) all advertising and promotional materials and all
graphics used on Licensed Products will not violate the intellectual
property rights of any third party. NBAP's approval of such materials will
not imply a representation or belief that NBAP believes such materials are
sufficient to meet applicable laws, regulations and standards, nor shall it
imply that NBAP agrees with or supports any claims made by LICENSEE in any
advertising materials relating to the Licensed Products.
24. SEVERABILITY
In the event any provision of this Agreement is found to be void, invalid
or unenforceable as a result of any judicial or administrative proceeding
or decree, this Agreement shall be construed and enforced as if such
provision were not contained in this Agreement.
25. MISCELLANEOUS
<PAGE>
(a) Assignment: This Agreement and any rights granted under this Agreement
are personal to LICENSEE and shall not be assigned, sublicensed,
subcontracted or encumbered, directly or indirectly, by law or by
contract, without NBAP's prior written consent, which consent may, in
NBAP's sole discretion, (i) be contingent upon a fee payable by
LICENSEE or the transferee, the amount of which shall be determined by
NBAP in its sole discretion, and/or (ii) impose other terms and
conditions upon the assignment, or transfer. Any transfer of a
controlling interest in LICENSEE or in any party which currently
controls LICENSEE (directly or indirectly), which is accompanied, or
followed within a year thereof, by a change in 2 of the 3 following
senior management positions: chief executive officer; president; or
vice president of marketing, shall be deemed an assignment prohibited
by the preceding sentence. Any nonconsensual assignment, sublicense,
subcontract or encumbrance of this Agreement by LICENSEE shall be
invalid and of no force or effect. Upon any such nonconsensual
assignment, sublicense or encumbrance, this Agreement shall terminate
and all rights granted under this Agreement shall immediately revert
to NBAP.
(b) Waiver: None of the provisions of this Agreement can be waived or
modified except expressly by a writing signed by both parties. There
are no representations, promises, agreements, warranties, covenants or
undertakings by either party other than those contained in this
Agreement. No failure on the part of NBAP to exercise any right under
this Agreement shall operate as a waiver of such right; nor shall any
single or partial exercise of any right preclude any other or further
exercise or the exercise of any other rights.
(c) Survival: No expiration or termination of this Agreement shall relieve
LICENSEE of its obligation to pay NBAP any amounts due to NBAP at the
time of termination (subject to any credit otherwise provided for
above), regardless of whether these amounts are then or thereafter
payable. The provisions of Paragraphs 3, 4, 10(d), 12 and 25(f) shall
survive the expiration or termination of this Agreement.
(d) Governing Law and Jurisdiction: This Agreement shall be construed in
accordance with the laws of the State of New York, USA, without regard
to its principles of conflicts of laws. Any claim arising under this
Agreement (except as provided under Paragraph 21) shall be prosecuted
in a federal or state court of competent jurisdiction located within
the City of New York, USA and LICENSEE and NBAP consent to the
jurisdiction of such court and to the service of process by mail.
(e) Loss or Damaged Materials:In the event of any dispute between NBAP and
LICENSEE regarding loss or damaged Commissioned Photos, the parties
agree that the value of each such photographs, transparency or
negative shall not exceed one dollar ($1.00). If unprocessed film is
lost by NBA PHOTOS, NBAP shall reimburse LICENSEE for its
out-of-pocket costs in connection with the assignment (e.g., the
photographer's fee and travel expenses, film and strobe expenses)
where the lost film was shot.
(f) Confidentiality: Neither party shall (nor shall they permit or cause
their employees or agents to) divulge, disseminate or publicize
information relating to this Agreement or the financial or other terms
of this Agreement (including any information on the specifications or
methods of reproduction of the Licensed Marks or obtained pursuant to
Paragraph 13 above (except as for use as otherwise permitted
thereunder) or Paragraph 15(a) above) to any third party (other than
their respective attorneys or accountants or the NBA Board of
Governors), except as may be required by law or to fulfill the terms
of this Agreement.
(g) Construction: This Agreement has been executed in a text using the
English language, which text shall be controlling. This Agreement,
together with any exhibits or attachments, constitutes the entire
agreement and understanding between the parties and cancels,
terminates and supersedes any prior agreement or understanding
relating to the subject matter of this Agreement between LICENSEE and
the NBA, any Member Team, NBAP or NBAE. The headings in this Agreement
are for reference purposes only and shall not affect the
interpretation of this Agreement. This Agreement shall not be binding
on NBAP until signed on its behalf by its President or Senior Vice
President, Business Affairs.
# # #
<PAGE>
SCHEDULE A
(Information subject to confidential treatment.)
<PAGE>
SCHEDULE B
(Information subject to confidential treatment.)
<PAGE>
EXHIBIT A
NBA PROPERTIES, INC.
LICENSEE AND SUPPLIER CODE OF CONDUCT
The NBA's mission is to be the most respected and successful sports league and
sports marketing organization in the world. In keeping with this mission, NBA
Properties, Inc. ("NBAP") is committed to conducting its business in a socially
responsible and ethical manner. We expect all NBAP licensees, including their
contractors, engaged in the manufacture and sourcing of products bearing NBA,
WNBA, USA Basketball and NBC trademarks (collectively "Product Suppliers") to
share this commitment. At a minimum, all Product Suppliers must adhere to the
following Licensee and Supplier Code of Conduct:
1. ETHICAL STANDARDS
Product Suppliers shall conduct their businesses in accordance with the
highest standards of ethical behavior.
2. COMPLIANCE WITH APPLICABLE LAWS
Product Suppliers shall comply with all applicable laws and regulations of
the countries, states and localities in which they operate.
3. EMPLOYMENT PRACTICES
NBAP will only do business with Product Suppliers whose employees are
appropriately compensated, present at work voluntarily, not at undue risk
of physical harm and not exploited in any way. In addition, Product
Suppliers must comply with the following specific standards:
o Wages and Benefits: Product Suppliers shall provide wages, overtime
compensation and benefits at not less than the minimum levels required
by applicable laws and regulations or the prevailing local industry
levels, if higher.
o Working Hours: Product Suppliers shall, at a minimum, comply with
all applicable working hours laws and regulations. Except in unusual
business circumstances, employees shall not be required to work more
than the lesser of (a) 48 hours per week and 12 hours of overtime or
(b) the limits on regular and overtime hours allowed by local law or,
where local law does not limit the hours of work, the regular work
week in such locality plus 12 hours of overtime. In addition, except
in unusual business circumstances, employees shall be entitled to at
least one day off in every seven-day period.
o Child Labor: Product Suppliers shall not employ any person under the
age of 15 (or 14 where allowed by local law) or under the local age
for completing compulsory education, if higher.
o Forced Labor: Product Suppliers shall not use any forced labor,
whether in the form of prison labor, indentured labor, bonded labor or
otherwise.
o Harassment or Abuse: Product Suppliers shall treat each employee
with dignity and respect, and shall not use corporal punishment,
threats of violence or other forms of physical, sexual, psychological
or verbal harassment or abuse.
o Nondiscrimination: Product Suppliers shall not discriminate in
employment practices on the basis of race, religion, age, nationality,
social or ethnic origin, gender, sexual orientation, political opinion
or disability.
o Freedom of Association: Product Suppliers shall recognize and
respect the right of employees to join organizations of their own
choosing and shall neither threaten nor penalize employees for their
efforts to organize or bargain collectively.
o Health and Safety: Product Suppliers shall provide employees with a
safe and healthy working environment. Manufacturing facilities shall,
at a minimum, contain clean restrooms, potable water, adequate
lighting, adequate ventilation and fire exits. Residential facilities,
if provided, shall also be kept sanitary and safe.
4. ENVIRONMENTAL REQUIREMENTS
Product Suppliers shall comply with all applicable environmental laws and
regulations.
<PAGE>
5. COMMUNICATION
Product Suppliers shall take appropriate steps to ensure that the
provisions of this Code are communicated to employees, including the
prominent posting of the Code (in the local language) in their
manufacturing facilities.
6. MONITORING AND COMPLIANCE
Product Suppliers shall conduct periodic audits of manufacturing
facilities, on the basis of which they shall certify to NBAP on request
either that (a) all products bearing NBA, WNBA, USA Basketball and NBC
trademarks have been manufactured in compliance with this Code, or (b)
identified facilities have been found not to be in compliance with this
Code, in which event the Product Supplier shall specify appropriate and
effective steps to remedy the non-compliance. NBAP or its representatives
are authorized to engage in monitoring activities to confirm compliance
with this Code, including on-site inspections of manufacturing facilities
and residential facilities, audits of records relating to employment
matters and private interviews with employees at all levels. Product
Suppliers shall retain and make available to NBAP or its representatives,
either on site or at agreed upon locations, all documentation that may be
required to assess whether or not the Product Supplier is in compliance
with this Code.
7. FAILURE TO COMPLY
NBAP reserves the right, in addition to all other legal and contractual
rights, to terminate its relationship with any Product Supplier found to be
in violation of this Code.
AGREEMENT
This Agreement is made and entered into this 22nd day of September, 1998,
by and between The Topps Company, Incorporated with offices at One Whitehall
Street, New York, NY 10009-2109 (hereinafter "Licensee"), and NATIONAL FOOTBALL
LEAGUE PLAYERS INCORPORATED, a corporation with offices at 2021 L Street, N.W.,
Washington, D.C. 20036 (hereinafter "Players Inc" or "Licensor"). This Agreement
shall be effective as of March 1, 1997.
1. REPRESENTATIONS.
(A) Players Inc represents that it is a licensing affiliate of the National
Football League Players Association ("NFLPA"); that the NFLPA has been duly
appointed and is acting on behalf of the football players of the National
Football League who have entered into a Group Licensing Authorization, either in
the form attached hereto as Attachment "A" or through the assignment contained
in Paragraph 4(b) of the NFL Player Contract, which have been assigned to
Players Inc; and that in such capacity Players Inc has the right to negotiate
this contract and the right to grant the rights and licenses described herein.
Licensee acknowledges that Players Inc also on occasion secures authorization
for inclusion in Players Inc licensing programs from players who have not
entered into such Group Licensing Authorization, but who, nevertheless,
authorize Players Inc to represent such players for designated Players Inc
licensed programs.
(B) Players Inc makes no representation that it has the authority to grant,
nor does it grant herein, the right to utilize any symbols, insignias, logos, or
other identifying names or marks of the National Football League (hereinafter
"NFL") and/or any of its member clubs. Accordingly, it is understood by the
parties hereto that if likenesses of players are to be used by Licensee in
conjunction with any symbols, insignia, or logos of the NFL or any of its member
clubs, in the exercise of the License granted hereunder, it will be the
responsibility of Licensee to obtain such permission as may be necessary for the
use of such material from the NFL or the club(s) in question. Licensor retains
all rights not expressly and exclusively granted to Licensee hereunder.
2. GRANT OF LICENSE.
(A) Upon the terms and conditions hereinafter set forth, Players Inc hereby
grants to Licensee and Licensee hereby accepts the non-exclusive right, license
and privilege of utilizing the trademarks and names of Players Inc which may be
amended from time to time by Players Inc and the names, likenesses, pictures,
photographs, voices, facsimile signatures and/or biographical information of the
NFL players listed in Attachment "B", for product(s) in the form of football
player trading cards sold alone and collectors' aids products (hereinafter
referred to as "the licensed product(s)"). Provided, however, that the specific
manner in which the rights licensed hereunder are to be used on the licensed
product(s) in question shall require the prior written consent of Players Inc.
(B) The rights, licenses and privileges granted by Players Inc hereunder
shall not constitute or be used by Licensee as a testimonial or an endorsement
of any product, service, or event by all or any of the players, or by Players
Inc. In the event Licensee is interested in securing an individual player's
personal endorsement, Licensee further agrees and acknowledges that such
endorsement will require the personal approval of the individual player and
approval of Players Inc and a separate payment to Players Inc. All contact with
such player or player's agent shall be made by Players Inc. Licensee further
agrees and acknowledges that any player who is committed individually by
contract for products or services competitive with those of Licensee may be
required to cease from further inclusion in this Agreement, provided, however,
<PAGE>
that the use of such player for such products and services shall be on an
individual basis and shall not be combined with the use of five or more other
NFL Players.
3. RETAIL LICENSE ONLY. The Grant of License set forth in Paragraph 2 of this
Agreement applies only to the manufacture and distribution of licensed
product(s) for retail sale, and shall not permit the use of licensed product(s)
as "premium items" to be included with non-licensed product(s), services or
events to promote the sale of such non-licensed product(s), services or events;
provided, however, that Licensee shall be permitted to promote the sale of
licensed product(s), subject to prior written approval by Players Inc and in a
manner consistent with the provisions of the Agreement. Any such promotion using
the licensed product(s) herein as premium items shall require a separate
agreement between Players Inc and Licensee or other sponsor of the promotion,
with separate terms and conditions, and nothing contained herein shall obligate
either Players Inc or Licensee to enter into such an agreement.
4. TERRITORY. Licensee shall have the right to utilize the rights granted
hereunder for distribution of the licensed product(s) in the following
territory: United States, its territories and possessions, Argentina, Australia,
Brazil, Canada, Europe, Japan, Korea, Mexico and Taiwan.
5. TERM.
(A) The term of this Agreement shall extend from March 1, 1997 to February
28, 1999 (hereinafter referred to as Original License Period) unless terminated
in accordance with the provisions hereof. Licensee may renew this Agreement for
an Additional License Period from March 1, 1999 to February 28, 2000, provided
Licensee has faithfully fulfilled its obligations hereunder in the Original
License Period. Notice of desire to renew shall be given by Licensee no later
than January 1, 1999 in the Original License Period.
(B) Licensee acknowledges and agrees that Licensee has and shall have no
right to extend or renew this Agreement beyond the term and renewal options, if
any, stated herein. No conduct by either Licensor or Licensee (including without
limitation, any approvals granted pursuant to Paragraph 12 hereof) shall create,
imply or infer a new license agreement or an extension of the stated term and
renewal options, if any, of this Agreement, unless same is specifically set
forth in a written agreement signed by both Licensor and Licensee. Licensee's
agreement that this Agreement is subject to the term and renewal options, if
any, stated herein, in all events whatsoever, is a material inducement for
Licensor to enter into this Agreement.
6. ROYALTY PAYMENT.
(A) Licensee agrees to pay Players Inc a guaranteed royalty of (Information
subject to confidential treatment.) for its use of the rights licensed hereunder
for the Original License Period and a guaranteed royalty of (Information subject
to confidential treatment.) for the Additional License Period, if applicable.
The guaranteed royalty shall be paid as follows:
(i) For the Original License Period, (Information subject to confidential
treatment.).
(ii) For the Additional License Period, if applicable, (Information subject
to confidential treatment.).
2
<PAGE>
(B) Such guaranteed royalty payments shall be made by Licensee as specified
hereinabove whether or not Licensee uses the rights licensed hereunder, and no
part of such guaranteed payments shall be repayable to Licensee.
(C) Licensee shall also pay to Players Inc an amount equal to (Information
subject to confidential treatment.) of the gross sales of the licensed
product(s) covered by this Agreement, less the guaranteed payments specified
above for the applicable license period. The guaranteed payments for the
Original License Period shall be calculated annually and separately at the rate
of (Information subject to confidential treatment.) for the period of March 1,
1997 through February 28, 1998 and (Information subject to confidential
treatment.) for the period of March 1, 1998 through February 28, 1999. For
example, the (Information subject to confidential treatment.) royalty shall be
paid in the first year of the Agreement less only the guarantee of (Information
subject to confidential treatment.) for such first year and similarly for the
second year of the Original License Period. Similarly, the guaranteed payments
for the Additional License Period shall be calculated annually and separately at
the rate of (Information subject to confidential treatment.) for the period
March 1, 1999 through February 28, 2000. Royalties shall be calculated on a
quarterly basis and shall be due as of the last day of each May, August,
November, and February of this Agreement and must be paid no later than fifteen
(15) days following such due dates. Gross sales shall be calculated based on the
actual price(s) charged by Licensee to the retailer directly or to the
wholesaler in an arms length transaction. Licensee shall transact no sale, the
effect of which is to reduce the royalty paid by Licensee to Players Inc;
provided, however, that Licensee shall be permitted to provide arms length
discounts, allowances and returns which are normal and customary. Gross sales
shall exclude only such normal and customary discounts, allowances and returns.
In addition to all other rights contained in this Agreement, Players Inc shall
be entitled to collect and Licensee shall pay daily interest at the rate of one
and one-half percent (1 1/2%) monthly, or the maximum interest permitted by law
if less, on all guarantee or royalty payments not timely made to Players Inc by
Licensee.
7. PERIODIC STATEMENTS.
(A) Licensee shall furnish to Players Inc, no later than fifteen (15) days
following the last day of each June, September, December, and February of this
Agreement, a complete and accurate statement certified to be accurate by an
officer of Licensee, showing the number, description and gross purchase price,
of the licensed product(s) distributed by Licensee during the preceding
quarterly reporting period described in Paragraph 6(C) herein, together with any
returns made during such reporting period. Once in every twelve-month period,
Licensee shall furnish Players Inc with a detailed statement certified by an
officer of Licensee, showing the number of gross sales of the licensed
product(s) covered by this Agreement.
(B) Such statements shall be furnished to Players Inc whether or not any of
the licensed product(s) have been purchased during the reporting period for
which such statement is due. The receipt or acceptance by Players Inc of any
statement or of any royalty paid hereunder (or the cashing of any royalty check
paid hereunder) shall not preclude Players Inc from questioning the correctness
thereof at any time, and in the event any inconsistencies or mistakes are
discovered in connection therewith, they shall immediately be rectified and the
appropriate payment made by Licensee.
3
<PAGE>
8. BOOKS AND RECORDS.
(A) For a period of two (2) years following the termination or expiration
of this Agreement, Licensee shall maintain accurate books and records for itself
and any subsidiary or affiliated entity with respect to its sale of licensed
product(s) under this Agreement. Said books and records shall be subject to
inspection and audit by Players Inc or its duly authorized representative at
reasonable times upon reasonable notice from Players Inc to Licensee. In
addition and similarly, Licensee shall cause any entity from which it contracts
for services or production of product to cause its books and records to be
available for audit and inspection by Players Inc to the extent necessary to
confirm the audit of Licensee. Licensee shall not interfere with such
inspections and audits in any way.
(B) The reasonable cost of such inspections and audits shall be paid by
Licensee if the result of such inspections and audits indicates a difference of
3% or more, when compared to the statement certified to be accurate by an
officer of Licensee, as required by Paragraph 7 (A) of this Agreement, for the
twelve month period covered by such statement, or the cost of such inspection
and audits as the result of an inspection or audit performed by Players Inc as
specified in Paragraph 8(A) above shall be paid by Players Inc if such
difference is less than 3%.
(C) In the event any inconsistencies or mistakes are discovered as a result
of such inspections and audits, they shall immediately be rectified and the
appropriate payment made by Licensee.
9. PAYMENT AND NOTICES: All transactions under this Agreement, including without
limitation all payment of royalties and all notices, reports, statements,
approvals and other communications, shall be with or made payable in the name of
NATIONAL FOOTBALL LEAGUE PLAYERS INCORPORATED, 2021 L Street, N.W., Washington,
D.C. 20036, or its assignee where applicable. All correspondence, notices,
approvals and other communications to Licensee shall be with The Topps Company,
One Whitehall Street, New York, NY 10004-2109, Attention: Scott Silverstein,
Vice President - Business Affairs.
10. INDEMNIFICATION.
(A) Licensee agrees that it will not during the term of this Agreement, or
thereafter, attack the rights of Players Inc in and to the trademarks or names
owned by or licensed to Players Inc or any of the rights licensed hereunder as
specified in Paragraph 2 of this Agreement, or in any way attack the validity of
this Agreement.
(B) Licensee further agrees to assist Players Inc to the extent necessary
in the procurement of any protection or to protect any of the rights conveyed
hereunder, and Players Inc, if it so desires, may commence or prosecute at its
own expense any claims or suits in its own name or in the name of Licensee (with
Licensee's consent, which shall not be unreasonably withheld) or join Licensee
as a party thereto (with Licensee's consent, which shall not be unreasonably
withheld). Licensee shall notify Players Inc in writing of any infringement by
others of the rights covered by this Agreement which may come to Licensee's
attention, and Players Inc shall have the sole right to determine whether or not
any action shall be taken on account of any such infringement. Licensee shall
not institute any suit or take any action on account of any such infringement
without first obtaining the written consent of Players Inc to do so and Players
Inc shall reasonably consider any such request.
4
<PAGE>
(C) Licensee for its own acts hereby indemnifies Players Inc and undertakes
to defend Players Inc from and against any and all claims, suits, losses,
damages, and expenses (including reasonable attorney's fees and expenses)
arising out of the manufacture, marketing, sale, distribution, or use of the
licensed product(s) which are the subject of this Agreement. Licensee agrees to
obtain, at its own expense, general liability insurance, providing adequate
protection for Licensee and Players Inc against any such claims or suits in
amounts not less than Three Million Dollars ($3,000,000.00). Within thirty (30)
days from the date hereof, Licensee shall submit to Players Inc a fully paid
policy or certificate of insurance naming Players Inc as an insured party,
requiring that insurer will not terminate or materially modify such without
written notice to Players Inc at least twenty (20) days in advance thereof.
(D) Players Inc hereby indemnifies Licensee and undertakes to defend
Licensee against, and hold Licensee harmless from any liabilities, losses,
damages, and expenses (including reasonable attorney's fees and expenses)
resulting from claims made or suits brought against Licensee based upon the use
by Licensee of the rights licensed in Paragraph 2 strictly as authorized in this
Agreement.
(E) Players Inc represents that no provisions in this Agreement, including
without limitation Paragraph 13, are contrary to federal and state law, and
Players Inc hereby indemnifies Licensee and undertakes to defend Licensee
against, and hold Licensee harmless from, any liabilities, losses, damages and
expenses (including reasonable attorney's fees) arising out of or relating to a
breach of this representation or based upon a finding that any said provisions
are in violation of federal and state law.
(F) In the event that Paragraph 13 is declared invalid by any court of
competent jurisdiction, Players Inc hereby agrees not to enforce the terms of
said paragraph against Licensee.
11. COPYRIGHT AND TRADEMARK NOTICES.
(A) Licensee shall prominently place or cause to be placed Licensor's
"PLAYERS INC (and design)" trademark (hereinafter "Licensor's Trademark") on the
licensed products and on packaging, wrapping, advertising (both print and
media), and any other material, including trade show booths and exhibits in
connection with such licensed product(s) that are publicly distributed or
relating to such licensed product(s).
(B) Licensor's Trademark appearing on the licensed product(s) and on all
materials in connection with the licensed product(s) distributed or relating to
such licensed product(s), shall appear precisely according to the specifications
set forth in Appendix B attached hereto, which may be amended from time to time
by Licensor, without variation, with the letters "TM", and upon notification by
Players Inc, the letter R enclosed within a circle. Further, Licensee shall
provide to Licensor the date of the first use of such licensed product(s)
bearing Licensor's Trademark in intrastate and interstate commerce.
(C) Additionally, Licensee shall imprint or cause to be imprinted the
following text on any such licensed product(s) and/or materials therefor:
"Officially Licensed Product of the
National Football League Players",
or
5
<PAGE>
"Officially Licensed Product of
Players Inc"
The specific text imprinted shall be subject to Licensor's sole discretion.
12. APPROVALS.
(A) Upon execution of this Agreement, and thereafter annually by May 1 of
each calendar year covered by this Agreement, Licensee shall submit to Players
Inc for approval, a preliminary marketing plan for all licensed products for the
upcoming license period. Players Inc shall respond in writing signifying
approval or disapproval of such marketing plan with fifteen (15) business days.
Such marketing plan shall include without limitation: a complete listing and
description of all products to be produced, quantities, pricing and advertising
and promotion schedules.
(B) For licensed product to be produced under each brand or sub-brand
covered by this Agreement, Licensee shall submit annually to Players Inc for
approval a product outline. Such product outline shall include without
limitation a complete listing and description of all products to be produced,
pricing, quantities, and advertising and promotion schedules. Players Inc shall
respond in writing signifying approval or disapproval of such product outlines
with fifteen (15) business days.
(C) Attachment "B" hereto shall be established and may be modified in the
following manner:
(i) Upon execution of this Agreement, and thereafter annually by
February 1 of each calendar year covered by this Agreement, Licensee
shall submit to Players Inc a proposed list of players' names for
inclusion in Attachment "B" for the upcoming football season.
(ii) Players Inc shall respond to such submissions in writing to
Licensee, signifying approval or disapproval in the case of each
player's name so requested.
(iii) Licensee may submit requests in writing to Players Inc for
additions, deletions, or substitutions of players' names contained in
Attachment "B" and Players Inc shall respond to such requests within a
reasonable period of time.
(D) The Licensee agrees to furnish Players Inc free of cost for its written
approval as to quality and style, samples of artwork, plans, photographs and any
other representations of licensed product(s) produced by or for Licensee
(collectively hereinafter "artwork") and samples of each of the licensed
product(s), together with their packaging, hangtags, and wrapping material,
before their manufacture, sale or distribution, whichever occurs first, and no
licensed product(s) shall be manufactured, sold or distributed by the Licensee
without such prior written approval of such artwork and such sample licensed
product(s). Players Inc shall respond in writing to requests for such approval
from Licensee within 15 business days. Any request by Licensee for such approval
which is received by Players Inc and is not responded to within 15 business days
shall be deemed approved by Players Inc. Subsequent to final approval, a
reasonable number of production samples of licensed product(s) will periodically
be sent to Players Inc to insure quality control, and should Players Inc require
additional samples for any reason, Players Inc may purchase such at Licensee's
cost.
6
<PAGE>
Licensee shall also provide to Players Inc free of charge the following:
(i) Prior to December 1 of each License Period, for each player
included in Attachment "B": 100 of each individual common card, 6 of
each card other than common cards, and one complete set of all player
cards produced for that License period; and
(ii) Prior to December 1 of each License Period for Players Inc, six
cases of count goods and six dozen complete sets of all player cards
produced for that License Period.
(E) Licensee may choose to use player names and/or likenesses to promote
licensed product(s) on or in any material pertaining to packaging, hangtags,
wrapping material, print ads, flyers, point-of-purchase displays, press
releases, catalogues, trade show booths and exhibits or any other written
material or medium, including but not limited to electronic or interactive use;
provided, however, that such use shall require the prior written approval of
Players Inc. The number of players included in any such use, if approved, shall
be a minimum of six, and shall be selected from Attachment "B". Player names
and/or likenesses so used shall be written or displayed with equal prominence.
(F) Licensee may choose to use player names and/or likenesses (including,
without limitation, action footage) in radio or television commercials to
promote licensed product(s); provided, however, that such use shall require the
prior written approval of Players Inc. The number of players included in such
commercials, if approved, shall be a minimum of six and shall be selected from
Attachment "B". The players used in such commercials shall be shown with equal
prominence. Licensee agrees to furnish Players Inc all scripts and story boards
for proposed radio and television commercials in connection with the promotion
of the licensed product(s), and the content of such scripts and story boards
shall require the prior written approval of Players Inc before any commercials
shall be made or shall be contracted for by Licensee.
(G) The use of player names and/or likenesses in accordance with this
Paragraph 12, in any radio or television commercials, print ads,
point-of-purchase displays, packaging, hangtags, wrapping material, press
releases, catalogues, flyers, trade show booths and exhibits or any other
written material or medium, including, but not limited to, electronic or
interactive use, to promote licensed product(s), shall require payment by
Licensee to Players Inc, separate from and in addition to any guarantees or
royalty payments contained in this Agreement. The amount of such payment shall
be subject to mutual agreement by Players Inc and Licensee. All contacts with
such players or their agents shall be made by Players Inc.
(H) Notwithstanding anything to the contrary hereinabove, Licensee shall be
permitted, without additional separate payment to Players Inc for players, to
show on counter card boxes: (1) six or more examples of the football trading
cards licensed herein, and/or (2) a list of six or more players' names whose
images or likenesses are used on the football trading cards licensed herein;
provided, however, that such cards are shown with equal prominence, and provided
further, however, that Players Inc shall retain all rights to prior written
approval contained hereinabove.
(I) In the event Licensee wishes to secure an individual player or players
to make appearances to promote licensed product(s) or to autograph licensed
product(s), the selection of such player and the separate fee to Players Inc for
such player services shall be subject to mutual agreement between Licensee and
Players Inc. All contact with requested player or his agents shall be made by
Players Inc. Once the
7
<PAGE>
player has made the appearance or performed the autograph service, payment shall
be made immediately to Players Inc. Any such payments shall be separate from and
in addition to any royalties paid by Licensee under this Agreement. Once the
selection of such player and such separate fee have been agreed upon by Licensee
and Players Inc, in the event of cancellation of such appearance or autographing
by Licensee, Licensee shall nevertheless be obligated to make such fee payment
to Players Inc immediately upon such cancellation.
13. NON-INTERFERENCE. Licensee agrees and acknowledges that it shall not secure
or seek to secure, directly from any player who is under contract or seeking to
become under contract to an NFL club, or from such player's agent, permission or
authorization for the use of such player's name, facsimile signature, image,
likeness, photograph or biography in conjunction with the licensed product(s)
herein.
14. GOODWILL.
(A) Licensee recognizes the great value of the goodwill associated with the
rights licensed in Paragraph 2 of this Agreement and acknowledges that such
goodwill belongs exclusively to Players Inc and that said trademarks, names and
rights licensed in Paragraph 2 of this Agreement have acquired secondary meaning
in the mind of the public.
(B) Licensee agrees that all elements (including all material of any nature
utilizing in any way the rights licensed hereunder, including but not by way of
limitation, all packages, cartons, point of sale material, newspaper and
magazine advertisements) of the licensed product(s) shall be of high standard
and of such style, appearance and quality as to be adequate and suited to the
best advantage and to the protection and enhancements of such rights; that the
marketing of the licensed product(s) will be conducted in accordance with all
applicable federal, state and local laws and any other governmental or
quasi-governmental laws or regulations of the United States, Canada or any other
country; and that the licensed product(s) and their exploitation shall be of
high standard and to the best advantage and that the same in no manner reflect
adversely upon the good name of Players Inc.
15. SPECIFIC UNDERTAKINGS OF LICENSEE.
(A) Licensee agrees that every use of the rights licensed hereunder by
Licensee shall inure to the benefit of Players Inc and that Licensee shall not
at any time acquire any title of interest in such rights by virtue of any use
Licensee may make of such rights hereunder.
(B) All rights relating to the rights licensed hereunder are specifically
reserved by Players Inc except for the License herein granted to Licensee to use
the rights as specifically and expressly provided in this Agreement.
(C) Upon expiration or termination of this Agreement, all rights granted
hereunder shall immediately revert to Players Inc, and Licensee will refrain
from further use of such rights or any further reference thereto, direct or
indirect, except as provided in Paragraph 16(E) below. Licensee acknowledges
that its failure to cease the use of such rights at the termination or
expiration of this Agreement will result in immediate and irreparable damage to
Licensor, and/or individual National Football League player(s), and to the
rights of any subsequent licensee(s).
8
<PAGE>
(D) Licensee agrees to spend the following total amounts on activities
which stimulate and promote the market for licensed product(s) subject to prior
written approval by Players Inc of such activities:
(Information subject to confidential treatment.) of sales during the
first year of the Original License Period;
(Information subject to confidential treatment.) of sales during the
second year of the Original License Period; and
(Information subject to confidential treatment.) of sales during the
Additional License Period, if applicable.
Such activities shall include, but not be limited to, sponsorships,
promotions, autographs, player appearances, and special events. Licensee shall
provide documentation that such approved expenditures have been made. The
expenditure documentation shall be provided on a quarterly basis and shall be
certified by an officer of Licensee. Such documentation shall be subject to
inspection and audit by Players Inc on the same basis as Licensee's books and
records.
If, at the end of each annual period or license period covered by this
Agreement, Licensee has not spent the required amount for such period specified
above in this Paragraph 15(D), then Licensee shall pay to Players Inc no later
than the last day of such period an amount equal to the difference between the
amount specified in this Paragraph 15(D) for such period and the amount actually
spent by Licensee during such period on approved activities.
16. TERMINATION BY PLAYERS INC
(A) In the event Licensee does not commence in good faith to cause the
manufacture, distribution, and sale of the licensed product(s), in substantial
quantities on or before September 15, 1997, Players Inc, in addition to all
other remedies available to it shall have the option to terminate the License
granted hereunder upon written notice of such termination to Licensee.
(B) In the event Licensee files a petition in bankruptcy or is adjudicated
as bankrupt, or if a petition in bankruptcy is filed against Licensee or if
Licensee becomes insolvent, or makes an assignment for the benefit of its
creditors or an arrangement pursuant to any bankruptcy laws, or if Licensee
discontinues its business, or if a receiver is appointed for it or its business,
all rights granted hereunder, without notice, shall terminate automatically upon
the occurrence of any such event. In the event of such termination, neither
Licensee nor its receivers, representatives, trustees, agents, administrators,
successors, and/or assigns shall have any right to sell, exploit or in any way
deal with the rights granted hereunder or with any licensed product(s), or any
carton, container, packaging or wrapping material, advertising, promotional or
display material pertaining to any licensed product(s).
(C) If Licensee shall violate any of its other obligations under the terms
of this Agreement, Players Inc shall have the right to terminate this Agreement
upon thirty (30) days' notice in writing, and such notice of termination shall
become effective unless Licensee shall completely remedy the violation within
the thirty (30) day period and shall provide reasonable proof to Players Inc
that such violation has
9
<PAGE>
been remedied. If this Agreement is terminated under this paragraph, all
royalties theretofore accrued shall become due and payable immediately to
Players Inc, and Players Inc shall not be obligated to reimburse Licensee for
any royalties paid by Licensee to Players Inc.
(D) Failure to resort to any remedies referred to herein shall not be
construed as a waiver of any other rights and remedies to which Players Inc is
entitled under this Agreement or otherwise.
(E) Upon termination of this Agreement, Licensee shall have ninety (90)
days to dispose of and liquidate all inventory. This inventory shall not be
available to Licensee's customers after this ninety (90) day period expires.
Such disposition shall conform to this Agreement in all respects. Players Inc
shall have right to conduct a physical inventory at the time of termination if
it so elects.
17. PARTNERSHIP. Nothing herein contained shall be construed to place Players
Inc and Licensee in the relationship of partners or joint venturers, and
Licensee shall have no power to obligate or bind Players Inc in any manner
whatsoever.
18. WAIVER AND/OR MODIFICATION. None of the terms of this Agreement shall be
waived or modified except by an express agreement in writing signed by both
parties. There are no representations, promises, warranties, covenants or
undertakings other than those contained in this Agreement, which represents the
entire understanding of the parties. No written waiver shall excuse the
performance of an act other than those specified therein. The failure of either
party hereto to enforce, or delay by either party in enforcing any of its rights
under this Agreement shall not be deemed a continuing waiver or modification
thereof and either party may, within the time provided by applicable laws,
commence appropriate legal proceeding(s) to enforce any or all of such rights.
19. NON-ASSIGNABILITY. This Agreement and all rights and duties hereunder are
personal to Licensee and shall not, without written consent of Players Inc, be
assigned, mortgaged, sublicensed or otherwise encumbered by Licensee or by
operation of law to any other person, or entity. Upon any such attempted
unapproved assignment, mortgage, license, sublicense or other encumbrance this
Agreement shall terminate and all rights granted to Licensee hereunder shall
immediately revert to Players Inc. In addition, Players Inc may terminate this
Agreement, at its sole discretion, in the event that Licensee is merged,
consolidated, or transfers all or substantially all of its assets. If, in its
sole discretion, Players Inc shall exercise such termination, all rights granted
to Licensee hereunder shall immediately revert to Players Inc.
20. CONSTRUCTION.This Agreement shall be governed by, and shall be construed in
accordance with the laws of the State of New York of the United States of
America. The parties consent to jurisdiction under the State of New York and
designate the courts of the State of New York as the venue for any dispute
arising out of, under or relating to this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day
and date written first above.
The Foregoing is Acknowledged:
NATIONAL FOOTBALL LEAGUE THE TOPPS COMPANY, INC.
PLAYERS INCORPORATED
BY:____________________________ BY:________________________
Title:___________________________ Title:_______________________
11
<PAGE>
ATTACHMENT "A"
TEAM:___________________________
NFL PLAYERS ASSOCIATION
GROUP LICENSING ASSIGNMENT
The undersigned player, a member of the National Football League Players
Association ("NFLPA"), hereby assigns to the NFLPA and its licensing affiliates,
if any, the exclusive right to use and to grant to persons, firms or
corporations (collectively "licensees") the right to use his name, signature
facsimile, voice, picture, photograph, likeness and/or biographical information
(collectively "image") in group licensing programs. Group licensing programs are
defined as those licensing programs in which a licensee utilizes a total of six
(6) or more NFL player images in conjunction with or on products that are sold
at retail or used as promotional or premium items. The undersigned player
retains the right to grant permission to a licensee to utilize his image if that
licensee is not concurrently utilizing the images of five (5) or more other NFL
players in conjunction with or on products that are sold at retail or are used
as promotional or premium items. If the undersigned player's inclusion in a
particular NFLPA program is precluded by an individual exclusive endorsement
agreement, and the undersigned player provides the NFLPA with timely notice of
that preclusion, the NFLPA agrees to exclude the undersigned player from that
particular program.
In consideration for this assignment of right, the NFLPA agrees to use the
revenues it receives from group licensing programs to support the objectives as
set forth in the By-laws of the NFLPA. The NFLPA further agrees to use its best
efforts to promote the use of NFL player image in group licensing programs, to
provide group licensing opportunities to all NFL players and to ensure that no
entity engages in a group licensing program without first obtaining a license
from the NFLPA. The NFLPA makes no representations regarding group licensing
other than those expressed herein. This agreement shall be construed under New
York law.
This assignment shall expire on December 31, 2001 and may not be revoked or
terminated by the undersigned player until such date.
Dated:_________________________ ______________________________
Player's Signature
Agreed to by the NFLPA: _____________________________
Player's Name (PLEASE PRINT)
_______________________________
Name
_______________________________
Title
------------------------------------
------------------------------------
Player's Autograph
<PAGE>
AMENDMENT TO LICENSE AGREEMENT
This Amendment is made and entered into as of this 22nd day of September,
1998 by and between The Topps Company, Inc. ("Licensee") and National Football
League Players Incorporated ("Players Inc").
1. This Amendment shall serve as an amendment to the License Agreement
entered into by Licensee and Players Inc on September 22, 1998 (the "License
Agreement"). This Amendment shall be effective as of March 1, 1997 and shall
expire on February 28, 1998.
2. Licensee hereby reaffirms that Paragraph 13 of the License
Agreement, titled Non-Interference, (hereinafter referenced as the
"Non-Interference Clause") has been, and continues to be, a valid and binding
provision of the License Agreement. Nothing set forth in this Amendment shall be
construed in any way as a waiver, repudiation, or nullification of the
Non-Interference Clause by Players Inc or Licensee.
3. In accordance with the settlement of an action brought by the NFLPA
against NFL Properties in Federal Court in The Southern District of New York,
styled National Football League Players Association v. National Football League
Properties, et al., 90 Civ. 4244 (MJL), Players Inc agrees that Licensee may,
pursuant to and without thereby violating the License Agreement, manufacture,
market, distribute, and sell the licensed product(s) for the current license
period utilizing the image, likeness, photograph, voice, facsimile signature
and/or biographical information of the members of the NFL Quarterback Club
listed in Exhibit A hereto in conjunction with the licensed product(s);
provided, however, that any licensed product(s) produced by Licensee which
contain players listed on Exhibit A hereto are subject to the terms contained in
the License Agreement, including, but not limited to, Paragraph 12 -- APPROVALS.
All such licensed product(s) must relate directly to the 1997 football season.
NFL Properties has agreed, as part of the settlement of the Properties action,
to license the players listed on Exhibit A hereto to Licensee on a royalty free
basis.
4. Licensee shall pay the full royalties owed to Players Inc in
accordance with the License Agreement, including, without limitation, royalties
for any licensed products sold by Licensee that utilize the identities of the
players listed in Exhibit A hereto and, subject only to Paragraph 6 of the
License Agreement, shall make no deduction nor pro-ration, of those royalties
for any reason whatsoever.
5. Licensee expressly warrants and represents that prior to inclusion
in licensed products of the players listed on Exhibit A for the current license
period, it will obtain from NFL Properties, agent for the NFL Quarterback Club,
the non-exclusive right to utilize the image, likeness, photograph, voices,
facsimile signature and/or biographical information of the players listed in
Exhibit A hereto. To obtain such right Licensee must: (i) deal directly with NFL
Properties, on behalf of the NFL Quarterback Club; and (ii) accept NFL
Properties standard form licensing agreement for NFL Quarterback Club licenses;
provided, however, that such form licensing agreement shall not provide for or
require Licensee to make any payment to any entity or person for such right.
6. Licensee indemnifies Players Inc and undertakes to defend Players
Inc against, and hold Players Inc harmless from any liabilities, losses, damages
and expenses (including reasonable attorney's fees and cost of suit) resulting
from any and all claims, causes of action or suits brought against Players Inc
based upon the exercise by Licensee of the rights obtained by it to manufacture,
market and sell any licensed products utilizing the players listed on Exhibit A
<PAGE>
hereto. Players Inc shall have the right to approve of counsel selected pursuant
to this Paragraph 6, which approval shall not unreasonably be withheld.
7. Licensee agrees that it will continue to abide by all terms of the
License Agreement.
8. It is hereby agreed that to the extent that this Amendment shall
conflict with the License Agreement, the terms of this Amendment shall govern.
In all other respects, the parties hereto agree that the License Agreement shall
remain in full force and effect.
9. Each party hereto acknowledges: (i) that it is voluntarily entering
into this Amendment; (ii) that it has had the benefit of counsel of its choice
in connection with the negotiation and execution of this Amendment; and (iii)
that it has neither sought nor obtained any inducements or other consideration
beyond that which is contained herein.
10. This Amendment may not be amended, modified or altered except by a
writing executed by duly-authorized officers of each party.
11. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York of the United States of America. Any
dispute or litigation arising out of, under or relating to this Amendment may be
brought in the courts of the State of New York, which the parties hereby agree
shall have jurisdiction and venue over any such claim.
12. If any portion of this Amendment is deemed void or unenforceable
for any reason whatsoever, the remaining terms and conditions of this Amendment
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and date written first above.
THE TOPPS COMPANY, INC.
By:___________________________
Title:__________________________
NATIONAL FOOTBALL LEAGUE
PLAYERS INCORPORATED
By:___________________________
Title:__________________________
<PAGE>
EXHIBIT A
NFL QUARTERBACK CLUB MEMBERS
<TABLE>
<S> <C> <C>
- ------------------------------------------- ------------------------------------------ ------------------------------------------
BUFFALO BILLS MIAMI DOLPHINS SAN FRANCISCO 49ERS
Jim Kelly Dan Marino Steve Young
Bernie Kosar Jerry Rice
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
CHICAGO BEARS MINNESOTA VIKINGS SEATTLE SEAHAWKS
Erik Kramer Randall Cunningham Warren Moon
Rick Mirer
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
CINCINNATI BENGALS NEW ENGLAND PATRIOTS
Jeff Blake Drew Bledsoe
Boomer Esiason
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
DALLAS COWBOYS NEW ORLEANS SAINTS
Troy Aikman Jim Everett
Michael Irvin Heath Shuler
Emmitt Smith
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
DENVER BRONCOS NEW YORK GIANTS
Bubby Brister Dave Brown
John Elway Phil Simms
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
DETROIT LIONS NEW YORK JETS
Barry Sanders Neil O'Donnell
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
GREEN BAY PACKERS OAKLAND RAIDERS
Brett Favre Jeff George
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
INDIANAPOLIS COLTS PITTSBURGH STEELERS
Jim Harbaugh Kordell Stewart
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
JACKSONVILLE JAGUARS SAN DIEGO CHARGERS
Mark Brunell Junior Seau
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
9/22/98 1997 QBC MEMBERS
</TABLE>
<PAGE>
AMENDMENT TO LICENSE AGREEMENT
This Amendment is made and entered into as of this 22nd day of September,
1998 by and between The Topps Company, Inc. ("Licensee") and National Football
League Players Incorporated ("Players Inc").
1. This Amendment shall serve as an amendment to the License Agreement
entered into by Licensee and Players Inc on September 22, 1998 (the "License
Agreement"). This Amendment shall be effective as of March 1, 1998 and shall
expire on February 28, 1999.
2. Licensee hereby reaffirms that Paragraph 13 of the License
Agreement, titled Non-Interference, (hereinafter referenced as the
"Non-Interference Clause") has been, and continues to be, a valid and binding
provision of the License Agreement. Nothing set forth in this Amendment shall be
construed in any way as a waiver, repudiation, or nullification of the
Non-Interference Clause by Players Inc or Licensee.
3. In accordance with the settlement of an action brought by the NFLPA
against NFL Properties in Federal Court in The Southern District of New York,
styled National Football League Players Association v. National Football League
Properties, et al., 90 Civ. 4244 (MJL), Players Inc agrees that Licensee may,
pursuant to and without thereby violating the License Agreement, manufacture,
market, distribute, and sell the licensed product(s) for the current license
period utilizing the image, likeness, photograph, voice, facsimile signature
and/or biographical information of the members of the NFL Quarterback Club
listed in Exhibit A hereto in conjunction with the licensed product(s);
provided, however, that any licensed product(s) produced by Licensee which
contain players listed on Exhibit A hereto are subject to the terms contained in
the License Agreement, including, but not limited to, Paragraph 12 -- APPROVALS.
All such licensed product(s) must relate directly to the 1998 football season.
NFL Properties has agreed, as part of the settlement of the Properties action,
to license the players listed on Exhibit A hereto to Licensee on a royalty free
basis.
4. Licensee shall pay the full royalties owed to Players Inc in
accordance with the License Agreement, including, without limitation, royalties
for any licensed products sold by Licensee that utilize the identities of the
players listed in Exhibit A hereto and, subject only to Paragraph 6 of the
License Agreement, shall make no deduction nor pro-ration, of those royalties
for any reason whatsoever.
5. Licensee expressly warrants and represents that prior to inclusion
in licensed products of the players listed on Exhibit A for the current license
period, it will obtain from NFL Properties, agent for the NFL Quarterback Club,
the non-exclusive right to utilize the image, likeness, photograph, voices,
facsimile signature and/or biographical information of the players listed in
Exhibit A hereto. To obtain such right Licensee must: (i) deal directly with NFL
Properties, on behalf of the NFL Quarterback Club; and (ii) accept NFL
Properties standard form licensing agreement for NFL Quarterback Club licenses;
provided, however, that such form licensing agreement shall not provide for or
require Licensee to make any payment to any entity or person for such right.
6. Licensee indemnifies Players Inc and undertakes to defend Players
Inc against, and hold Players Inc harmless from any liabilities, losses, damages
and expenses (including reasonable attorney's fees and cost of suit) resulting
from any and all claims, causes of action or suits brought against Players Inc
based upon the exercise by Licensee of the rights obtained by it to manufacture,
market and sell any licensed products utilizing the players listed on Exhibit A
<PAGE>
hereto. Players Inc shall have the right to approve of counsel selected pursuant
to this Paragraph 6, which approval shall not unreasonably be withheld.
7. Licensee agrees that it will continue to abide by all terms of the
License Agreement.
8. It is hereby agreed that to the extent that this Amendment shall
conflict with the License Agreement, the terms of this Amendment shall govern.
In all other respects, the parties hereto agree that the License Agreement shall
remain in full force and effect.
9. Each party hereto acknowledges: (i) that it is voluntarily entering
into this Amendment; (ii) that it has had the benefit of counsel of its choice
in connection with the negotiation and execution of this Amendment; and (iii)
that it has neither sought nor obtained any inducements or other consideration
beyond that which is contained herein.
10. This Amendment may not be amended, modified or altered except by a
writing executed by duly-authorized officers of each party.
11. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York of the United States of America. Any
dispute or litigation arising out of, under or relating to this Amendment may be
brought in the courts of the State of New York, which the parties hereby agree
shall have jurisdiction and venue over any such claim.
12. If any portion of this Amendment is deemed void or unenforceable
for any reason whatsoever, the remaining terms and conditions of this Amendment
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and date written first above.
THE TOPPS COMPANY, INC.
By:___________________________
Title:__________________________
NATIONAL FOOTBALL LEAGUE
PLAYERS INCORPORATED
By:___________________________
Title:__________________________
<PAGE>
EXHIBIT A
NFL QUARTERBACK CLUB MEMBERS
<TABLE>
<S> <C> <C>
- ------------------------------------------- ------------------------------------------ ------------------------------------------
ARIZONA CARDINALS MIAMI DOLPHINS SAN FRANCISCO 49ERS
David Brown Dan Marino Steve Young
Bernie Kosar Jerry Rice
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
BUFFALO BILLS MINNESOTA VIKINGS SEATTLE SEAHAWKS
Jim Kelly Randall Cunningham Warren Moon
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
CHICAGO BEARS NEW ENGLAND PATRIOTS
Erik Kramer Drew Bledsoe
Rick Mirer
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
CINCINNATI BENGALS NEW ORLEANS SAINTS
Jeff Blake Jim Everett
Boomer Esiason Heath Shuler
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
DALLAS COWBOYS NEW YORK GIANTS
Troy Aikman Dave Brown
Michael Irvin Phil Simms
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
DENVER BRONCOS NEW YORK JETS
Bubby Brister Neil O'Donnell
John Elway
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
DETROIT LIONS OAKLAND RAIDERS
Barry Sanders Jeff George
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
GREEN BAY PACKERS PITTSBURGH STEELERS
Brett Favre Kordell Stewart
Rick Mirer
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
INDIANAPOLIS COLTS SAN DIEGO CHARGERS
Jim Harbaugh Junior Seau
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
- ------------------------------------------- ------------------------------------------ ------------------------------------------
9/22/98 1998 QBC MEMBERS
</TABLE>
SECOND AMENDMENT TO
CREDIT AGREEMENT
Dated as of November 6, 1998
SECOND AMENDMENT, dated as of November 6, 1998 (the "Second Amendment"), to
Credit Agreement, dated as of May 11, 1998 (as heretofore amended and as may be
from time to time supplemented and amended, the "Credit Agreement"), between THE
TOPPS COMPANY, INC., a Delaware corporation (the "Borrower"), and THE CHASE
MANHATTAN BANK, in its capacity as lender (in such capacity, the "Lender") and
as Agent (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, on May 11, 1998, the Borrower, the Lender and the Agent entered
into the Credit Agreement;
WHEREAS, the Borrower has requested that the Lender agree to modify certain
terms of the Credit Agreement, and the Lender has agreed to do so on the terms
and conditions set forth herein;
WHEREAS, unless otherwise defined herein, capitalized terms defined in the
Credit Agreement and used herein are used herein as therein defined.
NOW THEREFORE, the parties to this Second Amendment, for valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
hereto agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.01. Section 1.01 of the Credit Agreement
is hereby amended by amending and restating the defined term "Applicable Rate"
as follows:
"Applicable Rate" means, for any day (a) with respect to any
Eurodollar Loan, 2.25% per annum, or (b) with respect to the
commitment fees payable hereunder, 1/2 of 1% per annum.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower and each of the
Guarantors hereby represents and warrants that:
(a) each of the representations and warranties contained in Article
III of the Credit Agreement and in each of the other Loan Documents is true
and correct (provided that any representations and warranties which speak
to a specific date shall remain true and correct as of such specific date);
(b) after giving effect to this Second Amendment, there does not exist
a Default or an Event of Default as of the date hereof;
(c) the execution, delivery and performance by the Borrower of this
Second Amendment (i) are within the corporate powers of the Borrower, (ii)
have been duly authorized by all necessary corporate and, if required,
stockholder action, and (iii) (A) do not require any consent or approval
of, registration or filing with, or any other action by, any Governmental
Authority, except such as have been obtained or made and are in full force
<PAGE>
and effect and except filings necessary to perfect Liens created under the
Loan Documents, (B) will not violate any applicable law or regulation or
the charter, by-laws or other organizational documents of the Borrower or
any of its Subsidiaries or any order of any Governmental Authority, (C)
will not violate or result in a default under any indenture, agreement or
other instrument binding upon the Borrower or any of its Subsidiaries or
its assets, or give rise to a right thereunder to require any payment to be
made by the Borrower or any of its Subsidiaries, and (D) will not result in
the creation or imposition of any Lien on any asset of the Borrower or any
of its Subsidiaries, except Liens created under the Loan Documents.
(d) This Second Amendment has been duly executed and delivered by the
Borrower.
(e) This Second Amendment is the legal, valid and binding obligation
of the Borrower, enforceable against the Borrower in accordance with its
terms.
SECTION 3. CONDITIONS PRECEDENT. This Second Amendment shall become
effective when the Agent shall have received counterparts of this Second
Amendment executed by each of the Borrower, the Lender and the Agent.
SECTION 4. CONTINUOUS EFFECT. The terms of this Second Amendment shall not
operate as a waiver by the Agent or the Lender, or otherwise prejudice the
rights, remedies or powers of the Agent or the Lender under the Loan Documents
or under applicable law. Except as expressly provided herein: (x) no terms and
provisions of the Loan Documents are modified or changed by this Second
Amendment; and (y) the terms and provisions of the Loan Documents shall continue
in full force and effect.
SECTION 5. SEVERABILITY. The provisions of this Second Amendment are
intended to be severable. If for any reason any provision of this Second
Amendment shall be held invalid or unenforceable in whole or in part in any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or unenforceability without in any manner
affecting the validity or enforceability thereof in any other jurisdiction or
the remaining provisions hereof in any jurisdiction.
SECTION 6. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Second Amendment by
signing any such counterpart.
SECTION 7. INTEGRATION. This Second Amendment sets forth the entire
agreement among the parties hereto relating to the transactions contemplated
thereby and supersedes any prior oral or written statements or agreements with
respect to such transactions.
SECTION 8. GOVERNING LAW. THIS SECOND AMENDMENT SHALL IN ALL RESPECTS BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be duly executed as of the day and the year first written.
THE TOPPS COMPANY, INC.
By:_______________________
Name: Catherine Jessup
Title: VP - CFO
THE CHASE MANHATTAN BANK,
individually and as Agent,
By:___________________________
Name: Christopher L. Murtha
Title: Vice President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000812076
<NAME> TOPPS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-27-1999
<PERIOD-END> NOV-28-1998
<CASH> 44,138
<SECURITIES> 0
<RECEIVABLES> 34,802
<ALLOWANCES> 1,281
<INVENTORY> 15,666
<CURRENT-ASSETS> 99,103
<PP&E> 13,144
<DEPRECIATION> 5,458
<TOTAL-ASSETS> 170,838
<CURRENT-LIABILITIES> 75,012
<BONDS> 10,000
475
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 170,838
<SALES> 67,647
<TOTAL-REVENUES> 67,964
<CGS> 41,102
<TOTAL-COSTS> 60,312
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 110
<INTEREST-EXPENSE> 395
<INCOME-PRETAX> 7,257
<INCOME-TAX> 3,123
<INCOME-CONTINUING> 4,134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,134
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
