August 11, 1997
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 June 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _________________ to ________________.
Commission file number 1-11812
STARTER CORPORATION
(exact name of registrant as specified in its charter)
Delaware 06-0872266
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
370 James Street, New Haven, Connecticut 06513
-----------------------------------------------
(Address of principal executive offices, including zip code)
(203) 781-4000
--------------
(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 |_|
27,858,643 shares of common stock, $.01 par value, were outstanding as of August
1, 1997.
1
<PAGE>
INDEX
STARTER CORPORATION
Page Number
-----------
PART 1 Financial Information
ITEM 1 Consolidated Financial Statements (unaudited)
Consolidated balance sheets - June 30, 1997,
December 31, 1996 and June 30, 1996 3-4
Consolidated statements of operations - Three and
six month periods ended June 30, 1997 and
June 30, 1996 5
Consolidated statements of cash flows - Six months
ended June 30, 1997 and June 30, 1996 6
Notes to consolidated financial statements -
June 30, 1997 7
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II Other Information
ITEM 4 Submission of Matters to a Vote of Security Holders 14
ITEM 6 Exhibits and Reports on Form 8-K 15
Signature 16
2
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STARTER CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996 June 30, 1996
------------- ----------------- -------------
(unaudited) (note) (unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,489 $ 2,995 $ 2,008
Accounts receivable - trade, less allowance for
doubtful accounts of $3,000 at June 30,
1997, $3,800 at December 31, 1996 and
$3,000 at June 30, 1996 45,317 55,910 43,794
Inventories 90,396 76,964 103,673
Prepaid expenses and other assets 12,392 8,539 10,635
Deferred income taxes 8,565 8,565 10,081
--------- --------- ---------
Total current assets 160,159 152,973 170,191
Plant and equipment 36,338 36,034 32,700
Less accumulated depreciation (8,748) (8,095) (7,315)
--------- --------- ---------
Plant and equipment, net 27,590 27,939 25,385
Other assets:
Other assets (primarily intangibles) 8,718 5,053 2,526
Non-current deferred income taxes 1,568 1,568 523
Other investments 1,362 1,362 1,362
--------- --------- ---------
Total other assets 11,648 7,983 4,411
--------- --------- ---------
Total assets $ 199,397 $ 188,895 $ 199,987
========= ========= =========
</TABLE>
3
<PAGE>
STARTER CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996 June 30, 1996
------------- ----------------- -------------
(unaudited) (note) (unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 65,679 $ 34,666 $ 62,792
Accounts payable 13,622 14,218 11,452
Accrued commissions 1,845 3,007 2,249
Accrued licensing fees 4,923 6,166 7,615
Accrued expenses 8,201 12,053 12,092
Accrued advertising 4,455 7,381 5,274
Current portion of long-term debt 351 2,299 1,749
-------- -------- --------
Total current liabilities 99,076 79,790 103,223
Long-term debt, less current portion 3,825 5,852 7,056
-------- -------- --------
Total liabilities 102,901 85,642 110,279
Stockholders' equity:
Convertible Preferred Stock (par value $.01)
5,000,000 authorized shares
Common Stock (par value $.01)
50,000,000 shares authorized; issued
27,856,615 at June 30, 1997,
27,708,146 at December 31, 1996 and
26,843,249 at June 30, 1996 278 277 268
Additional paid in capital 82,716 81,657 75,197
Retained earnings 13,502 21,319 14,243
-------- -------- --------
Total stockholders' equity 96,496 103,253 89,708
-------- -------- --------
Total liabilities and stockholders' equity $199,397 $188,895 $199,987
======== ======== ========
</TABLE>
Note: The consolidated balance sheet at December 31, 1996 has been derived from
the audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
4
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STARTER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 58,304 $ 62,765 $ 120,020 $ 122,060
Cost of sales 40,727 42,916 83,272 84,025
------------ ------------ ------------ ------------
Gross profit 17,577 19,849 36,748 38,035
Royalty income 1,495 568 2,054 1,190
Selling, general & administrative expenses 25,367 24,816 49,360 46,287
------------ ------------ ------------ ------------
Income (loss) from operations (6,295) (4,399) (10,558) (7,062)
Other income 15 110 24 208
------------ ------------ ------------ ------------
(6,280) (4,289) (10,534) (6,854)
Interest expense 1,477 1,083 2,493 1,762
------------ ------------ ------------ ------------
Loss before income taxes (7,757) (5,372) (13,027) (8,616)
Income tax benefit (3,102) (2,148) (5,210) (3,417)
------------ ------------ ------------ ------------
Net (loss) $ (4,655) $ (3,224) $ (7,817) $ (5,199)
============ ============ ============ ============
Loss per share $ (.17) $ (.12) $ (.28) $ (.19)
============ ------------ ------------ ============
Average common and common
equivalent shares 27,853,258 26,840,977 27,830,176 26,838,528
============ ============ ============ ============
</TABLE>
See accompanying notes.
5
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STARTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (7,817) $ (5,199)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 2,064 1,461
Provision for bad debts (500) 590
Deferred income taxes 0 (452)
Changes in operating assets and liabilities:
Accounts receivable 12,169 180
Inventories (12,955) (42,213)
Prepaid expenses and other assets (3,853) 6,047
Accounts payable and accrued expenses (13,694) (2,855)
-------- --------
Net cash used by operating activities (24,586) (42,441)
Cash flows from investing activities
Purchase of property, plant and equipment (1,041) (221)
Other, net (977) (191)
-------- --------
Net cash used by investing activities (2,018) (412)
Cash flows from financing activities
Repayment of long-term borrowings (3,975) (772)
Net borrowings on credit arrangements 31,013 41,063
Net proceeds from sale of common stock 60 64
-------- --------
Net cash provided by financing activities 27,098 40,355
-------- --------
Net increase (decrease) in cash and cash equivalents 494 (2,498)
Cash and cash equivalents - beginning of period 2,995 4,506
-------- --------
Cash and cash equivalents - end of period $ 3,489 $ 2,008
======== ========
</TABLE>
See accompanying notes.
6
<PAGE>
STARTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
1) Basis of Presentation
The accompanying unaudited consolidated financial statements of STARTER
Corporation ("the Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.
The Company has experienced, and expects to continue to experience, variability
in net sales and operating results from quarter to quarter. Therefore, the
results of the interim periods presented herein are not necessarily indicative
of the results to be expected for any other interim period or the full year.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto for the year ended
December 31, 1996 included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
2) Inventories
Inventories were as follows (in thousands):
June 30 December 31 June 30
1997 1996 1996
---- ---- ----
Raw materials $20,772 $16,580 $ 13,929
Finished goods 69,624 60,384 89,744
------- ------- --------
$90,396 $76,964 $103,673
======= ======= ========
3) Credit Arrangement
On May 13, 1997, the Company entered into an amended and restated three year
$125 million secured revolving credit facility ("the credit facility"), which
replaces the previously existing facility. The credit facility provides for a
seasonal increase to $160 million from April 15 to October 15 each year.
Borrowings under the credit facility are subject to various limitations based
upon eligible receivables and inventory, as defined, of the Company and its
subsidiaries. The credit facility, which expires on May 31, 2000, contains
covenants requiring certain defined ratios, including debt to net worth and EBIT
(earnings before interest and taxes) to
7
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interest, among others, and places restrictions on capital expenditures and
capital lease obligations, payment of dividends, distributions, mergers and
consolidations. Amounts outstanding under the credit facility accrue interest at
either the Bank's base lending rate or a rate which can range from 1.0 to 2.125
percentage points per annum, as defined, above LIBOR, at the Company's option.
The Company is required to pay an annual fee which can range from .25 to .50
percentage points, as defined, on the credit facility. The credit facility is
secured by substantially all of the Company's assets.
The Company is in the process of amending the credit facility as a result of the
Company's projected inability to meet certain financial covenants at the end of
the third quarter of 1997. The Company believes it will finalize the amended
agreement in the third quarter of 1997. Such amendment will include provisions,
among others, for an increase in seasonal overadvances and a relaxation in
certain financial covenants.
4) Commitments and Contingencies
The Company is a party to various lawsuits incidental to its business which
management believes will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
5) Acquisition of Galt Sand Company and Subsidiaries
On August 9, 1996, Starter Galt, Inc., a wholly-owned subsidiary of the Company,
purchased substantially all of the assets and assumed all recorded liabilities
of Galt Sand Company and its wholly-owned subsidiaries, Galt Shop Company,
Danaggers Company and Galt Sand Canada, Inc. (collectively, "Galt"), for
approximately $7,000,000. Galt was engaged in the wholesale apparel business and
operated 18 factory outlet stores. The Company accounted for the acquisition as
a purchase and, accordingly, the purchase price has been allocated to the
acquired assets and liabilities based on their fair values. The fair values of
the acquired assets and assumed liabilities were $23,496,000 and $19,627,000,
respectively. The excess of cost over fair value of net assets acquired is being
amortized over 15 years. The purchase price, which was subject to certain
adjustments as defined in the asset purchase and sale agreement, was paid
through the issuance of 933,333.33 shares of the Company's common stock, based
upon the closing price ($7.50) of the Company's stock on July 25, 1996. The
operating results of Galt from the date of acquisition have been included in the
consolidated statements of operations from the date of acquisition. The
following pro forma unaudited consolidated operating results of the Company and
Galt have been prepared as if the acquisition had been made at the beginning of
the periods presented and include pro forma adjustments to exclude costs
associated with the elimination of certain outlet stores and costs associated
with the closure of a duplicate facility. In addition, the pro forma information
includes adjustments to reflect amortization of goodwill and revised financing
arrangements.
Quarter Ended Six Months Ended
June 30, 1996 June 30, 1996
------------- -------------
Net sales $67,675 $131,758
Net loss $(4,468) $ (7,502)
Net loss per share $ (.16) $ (.27)
8
<PAGE>
These results are not necessarily indicative of the results of operations of the
combined companies had the acquisition occurred at the beginning of the period
presented, nor are they necessarily indicative of future operating results.
6) Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods if necessary.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement No.
128 on the calculation of primary and fully diluted earnings per share for the
quarter and six month periods ended June 30, 1997 and 1996 is not expected to be
material.
9
<PAGE>
ITEM 2
STARTER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's business is seasonal with higher sales reported in the second half
of the year due to the higher price points of a significant portion of the
Company's products which are sold during the fall and holiday seasons. The
seasonality of the Company's business also affects borrowings under the
Company's revolving credit agreement. The amount outstanding under the revolving
credit agreement fluctuates as a result of seasonal demands for the Company's
products. Traditional quarterly fluctuations in the Company's business may vary
in the future depending upon, among other things, changes in order cycles and
product mix.
The Company's business is vulnerable to a number of factors beyond its control.
These include: (1) player strikes, (2) owner lockouts, (3) work stoppages, (4)
the granting of additional licenses to competitors, some of which have greater
financial resources and manufacturing capabilities than the Company, and (5)
changes in consumer tastes and enthusiasm for spectator sports. The Company's
business can also be affected by other matters which impact the retail
marketplace, including increased credit and inventory exposure, consolidation
and resulting decline in the number of retailers and other cyclical economic
factors. The Company seeks to minimize inventory exposure by encouraging
retailers to place orders five to six months in advance of the date products are
scheduled to be delivered. This provides the Company with better information to
purchase product for its reorder business.
A substantial portion of the Company's products are manufactured through
arrangements with independent contractors located in Korea and, to a lesser
extent, other foreign countries. In addition, the Company's import operations
are subject to constraints imposed by bilateral textile agreements between the
United States and a number of foreign countries. The agreements impose quotas on
the amount and type of goods which can be imported into the United States from
these countries. The Company's operations may be adversely affected by political
instability resulting in the disruption of trade from foreign countries in which
the Company's contractors and suppliers are located, the imposition of
additional regulations relating to imports, or duties and taxes and other
charges on imports. The Company is unable to predict whether any additional
regulations, duties, taxes, quotas or other charges may be imposed on the
importation of its products. The assessment of any of these items could result
in increases in the cost of such imports and affect the sales or profitability
of the Company. In addition, the failure of one or more manufacturers to ship
some or all of the Company's orders could impact the Company's ability to
deliver products to its customers on time. Delays in delivery could result in
missing certain retailing seasons with respect to some or all of the Company's
products or could otherwise adversely affect the Company.
10
<PAGE>
Results of Operations
On August 9, 1996, Starter Galt, Inc., a wholly-owned subsidiary of the Company,
purchased substantially all of the assets and assumed all recorded liabilities
of Galt Sand Company and its subsidiaries ("Galt"). Galt was engaged in the
wholesale apparel business and operated 18 factory outlet stores. The discussion
below relates to the results of operations of the Company on a historical basis
for the three and six month periods ended June 30, 1997 and 1996 (including the
results of Galt's operations since August 9, 1996).
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items in the Company's consolidated
statements of operations.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales (69.9) (68.4) (69.4) (68.8)
------ ------ ------ ------
Gross Profit 30.1 31.6 30.6 31.2
Royalty income 2.6 .9 1.7 .9
Selling, general &
administrative expenses (43.5) (39.5) (41.1) (37.9)
------ ------ ------ ------
Loss from operations (10.8) (7.0) (8.8) (5.8)
Other income - net -- .2 -- .2
Interest expense (2.5) (1.7) (2.1) (1.4)
------ ------ ------ ------
Loss before income taxes (13.3) (8.5) (10.9) (7.0)
Income tax benefit (5.3) (3.4) (4.3) (2.8)
------ ------ ------ ------
Net loss (8.0%) (5.1%) (6.6%) (4.2%)
====== ====== ====== ======
</TABLE>
Net sales for the three and six month periods ended June 30, 1997 decreased
approximately 7.1% and 1.7%, respectively, as compared to the three and six
month periods ended June 30, 1996. The decreases are primarily attributable to
the lack of Olympic licensed product sales in
11
<PAGE>
1997 which accounted for 15.1% and 10.1% of total sales for the three and six
month periods ended June 30, 1996, respectively.
Gross profit for the three and six month periods ended June 30, 1997 was $17.6
million and $36.7 million, respectively, as compared to $19.8 and $38.0 million
for the three and six month periods ended June 30, 1996, respectively. The gross
profit margin as a percent of sales decreased to 30.1% and 30.6% for the three
and six months ended June 30, 1997, respectively as compared to 31.6% and 31.2%
for the three and six months ended June 30, 1996, respectively. The decreases
are primarily attributable to retail pressures associated with increased
competition and continued slowdown of licensed product at the retail level.
Royalty income for the three and six months ended June 30, 1997 increased $.9
million as compared to the three and six months ended June 30, 1996, primarily
as a result of the addition of new domestic licensees.
Selling, general and administrative expenses increased to $25.4 million or 43.5%
of net sales and $49.4 million or 41.9% of net sales for the three and six
months ended June 30, 1997, respectively, as compared to $24.8 million or 39.5%
and $46.3 million or 37.9% for the three and six months ended June 30, 1996,
respectively. The increases are primarily attributable to increased employee
compensation and outlet store expenses associated with the Galt acquisition.
Additionally, higher marketing costs resulted from the accelerated timing of
certain advertising programs for the periods this year as compared to the prior
year periods.
Interest expense increases for the three and six months ended June 30, 1997 are
primarily attributable to increased interest rates and increased average
borrowings needed to finance operations due in part to the Galt acquisition.
Liquidity and Capital Resources
The Company's working capital at June 30, 1997 was $61.1 million as compared to
$73.2 million at December 31, 1996 and $67.0 million at June 30, 1996. The
decrease from December 31 is primarily attributable to the loss for the six
months ended June 30, 1997 as well as the repayment of $4.0 million of long term
debt. Cash used by operations for the first six months of 1997 was $24.6 million
compared to $42.4 million for the comparable 1996 period.
On May 13, 1997 the Company entered into an amended and restated three year $125
million secured revolving credit facility ("the credit facility"), which
replaces the previously existing facility. The credit facility provides for a
seasonal increase to $160 million from April 15 to October 15 each year.
Borrowings under the credit facility are subject to various limitations based
upon eligible receivables and inventory, as defined, of the Company and its
subsidiaries. The credit facility, which expires on May 31, 2000, contains
covenants requiring certain
12
<PAGE>
defined ratios, including debt to net worth and EBIT to interest, among others,
and places restrictions on capital expenditures and capital lease obligations,
payment of dividends, distributions, mergers and consolidations. Amounts
outstanding under the credit facility accrue interest at either the Bank's base
lending rate or a rate which can range from 1.0 to 2.125 percentage points per
annum, as defined, above LIBOR, at the Company's option. The Company is required
to pay an annual fee which can range from .25 to .50 percentage points, as
defined, on the credit facility. The credit facility is secured by substantially
all of the Company's assets.
The Company is in the process of amending the credit facility as a result of the
Company's projected inability to meet certain financial covenants at the end of
the third quarter of 1997. The Company believes it will finalize the amended
agreement in the third quarter of 1997. Such amendment will include provisions,
among others, for an increase in seasonal overadvances and a relaxation in
certain financial covenants.
Cash generated by operations, together with funds expected to be available under
the credit facility, as amended, is expected, under current conditions, to be
sufficient to finance the Company's planned operations in 1997.
13
<PAGE>
Part II - Other Information
Item 4: Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on May 20, 1997. At the
Annual Meeting the following matters were voted upon:
* The election of David A. Beckerman, Joseph P. Grant and Richard H. Saletan
as Class I directors.
David A. Beckerman
For Withheld
--- --------
25,491,670 220,120
Joseph P. Grant
For Withheld
--- --------
25,456,029 255,761
Richard H. Saletan
For Withheld
--- --------
25,503,933 207,857
* The approval of the 1997 Quality Based-Performance Goals relating to
compensation to be paid to certain executive officers.
For Against Abstain No Vote
--- ------- ------- -------
21,420,330 381,418 71,498 3,838,544
14
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Item 6: Exhibits and reports on Form 8-K
(a) Exhibits
10.2* License Agreement by and between Major League Baseball Properties,
Inc. and Starter effective as of January 1, 1995.
10.7* License Agreement by and between NBA Properties, Inc. and Starter
effective as of August 1, 1997
10.33 Second Amended and Restated Credit Agreement dated May 13, 1997
11 Computation of net loss per share for the three and six month
periods ended June 30, 1997 and June 30, 1996
27 Financial Data Schedule
* Confidential treatment requested as to certain portions
(b) Reports on Form 8-K
There were no Reports on Form 8-K filed during the quarter ended
June 30, 1997.
15
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SIGNATURES
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.
STARTER CORPORATION
DATE: AUGUST 11, 1997 /s/ Lawrence C. Longo, Jr.
-------------------------------------
Lawrence C. Longo, Jr.
Chief Financial Officer and Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Description Numbered Page
- ------- ----------- -------------
10.2* License Agreement by and between Major League Baseball
Properties, Inc. and Starter effective as of January 1, 1995.
10.7* License Agreement by and between NBA Properties, Inc. and
Starter effective as of August 1, 1997
10.33 Second Amended and Restated Credit Agreement dated May 13, 1997
11 Computation of net loss per share for the three and six month
periods ended June 30, 1997 and June 30, 1996
27 Financial Data Schedule
* Confidential treatment requested as to certain portions
================================================================================
[Major League Baseball Logo]
Contract No. ML-2029B
MAJOR LEAGUE BASEBALL PROPERTIES, INC.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT by and between Major League Baseball Properties,
Inc., 350 Park Avenue, New York, NY 10022 (hereinafter referred to as
"Licensor"), as agent for the Major League Baseball Clubs (the "Clubs"), and
Starter Corporation, 370 James Street, New Haven, CT 06513 (hereinafter referred
to as "Licensee"). This Agreement is not effective until signed by the parties
hereto.
THIS WILL CONFIRM OUR AGREEMENT AS FOLLOWS:
1. GRANT OF LICENSE: Licensor grants to Licensee for the term of this
Agreement, subject to the terms and conditions hereinafter contained, the
non-exclusive license to utilize the names, characters, symbols, designs,
likenesses and visual representations described in Schedule A attached hereto
(herein such names, characters, symbols, designs, likenesses and visual
representations are collectively called "Logos"), to be used solely in
connection with the manufacture, distribution, promotion, advertisement and sale
of the article or articles specified in Schedule B attached hereto (herein such
article or articles are called "Licensed Product(s)"). This license does not
constitute and may not be used so as to imply the endorsement of the Licensed
Product(s) or any other product of Licensee by Licensor, the Office of the
Commissioner of Baseball, the American or National League of Professional
Baseball Clubs (hereinafter referred to as the "Leagues") or the Clubs. While
the Logos licensed herein may be used as trademarks subject to the terms of this
License Agreement, the Logos are not licensed herein for use as certification
marks or indications of a particular standard of quality. Any exclusivity
granted hereunder shall be subject to presently outstanding agreements granted
by the Clubs. Further, any exclusivity granted hereunder shall pertain only to
the extent of the items described and, if given, at the price set forth in
Schedule E. Licensor warrants and represents that as the agent for the Clubs,
pursuant to authority granted by the Clubs, it has the full authority to
license the Logos in connection with the manufacture, distribution, promotion,
advertisement and sale of the Licensed Product(s).
2. TERRITORY: Licensee shall be entitled to use the license granted
hereunder only in the territory described in Schedule C attached hereto (herein
such territory is called "Licensed Territory"). Licensee will not make use of or
authorize any use of this license or the Licensed Product(s) outside the
Licensed Territory or distribute or sell the Licensed Product(s) directly or
through others to retailers outside the Licensed Territory.
3. LICENSE PERIOD: The license granted hereunder shall be effective and
terminate as of the dates specified in Schedule D attached hereto, unless
sooner terminated or renewed in accordance with the terms and conditions hereof.
4. PAYMENT: A. Advance and Guaranteed Compensation: Licensee agrees to pay
Licensor the sums specified in Schedule E attached hereto, as advance minimum
compensation (herein called "Advance Compensation") and as guaranteed minimum
compensation (herein called "Guaranteed Compensation"). The Advance Compensation
shall be paid as set forth in Schedule E, and shall apply against Percentage
Compensation as defined below. The Guaranteed Compensation shall be paid as
provided in Schedule E except to the extent that paid Advance Compensation and
annual cumulative payments of Percentage Compensation shall theretofore have
offset all or a portion of the total of such Guaranteed Compensation.
Notwithstanding the foregoing, no part of Percentage Compensation which may be
attributable to premium sales (as defined hereunder) of the Licensed Product(s)
shall serve to offset any part of the Total Guaranteed Compensation specified in
Schedule E. No part of such Advance Compensation and no part of such Guaranteed
Compensation shall be repayable to Licensee in any event, except as is expressly
provided for herein.
B. Percentage Compensation: Licensee agrees to pay Licensor a sum equal to
the percentage specified in Schedule E (or Licensor's prevailing rate, if
greater) of all net sales (as defined below) by Licensee or any of its
affiliated, associated or subsidiary entities of the Licensed Product(s) covered
by this Agreement. (Such percentage of net sales is herein called "Percentage
Compensation.") Percentage Compensation shall be payable concurrently with the
periodic statements required in the following paragraph, except to the extent
offset by Guaranteed Compensation theretofore remitted. The term "net sales"
shall mean gross sales based on the wholesale price to the retail trade less
quantity discounts and actual returns, but no deduction shall be made for
uncollectible accounts, commissions, taxes, discounts other than quantity
discounts, such as cash discounts and discounts attributable to the issuance of
a letter of credit, or any other amount. No costs incurred in the manufacture,
sale, distribution, promotion or advertisement of the Licensed Product(s) shall
be deducted from any Percentage Compensation payable by Licensee. Said
Percentage Compensation shall also be paid by Licensee to Licensor on all
Licensed Product(s) (including, without limitation, any irregulars, seconds,
etc. distributed pursuant to the provisions of Paragraph 10 of this Agreement)
distributed by Licensee or any of its affiliated, associated or subsidiary
entities even if not billed or billed at less than usual net sales price for
such Licensed Product(s),
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and shall be based upon the usual net sale sprice for such Licensed Product(s)
sold to the trade by Licensee. Any late payments of Advance Compensation,
Guaranteed Compensation or Percentage Compensation shall require Licensee to pay
Licensor, in addition to the amounts due, interest at one percent (1%) per month
or the highest prime lending rate of Chemical Bank during the period such
amounts are delinquent, whichever is greater, on the amounts delinquent for the
period of the delinquency, without prejudice to any other rights of Licensor in
connection therewith.
C. Catalog Contribution: Licensee agrees that Licensor shall have the right
in its sole discretion and in a style and manner in which it chooses, to print
catalogs, sales sheets or brochures (hereinafter "catalogs") wherein
representative merchandise from licensees of Licensor shall be displayed. In
this regard, Licensee agrees it will purchase from Licensor, at prevailing
rates, but in no event more than $3,000 for each year during the license period,
a minimum of one page in every catalog published during the term of this
Agreement in order to promote the Licensed Product(s), unless Licensee's
purchase obligation is excused by Licensor in writing. Licensee shall promptly
pay all amounts due upon invoicing and shall timely furnish materials necessary
to the publication of the catalogs. All payments made by Licensee in connection
with the publication of the catalogs shall be in addition to all other payments,
and shall not be credited against Advance Compensation, Guaranteed Compensation
or Percentage Compensation otherwise required hereunder.
5. PERIODIC STATEMENTS: Within thirty (30) days after the first day of the
license period, and promptly on the 15th day of every calendar month thereafter,
Licensee shall furnish to Licensor complete and accurate statements, certified
to be accurate by Licensee, or if a corporation, by an officer of Licensee,
showing the sales volume of each Licensed Product (itemized by Club, for each
applicable Licensed Product), gross sales price, itemized deductions from gross
sales price, and net sales price of the Licensed Product(s) distributed and/or
sold by Licensee during the preceding calendar month, together with any returns
made during the preceding calendar month. Such statements shall be furnished to
Licensor whether or not any of the Licensed Product(s) have been sold, or any
payment is shown to be due Licensor, during the calendar months in which such
statements are due. Licensee shall furnish to Licensor sufficient background
information so as to make such statements intelligible to Licensor, and upon
request by Licensor, a complete list of Licensee's customers to whom Licensed
Product(s) have been sold. Licensor agrees that it will not by divulge said
customer list to any other licensee, to any other competitor licensing
organization, or to any competitor of Licensee. Receipt or acceptance by
Licensor of any of the statements furnished pursuant to this Agreement or of any
sums paid hereunder shall not preclude Licensor from questioning the correctness
thereof at any time, and in the event that any inconsistencies or mistakes are
discovered in such statements or payments, they shall immediately be rectified
and the appropriate payments made by Licensee. Late payment penalties, if any,
shall be made pursuant to Paragraph 4.B. Upon demand of Licensor, Licensee shall
at its own expense, but not more than once in any twelve (12) month period,
furnish to Licensor a detailed statement certified by an independent certified
public accounting firm approved by Licensor showing the sales volume of each
Licensed Product (itemized by Club, for each applicable Licensed Product), gross
sales price, itemized deductions from gross sales price and net sales price of
the Licensed Product(s) covered by this Agreement distributed and/or sold by
Licensee to the date of the Licensor's demand. All amounts payable pursuant to
this Agreement shall be in U.S. dollars only.
6. BOOKS AND RECORDS: Licensee shall keep, maintain and preserve in its
principal place of business for at least two (2) years following termination or
expiration of this Agreement or any renewal thereof, complete and accurate
records and accounts covering all transactions relating to this Agreement and
pertaining to the various items required to be shown on the statements to be
submitted by Licensee, including, without limitation, invoices, correspondence
and banking, financial and other records in Licensee's possession or under its
control. Such records and accounts shall be available for inspection and audit
(and copying at Licensor's expense) at any time or times during or after the
term or terms of this Agreement during reasonable business hours and upon
reasonable notice by Licensor or its representatives. Licensee agrees not to
cause or permit any interference with Licensor or representatives of Licensor in
the performance of their duties of inspection and audit.
The exercise by Licensor, in whole or in part or at any time or times, of
the right to audit records and accounts or of any other right herein granted,
the acceptance by Licensor of any statement or statements or the receipt and
deposit by Licensor of any payment tendered by or on behalf of Licensee shall be
without prejudice to any rights or remedies of Licensor and shall not estop or
prevent Licensor from thereafter disputing the accuracy of any such statement or
payment.
If pursuant to its right hereunder to audit and inspect Licensor causes an
audit and inspection to be instituted which thereafter discloses a deficiency of
three percent (3%) or more between the amount found to be due to Licensor and
the amount actually paid or credited to Licensor, then Licensee shall be
responsible for payment of the entire deficiency, together with interest thereon
at the then current prime rate of Chemical Bank or its successor from the date
such amount became due until the date of payment, and the costs and expenses of
such audit and inspection. If the audit discloses a deficiency of less than
three percent (3%) between the amount found to be due to Licensor and the amount
actually paid or credited to Licensor, and if the amount actually paid or
credited to Licensor plus the deficiency exceeds the Guaranteed Compensation for
the period covered by the deficiency, then Licensee shall pay Licensor the
amount of the deficiency plus interest as calculated above.
7. INDEMNIFICATIONS AND PROTECTIONS: A. Licensor hereby agrees to
indemnify, defend and hold Licensee and its owners, shareholders, directors,
officers, employees, agents, representatives, successors and assigns harmless
from any claims, suits, damages or costs (including reasonable attorneys fees
and expenses) arising from (i) challenges to Licensor's authority as agent for
and pursuant to authority granted by the Clubs to license the Logos in
connection with the manufacture, distribution, promotion, advertisement and sale
of the Licensed
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Product(s) or (ii) assertions to any claim of right or interest in or to the
Logos as authorized and used on the Licensed Products, provided in each case
that Licensee shall give prompt written notice, cooperation and assistance to
Licensor relative to any such claim or suit, and provided further in each case
that Licensor shall have the option to undertake and conduct the defense of any
suit so brought and to engage in settlement thereof at its sole discretion. The
indemnifications hereunder shall survive the the termination or expiration of
this Agreement.
B. Licensee shall assist Licensor at Licensor's expense and to the extent
necessary, in the procurement of any protection or to protect any of Licensor's
rights to the Logos, and Licensor, if it so desires and in its sole discretion,
may commence or prosecute any claims or suits in its own name or in the name of
Licensee or join Licensee as a party thereto. Licensee shall notify Licensor in
writing of any infringements or imitations by others of the Logos of which it is
aware. Licensor shall have the sole right to determine whether or not any action
shall be taken on account of such infringements or imitations. Licensee shall
not institute any suit or take any action on account of any such infringements
or imitations without first obtaining the written consent of Licensor to do so.
Licensee agrees that it is not entitled to share in any proceeds received by
Licensor (by settlement or otherwise) in connection with any formal or informal
action brought by Licensor hereunder.
C. Licensee hereby agrees to indemnify, defend and hold Licensor, the
Clubs, the Leagues and the Office of the Commissioner of Baseball and their
respective owners, shareholders, directors, officers, employees, agents,
representatives, successors and assigns harmless from any claims, suits, damages
and costs (including reasonable attorneys' fees and expenses) arising out of (i)
any unauthorized use of or infringement of any trademark, service mark,
copyright, patent, process, method or device by Licensee in connection with the
Licensed Product(s) covered by this Agreement, (ii) alleged defects or
deficiencies in said Licensed Product(s) or the use thereof, or false
advertising, fraud, misrepresentation or other claims related to the Licensed
Product(s) not involving a claim of right to the Logos, (iii) the unauthorized
use of the Logos or any breach by Licensee of this Agreement, (iv) libel or
slander against, or invasion of the right of privacy, publicity or property of,
or violation or misappropriation of any other right of any third party, and/or
(v) agreements or alleged agreements made or entered into by Licensee to
effectuate the terms of this Agreement. Licensor shall give Licensee notice of
the making of any claim or the institution of any action hereunder and Licensor
may at its option participate in any action. The indemnifications hereunder
shall survive the expiration or termination of this Agreement.
8. INSURANCE: Licensee agrees to obtain, at its own cost and expense,
comprehensive general liability insurance including product liability insurance
from an insurance company acceptable to Licensor, providing adequate protection
for Licensor, the Clubs, the Leagues, the Office of the Commissioner of Baseball
and Licensee against any claims or suits arising out of any of the circumstances
described in Paragraph 7C above for which insurer is able to provide insurance,
in an amount no less than $5,000,000.00 (five million dollars) per incident or
occurrence, or Licensee's standard insurance policy limits, whichever is
greater, and with a reasonable deductible in relation thereto. Such insurance
shall remain in force at all times during the license period and for a period of
five years thereafter. Within thirty (30) days from the date hereof, Licensee
will submit to Licensor a fully paid policy or certificate of insurance naming
Licensor, the Leagues and the Office of the Commissioner of Baseball as
additional insured parties and requiring that the insurer shall not terminate or
materially modify such policy or certificate of insurance without written notice
to Licensor at least thirty (30) days in advance thereof.
9. COPYRIGHT AND TRADEMARK NOTICES AND REGISTRATIONS: Licensee further
agrees that in any instance wherein the Logos of the Clubs and/or the Leagues
are used, the following general notice shall be included (i.e., on the product,
on a label, on the packaging material or on a separate slip of paper attached to
the product): "The Major League Club insignias depicted on this product are
trademarks which are the exclusive property of the respective Major League Clubs
and may not be reproduced without their written consent." Further, all products
containing the Logos shall contain a hangtag and label with Licensee's name
stating "Genuine Merchandise" and containing the Major League Baseball
silhouetted batter logo and, where appropriate, the Major League Baseball
Cooperstown Collection logo or Major League Baseball Authentic Diamond
Collection logo. All Licensed Product(s) shall contain a permanently affixed
label that displays Licensee's name. All Licensed Product(s) components which
bear any of the Logos (embroidered emblems, cloth or paper labels, hangtags,
etc.) shall be manufactured in-house by Licensee or shall be obtained only from
one or more suppliers officially authorized by Licensor to produce those
components. All Licensee advertisements displaying the Logos, all retailer
advertisements featuring Licensed Product(s) and of which Licensee has knowledge
or any Licensed Product(s), shall contain the words "Genuine Merchandise" and
the silhouetted batter logo. Licensee shall require those to whom it sells
Licensed Product(s) directly or indirectly to display the words "Genuine
Merchandise" (or such other appropriate notice as directed by Licensor) and the
silhouetted batter logo in all advertisements. All uses of the Logos shall also
include any designations legally required or useful for enforcement of
copyright, trademark or service mark rights (e.g., "(C),""(R)" or "TM").
Licensee shall submit a copy of its specifications for all of the above notices
(including copies of its artwork, layouts or mold blueprints) to Licensor for
its review. Licensor shall have the right to revise the above notice
requirements and to require such other notices as shall be reasonably necessary
to protect the interests of Licensor, the Clubs and/or the Leagues in the
respective Logos. Licensee agrees to advise Licensor of the initial date of the
marketing of each Licensed Product, and upon request, to deliver to Licensor the
required number and type of specimen samples of the Licensed Product, labels or
the like upon which the Logos are used for use in procuring copyright, trademark
and/or service mark registrations in the name of and at the expense of the
person, firm, corporation or other legal entity owning the Logos, in compliance
with any laws relating to copyright, trademark and service mark registrations.
Except to the extent set forth in any schedules attached to this Agreement,
Licensor, the Clubs and/or the Leagues shall be solely responsible for taking
such action as it or they deem appropriate to obtain such copyright, trademark
or service mark registrations for its or their Logos. If it shall be necessary
for Licensee to be the applicant to effect any such registrations, Licensee
shall and hereby does assign all of its rights in each such application and any
resulting registration to Licensor or any other appropriate owner thereof, and
further
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-4-
agrees to execute all papers necessary to effectuate and/or confirm such
assignments. Licensee shall perform all acts necessary and execute all documents
necessary to effectuate its registration as a user of the Logos where such
registration is needed.
Licensee also agrees that, in any case where it employs the services of
photographers or artists in connection with the production, promotion, marketing
or distribution of the Licensed Product(s), it will require each such
photographer or artist to agree that the photographic or artistic works he or
she produces for Licensee shall be "works made for hire" for the purposes of the
copyright laws, and that to the extent such photographic or artistic works may
not qualify as "works made for hire," the copyright in each such work is
assigned to Licensee.
10. APPROVALS: Licensor shall have absolute approval of the Licensed
Product(s) and of all packaging, advertising and promotional material at all
stages of the development thereof. Licensee agrees to furnish in a timely manner
to Licensor, free of cost, for its written approval as to quality and style,
designs of each Licensed Product and samples of each Licensed Product before its
manufacture, sale, promotion, advertisement or distribution, whichever first
occurs, and samples of all advertising, point-of-sale displays, catalogs, sales
sheets and other items that display or picture the Logos, and no such Licensed
Product or other such materials shall be manufactured, sold, promoted,
advertised or distributed by Licensee without such prior written approval. In
particular, no use of any Logo or Logos shall be made on stationery of Licensee
(specifically including, without limitation, letterhead, envelopes, business
cards, shopping bags, invoices, statements, packing slips, etc.) without
Licensor's express written approval in advance of any such use. In addition, no
irregulars, seconds or other Licensed Products which do not conform in all
material respects to the approved samples may be distributed or sold without the
express written advance consent of Licensor. All such sales, if made, shall bear
Percentage Compensation as set forth in Paragraph 4.B. Subject, in each
instance, to the prior written approval of Licensor, Licensee or its agents may
use textual and/or pictorial matter pertaining to the Logos on such promotional
display and advertising material as may, in its judgment, promote the sale of
the Licensed Product(s). All promotional display and advertising material must
contain and prominently display the official logo of Licensor. Ten samples of
each Licensed Product shall be supplied free of cost to Licensor, and one to
each Club whose Logos are used on such Licensed Product(s). From time to time
subsequent to final approval, a reasonable number of production samples shall
periodically be sent to Licensor free of cost. Such samples shall also be sent
upon any change in design, style or quality, which shall necessitate subsequent
approvals by Licensor. Additional samples shall be supplied to Licensor upon
request at no more than cost. Licensor shall also have the right to inspect
Licensee's plants, warehouses or storage facilities at any reasonable time
without notice.
In the event that any item or matter submitted to Licensor under this
Agreement for approval or consent shall not have been approved or consented to,
disapproved or denied, or commented upon within twenty (20) Licensor business
days after receipt thereof by Licensor (both Licensing Director and Licensed
Product Compliance), and Licensor (both Licensing Director and Licensed Product
Compliance) shall have received notice from Licensee that comment is overdue by
telegram or other written communication, and Licensor shall not have commented
within five (5) additional Licensor business days of receipt of such notice, any
items or matters so submitted shall be deemed approved and consented to.
In any instance where any matter is required to be submitted to Licensor
for Licensor's approval, that approval shall be granted or withheld in
Licensor's sole discretion.
11. DISTRIBUTION: Licensee shall sell the Licensed Product(s) to jobbers,
wholesalers, distributors or retailers for sale or resale and distribution to
retail stores and merchants for their resale and distribution or directly to the
public. In the event Licensee sells or distributes a Licensed Product at a
special price directly or indirectly to itself, including, without limitation,
any subsidiary of Licensee, or to any other person, firm or corporation related
in any manner to Licensee or its officers, directors or major stockholders,
Licensee shall pay compensation with respect to such sales or distribution based
upon the price generally charged the trade by Licensee.
12. GOODWILL: Licensee recognizes the great value of the publicity and good
will associated with the Logos and, in such connection, acknowledges that such
good will belongs exclusively to Licensor, the Clubs, the Office of the
Commissioner of Baseball and/or the Leagues and that the Logos have acquired a
secondary meaning in the minds of the purchasing public.
13. SPECIFIC UNDERTAKINGS OF LICENSEE: During the license period, each
additional license period if any and thereafter, Licensee agrees that:
A. It will not acquire any rights in the Logos as a result of its use
thereof and all use of the Logos shall inure to Licensor's benefit;
B. It will not, directly or indirectly, attack the tide of Licensor, the
Clubs, the Office of the Commissioner of Baseball and/or the Leagues in and to
the Logos or any copyright, trademark or service mark pertaining thereto, nor
will it attack the validity of the license granted hereunder, nor will it use
the Logos in any manner other than as licensed hereunder;
C. It will not at any time apply for any registration of any copyright,
trademark, service mark or other designation which would affect the ownership of
the Logos, or file any document with any governmental authority or take any
action which would affect the ownership of the Logos or aid or abet anyone in
doing so;
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D. It will not harm, misuse or bring into disrepute the Logos;
E. It will manufacture, sell, promote, advertise and distribute the
Licensed Product(s) in a legal and ethical manner and in accordance with the
terms and intent of this Agreement;
F. It will not create any expenses chargeable to Licensor without the prior
written approval of Licensor;
G. It will protect to the best of its ability the right to manufacture,
sell and distribute the Licensed Product(s) hereunder;
H. It will not use the Licensed Product(s) for combination sales, as
self-liquidating or free giveaways or for any similar method of merchandising
without the prior written consent of Licensor and will exercise due care that
its customers likewise will refrain from making such use of the Licensed
Product(s);
I. It will not, without the prior written consent of Licensor, enter into
any sublicense or agency agreement for the manufacture, sale, promotion,
advertisement or distribution of the Licensed Product(s);
J. It will not engage in tying practices, illegal restraints of trade, or
selling practices that exclude any members of the retail trade for any reason
other than poor credit history, known lack of integrity or disregard for the
rights of Licensor or Major League Baseball. Nothing in the preceding sentence
shall be deemed to require Licensee to violate any other term of this Agreement;
K. It will not use, or knowingly permit the use of, the Licensed Product(s)
as a premium, except with the prior written consent of Licensor and the specific
negotiation of a higher royalty payment therefor. For purposes of this
subparagraph and Paragraph 19 below, the term "premium" shall be defined as
including, but not necessarily limited to, free or self-liquidating items
offered to the public in conjunction with the sale or promotion of a product or
service, including traffic building or continuity visits by the
consumer/customer, or any similar scheme or device, the prime intent of which is
to use the Licensed Product(s) in such a way as to promote, publicize and/or
sell the products, services or business image of the third party company or
manufacturer. "Premium" use shall also specifically include distribution of the
Licensed Product(s) for retail sale through distribution channels (including,
without limitation, catalogs) offering earned discounts or "bonus" points based
upon the extent of usage of the offeror's product or service;
L. It will comply with such guidelines and/or requirements as Licensor may
announce from time to time. It will comply with all laws, regulations and
standards relating or pertaining to the manufacture, sale, advertising or use of
the Licensed Product(s) and shall maintain the highest quality and standards,
and shall comply with the requirements of any regulatory agencies (including,
without limitation, the United States Consumer Safety Commission) which shall
have jurisdiction over the Licensed Product(s);
M. It guarantees that Licensor, Clubs, official Club and/or Licensor retail
stores, Club in-stadium concessionaires and the Clubs belonging to The National
Association of Professional Baseball Leagues ("NAPBL Clubs") will obtain the
Licensed Product(s) for retail sale at lowest possible wholesale prices and
shall receive prompt shipments and/or deliveries of the Licensed Product(s),
without regard to the relatively small volume their orders may represent.
Licensor, Clubs and NAPBL Clubs may obtain the Licensed Product(s) for their
use, but not resale, at the manufacturer's lowest possible price, which shall in
no event be greater than its lowest wholesale price;
N. It will furnish to Licensor, upon request of Licensor (which shall be
made only for reasonable cause and no more often than once per year), a list of
all its distributors, sales representatives and jobbers for the Licensed
Product(s), as well as a list of all its "trade names," said list to include the
company name, address, telephone number, territorial representation and key
contact name. Licensor agrees that it will not divulge any information provided
to it under this paragraph to any other competitor licensing organization;
0. Concurrently with its execution of this Agreement, it will provide
Licensor with the names, addresses, telephone numbers and names of principal
contacts of each party (hereinafter referred to as "Manufacturer"), both
domestic and foreign, that Licensee desires or intends to have produce one or
more of the Licensed Products in the event Licensee desires not to be the
manufacturer of such Licensed Product(s). This information shall be set out in
Schedule F of this Agreement and Licensee shall specify the Licensed Product(s)
Manufacturer will produce. In the event Licensee wishes to substitute a
Manufacturer for those listed in Schedule F or wishes to add to the number of
Manufacturers, Licensee shall first provide Licensor with the information set
out in Schedule F regarding the proposed new Manufacturers for Licensor's
written approval of such Manufacturers. Licensee's failure to do so may result
in termination of this Agreement and/or confiscation and seizure of the Licensed
Product(s). Licensee shall ensure that:
(a) Manufacturer produces no merchandise bearing the Logos other than
the Licensed Product(s) described in Schedule F of this Agreement unless
authorized by Licensor;
(b) Manufacturer produces the Licensed Product(s) only as and when
directed by Licensee and in accordance with the terms herein and in
compliance with all laws, regulations and governmental rules applicable to
the Licensed Product(s) and/or their manufacture;
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(c) Manufacturer does not supply the Licensed Product(s) to any
person, firm, corporation or business entity other than Licensee or to such
entities as may be authorized by Licensee and Licensor jointly; and
(d) Manufacturer does not delegate in any manner whatsoever its
obligations with respect to the Licensed Product(s).
Prior to the delivery of the Licensed Product(s) from Manufacturer to Licensee,
Licensee shall submit to Licensor, free of cost, for its written approval as to
quality and style, at least two samples of the Licensed Product(s) produced by
Manufacturer;
P. It will not manufacture or allow the manufacture, or accumulate
inventory, of the Licensed Product(s), at a rate greater than its average rate
during the license period as the end of the license period approaches;
Q. It will not sell the Licensed Product(s) to parties whom it knows or
reasonably should know will resell or distribute such Product(s) outside the
Licensed Territory;
R. It will not disclose any confidential, private, restricted or otherwise
nonpublic information concerning Major League Baseball which, it acknowledges,
it may become privy to during the term of this Agreement;
S. It will not grant to any third person or entity a security interest in
the Licensed Product(s) without Licensor's prior written approval;
T. It has not had and does not have an investment or interest in casinos,
any other form of legalized gambling enterprise, or any activity that Licensor
or any other Major League Baseball related entity has made unauthorized or which
is contrary to official policy of Major League Baseball; and
U. With respect to any Licensed Products manufactured outside the United
States, except as otherwise pre-approved in writing by Licensor, (i) it will
take receipt of goods at U.S. ports of entry, (ii) it will not allow any entity
in the United States, including but not limited to distributors, wholesalers and
retailers, to accept shipment of the Licensed Products from any non-U.S.
manufacturer of such Products, and (iii) it will distribute such Products to
third parties, including but not limited to distributors, wholesalers and
retailers, from Licensee's principal place of business only.
14. APPROVAL OF MANUFACTURER, ETC.: Nothing contained herein may be
construed so as to imply endorsement of Manufacturer by Licensor, the Office of
the Commissioner of Baseball, the Leagues or the Clubs. Licensee shall seek
Licensor's written approval of Manufacturer prior to Licensee's engagement of
Manufacturer. Any approval of Manufacturer granted by Licensor relates solely to
the manufacturing of the Licensed Product(s) and shall not constitute a grant of
any right, title or interest in or to the Logos, nor to any copyrights, service
marks, trademarks or other property rights associated therewith. Licensor hereby
reserves the right to terminate in its discretion the engagement of Manufacturer
at any time. Additionally, Licensor may confiscate goods or samples imported by
Licensee or shipped by Manufacturer that bear any of the Logos and that have not
been approved by Licensor as to quality.
15. ACKNOWLEDGEMENT OF RIGHTS: Licensee hereby acknowledges the proprietary
nature of all names and logos of the Major League Baseball Clubs, the Leagues,
the Office of the Commissioner of Baseball or Licensor and acknowledges that all
rights, title and interest to such names or logos belong to the individual
Clubs, the Leagues, the Office of the Commissioner of Baseball and/or Licensor,
as the case may be. Licensee represents that it has not made any unauthorized
use of names or logos of the Major League Baseball Clubs, the Leagues, the
Office of the Commissioner of Baseball or Licensor and agrees that it will make
no use of any such names or logos, other than as provided in this Agreement,
without the prior written consent of Licensor, the Office of the Commissioner of
Baseball or the appropriate individual League or Club. Any use Licensee has made
or will make of such names and logos has not conferred or will not confer, as
the case may be, any rights or benefits upon it whatsoever, and any rights
created by such use shall inure to the benefit of the individual Clubs, the
Leagues, the Office of the Commissioner of Baseball and/or Licensor, as the case
may be.
16. TERMINATION: A. Immediate Termination: Licensor shall have the right to
terminate this Agreement immediately upon the occurrence of any one or more of
the following events (herein called "defaults"):
(i) If Licensee fails to deliver to Licensor or to maintain in full force
and effect the insurance referred to in Paragraph 8 hereof; or
(ii) If any governmental agency or court of competent jurisdiction finds
that the Licensed Product(s) are defective in any way, manner or form; or
(iii) If Licensee shall breach any one of the following undertakings set
forth in Paragraph 13 hereof: 13A through F, H through J, Q, R or T; or
(iv) If Licensee shall undergo a change in majority or controlling
ownership.
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B. Termination With Cure Period: Licensor shall have the right to terminate
this Agreement upon the occurrence of any one or more of the following defaults,
and Licensee's failure to cure such default(s) completely within ten (10)
business days from Licensee's receipt of notice from Licensor:
(i) If Licensee fails to make any payment due hereunder on the date due, at
which time all monies which are owed during the current term or renewal referred
to in Schedule E of this Agreement shall become due and payable to Licensor; or
(ii) If Licensee fails to deliver any of the statements hereinabove
referred to or to give access to the premises and/or license records pursuant to
the provisions hereof to Licensor's authorized representatives for the purposes
permitted hereunder; or
(iii) If Licensee is unable to pay its debts when due, or makes any
assignment for the benefit of creditors or an arrangement pursuant to any
bankruptcy law, or files or has filed against it any petition under the
bankruptcy or insolvency laws of any jurisdiction, county or place, or shall
have or suffer a receiver or trustee to be appointed for its business or
property, or be adjudicated a bankrupt or an insolvent. In the event the license
granted hereunder is terminated pursuant to this Paragraph 1 6(B)(iii), neither
Licensee nor its receivers, representatives, trustees, agents, administrators,
successors and/or assigns shall have any right to sell, exploit or otherwise
deal with or in the Licensed Product(s) without the prior written consent of
Licensor; or
(iv) If Licensee does not commence in good faith to manufacture, distribute
and sell each Licensed Product throughout the Licensed Territory within any
twelve (12) month period, but such default and Licensor's resultant right of
termination shall apply only to the specific Licensed Product(s) and/or the
specific territory(ies) which or wherein Licensee fails to meet said
requirements; or
(v) If Licensee shall discontinue its business as it is now conducted; or
(vi) If Licensee shall breach any of the undertakings set forth in
Paragraph 13 hereof, except as otherwise provided in Paragraph 16(A)(iii) above;
or
(vii) If Licensee shall breach any of the terms of this Agreement; or
(viii) If, in the periodic statements furnished pursuant to Paragraph 5
hereof, the amounts owed to Licensor are significantly or consistently
understated.
Licensor's right to terminate this Agreement shall be without prejudice to
any other rights which it may have, whether under the provisions of this
Agreement, in law or in equity or otherwise. In the event any of these defaults
occurs and Licensor desires to exercise its right of termination under the terms
of this Paragraph 16, Licensor shall give notice of termination in writing to
Licensee. Any and all payments then or later due from Licensee hereunder
(including Advance Compensation) shall then become promptly due and payable in
full to Licensor and without set off of any kind; i.e. no portion of any prior
payments made to Licensor shall be repayable to Licensee. Until payment to
Licensor of any monies due it, Licensor shall have a lien on any units of the
Licensed Product(s) not then disposed of by Licensee and on any monies due
Licensee from any jobber, wholesaler, distributor, sublicensee or other third
parties with respect to sales of the Licensed Product(s). Upon termination or
expiration of the term hereof, all rights, licenses and privileges granted to
Licensee hereunder shall automatically revert to Licensor and Licensee shall
execute any and all documents evidencing such automatic reversion.
17. FINAL STATEMENT UPON TERMINATION OR EXPIRATION: Licensee shall deliver
to Licensor, as soon as practicable, following expiration or termination of this
Agreement, a statement indicating the number and description of the Licensed
Product(s) on hand. Following expiration or termination Licensee may manufacture
no more Licensed Product(s), but may continue to distribute its remaining
inventory for a period not to exceed ninety (90) days, subject to the terms of
Paragraph 13(P) hereof and payment of applicable royalties relative thereto;
provided, however, that such royalties shall not be applicable against Advance
Compensation or Guaranteed Compensation. Notwithstanding the foregoing, Licensee
shall not manufacture, sell or distribute any Licensed Product(s) after the
expiration or termination of this Agreement because of (a) the failure of
Licensee to cause the appropriate statutory notice of copyright, trademark,
service mark or user registration to appear wherever the Logos are used; (b) the
departure of Licensee from the quality and style approved by Licensor under the
terms of Paragraph 10 hereof; (c) the failure of Licensee to obtain the approval
of Licensor under the terms of Paragraph 10 hereof; or (d) the occurrence of an
event of default under the terms of Paragraph 16 hereof. Licensor shall have the
option to conduct physical inventories before termination and continuing until
the end of the 90-day sell-off period in order to ascertain or verify such
inventories and/or statement. Immediately upon expiration of the sell-off
period, Licensee shall furnish Licensor a detailed statement certified by an
officer of Licensee showing the number and description of Licensed Products on
hand in its inventory and shall dispose of such inventory at Licensor's
direction and at Licensee's expense. In the event Licensee refuses to permit
Licensor to conduct such physical inventory, Licensee shall forfeit its right
hereunder to dispose of such inventory. In addition to such forfeiture, Licensor
shall have recourse to all other remedies available to it.
18. INJUNCTION: Licensee acknowledges that its failure to perform any of
the terms or conditions of this Agreement, or its failure upon the expiration or
termination of this Agreement to cease the manufacture of the
================================================================================
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-8-
Licensed Product(s) and limit their distribution and sale as provided in
Paragraph 17 hereof, shall result in immediate and irreparable damage to
Licensor. Licensee also acknowledges that there may be no adequate remedy at law
for such failures and that in the event thereof Licensor shall be entitled to
equitable relief in the nature of an injunction and to all other available
relief, at law and/or in equity.
19. RESERVATION OF RIGHTS: Licensor retains all rights not expressly and
exclusively conveyed herein, and Licensor may license firms, individuals,
partnerships or corporations to use the Logos, artwork and textual matter in
connection with other products, including other products identical to the
Licensed Product(s) contemplated herein. Licensor reserves the right to use, or
license others to use and/or manufacture, identical items as premiums.
20. PAYMENTS AND NOTICES: All notices and statements provided for herein
shall be in writing, and all notices hereunder are to be sent to Major League
Baseball Properties, Inc., 350 Park Avenue, New York, New York 10022, Attention:
President. All statements and payments shall be made to Major League Baseball
Properties and sent to an address designated by Licensor.
21. WAIVER, MODIFICATION, ETC.: No waiver, modification or cancellation of
any term or condition of this Agreement shall be effective unless executed in
writing by the party charged therewith. No written waiver shall excuse the
performance of any act other than those specifically referred to therein. No
waiver by either party hereto of any breach of this Agreement shall be deemed to
be a waiver of any preceding or succeeding breach of the same or any other
provision hereof. The exercise of any right granted to either party hereunder
shall not operate as a waiver. The normal expiration of the term of this
Agreement shall not relieve either party of its respective obligations accruing
prior thereto, nor impair or prejudice the respective rights of either party
against the other, which rights by their nature survive such expiration.
Licensor makes no warranties or representations to Licensee except those
specifically expressed herein.
22. NO PARTNERSHIP, ETC.: This Agreement does not constitute and shall not
be construed as constituting an agency, partnership or joint venture
relationship between Licensee and Licensor and/or the Clubs. Licensee shall have
no right to obligate or bind Licensor in any manner whatsoever, and nothing
herein contained shall give or is intended to give any rights of any kind to any
third persons.
23. NON-ASSIGNABILITY: Licensee acknowledges and recognizes: (a) that it
has been granted the license described in Paragraph 1 because of its particular
expertise, knowledge, judgement, skill and ability; (b) that it has substantial
and direct responsibilities to perform this Agreement in accordance with all of
the terms contained herein; (c) that Licensor is relying on Licensee's unique
knowledge, experience and capabilities to perform this Agreement in a specific
manner consistent with the high standards of integrity and quality associated
with Major League Baseball as a national sport and with Major League Baseball
licensed merchandise; and (d) that the granting of the license under this
Agreement creates a relationship of confidence and trust between Licensee and
Licensor. This Agreement is personal to Licensee, and Licensee shall not
sublicense or franchise any of its rights hereunder, and neither this Agreement
nor any of the rights of Licensee hereunder shall be sold, transferred or
assigned by Licensee without Licensor's prior written approval and no rights
hereunder shall devolve by operation of law or otherwise upon any assignee,
receiver, liquidator, trustee or other party. Subject to the foregoing, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their successors and assigns.
24. PARAGRAPH HEADINGS: Paragraph headings contained in this Agreement are
for convenience only and shall not be considered for any purpose in governing,
limiting, modifying, construing or affecting the provisions of this Agreement
and shall not otherwise be given any legal effect.
25. CONSTRUCTION: This Agreement shall be construed in accordance with the
laws of the State of New York, which shall be the sole jurisdiction for any
disputes.
26. SEVERABILITY: The determination that any provision of this Agreement is
invalid or unenforceable shall not invalidate this Agreement, and the remainder
of this Agreement shall be valid and enforceable to the fullest extent permitted
by law.
27. TIME OF THE ESSENCE: Time is of the essence of all parts of this
Agreement.
28. ACCEPTANCE BY LICENSOR: This instrument, when signed by Licensee or a
duly authorized officer of Licensee if Licensee is a corporation, shall be
deemed an application for a license and not a binding agreement unless and until
signed by a duly authorized officer of Licensor. The receipt and/or deposit by
Licensor of any check or other consideration given by Licensee and/or the
delivery of any material by Licensor to Licensee shall not be deemed an
acceptance by Licensor of this application. The foregoing shall also apply to
any documents relating to renewals or modifications hereof.
29. INTEGRATION: This Agreement, when fully executed, shall represent the
entire understanding between the parties hereto with respect to the subject
matter hereof and supersedes all previous representations, understandings or
agreements, oral or written, between the parties with respect to the subject
matter hereof.
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30. SURVIVAL OF PROVISIONS: Paragraphs 2, 6, 7A, 7C, 8, 12, 13A, B, C, D,
F, H, I, K, Q and R, 15, 17, 18, 19, 21, 22, 24, 25, 26, 30 and 31 shall survive
any termination or expiration of this Agreement.
31. MISCELLANEOUS: By signing below, Licensee acknowledges that this
Agreement is for the term specified in Schedule D only and that neither the
existence of this Agreement nor anything contained herein shall impose on
Licensor any obligation to renew or otherwise extend this Agreement after
expiration of the license period.
<PAGE>
-10-
SCHEDULE A
LOGOS
The names, characters, symbols, designs, likenesses, visual representations
and such other similar or related identifications (but such similar or related
identifications must be approved in writing by Licensor in advance of use) of
the following noted organizations in connection with the marketing, promotion
and sale of that described in Schedule B hereof: (1) Major League Baseball
Properties, Inc., (2) the American League, (3) the National League, (4) the
following Clubs: Arizona Diamondbacks, Tampa Bay Devil Rays, Baltimore Orioles,
Boston Red Sox, California Angels, Chicago White Sox, Cleveland Indians, Detroit
Tigers, Kansas City Royals, Milwaukee Brewers, Minnesota Twins, New York
Yankees, Oakland Athletics, Seattle Mariners, Texas Rangers, Toronto Blue Jays,
Atlanta Braves, Chicago Cubs, Cincinnati Reds, Colorado Rockies, Florida
Marlins, Houston Astros, Los Angeles Dodgers, Montreal Expos, New York Mets,
Philadelphia Phillies, Pittsburg Pirates, St. Louis Cardinals, San Diego Padres
and San Francisco Giants, (5) All-Star Game, Division Series, League
Championship Series, World Series, other names given to such games or events and
other names given to other Major League Baseball playoff games and (6) Major
League Baseball Authentic Diamond Collection.
SCHEDULE B
LICENSED PRODUCT(S)
*** ALL LICENSED PRODUCTS SHALL CONFORM TO LICENSOR'S
THEN-CURRENT LABELING REQUIREMENTS. ***
1. Authentic jackets made of 100% insulated nylon fabric, featuring a
full zippered or a snap front and embroidered Logos, and marketed
under Licensor's Authentic Diamond Collection line of products, in
adult, youth and children's sizes as defined below.
2. Authentic jackets made of 100% nylon fabric, featuring a full zippered
or a snap front and embroidered Logos and marketed under Licensor's
Authentic Diamond Collection line of products, in adult, youth and
children's sizes as defined below.
3. Authentic jackets in a pullover style, made of 100% nylon fabric and
featuring a half or full-zippered front or half or full-snap front and
embroidered Logos and marketed under Licensor's Authentic Diamond
Collection line of products, in adult, youth and children's sizes as
defined below.
4. Authentic jackets made of an insulated wool blend fabric body and
leather sleeves featuring a full snap front and embroidered Logos and
marketed under Licensor's Authentic Diamond Collection line of
products, in adult, youth and children's sizes as defined below.
5. Authentic jackets made of insulated satin fabric, a full snap front
and embroidered Logos and marketed under Licensor's Authentic Diamond
Collection line of products, in adult, youth and children's sizes as
defined below.
6. Authentic jackets made of satin fabric and featuring a full snap front
and embroidered Logos and marketed under Licensor's Authentic Diamond
Collection line of products, in adult, youth and children's sizes as
defined below.
7. Authentic jackets made with a down fill, in waist or 3/4 length sizes
and featuring embroidered Logos and marketed under Licensor's
Authentic Diamond Collection line of products, in adult, youth and
children's sizes as defined below.
8. Authentic jackets in a stadium style, made with a polyester fill and
embroidered and/or appliqued Club Logos, and marketed under Licensor's
Authentic Diamond Collection line of products, in adult, youth and
children's sizes as defined below.
9. Jackets (other than authentic jackets) made of 100% insulated nylon
fabric, featuring a full zippered or a snap front and embroidered
and/or appliqued Club Logos, in adult, youth and children's sizes as
defined below.
10. Jackets (other than authentic jackets) made of 100% nylon fabric,
featuring a full zippered or snap front and embroidered and/or
appliqued Club Logos, in adult, youth and children's sizes as defined
below.
11. Jackets (other than authentic jackets) in a pullover style, made of
100% nylon fabric, featuring a half or full zippered front or a half
or full-snap front and embroidered and/or appliqued Club Logos, in
adult, youth and children's sizes as defined below.
12. Jackets (other than authentic jackets) in a pullover style, made of
100% insulated nylon fabric, featuring a half or full zippered front
or a half or full-snap front and embroidered and/or appliqued Club
Logos, in adult, youth and children's sizes as defined below.
13. Jackets (other than authentic jackets) made of insulated
polyester/nylon blend fabric, featuring a full zippered or a snap
front and embroidered and/or appliqued Club Logos, in adult, youth and
children's sizes as defined below.
<PAGE>
-11-
14. Jackets (other than authentic jackets) made of polyester/nylon blend
fabric, featuring a full zippered front and embroidered and/or
appliqued Club Logos, in adult, youth and children's sizes as defined
below.
15. Jackets (other than authentic jackets) in a pullover style, made of
insulated polyester/nylon blend fabric, featuring embroidered and/or
appliqued Club Logos, in adult, youth and children's sizes as defined
below.
16. Jackets (other than authentic jackets) in a pullover style, made of
polyester/nylon blend fabric, featuring embroidered and/or appliqued
Club Logos, in adult, youth and children's sizes as defined below.
17. Jackets (other than authentic jackets) in a pullover style, made with
an insulated wool blend body and leather or polyurethane sleeves,
featuring a full zippered or snap front and embroidered and/or
appliqued Club Logos, in adult, youth and children's sizes as defined
below.
18. Jackets (other than authentic jackets) in a parka style, made with
down filling, featuring embroidered and/or appliqued Club Logos, in
adults, youth and children's sizes as defined below.
19. Jackets (other than authentic jackets) made of 100% insulated cotton
fabric, featuring a full zippered or a snap front and embroidered
and/or appliqued Club Logos, in adult, youth and children's sizes as
defined below.
20. Jackets (other than authentic jackets) made of 100% cotton fabric,
featuring a full zippered front and embroidered and/or appliqued Club
Logos, in adult, youth and children's sizes as defined below.
21. Jackets (other than authentic jackets) made of satin or insulated
satin fabric, featuring a full snap front and embroidered and/or
appliqued Club Logos, in adult, youth and children's sizes as defined
below.
22. Jackets (other than authentic jackets) made of polar fleece-like
fabric, in pullover or full snap front styles and featuring
embroidered and/or appliqued Logos, in adult, youth and children's
sizes as defined below.
23. Jackets (other than authentic jackets) in a warm-up style, made of
100% nylon fabric and featuring embroidered Logos, in adult, youth
and children's sizes as defined below.
24. Jackets (other than authentic jackets) in a warm-up style, made of
polyester blend fabric and featuring embroidered Logos, in adult,
youth and children's sizes as defined below.
25. Tank tops made of 100% cotton or polyester/cotton blend fabric
featuring Club Logos on the front of the top and/or the name or
nickname of a current, active Major League Baseball player in block or
script lettering on the back of the top, in adult, youth and
children's sizes as defined below.
26. T-shirts made of 100% cotton or polyester/cotton blend fabric
featuring Club Logos on the front of the T-shirt and/or the name or
nickname of a current, active Major League Baseball player in block or
script lettering on the back of the T-shirt, in adult, youth and
children's sizes as defined below.
27. Pullover jackets made of fleece fabric featuring Club Logos on the
front of the jacket and/or the name or nickname of a current Major
League Baseball player in block or script lettering on the back of the
jacket, in adult, youth and children's sizes as defined below.
28. Turtlenecks (other than authentic turtlenecks) in long or short-sleeve
styles, made of 100% cotton jersey knit fabric and featuring
embroidered or screen printed Logos, in adult and youth sizes as
defined below.
29. Polo shirts made of cotton jersey, mesh knit or polyester/cotton blend
fabric and featuring a collar, a button placket, banded short sleeves
and embroidered or screen printed Logos, in adult and youth sizes as
defined below.
30. T-shirts made of midweight 100% cotton jersey fabric and featuring
ring necks in grey, heather, white and/or other colors to be
pre-approved in writing by Licensor, and embroidered or screen printed
Logos, in adult, youth and children's sizes as defined below.
31. Pants and shorts (other than those worn by coaches of the Clubs) in
designs and styles to be pre-approved in writing by Licensor in
adult, youth and children's sizes as defined below.
32. Pullover tops made of nylon or polyester/mesh, heavy or light weight
fleece or art fleece jersey fabric, featuring a zipper and/or a button
placket, with or without a hood and Logos applied in any combination
of the following: applique, embroidery, emblems and/or screen printed,
in youth and children's sizes as defined below.
33. Jackets (other than authentic jackets) made of 100% insulated nylon
fabric, featuring a full zippered or a snap front and embroidered
and/or appliqued Clubs Logos, and marketed under Licensee's "First
Pick" brand name, in adult, youth and children's sizes as defined
below.
34. Jackets (other than authentic jackets) made of 100% nylon fabric,
featuring a full zippered or a snap front and embroidered and/or
appliqued Club Logos, and marketed under Licensee's "First Pick" brand
name, in adult, youth and children's sizes as defined below.
<PAGE>
-12-
35. Jackets (other than authentic jackets) in a pullover style, made of
100% nylon fabric, featuring a half-zippered or a snap front and
direct embroidered and/or appliqued Club Logos, and marketed under
Licensee's "First Pick" brand name, in adult, youth and children's
sizes as defined below.
36. Jackets (other than authentic jackets) made of insulated nylon fabric,
in a pullover style, featuring a half-zippered or a snap front and
direct embroidered and/or appliqued Club Logos, and marketed under
Licensee's "First Pick" brand name, in adult, youth and children's
sizes as defined below.
37. Jackets (other than authentic jackets) made of insulated satin fabric,
featuring a full snap front and embroidered and/or appliqued Club
Logos, and marketed under Licensee's "First Pick" brand name, in
adult, youth and children's sizes as defined below.
38. Jackets (other than authentic jackets) made of satin fabric, featuring
a full snap front and embroidered or appliqued Club Logos, and
marketed under Licensee's "First Pick" brand name, in adult, youth and
children's sizes as defined below.
39. Jackets (other than authentic jackets) in a stadium style, made with
polyester fill and featuring embroidered or appliqued Club Logos, and
marketed under Licensee's "First Pick" brand name, in adult, youth and
children's sizes as defined below.
40. Jackets (other than authentic jackets) in a pullover style, made of
100% nylon fabric and featuring embroidered and/or appliqued Club
Logos, and marketed under Licensee's "First Pick" brand name, in
adult, youth and children's sizes as defined below.
41. Jackets (other than authentic jackets) made of an insulated
polyester/nylon blend fabric and featuring a full zippered or a full
snap front and embroidered or appliqued Club Logos, and marketed under
Licensee's "First Pick" brand name, in adult, youth and children's
sizes as defined below.
42. Jackets (other than authentic jackets) made of polyester/nylon blend
fabric and featuring a full zippered or a full snap front and
embroidered or appliqued Club Logos, and marketed under Licensee's
"First Pick" brand name, in adult, youth and children's sizes as
defined below.
43. Jackets (other than authentic jackets) in a pullover style, made of an
insulated polyester/nylon blend fabric and featuringembroidered or
appliqued Club Logos, and marketed under Licensee's "First Pick" brand
name, in adult, youth and children's sizes as defined below.
44. Jackets(other than authentic jackets) in a pullover style, made of
polyester/nylon blend fabric and featuring a full zippered or a full
snap front and embroidered or appliqued Club Logos, and marketed under
Licensee's "First Pick" brand name, in adult, youth and children's
sizes as defined below.
45. Jackets (other than authentic jackets) made of insulated cotton fabric
and featuring a full zippered or a full snap front and embroidered or
appliqued Club Logos, and marketed under Licensee's "First Pick" brand
name, in adult, youth and children's sizes as defined below.
46. Jackets (other than authentic jackets) made of cotton fabric and
featuring a full zippered or a full snap front and embroidered or
appliqued Club Logos, and marketed under Licensee's "First Pick" brand
name, in adult, youth and children's sizes as defined below.
47. Jackets (other than authentic jackets) in warm-up style, made of 100%
nylon fabric and featuring embroidered or appliqued Club Logos, and
marketed under Licensee's "First Pick" brand name, in adult, youth and
children's sizes as defined below.
48. Jackets (other than authentic jackets) with a down fill, in waist or
3/4 length sizes and featuring embroidered Logos, in adult, youth and
children's sizes as defined below.
49. Jackets (other than authentic jackets) in a stadium style, with a
polyester fill and featuring embroidered and/or appliqued Club Logos,
in adult, youth and children's sizes as defined below.
50. Non- replica baseball-style jerseys made of 100% cotton or 50/50
cotton-polyester blend fabric, featuring a full-button front and
embroidered and/or appliqued Club Logos, in adult, youth and
children's sizes as defined below.
For the purposes of this Agreement, except as specifically modified by the
descriptions for the Licensed Product Nos. 1-8, "authentic" jackets and
turtlenecks shall mean: jackets and turtlenecks identical in design (including,
but not limited to, style, silhouette, color and Logo placement) and fabrication
to jackets and turtlenecks worn on-field by Major League Baseball players,
coaches or managers, regardless of size or whether numbers are worn on field.
For purposes of this Agreement, except as specifically modified by the
description for the Licensed Product No. 50, "non-replica baseball-style
jerseys" shall mean: jerseys made of any fabrication, color, silhouette and
style and with any Logo placement and Logo application, and featuring one or
more Club Logos; provided that if the jerseys have the identical style and
silhouette (without regard to the existence or number of bands on item) as the
jerseys worn on-field by the Major League Baseball players, coaches or managers,
then such jerseys shall not contain the same Logo or Lettering, regardless of
whether home or road, as the on-field jerseys.
<PAGE>
-13-
Rights to utilize players' names and/or likenesses are not granted under
this Agreement. Licensee must present to Licensor written evidence of having
obtained the proper authorization to utilize any players' names and/or
likenesses in conjunction with the Licensed Products.
SIZES
ADULT:
S M L XL
34/36 38/40 42/44 46/48 (chest sizes)
28/30 32/34 36/38 40/42 (waist sizes)
YOUTH:
S M L XL
Boys: 8/10 12/14 16/18 20
Girls: 7/8 10/12 14
CHILDREN'S:
Newborn: 3/6 6/9 months
Infant: 12 18 24 months
Toddler: 2T 3T 4T
Boys: 4 5 6 7
Girls: 4 5 6 6X
SCHEDULE C
LICENSED TERRITORY
The fifty United States of America, the District of Columbia, Puerto Rico
and U.S. territories and possessions, including U.S. military bases worldwide.
SCHEDULE D
LICENSE PERIOD
January 1, 1995 - December 31, 1999
SCHEDULE E
COMPENSATION
TOTAL GUARANTEED COMPENSATION: $ *
PAYABLE AS:
(i) NON-RETURNABLE ADVANCE COMPENSATION due upon signing:
$ *
(ii) REMAINDER OF GUARANTEED COMPENSATION due as follows:
April 1, 1996 ............. $ * April 1, 1997 ......... $ *
July 1, 1996 .............. $ * July 1, 1997 .......... $ *
November 1, 1996 .......... $ * November 1, l997 ...... $ *
Total 1995-1996 Guarantee.. $ * Total 1997 Guarantee .. $ *
April 1, 1998 ............. $ * April 1, 1999 ......... $ *
July 1, 1998 .............. $ * July 1, 1999 .......... $ *
November 1, 1998 .......... $ * November 1, 1999 ...... $ *
Total 1998 Guarantee....... $ * Total l999 Guarantee .. $ *
PERCENTAGE COMPENSATION:
For Licensed Products Nos. 1-8:
Ten percent (10%) of net sales as defined in Paragraph 4B.
* Material omitted pursuant to a request for confidential treatment and such
omitted material has been filed separately with the Commission.
<PAGE>
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For Licensed Products Nos. 9-50:
Nine percent (9%) of net sales as defined in Paragraph 4B.
Percentage Compensation earned in either of calendar years 1995 or 1996 may
be applied against the Guaranteed Compensation payable in that two-year period;
otherwise, Percentage Compensation shall be applied against Guaranteed
Compensation payable in the same calendar year only, without carryover.
Percentage Compensation attributable to premium sales of the Licensed Products
shall not be applied against Total Guaranteed Compensation.
SCHEDULE F
MANUFACTURER:
Licensee agrees that at no time during the license or sell-off periods
shall it sell, directly or indirectly, to any of the Manufacturers listed
below, or to any individual or entity affiliated in any manner with any of
such Manufacturers, any Licensed Products for subsequent sale or
distribution, without prior written approval of Licensor.
1) Licensed Product(s): ______________________________
Name of Manufacturer: _____________________________
Address: __________________________________________
Telephone: _____________________________
Principal Contact: ________________________________
Approved by Major League Baseball
Properties, Inc.: _____________________________
Initials/Title
______________________________
Date
2) Licensed Product(s): ______________________________
Name of Manufacturer: _____________________________
Address: __________________________________________
Telephone: _____________________________
Principal Contact: ________________________________
Approved by Major League Baseball
Properties, Inc.: _____________________________
Initials/Title
______________________________
Date
3) Licensed Product(s): ______________________________
Name of Manufacturer: _____________________________
Address: __________________________________________
Telephone: _____________________________
Principal Contact: ________________________________
Approved by Major League Baseball
Properties, Inc.: _____________________________
Initials/Title
______________________________
Date
<PAGE>
-15-
SCHEDULE G
Product Credit:
1. Licensee shall provide to Licensor merchandise credit in the amount of
$ * (wholesale value) during each year of the license period. Licensee shall
ship at Licensor's direction such merchandise as Licensor shall request from
time to time under this merchandise credit.
2. In addition, Licensee shall provide to Licensor merchandise credit in
the amount of $ * (wholesale value) during each year of the license period for
use at the annual Major League Baseball All-Star FanFest ("FanFest") event.
Licensee shall ship at Licensor's direction such merchandise as Licensor shall
request from time to time under this merchandise credit.
3. Licensee shall also provide to Licensor merchandise credit in the amount
of $ * (wholesale value) during each year of the license period to use in
connection with Major League Baseball Youth Clinics/Market Development. Licensee
shall ship at Licensor's direction such merchandise as Licensor shall request
from time to time under this merchandise credit, and Licensor shall, in its sole
discretion, determine how to distribute such merchandise.
Advertising:
1. Licensee acknowledges that it is required to promote the Licensed
Products under this Agreement. Accordingly, during each year of the license
period, Licensee represents that it shall purchase at prevailing rates, and
produce, at no cost or expense to Licensor, (i) one full page, four-color
advertisement in all event publications produced by or on behalf of Licensor and
(ii) the back cover of every issue of Major League Baseball For Kids magazine
published by Licensor.
2. Licensee shall contribute the following amounts to participate in
Licensor's cooperative advertising program by May 1 of each of the following
years:
1996 .... $ *
1997 .... $ *
1998 .... $ *
1999 .... $ *
3. Licensee acknowledges that under this Agreement it is obligated to
promote the Licensed Products. Accordingly, Licensee has agreed to pay to
Licensor a minimum of $ * per year to participate in each FanFest event and
related clinics conducted during the license period and to execute Licensor's
standard FanFest Sponsorship agreements in connection therewith. The extent of
Licensee's participation at the FanFest events shall be mutually agreed upon by
Licensee and Licensor.
4. Licensee represents that during each year of the license period, it
shall spend a minimum of $ * per Club on promotional exposure (including,
without limitation, signage, print and broadcast advertising featuring
individual Club Logos) for each Club wearing the Licensed Products produced for
such Club by Licensee. The manner in which Licensee shall promote each such Club
shall be agreed to by Licensee and the applicable Club.
5. Licensee represents that it plans to spend no less than $ * in 1995 and
no less than $ * in l996 on television advertising to promote Major League
Baseball or the Licensed Products, to be aired during telecasts of Major League
Baseball games broadcast by national over-the-air television network rights
holders designated by Licensor. Licensee further represents that during each of
calendar years 1997, 1998 and 1999, it plans to spend three (3%) percent of its
prior year's gross wholesale sales of all products under its license agreements
with Licensor, or $ *, whichever is greater, to purchase advertising time during
telecasts of Major League Baseball games broadcast by national over-the-air
television network rights holders designated by Licensor.
Strike Clause/Game Cancellations:
In the event of a players' strike or other labor-related dispute which
results in the cancellation of regular season games for more than 21 consecutive
days, Licensee shall have an opportunity to demonstrate that its sales of
Licensed Products suffered as a result thereof and that Licensee will not be
able to earn its minimum Guaranteed Compensation or meet its advertising
commitments identified in Schedule G, Advertising Nos. 1-5, above. Subject to
Licensee demonstrating such adverse effects on its sales of Licensed Products,
Licensor and Licensee will agree on a reduction of the minimum Guaranteed
Compensation and Licensee's advertising commitments hereunder by an amount to
reflect the damage suffered by Licensee.
Miscellaneous:
1. Licensee acknowledges that it shall provide free of cost, in an
expeditious manner and to each Club's satisfaction, the quantity of Licensed
Product requested by each Major League Baseball Club wearing the Licensed
Products produced for such Major League Baseball Club by Licensee.
2. Licensee acknowledges that it is obligated to provide products for the
Major League Baseball Umpire program for calendar year 1995. Licensor
acknowledges that all such products were received by the Major League Baseball
Umpire program.
* Material omitted pursuant to a request for confidential treatment and such
omitted material has been filed separately with the Commission.
<PAGE>
-16-
3. Notwithstanding any language to the contrary contained in Paragraph 1 of
this Agreement, but subject to the terms of this Paragraph 3, during calendar
years 1995 and 1996, Licensor shall not license any other entity to produce and
distribute Licensed Product Nos. 1-8 in the Licensed Territory. Thereafter,
Licensor represents and agrees that, except as otherwise approved by Licensee,
Licensor shaIl grant to no more than two (2) other entities during the term the
right to distribute Licensed Product Nos. 1-8 in the licensed Territory.
Licensor shall notify Licensee Licensor no later than March 31 of the year prior
to the affected year of the number of other entities, if any, to whom such
rights have been granted by Licensor.
4. Licensor shall have the option, exercisable by January 15, 1999, to
extend the license period for a three (3) year period, on terms and conditions
that are substantially similar to the terms and conditions contained in
Licensor's other license agreements with licensees producing items similar to
those identified in Schedule B herein. The factors that Licensor may consider in
determining whether to exercise such option include, without limitation, whether
(i) the Clubs are fully satisfied with the products and services provided to
them by Licensee pursuant to this Agreement; (ii) Licensee has earned the
Guaranteed Compensation under this Agreement in each of calendar years 1996,
1997 and 1998; and (iii) Licensee is not in default hereunder.
5. Notwithstanding anything to the contrary contained herein, Licensor
acknowledges and agrees that any Guaranteed Compensation in excess of that which
is payable by Licensee hereunder may be applied against guaranteed compensation
payable under License Agreement No. ML-2771A. In connection therewith.
Percentage Compensation earned hereunder in either of calendar years 1995 or
1996 in excess of Guaranteed Compensation payable for such two-year period may
be applied against guaranteed compensation payable under License Agreement No.
ML-2771A for the period of 1995-1996, only. Similarly, Percentage Compensation
earned hereunder in calendar year 1997 in excess of Guaranteed Compensation
payable for calendar year 1997 may be applied against guaranteed compensation
payable under License Agreement No. ML-2771A for calendar year 1997, only.
Percentage Compensation earned hereunder for any calendar year not specified in
this Paragraph may not be applied against guaranteed compensation due under
License Agreement No. ML-2771A for any period whatsoever.
6. Licensee acknowledges that Licensor may, in its sole discretion, change
the name and/or logo of its authentic line of products, and that upon the
implementation of such change, Licensee shall market the Products licensed
herein under such new name and/or logo.
7. Licensee shall have the right to purchase, at face value, twelve (12)
tickets to each All-Star Game and twenty-four (24) tickets to each Division
Series, League Championship Series and World Series game played during the
license period.
8. Notwithstanding anything to the contrary contained in Paragraph 13S of
this Agreement, Licensee may grant a security interest in the Licensed Products
to a credible financial institution which maintains at least an A- rating from a
nationally recognized credit rating agency (such as Moody's or Standard & Poors)
throughout the license period; provided that (i) no distribution of such
Products is made by such institution or its agents, representatives, affiliates,
successors, or assignees without the prior written consent of Licensor, and (ii)
such institution does not have an investment or interest in casinos or any other
form of legalized gambling enterprise and does not participate in any activity
that Licensor or any other Major League Baseball-related entity has made
unauthorized or which is contrary to official policy of Major League Baseball.
9. Concurrently with its execution of this Agreement, Licensee will list
below the brand names that Licensee desires or intends to use on the Licensed
Products.
Brand Names:
1) Licensed Product(s) Nos.: ____________________
Brand Name(s): _______________________________
Approved by Major League Baseball
Properties. Inc.: _______________________________________
Initials/Title
________________________________________
Date
2) Licensed Product(s) Nos.: ____________________
Brand Name(s): _______________________________
Approved by Major League Baseball
Properties. Inc.: _______________________________________
Initials/Title
________________________________________
Date
<PAGE>
-17-
3) Licensed Product(s) Nos.: ____________________
Brand Name(s): _______________________________
Approved by Major League Baseball
Properties, Inc.: _______________________________________
Initials/Title
________________________________________
Date
In the event Licensee wishes to substitute a brand name for those listed
above or wishes to add to the number of brand names, Licensee shall first obtain
Licensor's written approval of such brand names.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement:
MAJOR LEAGUE BASEBALL PROPERTIES, INC., as agent for the Clubs
BY: /s/Illegible Sr. V. Pres
________________________________________________________________
Title
DATE: 5-14-96
LICENSEE: STARTER CORPORATION
BY: /s/ [Illegible] SVP
________________________________________________________________
Title
DATE: 4-19-96
FORM: NBAP
U.S./C-ApparelC
PR
LICENSEE: STARTER CORPORATION RETAIL PRODUCT LICENSE, MARKETING
ADDRESS: 370 James Street AND ADVERTISING AGREEMENT
New Haven, CT 06513
THIS RETAIL PRODUCT LICENSE, MARKETING AND ADVERTISING 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, designations, labels, insignia or indicia
thereof (the "Marks") of the National Basketball Association (the "NBA") and its
Member Teams (collectively, the "NBA Marks") alone and in combination with the
names, nicknames, photographs, portraits, likenesses, signatures or other
identifiable features of current NBA players ("Player Attributes"). Subject to
the terms and conditions of this Agreement (including 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 during the Term (i) the Marks of the Member
Teams, the silhouetted dribbler logo (the 'NBA Logo"), the Marks of the NBA, NBA
All-Star Weekend and NBA Playoffs and Finals, the Marks of those NBAP Events and
Programs (as defined below) that LICENSEE sponsors in accordance with Paragraph
J.2 below and the appropriate designations reflecting LICENSEE's status as an
official uniform, warm-up and/or practicewear supplier to the NBA (collectively,
the "Licensed Marks"), and/or (ii) the Licensed Marks in combination with
certain Player Attributes (on a group bases and to the extent NBAP can convey
such rights in accordance with the Group License Agreement (as defined below) in
accordance with the terms of this Agreement (the "Licensed Attributes"), in
either case, solely in connection with the manufacture, distribution,
advertisement, promotion and sale in the Territory of the products described in
Paragraph A below that include one or more of the Licensed Marks ("Licensed
Products"). No license or right is granted for the use of NBA Marks or Player
Attributes 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:
1. "On-Court Products": LICENSEE shall have the exclusive right (with
respect to the adult and youth sizes set forth in Paragraph A.3 below)
to manufacture, distribute and sell the following with respect to the
NBA Teams specified on Schedule A hereto ("Licensee's Teams") in
accordance with the terms and conditions of this Agreement:
(a) "Pro Cut" game jerseys with Licensed Attributes (player names) on
the back and game shorts (i.e., exact reproductions of the actual
NBA Team uniform jerseys and shorts worn by players in terms of
player size and all design and other elements).
(b) "Authentic" game jerseys with Licensed Attributes (player names)
on the back and game shorts (i.e., reproductions that incorporate
all of the design elements and characteristics as they appear on
the actual NBA Team uniform jerseys and shorts worn by players,
including sublimation (where appropriate), tackle twill,
lettering, embroidered patches and/or direct embroidery).
<PAGE>
(c) Authentic "shooting shirts" and/or "shooting jackets" (sometimes
referred to below collectively as "Shooting Shirts") and warm-ups
(tops and pants).
(d) Authentic "Practicewear" (i.e., reversible mesh tank top; mesh
short, t-shirts; sweatshirts; sweatpants; shorts; and sleeveless
t-shirts) incorporating the same graphic design approved by NBAP
for use in versions supplied to Licensee's Teams.
(e) Authentic "compression shorts" (i.e., athletic support
undershorts) incorporating the same graphic design approved by
NBAP for use in versions supplied to Licensee's Teams.
(f) Authentic "socks" bearing the NBA Logo in the same version
supplied to NBA Teams; provided, however, that LICENSEE's rights
with respect to socks bearing the NBA logo shall not be
exclusive.
(g) Other products that NBAP may from time to time designate as
"On-Court Products."
2. "Other" Products: LICENSEE shall have the non-exclusive right to
manufacture, distribute and sell the following with respect to all NBA
Teams in accordance with the terms and conditions of this Agreement:
(a) Under the "Starter" label for distribution to the traditional
retail accounts listed on Schedule B (as such schedule may be
amended from time to time):
(i) Headwear.
(ii) "Activewear" (e.g., t-shirts, tank tops, shorts,
sweatshirts, polos, sweatpants and warm-ups). (iii)
Outerwear (i.e., all fabrications of lightweight and
heavyweight outerwear).
(iii) Outerwear (e.g., all fabrications of lightweight and
heavyweight outerwear).
(iv) Athletic bags and soft luggage.
(b) Under the "Galt Sand" and "Sport One" labels for distribution to
certain department stores, LICENSEE shall have the right, subject
to NBAP's prior approval of a written business plan to be
submitted by LICENSEE (addressing, among other things, the
products to be distributed, the labels to be used and the retail
accounts to which such products are to be distributed), to
distribute certain Other Licensed Products in accordance with the
terms and conditions of this Agreement and such plan.
3. With respect to the categories of Licensed Products listed under
Paragraph A.1 and 2(a), all Licensed Products shall be manufactured,
distributed, advertised and sold under the "Starter" label. With
respect to any Licensed Product authorized by NBAP in accordance with
Paragraph A.2(b), such Licensed Product shall be manufactured,
distributed, advertised and sold under either the "Galt Sand" and/or
"Sport One" labels. All Licensed Products shall be made available only
in adult sizes S-XXXXXL and infant sizes (12-24 months), toddler sizes
(2T4T) and youth sizes (4-20); provided, however, that, in the event
that LICENSEE has not commenced the distribution to retail accounts of
any such Licensed Products in adult sizes XXXL, XXXXL or XXXXXL by
July 31, 1999 (the "size deadline"), NBAP shall have the right, at any
time following the size deadline, to withdraw LICENSEE's right to
manufacture, distribute, advertise and sell any such Licensed Product
in any such size (i.e., XXXL, XXXXL or XXXXXL) for which distribution
has not commenced by the size deadline and to thereafter license some
other company to
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<PAGE>
manufacture, distribute, advertise and sell any such Licensed Product
in any such size for which LICENSEE's rights have been withdrawn.
4. Practicewear shall not include (i) any Player Attributes or (ii) any
stylings or graphics that, in NBAP's sole opinion, resemble Pro-Cut or
Authentic jerseys or shorts made by any other NBAP licensee.
Activewear shall not include (i) any Player Attributes or (ii) any
fabrication, stylings or graphics that, in NBAP's sole opinion,
resemble (x) any On-Court products made by LICENSEE or any other NBAP
licensee and (y) any "Replica" game jerseys or shorts made by any
other NBAP licensee. NBAP shall ensure that each of its licenses with
respect to the manufacture and sale of Pro-Cut and Authentic products
contains a provision that is not materially different from this
Paragraph A.4.
5. LICENSEE shall not place any brand identification (e.g., the Starter
logo) on any Pro-Cut and Authentic jersey or short supplied to a Team
or offered at retail other than on the jersey jock tag or on the
Authentic short produced for retail, in either case, on the front
plane of the product (if LICENSEE so elects) and in accordance with
NBAP's policies regarding logo size and placement. LICENSEE shall be
permitted to place the Starter logo on all other Licensed Products
supplied to a Team or offered at retail (i) on the front plane of the
product (in the case of reversible items, on both sides) in a location
approved by NBAP (consistent with NBAP's policies regarding logo size)
and (ii) in such other locations (e.g., jock tag) as may be permitted
under NBAP's policies regarding logo size and placement NBAP agrees
that such other locations include, (a) in the case of shooting shirts
and jackets, a jock tag on the front plane of the product, (b) in the
case of warm up tops, one sleeve or center back (near the neck), and
(c) in the case of practicewear t-shirts and sweatshirts, one sleeve.
LICENSEE shall also be permitted to place the Starter logo on the
"hang-tag" of any Licensed Product sold at retail. In the event that
(x) any NBA player who has entered into an endorsement agreement with
LICENSEE (an "Endorser") who is on a Team other than one of Licensee's
Teams frequently does not wear an On-Court product of such other Team
during Team games (including warm-up periods and going to and from the
locker room to the playing floor) or in Team practices, (y) NBAP
reasonably believes such behavior is the result of such Endorser's
loyalty to LICENSEE and (z) NBAP requests LICENSEE to encourage such
Endorser to wear such product, LICENSEE shall use its best efforts to
encourage such player to wear such product (by communicating promptly
with such player following receipt of such request for the purpose of
encouraging him to wear such product) and, if NBAP requests LICENSEE
to do so, LICENSEE shall advise NBAP as to who encouraged the player
and when such encouragement was provided. NBAP shall ensure that each
other company licensed by NBAP to manufacture Pro-Cut and Authentic
products shall have the same obligations in respect to its endorsers
as LICENSEE has pursuant to the preceding sentence.
6. (a) The On-Court Products shall be designed to the manufacturably
reasonable specifications of, and be of such physical
characteristics of construction as specified by, the NBA and/or
NBAP for each of Licensee's Teams for each NBA Season. The
On-Court Products shall be of the same or reasonably better
construction, fabrication and quality as those worn for the
1995-96 NBA Season. The NBA Logo shall be directly embroidered or
applied (in a manner acceptable to NBAP) to the On-Court Products
in the same manner as employed on such items used during the
1995-96 Season, unless otherwise approved by NBAP LICENSEE
acknowledges that the design, including, but not limited to,
drawings, artwork. designs, patterns and material composition,
employed or developed for the production (through CAD/CAM or
otherwise) of the foregoing items, and the codification,
recording and reproduction, thereof, however maintained,
organized or derived, including any computer tapes, hard copy or
machine readable copies (collectively, the "Specs'), are for the
benefit
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<PAGE>
of NBAP and the Member Teams and that all proprietary interests
therein belong to NBAP. LICENSEE shall not, without NBAP's prior
written consent, divulge to any third party the substance of the
Specs except as may be required to fulfill the terms of this
Agreement. NBAP shall not authorize any of its licensees to use
any of the Specs, except that NBAP shall be entitled to so
authorize any of its licensees in connection with (i) the
manufacture, distribution, promotion and sale of On-Court
Products outside of the Territory, (ii) the manufacture,
distribution, promotion and sale of On-Court Products worldwide
in sizes that LICENSEE is not authorized to offer and (iii) a
change in Team assignments among NBAP licensees authorized to
manufacture On-Court Products involving one or more of Licensee's
Teams. NBAP shall ensure that it shall have the right to use the
designs of each other company licensed by NBAP to manufacture
On-Court Products to the same extent that it has the right to use
LICENSEE's designs pursuant to the preceding sentence.
(b) Prior to the September 1 of a Contract Year and at such other
times as NBAP may reasonably request, LICENSEE shall provide NBAP
with information with respect to the sizes and Specs of the
On-Court Products that LICENSEE supplies to each of Licensee's
Teams for such Contract Year. In addition, LICENSEE shall
participate in certain events (e.g., rookie combine physical
examination sessions) organized by NBAP (or the NBA) for the
purpose of, among other things, obtaining information with
respect to the sizes and measurements of basketball players.
B. TERM: The term ("Term") of this Agreement shall commence August 1, 1997 and
expire July 31, 2001.
C. TERRITORY: The Territory shall be, with respect to the distribution,
advertising and sale of Licensed Products, the 50 United States, the
District of Columbia and Canada ("North America"); provided, however, that
(1) NBAP acknowledges that LICENSEE, as of the date of the execution of
this Agreement, does not have the technological capability to restrict its
advertising over the Internet to North America and (2) LICENSEE shall not
be in breach of its obligations hereunder until and unless the
technological capability has been developed to so limit the distribution of
LICENSEE's advertising over the Internet.
D. TEAM PRODUCT SUPPLY COMMITMENT:
1. LICENSEE shall have the exclusive right and obligation to manufacture
and supply to Licensee's Teams On-Court Licensed Products and (subject
to Paragraph I.1 below) those Other Licensed Products supplied to a
Licensee Team for use by the Team's statisticians and ballpersons
during NBA games ("Ballperson Licensed Product"). LICENSEE shall have
the exclusive right to use appropriate designations with respect to
the supply of Licensed Products to Licensee's Teams, subject to the
approval of NBAP in accordance with the terms of this Agreement.
2. At least fourteen (14) days prior to the opening of training camp for
each Licensee's Teams, LICENSEE shall, at its cost, produce and
deliver to such places, at such times and of such sizes, as specified
by NBAP, the following for each such Team:
(a) two (2) sets of each home and two (2) sets of each away Pro-Cut
Uniform (i.e., jersey and shorts) and Authentic warm-up for each
of fifteen (15) players (i.e., 8 sets consisting of a top and a
bottom per player, 120 sets per team); one hundred forty-four
(144) pairs of Authentic compression shorts; four (4) Authentic
Shooting Shirts (it being understood that, until and unless NBAP
introduces home and away versions of Shooting Shirts, LICENSEE
shall provide NBAP with four (4) Shooting Shirts of the one
available style and that LICENSEE shall provide NBAP with two (2)
home
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<PAGE>
Shooting Shirts and two (2) road Shooting Shirts in the event
that NBAP introduces home and away versions of such products)
each of fifteen (15) players;
(b) three (3) reversible mesh tank tops, three (3) t-shirts, two (2)
pairs of mesh shorts, two (2) fleece tops and two (2) fleece
pants for each of fifteen (15) players (i.e., 12 pieces per
player, 180 pieces per team); and
(c) 1,200 pairs of socks.
3. LICENSEE shall use its best efforts to accommodate the reasonable
requests of NBAP and of each of Licensee's Teams regarding the style
and weight of each of the products listed in subparagraph 2(a)-(c).
4. Each Season, upon NBAP's request, LICENSEE shall provide to NBAP two
(2) sets of each of the products listed under subparagraph 2(a)-(c)
above for each Licensee Team.
5. (a) During the Term, each of Licensee's Team may request changes in
the design of its On-Court Products in accordance with NBA
Uniform and Logo guidelines, as they may be amended from
time-to-time. LICENSEE shall, for each Contract Year and for each
Team, bear the full cost in connection with the creation (other
than design creatives) and manufacture to Specs of one (1)
prototype/sample redesigned product. The timely delivery of such
redesigned product is contingent upon adherence to the NBA's
guidelines.
(b) LICENSEE's timely performance of its obligations pursuant to this
Paragraph 5 and Paragraph 2 above are contingent upon LICENSEE's
receipt of an order from each of Licensee's Teams containing
information with respect to product sizes, styles, colors,
numbers, names and quantities by the times specified below in
order to effect shipment to the Team by the corresponding date:
Orders Shipped to Teams as Follows:
Complete Orders
Received by: Practicewear Other On-Court Products
------------ ------------ -----------------------
February 1 July 1 September 1
June 1 August 1 September 1
June 15 August 15 September 15
July 1 September 1 October 1
6. NBAP or any of Licensee's Teams may purchase On-Court merchandise for
official or player use (not for retail sale) at LICENSEE's most
favorable wholesale catalog prices less twenty percent (20%), except
that reasonable requests for customized items for "VIPs" or NBAP
product placement use shall be available at LICENSEE's manufacturing
cost.
7. LICENSEE shall maintain a staff dedicated to service each of
Licensee's Teams outfitting needs and to respond expeditiously and
appropriately to Team On-Court Licensed Product requests. Without
limiting the effect of the preceding sentence, LICENSEE (i) shall
maintain (in the United States and Canada) 120 pieces of each of the
products listed under subparagraph 2(a)-(c) above (excluding socks) in
blank inventory to accommodate immediate Team needs, and (ii)
acknowledges that LICENSEE's Teams may request OnCourt Products for
players acquired during the course of the NBA Season and agrees that
it shall use its best efforts to satisfy such requests within one (1)
business day of its receipt of such request at no cost to NBAP or the
requesting Team.
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<PAGE>
E. RETAIL PRODUCT DISTRIBUTION:
1. (a) Except as expressly set forth herein and as NBAP and LICENSEE may
agree otherwise, LICENSEE shall the exclusive right and
obligation (with respect to the adult and youth sizes set forth
in Paragraph A.3 above) to offer, manufacture, distribute and
sell to retail accounts all styles of On-Court Licensed Products
for each of Licensee's Teams; provided, however, that, with
respect to each Contract Year, LICENSEE shall only be obligated
to:
(i) offer, manufacture, distribute and sell to retail accounts
at least one (1) style of a Pro-Cut jersey with respect to
at least fifteen (15) then-current players, to be determined
by NBAP by no later than the February 1 preceding the start
of such Contract Year from Licensee's Teams (it being
understood that at least one (1) player from each such Team
shall be included);
(ii) offer, manufacture, distribute and sell to retail accounts
at least one (1) style of an Authentic jersey with respect
to at least (x) two (2) then-current players, to be
determined by NBAP by no later than the February 1 preceding
the start of such Contract Year, from each of Licensee's
Teams and (y) three (3) then-current players, to be
determined by NBAP by no later than the February 1 preceding
the start of such Contract Year, from among all of
Licensee's Teams;
(iii) offer, manufacture, distribute and sell to retail accounts
at least each style of Shooting Shirt worn by each one (1)
of Licensee's Teams; provided, however, that in any Contract
Year in which NBAP determines that Shooting Shirts worn by
NBA players shall include player names, LICENSEE shall not
offer Shooting Shirts without player names and shall offer,
manufacture, distribute and sell player identified Shooting
Shirts on the same basis as for Authentic jerseys in
accordance with subparagraph (ii) above; and
(iv) offer, manufacture, distribute and sell to retail accounts
at least one (1) style of all other On-Court Licensed
Products.
(b) (i) LICENSEE shall offer to retail accounts at least four
(4) outerwear styles in adult styles for all NBA Teams
across a range of price points, and shall manufacture and
have available for distribution to retail accounts at least
two (2) such styles, with respect to each Fall selling
season covered by the Term. Licensee shall offer to retail
accounts at least three (3) outerwear styles in adult sizes
for all NBA Teams across a range of price points, and shall
manufacture and have available for distribution to retail
accounts at least one (1) such style, with respect to each
Spring selling season covered by the Term.
(ii) LICENSEE shall offer to retail accounts at least three (3)
outerwear styles in youth sizes for all NBA Teams across a
range of price points, and shall manufacture and have
available for distribution to retail accounts at least one
(1) such style, with respect to each Fall selling season
covered by the Term. LICENSEE shall offer to retail accounts
at least two (2) outerwear styles in youth sizes for all NBA
Teams across a range of price points, and shall manufacture
and have available for distribution to retail accounts at
least one (1) such style, with respect to each Spring
selling season covered by the Term.
(iii) Except as specified in subparagraphs (i) and (ii) above,
LICENSEE shall offer to retail accounts a representation of
Other Licensed Products (including various
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<PAGE>
styles of t-shirts, fleece, polos and a minimum of four (4)
styles of headwear with respect to the Fall and Spring
selling seasons) for all NBA Teams.
(c) LICENSEE shall have the right, but not the obligation, to offer
to retail accounts Authentic jerseys bearing the names of NBA
players who retire from one of Licensee's Teams during the Term,
subject to the following conditions:
(i) any such jersey shall be deemed a Licensed Product under
this Agreement;
(ii) any such jersey may be offered for a period (to be
determined by NBAP) not to exceed three (3) years from the
conclusion of the last NBA season in which the retired
player played; and
(iii) the royalty rate applicable to the sale of any jersey of a
retired player shall equal the then-current royalty rate for
Authentic Licensed Products containing Licensed Attributes.
(d) In each instance in which LICENSEE is obligated only to offer a
style of a Licensed Product pursuant to Paragraph E.1(b), such
product shall be manufactured, distributed and sold if LICENSEE
receives aggregate orders for such style for a Contract Year from
retail accounts of at least 600 units.
2. Set forth on Schedule B (as such schedule may be amended from
time-to-time) are the traditional retail accounts that support the
high quality and image of NBA officially licensed products with
appropriate merchandising displays, promotion and/or customer service
and to which LICENSEE shall offer a full range of Licensed Products.
LICENSEE shall not offer any On-Court Licensed Product or Ballperson
Licensed Product exclusively to any retail account and shall offer
each style or version of each such product required by this Agreement
to all of the retail accounts listed on Schedule B (as such schedule
may be amended from time-to-time). All Licensed Products shall be
offered, or made available, to each outlet of a retail account (i.e.,
"chainwide") listed on Schedule B and only to the retail accounts
listed on such Schedule.
3. (a) LICENSEE 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 NBAP
and/or Team owned or controlled concessions or stores ("NBA and
Team Stores"). Therefore, LICENSEE shall, in addition to and in
consideration of the benefits it will receive from having
merchandise displayed, sold and promoted at NBA and Team Stores,
(i) upon the request of NBAP, perform contract manufacturing
services for NBAP in connection with the manufacture of products
for sale in an NBAP owned or controlled store on terms mutually
agreed upon by NBAP and LICENSEE, and (ii) except as NBAP and
LICENSEE may otherwise agree, give NBA and Team Stores the same
priority under LICENSEE's sales and distribution policies (in
terms of price discounts, product offering, allocation, priority
of delivery and cooperative or other advertising and promotional
allowances or other benefits) as LICENSEE affords to its most
preferred high-volume customers, regardless of any such Store's
volume. No concession or store owned or controlled by a
professional sports team or league (other than the NBA or an NBA
Team) or by a college or university shall be entitled to more
favorable price discounts or priority than that offered to NBAP
and/or Team concessions or stores.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, in the event that LICENSEE fails (or informs NBAP that
it is unable) to accommodate an order by NBAP for delivery of one
or more On-Court and/or Ballperson Licensed Products to
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<PAGE>
an NBAP owned or controlled store by the time NBAP requests such
delivery be made, NBAP shall be entitled, on a "fill-in" basis,
to obtain the requested Licensed Products from any source.
4. LICENSEE shall have the exclusive right and obligation to offer,
manufacture, distribute and sell to retail accounts at least one (1)
style of a "celebratory" headwear product and at least one (1) style
of a "celebratory" t-shirt (each distributed under the "Starter"
label) with respect to any of Licensee's Teams "celebratory" events
(e.g., win an NBA Division or Conference championship), other than an
NBA Finals celebration, to be supplied to such Team for the Team's
locker room celebration. Any rights LICENSEE may have with respect to
"celebratory" products for an NBA Finals celebration shall result
from, and be governed by, a separate agreement with NBAP. In
connection with the rights granted in this subparagraph, LICENSEE
shall be given appropriate locker room access and designation rights
in accordance with the terms of this Agreement.
5. LICENSEE shall maintain sufficient personnel and stock of finished
products in facilities located in the United States and Canada to
accommodate promptly all orders and reorders from its retail accounts
for all On-Court and Ballperson Licensed Products.
F. COMBINED ROYALTY PAYMENTS:
Throughout the Term, LICENSEE shall pay monthly to NBAP in accordance with
Paragraph 4 of the Standard Terms and Conditions a combined royalty and
advertising and promotion payment equal to the percentage of "Met Sales"
(as defined in Paragraph 1 of the Standard Terms and Conditions) listed
below for each Licensed Product category set forth below for each Contract
Year:
Licensed Product Combined Royalty Payment
---------------- ------------------------
1. Pro-Cut Jerseys and Authentic Jerseys
Containing Licensed Attributes: * %
2. All other On-Court and Other Licensed
Products (e.g., Pro-Cut and Authentic
Shorts, Warm-ups (tops and pants),
Authentic Shooting Shirts, Authentic
Practicewear, Authentic Compression
shorts, Authentic socks, Athletic Bags
and Soft Luggage, Outerwear, Activewear
and Headwear): * %
G. MINIMUM GUARANTEES:
LICENSEE guarantees to make payments to NBAP (in accordance with Paragraph
3(a) and (b) of the Standard Terms and Conditions) with respect to all
Licensed Products (regardless of product sales) for each Contract Year of
not less than the amount listed below (in U.S. dollars) with respect to
both the United States and Canada:
Contract Year U.S. Minimum Canada Minimum
------------- ------------ --------------
1 $ * $ *
2 $ * $ *
3 $ * $ *
4 $ * $ *
* Material omitted pursuant to a request for confidential treatment and such
omitted material has been filed separately with the Commission.
8
<PAGE>
H. ADVERTISING AND PROMOTION:
1. 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 be entitled to devote
up to two percent (2%) of LICENSEE's annual royalty payments to cover
the expenses incurred by NBAP in connection with such advertising and
promotion activities. Any amounts devoted by NBAP to cover such
expenses shall be spent on such advertising and promotion activities
as NBAP, in its sole discretion, shall determine.
2. LICENSEE shall exhibit, at its sole cost and expense, a fair and
representative selection of Licensed Products at the Super Show and
every other trade show where LICENSEE exhibits licensed products.
I. TEAM MARKETING SUPPORT:
1. With respect to each Contract Year, LICENSEE shall require each of
Licensee's Teams, at LICENSEE's option, to enter into one of the
following marketing and sponsorship arrangements with LICENSEE:
(a) the "Basic" arrangement - under this arrangement, LICENSEE shall
spend not less than $ * with the Team during each Contract Year,
have the obligation and exclusive right to outfit the Team's
statisticians and ballpersons during NBA games in Licensed
Product (subject, in each case, to NBAP's policies) and receive:
(i) the exclusive right to outfit the Team's trainer(s),
equipment manager(s) and other team game personnel (other
than coaches) in Licensed Product (subject, in each case, to
NBAP's policies), if such personnel choose to wear
logo-identified apparel, courtside during Team games and
practices (including warm up periods, going to and from the
locker room to the playing floor and pre- and post-game
media sessions);
(ii) a commitment from the Team that (u) none of its
statisticians, ballpersons, trainers, equipment managers or
other team game personnel (other than coaches) shall wear
any brand identified (other than LICENSEE brand identified)
athletic apparel or accessories during a Team game or a Team
practice, (v) such individuals shall be advised not to wear
any brand identified (other than LICENSEE brand identified)
athletic apparel or accessories during Team warm up periods,
going to and from the locker room and during pre- and
post-game media sessions, (w) none of such individuals shall
obscure, alter or replace any brand identification of
LICENSEE on any Licensed Products supplied by LICENSEE, (x)
the Team shall uses its best efforts to prevent any company
(other than LICENSEE) from providing athletic apparel or
accessories to people gathered at media sessions arranged by
the Team at a venue that the Team controls, (y) no
advertising (other than LICENSEE's brand identification)
that can be placed on any apparel worn by any of such
individuals (except for apparel worn by ballpersons) shall
be provided to any company and (z) no advertising (other
than LICENSEE's brand identification) that can be placed on
any apparel worn by ballpersons or on any courtside item
that "touches a player" (e.g., seatbacks, towels, athletic
bags, cups and coolers) shall be provided by the Team (not
NBAP) to a company in the athletic footwear and/or apparel
sponsor category other than LICENSEE; and
* Material omitted pursuant to a request for confidential treatment and such
omitted material has been filed separately with the Commission.
9
<PAGE>
(iii) a marketing and sponsorship package, to be agreed upon the
Team and LICENSEE, that includes at least $ * of value in
cash and/or product (other than product that LICENSEE is
obligated to provide to the Team under this Agreement,
including, but not limited to, the Licensed Product worn by
ballpersons) (e.g., media advertising, signage, tickets,
participation in community programs with the Team or a third
party) during each Contract Year; or
(b) the "Advanced" arrangement - under this arrangement, LICENSEE and
the Team shall have the same rights and obligations as under the
Basic arrangement plus:
(i) LICENSEE shall spend at least an additional $ * (for a total
minimum of $ *) with the Team during each Contract Year;
(ii) LICENSEE shall receive a commitment from the Team that (x)
no courtside signage (e.g., a rotation in AdTime), during
the Team's games, shall be provided by the Team to a company
in the athletic footwear and/or- apparel sponsor category
other than LICENSEE (provided that, notwithstanding the
foregoing, the Team shall be entitled to provide signage on
balicarts to NBAP's then-current ball licensee and, if such
licensee is Spalding, the Team shall be entiUed to provide
Spalding with courtside signage that refers to basketballs
or its official supplier status regarding basketballs and
that advertises no other Spalding product (e.g., such
courtside signage cannot have only the Spalding name and
logo)), (y) no LICENSEE-identified courtside signage
provided by the Team, during the Team's games, shall be
obscured, altered or replaced or added to in any Team
licensed telecast distributed within the Team's territory
(it being understood that such prohibition shall not apply
to NBAP's distribution of such game telecast outside the
Team's territory) and (z) apparel worn by ballpersons will
not contain any signage other than the brand identification
of LICENSEE (in accordance with NBAP's policies); and
(iii) LICENSEE's marketing and sponsorship package shall include
at least an additional $ * (a total of $ *) in value in cash
and/or product (other than product that LICENSEE is
obligated to provide to the Team under this Agreement,
including, but not limited to, the Licensed Product worn by
ballpersons) during each Contract Year, to be agreed upon by
the Team and LICENSEE.
2. In addition to the amounts required under Paragraph I.1 above,
LICENSEE shall spend, at its sole discretion, each Contract Year, in
cash and/or product (other than product that LICENSEE is obligated to
provide to the Team under this Agreement, including, but not limited
to, the Licensed Product worn by ballpersons), on marketing and
sponsorship programs offered by one or more of Licensee's Teams, a
minimum of $ *. Notwithstanding anything to the contrary contained in
this Agreement, LICENSEE shall spend, in the aggregate, at least $ *
each Contract Year, in satisfaction of its obligations under Paragraph
I.1 above and the preceding sentence.
3. Any amount that LICENSEE is obligated to spend with any NBA Team
during any Contract Year by reason of a marketing and/or sponsorship
relationship that LICENSEE has with such Team as of the date of this
Agreement shall not be included in determining whether LICENSEE has
satisfied its obligations under Paragraphs I.1 and/or 2 above.
4. Notwithstanding anything to the contrary contained in Paragraph I.1
above, LICENSEE shall not be required to spend on one of Licensee's
Team's Team Inventory in excess of fifty percent (50%) of the value of
the applicable Team marketing and sponsorship
* Material omitted pursuant to a request for confidential treatment and such
omitted material has been filed separately with the Commission.
10
<PAGE>
package for that Team determined in accordance with either Paragraph
I.1(a)(iii) or I.1(b)(iii). For purposes of this Paragraph I, "Team
Inventory" shall mean all team-owned or controlled media advertising
(e.g., television, radio, signage and print), tickets and suites.
5. For purposes of this Agreement (and any agreement LICENSEE enters into
with any of Licensee's Teams pursuant hereto, unless such Team and
LICENSEE agree otherwise), "athletic accessories" shall mean all
headwear, headbands, wristbands, bags, towels, and all other
accessories that an individual wears or uses while participating in
any athletic activity. For purposes of this Agreement (and any
agreement LICENSEE enters into with any of Licensee's Teams pursuant
hereto, unless such Team and LICENSEE agree otherwise), any company
shall be deemed to be in the "athletic footwear and/or apparel sponsor
category" if such company is listed on Schedule C or D.
J. MARKETING AND MEDIA SUPPORT:
1. For the right to be designated an "official supplier" of the NBA
throughout the Term, LICENSEE shall pay to NBAP an annual fee ("Annual
Fee") of (i) $ * for Contract Year 1, (ii) $ * for Contract Year 2,
(iii) $ * for Contract Year 3, and (iv) $ * for Contract Year 4. The
Annual Fee for a Contract Year shall be paid in four (4)equal
installments on August 1, November 1, February 1 and May 1 of such
Year.
2. During each Contract Year, LICENSEE shall make not less than the
following expenditures on NBA media and events in the United States
and Canada:
(a) With respect to commercial inventory in national broadcast and
cable network (e.g., NBC and TNT) game telecasts in the United
States, LICENSEE shall purchase $ * (less advertising agency
commissions not to exceed 15%) with respect to each Contract
Year; provided, however, that in the event that LICENSEE pays
NBAP combined royalties of $ * or more with respect to Licensed
Products sold in the United States and Canada for any Contract
Year, LICENSEE shall purchase commercial inventory in national
broadcast and cable network game telecasts in the United States
of at least $ * (gross) with respect to each subsequent Contract
Year.
(b) With respect to commercial inventory in NBA-related programming
(including television, radio, Internet and print media) that NBAP
sells and Inside Stuff Magazine ("NBAP Controlled Media") in the
United States, LICENSEE shall purchase $ * (less advertising
agency commissions not to exceed 15%) with respect to each
Contract Year (including at least one (1) page of advertising in
each issue of Inside Stuff Magazine); provided, however, that in
the event that LICENSEE pays NBAP combined royalties of $ * or
more with respect to Licensed Products sold in the United States
and Canada for any Contract Year, LICENSEE shall purchase NBAP
Controlled Media in the United States of at least $ * (net) with
respect to each subsequent Contract Year (including at least one
(1) page of advertising in each issue of Inside Stuff Magazine).
(c) With respect to events, ceremonies, activities, competitions or
programs conducted by NBAP in the United States and Canada (e.g.,
Jam Session, grass roots programs) ("NBAP Events and Programs")
(to be selected mutually by LICENSEE and NBAP), LICENSEE shall
provide NBAP in cash and/or product, in exchange for appropriate
recognition and exposure, with (i) $ * for Contract Year, (ii)
$ * for Contract Year 2, (iii) $ * for Contract Year 3 and (iv)
$ * for Contract Year 4.
* Material omitted pursuant to a request for confidential treatment and such
omitted material has been filed separately with the Commission.
11
<PAGE>
(d) On or before the June 15 prior to a Contract Year, NBAP shall
provide LICENSEE with a reasonable selection of inventory and/or
sponsorship opportunities with respect to NBA Controlled Media
and NBAP Events and Programs that are available to LICENSEE for
such Contract Year together with the corresponding prices and/or
fees for such inventory and/or sponsorship opportunities. If,
within thirty (30) business days of receipt by LICENSEE of such
list, LICENSEE does not provide NBAP with written confirmation of
its selection of NBAP Controlled Media and NBAP Events and
Programs in amounts sufficient to satisfy LICENSEE's obligations
under Paragraph J.2.(b) and (c), then (i) NBAP shall not be
obligated to reserve for LICENSEE for such Contract Year any
particular NBAP Controlled Media for NBAP Events and Programs
(other than the inventory and/or sponsorship opportunities
selected during such 30 day period) and (ii) LICENSEE shall
satisfy its remaining obligations under Paragraph J.2(b) and (c)
with respect to NBA Controlled Media and NBAP Events and Programs
for such Contract Year from any inventory and/or sponsorship
opportunities made available to LICENSEE by NBAP for such
Contract Year.
(e) Without limiting the effect of any provision of this Paragraph J,
each Contract Year, LICENSEE shall support LICENSEE's
distribution and sale of Licensed Products with advertising and
marketing materials distributed within the Territory (e.g.,
purchased during NBA game telecasts or in NBAP Controlled Media)
worth not less than $ * (based on the actual cost incurred by
LICENSEE to create and distribute such advertising and marketing
materials). For purposes of this subparagraph, "advertising and
marketing materials" shall include television commercials, print
advertisements, outdoor boards, wall murals, point-of-purchase
displays and other forms of media advertising or marketing. In
order to be counted against LICENSEE's obligation under this
subparagraph (e), any such materials must (i) advertise or
promote one or more Licensed Marks (in equal or greater
prominence than the "Starter" brand), (ii) not indicate or depict
any brand other than "Starter" or any other sport or trademark,
and (iii) be approved by NBAP prior to execution by LICENSEE.
K. MEDIA ADVERTISING RIGHTS:
1. LICENSEE shall not use any photograph or footage incorporating,
displaying or depicting a Licensed Mark ("NBA Photo or Footage") for
any purpose other than for advertising and promoting Licensed
Products.
2. Unless otherwise approved by NBAP, any game action NBA Photo or
Footage must be obtained from NBAP or NBA Entertainment, Inc.
("NBAE"). LICENSEE shall not be charged any fee (other than NBAE's
search and edit charges and other out-of-pocket expenses) for NBA
Photo or Footage obtained from NBAP or NBAE and used by LICENSEE in
connection with an advertisement or promotion for Licensed Products so
long as any such advertisement or promotion has been approved by NBAP.
L. TEAM ASSIGNMENTS:
1. Set forth on Schedule A hereto (as such Schedule may be amended from
time to time in accordance with this Paragraph L or as the parties may
otherwise agree) are Licensee's Teams with respect to each Contract
Year.
2. (a) During the Term, NBAP shall have the right to assign to LICENSEE
(with LICENSEE's consent) either a Team other than one of the
twenty-nine Teams in existence as of the execution date of this
Agreement (an "Expansion Team") or a
* Material omitted pursuant to a request for confidential treatment and such
omitted material has been filed separately with the Commission.
12
<PAGE>
Team assigned initially to another NBAP licensee with rights to
manufacture Pro-Cut and Authentic products (an "Available Team").
LICENSEE shall notify NBAP as to whether it consents to such
proposed assignment within fifteen (15) days of LICENSEE's
receipt of written notice from NBAP advising LICENSEE of the
availability of such Expansion Team and/or Available Team. In the
event of any such assignment, the following modifications shall
be made to LICENSEE's obligations hereunder for each Expansion
Team and/or Available Team that becomes one of Licensee's Teams,
commencing with the first Contract Year in which such Expansion
Team and/or Available Team becomes a Licensee Team and continuing
through the Term:
(i) LICENSEE shall make available the team marketing and
sponsorship arrangements described n Paragraph I.1 above to
each such Expansion Team and/or Available Team in accordance
with the terms set forth in such Paragraph;
(ii) LICENSEE shall (x) supply such Expansion Team and/or
Available Team with On-Court Licensed Products and
Ballperson Licensed Products in accordance with Paragraph D
and (y) offer, manufacture, distribute and/or sell (as the
case may be) to retail accounts On-Court Licensed Products
and Ballperson Licensed Products with respect to such
Expansion Team and/or Available Team in accordance with
Paragraph E; and
(iii) the applicable Annual Fees set forth in Paragraph J.1 shall
be increased by 10% per Expansion Team and/or Available Team
(e.g., if one Expansion Team and one Available Team become
Licensee Teams in Contract Year 2, the Annual Fee for
Contract Year 2 (and for all remaining Contract Years) will
be 120% of the amount set forth in Paragraph J.1).
(b) In the event that LICENSEE does not timely consent to a proposed
assignment by NBAP to LICENSEE of an Expansion Team and/or
Available Team in accordance with subparagraph (a), then NBAP
shall be free to assign such Expansion Team and/or Available Team
to another company.
M. MISCELLANEOUS:
1. (a) In the event that, during the Term, LICENSEE takes any
action, or causes any NBA player to take any action, that would
cause or induce any such player to "opt-out" of the Group License
Agreement between NBAP and the National Basketball Players
Association ("NBPA") (or its successor), or that would otherwise
cause or induce any such player to materially breach the
Collective Bargaining Agreement between the NBA and NBPA in
effect as of the date hereof, or any successor collective
bargaining agreement between the NBA and NBAP (or its successor),
or any NBA Uniform Player Contract, NBAP shall have the right to
terminate this Agreement upon written notice to LICENSEE. Such
termination shall be effective at the conclusion of the
then-current Contract Year, or at such earlier time as NBAP and
LICENSEE may agree. In the event that this Agreement is
terminated pursuant to this Paragraph, LICEMSEE shall (i) cease
from manufacturing, distributing and selling Licensed Products,
(ii) have no right to use the Licensed Marks or Licensed
Attributes in the Territory, and (iii) remain responsible to NBAP
for any royalties relating to Met Sales on Licensed Products.
Nothing contained in this Paragraph M.1(a) shall affect, or be
deemed to affect, (i) any right of any individual NBA player to
"opt-out" of the Group License Agreement, or any successor group
licensing agreement between NBAP or the NBA and the NBAP (or its
successor), in accordance with the terms of such Agreement or
successor agreement, or (ii) any rights NBAP, the NBA or an NBA
13
<PAGE>
team may have be contract or law against a player for breach of
contract or against LICENSEE for causing or inducing a breach of
contract.
(b) In the event that (x) LICENSEE knows or reasonably should know
that an NBA player who has entered into an endorsement agreement
with LICENSEE (an "Endorser") is considering "opting out" of the
Group License Agreement, or any successor group licensing
agreement between NBAP or the NBA and the NBPA (or its
successor), with respect to any product (other than footwear)
that LICENSEE, is supplying, distributing or selling, in
accordance with the terms of the Group License Agreement (or
successor agreement) or (y) NBAP requests LICEMSEE to encourage
an Endorser not to "opt-out" of such Group License Agreement (or
successor agreement) with respect to any such product, then
LICENSEE shall use its best efforts to encourage such Endorser
not to "opt-out" with respect to such product (by communicating
promptly with such Endorser for the purpose of encouraging him
not to "opt-out") and, if NBAP requests LICENSEE to do so
LICENSEE shall advise NBAP as to who encouraged such Endorser and
when such encouragement was provided.
(c) LICENSEE shall use its best efforts to encourage any Endorser who
has "opted-out" or who "opts-out" of the Group License Agreement
(or any successor group licensing agreement between NBAP or the
NBA and the NBAP (or its successor)) with respect to any product
(other than footwear) that LICENSEE is supplying, distributing or
selling, by reason of a provision contained in any agreement such
Endorser has entered into with LICENSEE, to participate in such
group licensing agreement with respect to such product (by
communicating with such Endorser for the purpose of encouraging
him to so participate) and, if NBAP requests LICENSEE to do so,
LICENSEE shall advise NBAP as to who encouraged such Endorser and
when such encouragement was provided. NBAP shall advise LICENSEE
as to which Endorsers have "opted-out" as of the date of this
Agreement with respect to any such product and LICENSEE shall
confirm that it will not object to the participation of such
Endorsers in the Group License Agreement, or any successor group
license agreement between NBAP or the NBA and the NBPA (or its
successor) in accordance with the terms of such Agreement or
successor agreement, with respect to any such product.
(d) LICENSEE shall not take any action to cause or induce any
Endorser or NBA player who plays for a Team that is not a
Licensee Team (i) to wear or use any apparel or accessory
products and/or (ii) not to wear any On-Court products
manufactured by an NBAP licensee other than LICENSEE, in either
case, during a Team game (including warm-up periods, going to and
from the locker room to the playing floor and pre- and post-game
media sessions) or a Team practice. LICENSEE shall not
intentionally obscure, alter or replace any brand identification
of any company on any On-Court product or intentionally add any
signage to any On-Court product depicted in any NBA Photo or
Footage used by LICENSEE in connection with any product or with
any advertising or promotional material (it being understood that
this provision shall not restrict LICENSEE from using NBA Photos
or Footage in which an entire player is obscured in accordance
with NBAP rules or in which such brand identification is not
visible because of the angle at which such NBA Photos or Footage
are taken).
(e) NBAP agrees that the obligations and covenants set forth in this
Paragraph M.1 shall be required of any other company licensed by
NBAP to manufacture On-Court and Authentic licensed products.
14
<PAGE>
2. (a) NBAP shall not authorize any company to provide any NBA
players on any of Licensee's Teams with any brand identified
(other than LICENSEE brand identified) athletic apparel for use
by such players during a Team game (including warm-up periods,
going to and from the locker room to the playing floor and pre-
and post-game media sessions) or a Team practice.
(b) NBAP shall not take any action to cause or induce any NBA player
who plays for one of Licensee's Team (i) not to wear any On-Court
Licensed Product or (ii) to obscure, alter or replace in any way
LICENSEE's brand identification on any On-Court Licensed Product
or to add signage to any On-Court Licensed Product.
(c) NBAP shall not authorize any NBAP sponsor or licensee to
intentionally obscure, alter or replace LICENSEE's brand
identification on any On-Court Licensed Product or intentionally
add any signage to any On-Court Licensed Product depicted in any
NBA Photo or Footage used by such sponsor or licensee in
connection with any product or with any advertising and
promotional material (it being understood that this provision
shall not restrict any such sponsor or licensee from using NBA
Photos or Footage in which an entire player is obscured in
accordance with NBAP rules or in which such brand identification
is not visible because of the angle at which such NBA Photos or
Footage are taken).
(d) NBAP shall not authorize any company (other than LICENSEE) to
provide apparel to people gathered at media sessions arranged by
one (1) of Licensee's Teams at a venue that the Team or NBAP
controls.
3. LICENSEE shall use its best efforts to secure the services of NBA
players as Endorsers and to use Endorsers to promote the sale of
Licensed Products.
4. NBAP shall, at no charge to LICENSEE, provide LICENSEE with twenty
(20) tickets per event to all major, public NBA-sponsored events
conducted during the NBA All-Star Weekend held each Contract Year for
use by trade or by LICENSEE's personnel, it being understood that no
such ticket may be used as a sweepstakes prize or for other
promotional purposes without NBAP's written consent.
AGREED TO AND ACCEPTED: AGREED TO AND ACCEPTED:
STARTER CORPORATION NBA PROPERTIES, INC.
By: /s/unrecognizable By: /s/unrecognizable
----------------------- --------------------------
Date: 1/22/97 Date: 1/23/97
--------------------- ------------------------
15
<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 1,1997 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) "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.
(d) "Net Sales" shall mean the amount of the gross sales of a Licensed
Product by LICENSEE, after deducting any bona-fide credit or
adjustment for returns actually made and volume discounts actually and
customarily given to the trade (such discounts may not exceed ten
percent (10%) of the gross sales for the applicable accounting
period). In computing Net Sales, no direct or indirect expenses or
costs incurred in connection with paying royalties due under this
Agreement (including transferring funds or royalties or converting
currency into U.S. dollars) or manufacturing, selling, distributing,
importing or advertising (including cooperative and other advertising
and promotion allowances) the Licensed Products shall be deducted, nor
shall any deduction be made for uncollectible accounts, cash
discounts, early payment discounts, discounts relating to advertising,
mark-down allowances or other allowances. Met Sales resulting from
sales to any party directly or indirectly related to or affiliated
with LICENSEE (a "Related Transaction") shall be computed based on
regular selling prices to the trade. If such related party or
affiliate is a reseller to the trade of the Licensed Products, the
sales price for purposes of determining Met Sales of a Related
Transaction shall be the higher of the sales price to the related or
affiliated party or the sales price charged to the trade by such
related or affiliated party. If a purchaser from LICENSEE purchases
FOB the manufacturing source or participates in other arrangements
which result in such purchaser paying less for the Licensed Products
than LICENSEE's regular selling prices to the trade, Met Sales with
respect to any such transaction shall be computed based on the regular
selling prices to the trade.
(e) "Parallel Goods" shall mean and include Licensed Products transferred
outside of the Territory or brought into the Territory in violation of
this Agreement.
(f) "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.
(g) "Standard weight" means a garment weight of less than 5.5 oz. in the
case of non-fleece items and less than 10.5 oz. in the case of fleece
items.
2. TEAM REPRESENTATION; LIMITATIONS ON LICENSE
Except as provided herein or as otherwise approved in writing by NBAP, each
Licensed Product must be manufactured and offered for sale on LICENSEE's
standard terms in a version for each Member Team. LICENSEE acknowledges
that, unless the NBA Logo is specifically contained in the definition of
Licensed Marks above, no license is granted for
16
<PAGE>
the use of the NBA Logo except insofar as the NBA Logo is embodied in the
NBA "Official Licensed Product" logo. If LICENSEE is licensed to use the
NBA Logo under this Agreement and if this Agreement includes the right to
manufacture apparel products, the NBA Logo may, unless otherwise specified
on the first page of this Agreement, be used only on products sold under
LICENSEE's highest priced brand and must be embroidered on all apparel
products sold under LICENSEE's highest priced brand (other than
non-embroidered T-shirts and fleece). The NBA Logo may only be in
combination with the Marks of one (1) or more Member Teams (i.e., the NBA
Logo may not be used by itself), which must be shown with equal or greater
prominence than the NBA Logo. 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.
3. STATEMENTS AND PAYMENTS; REPORTING
(a) Statement and Payments: By the fifteenth (15th) day following the end
of each month, LICENSEE shall furnish NBAP with a statement of
estimated total gross sales for the preceding month, and within thirty
(30) days following the end of each month shall furnish (on forms
provided by or approved by NBAP) full and accurate statements (on a
country-by-country and unit basis, if 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 Met Sales for the preceding month. Simultaneously with
the submission of such full statement, LICENSEE shall make all
combined royalty and advertising and promotion payments required under
this Agreement for the applicable month. The minimum amount of each
monthly payment with respect to each Licensed Product category shall
be the amount which, when added to payments previously made for the
Contract Year with respect to such Licensed Product category, shall
equal one-twelfth (8.34%) of the Minimum Guarantee for such Licensed
Product category for such Contract Year required under Paragraph G
above, multiplied by the number of calendar months of such Contract
Year that have then elapsed. Aggregate royalties and any advertising
and promotion payments 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 Met Sales for that month. LICENSEE shall not deduct or
withhold any amounts by reason of any tax (including any taxes imposed
on NBAP); any applicable tax on the distribution and sale of the
Licensed Products shall be borne, and paid directly, by LICENSEE. In
order to avoid the imposition of foreign withholding taxes on NBAP,
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, Mew 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,
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auditing LICENSEE's books and records pursuant to Paragraph 12 or
claiming any shortfall in combined royalty and advertising and
promotion payments. In order to assist with NBAP's annual budget
process, by April 15 of 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. If LICENSEE fails to comply with the reporting requirements
contained in this Paragraph, NBAP may charge LICENSEE, as liquidated
damages, two thousand U.S. dollars (USD 2,000) for each instance of
non-compliance with this Paragraph.
(b) Cross Collateralization: Any combined 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 held by LICENSEE). If Minimum Guarantees are stated
separately for different categories of Licensed Products (or for
different countries within the Territory), royalty payments resulting
from Met Sales of a category of Licensed Product (or from Met Sales of
a country) shall be applied only against the Minimum Guarantee for
such category of Licensed Product (or against the Minimum Guarantee
for such country).
4. 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 14.
5. 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 Met Sales and in accordance with this
Agreement.
6. 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) 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.
7. PROTECTION OF RIGHTS
(a) Unauthorized Activities: LICENSEE shall promptly notify NBAP in
writing of any infringements of the Licensed Marks, Licensed
Attributes 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 or
unauthorized importation/exportation without obtaining the express
prior written permission of NBAP in each instance.
(b) Assistance in Protecting Marks: LICENSEE shall cooperate to the
fullest extent necessary to assist NBAP in the protection of the
rights of NBAP. the NBA and the
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Member Teams in and to the Licensed Marks and Licensed Attributes.
NBAP shall reimburse LICENSEE for any reasonable out-of-pocket costs
actually incurred by LICENSEE in providing such cooperation and
assistance. LICENSEE shall cooperate with NBAP in its enforcement
efforts, including being named by NBAP as a complainant in any action
against an infringer. LICENSEE shall pay to NBAP, and waives all
claims to, all damages or other monetary relief recovered 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) whether or not such damages or any part of such damages
represent or are intended to represent injury sustained by LICENSEE.
(c) Ownership of Marks: LICENSEE acknowledges that, based on NBAP's
representations and warranties, 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. Notwithstanding the foregoing, LICENSEE shall not
be prohibited from obtaining copyright protection, in its name, with
respect to graphic designs/background presentations that do not
specifically incorporate the Licensed Marks but are used in
combination with the Licensed Marks on the Licensed Products as well
as on merchandise produced under license from third parties (e.g. NFL,
MLB or NHL licensed product). 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.
(d) Notices, Labeling and Records: In every instance in which any Licensed
Mark is used, LICENSEE shall cause to appear on or within each
Licensed Product sold, by means of a tag, label, imprint or other
appropriate device, the notice "TM," "[registered mark],"
"[copyright]" or such other copyright, trademark or service mark
notices (including the form, location and content of such notices) as
NBAP may from time-to-time designate. In addition, the following
general notice (in the English language and the language of the
country where the Licensed Products will be sold) must be included on
a label, the packaging material or on a separate slip of paper packed
with or attached to the Licensed Product:
"The NBA and individual NBA member team identifications
reproduced on this product are trademarks and copyrighted
designs that are the exclusive property of NBA Properties,
Inc. and the respective NBA member teams and may not be
used without the written consent of NBA Properties, Inc."
LICENSEE shall: (i) cause all Licensed Products to bear the NBA
"Official Licensed Product" logo on either the article or its
packaging in such place, and in such prominence, as NBAP may designate
from time-to-time, (ii) faithfully comply with and adhere to NBAP's
mandatory hologram "Official Licensed Product" identification system
and Printables Policy (if applicable), or such other shipment
tracking, identification and anti-counterfeiting systems, tags and
labels that NBAP may establish from time-to-time, (iii) 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 (iv) 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
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first use in each country of each different Licensed Mark on the
Licensed Products and any promotional or packaging materials.
(e) 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.
(f) 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. 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. All apparel products sold under this Agreement
must bear permanently affixed neck or other labels with one of
LICENSEE's NBA-approved trade names or trademarks. 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 hang
tags, 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.
8. INDEMNIFlCATIONS
(a) LICENSEE shall be solely responsible for, and shall defend, hold
harmless and indemnify NBAP, NBA Entertainment, Inc. ("NBAE"), the
NBA, 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 act or omission of LICENSEE, (ii) any breach
of this Agreement by LICENSEE, (iii) any defect (whether obvious or
hidden and whether or not present in any sample approved by NBAP) in a
Licensed Product or any packaging or other materials (including
advertising materials), or arising from personal injury or any
infringement of any rights of any other person or entity by the
manufacture, sale, possession or use of Licensed Products or their
failure to comply with applicable laws, regulations and standards or
(iv) any claim that the use of any design or other graphic component
of any Licensed Product (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 using counsel of its choice.
If LICENSEE and NBAP agree to representation by counsel of NBAP's
choice, and is other than LICENSEE's first choice of counsel, NBAP
shall bear the sole cost of the difference between the billing rate of
LICENSEE's counsel of choice (of comparable experience, i.e., partner
rate to partner rate, senior associate rate to senior associate rate,
etc.) and that of NBAP's designated counsel. 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
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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
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 an amount
and providing coverage satisfactory to NBAP (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 authorized by 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
or (ii) 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 using counsel of its choice. 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.
9. 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) Pre-Production: Before commercial production and distribution of any
Licensed Product, LICENSEE shall submit to NBAP all preliminary and
proposed final artwork, three dimensional models (if any), prototypes,
mock-ups and pre-production samples of each Licensed Product,
including all styles, colors and variations, together with its labels,
tags, cartons and containers (including packaging and wrapping
materials). All LICENSEE submissions under this Paragraph shall be
accompanied by forms supplied by NBAP, using one (1) form for each
submission and filling in all necessary information. NBAP shall
approve or disapprove in writing all submissions, in its sole
discretion, before LICENSEE shall be entitled to distribute,
advertise, use, produce commercial quantities of or sell any item
relating to any such submission. Any article actually submitted and
not disapproved within sixty (60) days after receipt by NBAP shall be
deemed approved. Approval of an article which uses particular artwork
does not imply approval of such artwork with a different article or of
such article with different artwork. LICENSEE acknowledges that NBAP's
approval of an article does not imply approval of any non-NBA
controlled elements contained in any article. After a sample of an
article has been approved, LICENSEE shall not make any changes without
resubmitting the modified article for NBAP's written approval.
(b) Production Samples: Before selling or distributing any Licensed
Product, LICENSEE shall furnish NBAP with, at no charge, for its
permanent use, two (2) samples of the Licensed Product from the first
production run of each manufacturer of the Licensed
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Products, including all styles, colors and variations, together with
its labels, tags, cartons and containers (including packaging and
wrapping materials). If such samples do not conform to all aspects of
the Licensed Product as approved or if the quality of such sample does
not meet the requirements of this Paragraph 9, NBAP shall notify
LICENSEE and such article shall not be considered a Licensed Product,
be deemed unapproved and all such articles shall be promptly
destroyed. LICENSEE shall furnish to NBAP, free of charge, prior to
the start of each Contract Year, two (2) samples of all home and road
On-Court products to be made available for the season covered by such
Contract Year. LICENSEE shall also furnish NBAP, free of charge, with
any additional pieces of Licensed Product as may reasonably be
required by NBAP to promote the sale of Official Licensed Products
(e.g., for NBAP's display room, advertisements, catalogs, mailers,
product placement and trade shows) or for comparison with earlier
samples. In addition, LICENSEE shall provide NBAP with any additional
pieces of Licensed Product as may be required for the permanent use of
the Member Teams, not to exceed one (1) piece per Member Team. If NBAP
wishes to purchase Licensed Products for give-away purposes and not
for resale, LICENSEE shall sell the Licensed Products to NBAP at
LICENSEE's direct manufacturing cost for such Licensed Products and
LICENSEE shall not be required to pay royalties on such sales to NBAP
or incur any costs in shipping such merchandise to NBAP.
(c) Rejections and Non-Compliance: The rights granted under this Agreement
do not permit the sale of "seconds" or "irregulars" except that,
subject to NBAP's approval in each instance, LICENSEE shall be
permitted to sell limited quantities of such merchandise through
LICENSEE's outlet stores or other LICENSEE-controlled outlets (i.e.,
"First Pick" stores) provided that the merchandise is not an On-Court
product, that the defect or irregularity does not relate to any
Licensed Mark or Licensed Attribute, team colors or adversely affect
the goodwill of the NBA (e.g., merchandise with slight variation in
sizing or other slight imperfection) and that the merchandise is
otherwise saleable. 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 or Licensed Attributes, including
promotional materials, or the failure of LICENSEE to comply with
Paragraphs 7(d), 7(f), 9 or 11(c), NBAP shall have the right to: (i)
immediately revoke LICENSEE's rights with respect to any Licensed
Product licensed under this Agreement, (ii) charge LICENSEE, as
liquidated damages, two thousand U.S. dollars (USD 2,000) for each
instance (e.g., per unit) of non-compliance with this Paragraph with
respect to any article, product or material and/or (iii) at LICENSEE's
expense, confiscate or order the destruction of such unapproved,
unauthorized or non-complying products. Such right(s) shall be without
prejudice to any other rights NBAP may have under this Agreement or
otherwise.
(d) Testing: Both before and after Licensed Products are put on the
market, LICENSEE shall follow reasonable and proper procedures for
testing the Licensed Products for compliance with laws, regulations,
standards and procedures, and shall permit NBAP (upon reasonable
notice) to inspect its and its authorized manufacturer's testing,
manufacturing and quality control records, procedures and facilities
and to test or sample Licensed Products for compliance with this
Paragraph and the other terms and conditions of this Agreement.
Licensed Products found by NBAP at any time not to 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.
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(e) Revocation of Approval: In the event that: (i) the quality, appearance
or style of any Licensed Product ceases to be acceptable to NBAP, (ii)
LICENSEE uses the Licensed Marks or Licensed Attributes improperly or
violates any term of this Paragraph 9 or (iii) NBAP becomes aware of
an occurrence or factor connected with any such Licensed Product or
LICENSEE which, in the opinion of NBAP, reflects unfavorably upon the
professional, business or personal reputation of 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 in connection with the sale, distribution,
advertisement or use of such Licensed Product and 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 (i) above, NBAP and LICENSEE shall negotiate in good faith
to provide for a reasonable sell-off period for such Licensed Product
and an adjustment to the Minimum Guarantee for such Licensed Product.
Within ten (10) days after LICENSEE's receipt of such notice, LICENSEE
shall pay all combined royalty and advertising and promotion payments
and Minimum Guarantees due NBAP with respect to sold Licensed Product
for which approval has been revoked. 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.
10. PROMOTIONAL MATERIAL
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. 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
appr6ved. 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 may be used unless it has
been approved in all stages (i.e., storyboard, production "rough-cut" and
final version). Unless otherwise approved by NBAP, any NBA game action
photographs or footage that LICENSEE uses in connection with the Licensed
Products must be obtained from NBAE and shall be subject to NBAE's search
and edit charges and any applicable use fee. Any promotional material
submitted that is not approved or disapproved by NBAP within thirty (30)
days of its receipt by NBAP shall be deemed approved by NBAP.
11. DISTRIBUTION; COMPLIANCE
(a) 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. In any ninety (90) day period in which LICENSEE fails to
sell or distribute Licensed Products in reasonable commercial
quantities, LICENSEE shall be deemed not to have used its best
efforts. 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 its best 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,
refrain for any reason from selling Licensed Products to any
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retail outlet within the Territory that may desire to purchase
Licensed Products and whose credit rating and marketing image warrants
such sale.
(b) If LICENSEE desires to have a third party manufacture any Licensed
Product, LICENSEE must first notify NBAP of the name and address of
such third party and of the Licensed Product LICENSEE desires such
third party to manufacture. Attached as Schedule E is a true and
complete list of all third party manufacturers currently authorized by
NBAP. NBAP shall have the right, in its sole discretion, to withhold
approval of any third party manufacturer NBAP believes to be engaged
in unauthorized distribution of merchandise or other unethical
business practices. If NBAP grants approval for such third party
manufacturer, it may grant such approval pursuant to an agreement (on
a form supplied by NBAP) to be entered into prior to such manufacture
among NBAP, LICENSEE and such manufacturer which will, among other
things, require that the third party manufacturer be subject to all of
the terms and conditions of this Agreement. If NBAP does not require
the third party to enter into a separate agreement, LICENSEE must
provide NBAP with a copy of its agreement with the third party, which
agreement must provide that it is subject to this Agreement. If any of
LICENSEE's authorized manufacturers 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. Any change by LICENSEE from a third
party manufacturer previously approved by NBAP shall require approval
in accordance with this Paragraph.
(c) LICENSEE understands and acknowledges the meanings of "Counterfeit
Goods," "Diverted Goods" and "Parallel Goods" as set forth in
Paragraph 1 above and LICENSEE shall use all commercially reasonable
means to prevent 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
stamp on all invoices a prominent legend that states: "NBA Official
Licensed Product may only be sold within the United States [or Canada]
and only direct to the consumer." LICENSEE shall periodically, and at
the request of NBAP, inquire of its authorized manufacturers, agents
and customers as to whether they are observing territorial limits and
shall periodically 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 (or has reason to know after having
made reasonable inquiry) is located outside the Territory or intends
to resell the Licensed Products outside the Territory. If LICENSEE
knows or has reason to know that any Licensed Product sold by LICENSEE
is resold outside the Territory, LICENSEE shall compensate NBAP for
the injury to its licensing and distribution program and shall pay all
costs and expenses, including attorney's fees, required to remove such
goods from the marketplace. Any such monetary damages shall be in
addition to, and not in lieu of, such other rights and relief
(including injunctive relief) as may be available to NBAP. LICENSEE
shall incorporate within its contracts of sale or sales orders a
provision similar in substance to this subparagraph and which provides
that the obligations set forth in this subparagraph shall be a
continuing obligation on the re-sale of the Licensed Products to
subsequent authorized wholesale purchasers and which makes NBAP a
third party beneficiary of such provision.
(d) In the event LICENSEE sells or distributes other licensed merchandise
of a similar grade or quality as the Licensed Products, but which do
not bear any of the Licensed Marks, LICENSEE will not discriminate, in
a manner which adversely impacts the Licensed Products, in the
granting of commissions and discounts to salesmen, dealers and
distributors between the Licensed Products and the licensed products
of any third party. LICENSEE may not package the Licensed Products in
combination with other products, whether similar or different, without
the prior written approval of NBAP. In the event that NBAP believes in
good faith, based upon review of LICENSEE's royalty statements or
records and generally accepted accounting principles within the
industry,
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that LICENSEE has employed selling or reporting methods designed to
circumvent or reduce the royalty or other payment or reporting
obligations contained in this Agreement, NBAP may, in addition to any
other rights and remedies it may have, at its option and upon fifteen
(15) days' prior written notice, adjust the minimum royalty per unit.
(e) 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 establish from time to time and all applicable laws,
government rules and regulations, court and administrative decrees and
the highest standard of business ethics then prevailing in the
industry. LICENSEE shall use its commercially reasonable efforts to
ensure that all retailers and authorized distributors purchasing
Licensed Products comply with NBAP's anti-counterfeiting systems and
labels established from time-to-time.
(f) 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.
12. RECORDS; AUDITS
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 hang tags and compliance with shipment tracking, identification
and anti-counterfeiting systems and labels that NBAP may 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
(but not more frequently than twice per Contract Year), 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 (at its expense except as
provided below). 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 for youth
(0-20) and adult Licensed Products). 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 copies of either (i) financial information furnished to the
United States Securities and Exchange Commission or (ii) with all financial
statements and other financial information prepared by LICENSEE for
distribution to its banks or other financial lending institutions to whom
it reports regularly. LICENSEE shall cooperate with NBAP in
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developing an electronic data interchange through which NBAP may access
LICENSEE's electronic database relating to the manufacture, distribution
and sale of Licensed Products (such as work-in-process, finished goods on
hand, orders received, deliveries made and any other on-line information
relating to the Licensed Products) or developing such other system as will
enable NBAP to obtain such information or facilitate NBAP's review of
LICENSEE's graphic designs for Licensed Products.
13. 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) Within three (3) months from the date that this Agreement is executed
on behalf of NBAP, LICENSEE shall not have begun the bona-fide
distribution and sale of each Licensed Product within and throughout
the Territory in accordance with this Agreement.
(b) After three (3) delinquent payments during the Term, LICENSEE shall
fail to timely remit a royalty payment when due and shall fail to cure
such non-payment within ten (10) days (ten (10) days for other
non-payment defaults as well) of its receipt of written notice from
NBAP.
(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.
(d) LICENSEE shall exhibit a pattern of chronic failure to make timely
delivery of sufficient quantities of the Licensed Products to its
retail accounts: (i) resulting in the inability of retailers to meet
consumer demand, or (ii) adversely effecting the goodwill the NBA has
in its licensing program.
(e) LICENSEE shall fail to perform or shall be in breach of any other
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. However,
if the breach is curable within a time certain but has not been cured
within thirty (30) days despite LICENSEE's good faith due diligence,
NBAP shall in good faith consider extending the cure period for such
additional period as NBAP deems reasonable in its sole discretion.
(f) LICENSEE now or in the future holds a material license from NBAP
covering any other products or geographic area other than the
Territory and such license is terminated by NBAP.
(g) LICENSEE (i) delivers Licensed Products outside the Territory; (ii)
sells Licensed Products to a third party who LICENSEE knows, or has a
reasonable basis to believe, intends to deliver the Licensed Products
outside the Territory; or (iii) LICENSEE is in breach of Paragraph
11(c).
(h) LICENSEE sells to any third party that LICENSEE knows, or has a
reasonable basis to believe, is altering or modifying the Licensed
Products prior to sale to the ultimate consumer.
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
through the end of the Agreement, less the combined royalties paid to NBAP
through the date of termination.
14. DISPOSAL OF STOCK
Sixty (60) days before the expiration of this Agreement and ten (10) days
after any termination under Paragraphs 9 or 13, LICENSEE will furnish to
NBAP a certificate showing the number and description of 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
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otherwise deal in any Licensed Products or use the Licensed Marks except as
provided below. For a period of one hundred twenty (120) days following the
expiration (but not after the 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 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, or customary methods of disposal subject to
the prior approval of NBAP, (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.
15. 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 Licensed
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 of the Licensed Marks or
Licensed Attributes. 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, will,
in either case, cause immediate and irreparable damage to NBAP for which
NBAP would not have an adequate remedy at law. Therefore, 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.
16. NOTICES
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, overnight express delivery, or registered or certified
mail, return receipt requested, properly addressed and stamped. Any written
notice shall be deemed to have been given at the time it is sent.
17. 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.
18. 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.
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19. USE OF PLAYERS
LICENSEE acknowledges that this Agreement does not grant to LICENSEE any
licenses or rights with respect to the use of the names, likenesses or
other attributes of any NBA player (collectively, "Player Attributes")
except as expressly provided herein. 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 enter into any agreement with any NBA player which would require that
player to wear or use any Licensed Product at any NBA game (either
courtside or in any locker room). LICENSEE agrees that NBAP's grant of
rights relating to Licensed Attributes shall be subject to the terms of the
Group License Agreement (or any successor group licensing agreement between
NBAP and the NBPA (or its successor)).
20. WARRANTIES
Each party represents and warrants that it has the right and authority to
enter into and perform this Agreement and NBAP represents and warrants that
it has the right to grant the rights to use the Licensed Marks and Licensed
Attributes. LICENSEE represents and warrants that all advertising and
promotional materials shall comply with all applicable laws, regulations
and standards. 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. LICENSEE further represents
and warrants that all advertising and promotional materials and all
graphics used on Licensed Products will not violate the intellectual
property rights of any third party.
21. 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.
22. MISCELLANEOUS
(a) Work Stoppage: In the event of a labor dispute between the NBA and the
National Basketball Players Association that causes the pre-emption of
the playing (a "Work Stoppage"), in whole or in part, of any NBA
Regular Season or Playoff game during the Term, all obligations of
LICENSEE shall continue, including all payment obligations under
Paragraphs E and G above, and when such Work Stoppage has ceased, if
such Work Stoppage has had a material adverse effect on LICENSEE's
Licensed Product sales, NBAP and LICENSEE shall in good faith confer
with each other to negotiate with respect to an equitable adjustment
to LICENSEE's obligations hereunder, including an appropriate
adjustment in combined royalty and advertising and promotion payments
and/or Minimum Guarantees or an appropriate adjustment to the Term.
(b) 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, sublicense or transfer. Any transfer
of a controlling interest in LICENSEE or in any party which currently
controls LICENSEE, directly or indirectly, shall be deemed an
assignment prohibited by the preceding sentence; however, the
foregoing shall not apply to a change in controlling interest as a
consequence of an additional public offering that results in a
transfer of controlling interest to a party or an entity directly or
indirectly controlled by the current majority stockholder. 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.
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(c) 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.
(d) 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, regardless of whether these amounts are then or
thereafter payable. The provisions of Paragraphs 12 and 22(g) shall
survive the expiration or termination of this Agreement.
(e) Adjustments: NBAP shall have the option to increase the Royalty Rates
and any advertising and promotion commitment in the event that, at any
time during the Term, LICENSEE agrees to pay royalty rates and/or
advertising and promotion contributions with respect to any other
licensed sports property in excess of the Royalty Rate for any
Licensed Product or the advertising and promotion contribution
required under this Agreement and provided the adjustment of the
Royalty Rates and/or A&P Minimums is applied by NBAP uniformly against
all other licensees within the specific product categories and
channels of distribution for which LICENSEE has been granted rights
hereunder who have agreed to pay higher royalty rates and/or
advertising and promotion contributions to such other property.
(f) Governing Law and Jurisdiction: This Agreement shall be construed in
accordance with the laws of the State of Mew York, USA, without regard
to its principles of conflicts of laws. Any claim arising under this
Agreement (except as provided under Paragraph 18) shall be prosecuted
in a federal or state court of competent jurisdiction located within
the City of New York, USA and LICENSEE consents to the jurisdiction of
such court and to the service of process by mail.
(g) 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 obtained as the result of
any audit, or on the specifications or methods of reproduction of the
Licensed Marks) to any third party (other than their respective
attorneys or accountants or, in the case of NBAP, the NBA Board of
Governors and the NBPA), except as may be required by law or to
fulfill the terms of this Agreement.
(h) 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 an officer
designated by the president to sign.
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Schedule A
LICENSEE's TEAMS
Charlotte Hornets
Cleveland Cavaliers
Denver Nuggets
Golden State Warriors
Houston Rockets
Milwaukee Bucks
Minnesota Timberwolves
New York Knicks
Sacramento Kings
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Schedule B
STARTER RETAILERS
[To be supplied]
31
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Schedule C
FOOTWEAR COMPETITORS
Adidas
Airwalk
Asolo
Asics
Avia
British Knights
Brooks
Champion
Converse
Diadora
Etonic/Tretorn
Fila
Footjoy
Guess
Head
Hi-Tec
K-Swiss
Kaepa
Kangaroos
Keds
L.A. Gear
Lotto
Merrell
Mitre
Mizuno
New Balance
Mike
Patrick
Pony
Prince
Puma
Raichle
Reebok
Ryka
Saucony/Hyde
Spalding
Sportbuilt
Tacchini
Teva
Turntec
Umbro
Vans
Vasque
Wilson
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Schedule D
APPAREL COMPETITORS
Adidas Marx
And One Mitre
Ashworth Mizuno
Asics Nautica
Authentic Fitness Corporation New Balance
(Catalina, Cole, Edelweiss, Mike
Mountain Goat, Skiing No-Fear
Passport, Speedo, White Stag) Nordica
Avia North Face
B.U.M. Nutmeg
Callaway Patagonia
Champion Patrick
Columbia Sportswear Pony
Converse Prince
Danskin Pro-Player
Diadora Puma
Ellesse Quicksilver
Etonic Rawlings
Fila Reebok
First Down Riddell
Gilda Roces
Hyde Russell
K-2 Salem Screen
Kaepa Salomon
Karhu Spalding
L.A. Gear Tacchini
Le Coq Sportif The Game
Logo Athletic Timberland
MacGregor Tultex
Magic Johnson Tees Umbro
Mariba Wilson
33
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Schedule E
STARTER THIRD PARTY MANUFACTURERS
[To be supplied]
34
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
By and Among
STARTER CORPORATION,
STARTER GALT, INC.,
BANK OF BOSTON CONNECTICUT AS ADMINISTRATIVE AGENT,
CORESTATES BANK, N.A. AS SYNDICATION AGENT,
AND
THE OTHER LENDERS WHICH ARE OR MAY BECOME PARTIES HERETO
WITH
BANCBOSTON SECURITIES, INC. AND CORESTATES BANK, N.A. AS ARRANGERS
Dated: May 13, 1997
<PAGE>
TABLE OF CONTENTS
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Compliance Certificate
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Loan Request
Exhibit E - Borrowing Base Report
SCHEDULES
Schedule 1 - Lending Institutions
Schedule 2 - Definitions and Rules of Interpretation
Schedule 4.8 - Existing Letters of Credit
Schedule 7.2 - Ownership Interests
Schedule 7.4 - Owned Assets not listed on Balance Sheet
Schedule 7.8 - Litigation
Schedule 7.16 - Permitted Transactions
Schedule 7.22 - Bank Accounts
Schedule 9.1 - Permitted Indebtedness
Schedule 9.2 - Permitted Liens
Schedule 9.3 - Permitted Investments
<PAGE>
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT (the "Credit Agreement")
is made as of the 13th day of May, 1997, by and among STARTER CORPORATION
("Starter"), STARTER GALT, INC. ("Starter Galt" and, together with Starter, the
"Borrowers" and each, singularly, a "Borrower"), each a Delaware corporation,
Starter having its principal place of business at 370 James Street, New Haven,
Connecticut 06513 and Starter Galt having its principal place of business at 951
32nd Avenue, S.W., Cedar Rapids, Iowa, BANK OF BOSTON CONNECTICUT
("BankBoston"), CORESTATES BANK, N.A. ("CoreStates") and the other lending
institutions listed on Schedule 1 attached hereto (collectively, the "Lenders"),
BankBoston as Administrative Agent for itself and the other Lenders (in such
capacity, the "Administrative Agent") and CoreStates as Syndication Agent for
itself and the other Lenders (in such capacity, the "Syndication Agent").
W I T N E S S E T H
WHEREAS, pursuant to a 1996 Amended and Restated Commercial Revolving Loan
and Security Agreement dated as of October 7, 1996 (as amended, the "Original
Loan Agreement") by and among BankBoston, individually and as agent, Fleet Bank,
National Association, The Chase Manhattan Bank, People's Bank, BHF-Bank
Artiengelleschaft, Corestates Bank, N.A., National Bank of Canada, The Sanwa
Bank Limited and First Union Bank of Connecticut (collectively, the "Original
Banks") made revolving loans and other extensions of credit to the Borrowers in
an aggregate principal amount of up to $175,000,000 (the "Existing
Indebtedness"); and
WHEREAS, it is the intention of the Borrowers, BankBoston and certain of
the Original Banks that the terms and conditions of the Original Loan Agreement
be amended and restated in its entirety as set forth herein; and
WHEREAS, it is also the intention of the parties hereto that the Original
Banks who will not be a party to this Credit Agreement will surrender all of
their rights under the Original Loan Agreement upon the occurrence of the
Effective Date and receive payment in full of all amounts due and payable to
them under the Original Loan Agreement as of the Effective Date;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ss.1. DEFINITIONS AND RULES OF INTERPRETATION.
ss.1.1. Definitions. Except as otherwise expressly provided herein,
all capitalized terms used in this Credit Agreement, the exhibits hereto and any
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notes, certificates, reports or other documents or instruments made or delivered
pursuant to or in connection with this Credit Agreement shall have the meanings
set forth for such terms in Schedule 2 hereto.
ss.1.2. Rules of Interpretation. Except as otherwise expressly
provided herein, the rules of interpretation set forth in Schedule 2 hereto
shall apply to this Credit Agreement, the exhibits hereto and any notes,
certificates, reports or other documents or instruments made or delivered
pursuant to or in connection with this Credit Agreement.
ss.2. THE REVOLVING CREDIT FACILITY.
ss.2.1. Commitment to Lend. Subject to the terms and conditions set
forth in this Credit Agreement, each of the Lenders severally agrees to lend to
the Borrowers and the Borrowers may borrow, repay, and reborrow from time to
time between the Effective Date and the Maturity Date upon notice by the
Borrowers to the Administrative Agent given in accordance with ss.2.6, such sums
as are requested by the Borrowers up to a maximum aggregate amount outstanding
(after giving effect to all amounts requested) at any one time equal to such
Lender's Commitment minus such Lender's Commitment Percentage of the sum of the
Maximum Drawing Amount, the Acceptance Face Amount and all Unpaid Reimbursement
Obligations; provided that the outstanding aggregate amount of all Loans (after
giving effect to all amounts requested) plus the Maximum Drawing Amount, plus
the Acceptance Face Amount, plus all Unpaid Reimbursement Obligations shall not
at any time exceed an amount equal to the lesser of (i) the Total Commitment and
(ii) the sum of (A) the Borrowing Base plus (B) the Permitted Overadvance
Amount; provided, further, that the Borrowers shall not permit the outstanding
amount of the Loans (after giving effect to all amounts requested), plus the
Acceptance Face Amount to exceed $35,000,000 (the "Clean Down Amount") during
any one (1) thirty (30) consecutive day period occurring during each calendar
year ending after December 31, 1997. The Loans shall be made pro rata in
accordance with each Lender's Commitment Percentage. Each request for a Loan
hereunder shall constitute a representation and warranty by the Borrowers that
the conditions set forth in ss.11 and ss.12, in the case of the initial Loans to
be made on the Effective Date, and ss.12, in the case of all other Loans, have
been satisfied on the date of such request.
ss.2.2. Facility Fee. The Borrowers agree to pay to the
Administrative Agent for the respective accounts of the Lenders in accordance
with their respective Commitment Percentages a facility fee on the Total
Commitment, whether used or unused, at a rate per annum equal to the Facility
Fee Rate. The facility fee shall be payable quarterly in arrears on the first
day of each calendar quarter for the immediately preceding calendar quarter (or
portion thereof) commencing on the first such date following the date hereof,
with a final payment on the Maturity Date or any earlier date on which the
Commitments shall terminate. The facility fee provided in this ss.2.2 shall
accrue
<PAGE>
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at all times after the Effective Date, including at any time during which
one or more of the conditions in ss.11 are not met.
ss.2.3. Voluntary Reduction of Total Commitment. The Borrowers shall
have the right at any time and from time to time upon five (5) Business Days'
prior written notice to the Administrative Agent to reduce by $1,000,000 or any
greater integral multiple thereof or terminate entirely the Total Commitment,
whereupon the Commitments of the Lenders shall be reduced pro rata in accordance
with their respective Commitment Percentages of the amount specified in such
notice or, as the case may be, terminated. Promptly after receiving any notice
from the Borrowers delivered pursuant to this ss.2.3, the Administrative Agent
will notify the Lenders of the substance thereof. Upon the effective date of any
such reduction or termination, the Borrowers shall pay to the Administrative
Agent for the respective accounts of the Lenders the full amount of any facility
fee then accrued on the amount of the reduction. No reduction or termination of
the Commitments may be reinstated.
ss.2.4. The Notes. The Loans shall be evidenced by separate
promissory notes of the Borrowers in substantially the form of Exhibit A hereto
(each a "Note"), dated as of the Effective Date and completed with appropriate
insertions. One Note shall be payable to the order of each Lender in a principal
amount equal to such Lender's Commitment or, if less, the outstanding amount of
all Loans made by such Lender, plus interest accrued thereon, as set forth
below. Each Borrower irrevocably authorizes each Lender to make or cause to be
made, at or about the time of the Drawdown Date of any Loan or at the time of
receipt of any payment of principal on such Lender's Note, an appropriate
notation on such Lender's Note Record reflecting the making of such Loan or (as
the case may be) the receipt of such payment. The outstanding amount of the
Loans set forth on such Lender's Note Record shall be prima facie evidence of
the principal amount thereof owing and unpaid to such Lender, but the failure to
record, or any error in so recording, any such amount on such Lender's Note
Record shall not limit or otherwise affect the obligations of the Borrowers
hereunder or under any Note to make payments of principal of or interest on any
Note when due.
ss.2.5. Interest on Loans. Except as otherwise provided in ss.5.10,
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of each
Interest Period with respect thereto at the rate of the Base Rate from time to
time in effect.
(b) Each LIBOR Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of each
Interest Period with respect thereto at the rate of the LIBOR Rate determined
for such Interest Period plus the Applicable Margin; provided, that at any time
a Permitted Overadvance is outstanding, each LIBOR Rate Loan and Bankers'
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Acceptance shall bear interest for the period commencing with the date on which
such Permitted Overadvance is outstanding and ending on the last day of each
Interest Period with respect thereto at the rate of the LIBOR Rate determined
for such Interest Period plus the Applicable Margin, plus one-quarter of one
percent (0.25%).
(c) The Borrowers promise to pay interest on each Loan in arrears on
each Interest Payment Date with respect thereto.
ss.2.6. Requests for Loans. The Borrowers shall give to the
Administrative Agent written notice in the form of Exhibit D hereto (or
telephonic notice confirmed in a writing in the form of Exhibit D hereto) of
each Loan requested hereunder (a "Loan Request") (i) no later than 10:00 a.m.
(Hartford time) on the proposed Drawdown Date and not more than five (5)
Business Days prior to the proposed Drawdown Date of any Base Rate Loan and (ii)
not less than three (3) and not more than five (5) LIBOR Business Days prior to
the proposed Drawdown Date of any LIBOR Rate Loan. Each such notice shall
specify (1) the principal amount of the Loan requested, (2) the proposed
Drawdown Date of such Loan, (3) the Interest Period for such Loan and (4) the
Type of such Loan. Promptly upon receipt of any such notice, the Administrative
Agent shall notify each of the Lenders thereof. Each Loan Request shall be
irrevocable and binding on each Borrower and shall obligate the Borrowers to
accept the Loan requested from the Lenders on the proposed Drawdown Date. Each
Loan Request for a LIBOR Rate Loan shall be in a minimum aggregate amount of
$3,000,000 or an integral multiple thereof.
ss.2.7. Conversion Options.
(a) The Borrowers may elect from time to time to convert any
outstanding Loan to a Loan of another Type, provided that (i) with respect to
any such conversion of a Loan to a Base Rate Loan, the Borrowers shall give the
Administrative Agent not less than one (1) and not more than five (5) Business
Days' prior written notice of such election; (ii) with respect to any such
conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrowers shall give
the Administrative Agent no less than three (3) and not more than five (5) LIBOR
Business Days' prior written notice of such election; (iii) with respect to any
such conversion of a LIBOR Rate Loan into a Loan of another Type, such
conversion shall only be made on the last day of the Interest Period with
respect thereto and (iv) no Loan may be converted into a LIBOR Rate Loan when
any Default or Event of Default has occurred and is continuing. On the date on
which such conversion is being made each Lender shall take such action as is
necessary to transfer its Commitment Percentage of such Loans to its Domestic
Lending Office or its LIBOR Lending Office, as the case may be. All or any part
of outstanding Loans of any Type may be converted into a Loan of another Type as
provided herein, provided that (i) any partial conversion shall be in an
aggregate principal amount of $1,000,000 or a whole multiple thereof. Each
Conversion Request relating to the conversion of a Loan to a LIBOR Rate Loan
<PAGE>
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shall be irrevocable by the Borrowers and (ii) with respect to LIBOR Rate Loans,
there shall be no more than ten (10) separate Interest Periods in effect at any
one time.
(b) Any Loan of any Type may be continued as a Loan of the same Type
upon the expiration of an Interest Period with respect thereto by compliance by
the Borrowers with the notice provisions contained in ss.2.7(a); provided that
no LIBOR Rate Loan may be continued as such when any Default or Event of Default
has occurred and is continuing, but shall be automatically converted to a Base
Rate Loan on the last day of the first Interest Period relating thereto ending
during the continuance of any Default or Event of Default of which officers of
the Administrative Agent active upon the Borrowers' account have actual
knowledge. The Administrative Agent shall notify the Lenders promptly when any
such automatic conversion contemplated by this ss.2.7 is scheduled to occur.
(c) Any conversion to or from LIBOR Rate Loans shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, the aggregate principal amount of all LIBOR Rate Loans having the same
Interest Period shall not be less than $3,000,000 or a whole multiple of
$1,000,000 in excess thereof.
ss.2.8. Funds for Loans.
(a) Not later than 2:00 p.m. (Hartford, Connecticut time) on the
proposed Drawdown Date of any Loan, each of the Lenders will make available to
the Administrative Agent, at the Administrative Agent's Head Office, in
immediately available funds, the amount of such Lender's Commitment Percentage
of the amount of the requested Loans. Upon receipt from each Lender of such
amount, and upon receipt of the documents required by (i) ss.ss.11 and 12 in the
case of initial Loans, and (ii) ss.12 for all other Loans, and the satisfaction
of the other conditions set forth therein, to the extent applicable, the
Administrative Agent will make available to the Borrowers the aggregate amount
of such Loans made available to the Administrative Agent by the Lenders. The
failure or refusal of any Lender to make available to the Administrative Agent
at the aforesaid time and place on any Drawdown Date the amount of such Lender's
Commitment Percentage of the requested Loans shall not relieve any other Lender
from its several obligation hereunder to make available to the Administrative
Agent the amount of such other Lender's Commitment Percentage of any requested
Loans.
(b) The Administrative Agent may, unless notified to the contrary by
any Lender prior to a Drawdown Date, assume that such Lender has made available
to the Administrative Agent on such Drawdown Date the amount of such Lender's
Commitment Percentage of the Loans to be made on such Drawdown Date, and the
Administrative Agent may (but it shall not be required to), in reliance upon
such assumption, make available to the Borrowers
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a corresponding amount. If any Lender makes available to the Administrative
Agent such amount on a date after such Drawdown Date, such Lender shall pay to
the Administrative Agent on demand an amount equal to the product of (i) the
average, computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Administrative Agent for federal
funds acquired by the Administrative Agent during each day included in such
period, times (ii) the amount of such Lender's Commitment Percentage of such
Loans, times (iii) a fraction, the numerator of which is the number of days that
elapse from and including such Drawdown Date to the date on which the amount of
such Lender's Commitment Percentage of such Loans shall become immediately
available to the Administrative Agent, and the denominator of which is 365. A
statement of the Administrative Agent submitted to such Lender with respect to
any amounts owing under this paragraph shall be prima facie evidence of the
amount due and owing to the Administrative Agent by such Lender. If the amount
of such Lender's Commitment Percentage of such Loans is not made available to
the Administrative Agent by such Lender within three (3) Business Days following
such Drawdown Date, the Administrative Agent shall be entitled to recover such
amount from the Borrowers on demand, with interest thereon at the rate per annum
applicable to the Loans made on such Drawdown Date.
ss.2.9. Change in Borrowing Base. The Borrowing Base shall be
determined monthly (or at such other interval as may be specified pursuant to
ss.8.4(f)) by the Administrative Agent by reference to the Borrowing Base Report
delivered to the Lenders and the Administrative Agent pursuant to ss.8.4(f).
ss.2.10. Settlement; Application of Repayments of Revolving Credit
Loans. (a) BankBoston may, but is not required to, fund all Base Rate Loans made
in accordance with the provisions of this Credit Agreement. Prior to each
Settlement, (i) all payments of the principal of the Base Rate Loans shall be
credited to the account of BankBoston, and (ii) the outstanding amount of Base
Rate Loans made by BankBoston may exceed BankBoston's Commitment Percentage of
the outstanding amount of Base Rate Loans.
(b) The Lenders shall effect Settlements (i) on each Monday and
Thursday of each week (or the next immediately succeeding Business Day if
such day is not a Business Day), (ii) within one Business Day after each
other date on which borrowings of Base Rate Loans (net of payments of
principal of Base Rate Loans by the Borrowers) or payments of principal of
Base Rate Loans (net of borrowings of Base Rate Loans by the Borrowers)
exceed $5,000,000 and (iii) on the Maturity Date or any other date that
all of the Obligations become due and payable hereunder (whether by
acceleration or otherwise) (each such date, a "Settlement Date"). By 11:00
a.m. (Hartford time) of each such Settlement Date, the Administrative
Agent shall give telephonic notice to the Lenders of (A) the respective
outstanding amount of Base Rate Loans made by each Bank as at the close of
business on the prior day, (B) the amount that any Lender, as applicable
(the "Settling Lender"), shall pay to effect a Settlement
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(the "Settlement Amount") and (C) the portion (if any) of the aggregate
Settlement Amount to be paid to each Lender. A statement of the
Administrative Agent submitted to the Lenders with respect to any amounts
owing hereunder shall be prima facie evidence of the amount due and owing.
Each Settling Lender shall, not later than 4:00 p.m. (Hartford,
Connecticut time) on each Settlement Date, effect a wire transfer of
immediately available funds to the Administrative Agent at its head office
in the amount of such Lender's Settlement Amount. The Administrative Agent
shall, as promptly as practicable during normal business hours on each
Settlement Date, effect a wire transfer of immediately available funds to
each Lender of the Settlement Amount to be paid to such Lender. All funds
advanced by any Lender as a Settling Lender pursuant to this ss.2.10(b)
shall for all purposes be treated as a Base Rate Loan made by such
Settling Lender to the Borrowers and all funds received by any Lender
pursuant to this ss.2.10(b) shall for all purposes be treated as repayment
of amounts owed by the Borrowers with respect to Base Rate Loans made by
such Lender.
(c) The Administrative Agent may (unless notified to the contrary by
a Settling Lender by 2:00 p.m. (Hartford, Connecticut time) on the
Settlement Date) assume that each Settling Lender has made available to
the Administrative Agent on such Settlement Date the Settlement Amount,
and the Administrative Agent may (but shall not be required to), in
reliance upon such assumption, make available to each applicable Lender
its share (if any) of the aggregate Settlement Amount. If the Settlement
Amount of such Settling Lender is made available to the Administrative
Agent by such Settling Lender (or, conversely, if the Administrative Agent
makes the Settlement Amount available to a Lender entitled thereto) on a
date after such Settlement Date, such Settling Lender shall pay the
Administrative Agent (or, conversely, the Administrative Agent shall pay
such Lender entitled to such Settlement Amount) on demand an amount equal
to the product of (i) the average computed for the period referred to in
clause (iii) below, of the weighted average annual interest rate paid by
the Administrative Agent or such Lender, as applicable, for federal funds
acquired by the Administrative Agent or such Lender, as applicable during
each day included in such period times (ii) the Settlement Amount, times
(iii) a fraction, the numerator of which is the number of days that elapse
from and including such Settlement Date to but not including the date on
which the Settlement Amount shall become immediately available to the
Administrative Agent or such Lender, as applicable, and the denominator of
which is 360. Upon payment of such amount, the Settling Lender shall be
deemed to have delivered the Settlement Amount of such Settling Lender on
the Settlement Date and shall become entitled to interest payable by the
Borrowers with respect to such Lender's Settlement Amount as if such share
were delivered on the Settlement Date. If the Settlement Amount is not in
fact made available to the Administrative
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Agent by the Settling Lender within three (3) Business Days of such
Settlement Date, the Administrative Agent shall be entitled to debit the
Borrowers' account with the Administrative Agent to recover such amount
from the Borrowers and if the Borrowers' account with the Administrative
Agent does not contain sufficient funds the Borrowers agree to deposit
into the account such amount, with interest thereon at the rate per annum
applicable to any Base Rate Loans made on such Settlement Date. The
failure or refusal of any of the Lenders to make available to the
Administrative Agent at the aforesaid time on any Settlement Date the
amount of the Settlement Amount representing Base Rate Loans to be made by
such Lender on such date shall not relieve any other Lender from its
obligations hereunder to make Settlements and Base Rate Loans on such
Settlement Date or on any subsequent Settlement Date but in no event shall
any Lender or the Administrative Agent be responsible or liable for the
failure of any other Lender to make the Base Rate Loans to be made by such
other Lender.
(d) Each payment by the Borrowers of Base Rate Loans hereunder shall
be allocated among the Lenders on the first Settlement Date after such
payment, in amounts determined to provide that after such application the
outstanding amount of Base Rate Loans of each Lender equals, as nearly as
practicable, such Lender's Commitment Percentage of all outstanding Base
Rate Loans.
ss.2.11. Operating Accounts. The Borrowers and their Subsidiaries
shall maintain their primary operating accounts with the Agents.
ss.3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
ss.3.1. Maturity. The Borrowers absolutely and unconditionally and
jointly and severally promise to pay on the Maturity Date, and there shall
become absolutely due and payable on the Maturity Date, all of the Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon and all fees and reasonable expenses incurred by the Lenders and
Administrative Agent in connection therewith and payable by the Borrowers
hereunder.
ss.3.2. Mandatory Repayments of Loans. If at any time, the sum of
the outstanding amount of the Loans, the Maximum Drawing Amount, the Acceptance
Face Amount and all Unpaid Reimbursement Obligations exceeds an amount equal to
the lesser of (i) the Total Commitment and (ii) the sum of (A) the Borrowing
Base and (B) the Permitted Overadvance Amount, then the Borrowers shall
immediately pay the amount of such excess to the Administrative Agent for the
respective accounts of the Lenders for application: first, to any Unpaid
Reimbursement Obligations; second, to the Loans; and third, to provide to the
Administrative Agent cash collateral for Reimbursement Obligations as
contemplated by ss.ss.4.3(b) and (c). Each payment of any Unpaid
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Reimbursement Obligations or prepayment of Loans shall be allocated among the
Lenders, in proportion, as nearly as practicable, to each Reimbursement
Obligation or (as the case may be) the respective unpaid principal amount of
each Lender's Note, with adjustments to the extent practicable to equalize any
prior payments or repayments not exactly in proportion.
ss.3.3. Optional Repayments of Loans. The Borrowers shall have the
right, at their election, to repay the outstanding amount of the Loans, as a
whole or in part, at any time without penalty or premium, provided that any full
or partial prepayment of the outstanding amount of any LIBOR Rate Loans pursuant
to this ss.3.3 may be made only on the last day of the Interest Period relating
thereto unless, contemporaneously with such prepayment, the Borrowers shall have
paid to the Administrative Agent all amounts due under ss.5.9 hereof. The
Borrowers shall give the Administrative Agent, no later than 10:00 a.m.,
Hartford time, not less than one (1) and not more than five (5) Business Days'
prior written notice of any proposed prepayment pursuant to this ss.3.3 of Base
Rate Loans, and not less than three (3) and not more than five (5) LIBOR
Business Days' notice of any proposed prepayment pursuant to this ss.3.3 of
LIBOR Rate Loans, in each case specifying the proposed date of prepayment of
Loans and the principal amount to be prepaid. Each such partial prepayment of
the Loans shall be in an integral multiple of $1,000,000, shall be accompanied
by the payment of accrued interest on the principal prepaid to the date of
prepayment and shall be applied, in the absence of instruction by the Borrowers,
first to the principal of Base Rate Loans and then to the principal of LIBOR
Rate Loans. Each partial prepayment shall be allocated among the Lenders, in
proportion, as nearly as practicable, to the respective unpaid principal amount
of each Lender's Note, with adjustments to the extent practicable to equalize
any prior repayments not exactly in proportion.
ss.4. LETTERS OF CREDIT AND BANKERS' ACCEPTANCES.
ss.4.1. Letter of Credit Facility.
(a) Subject to the terms and conditions hereof and the execution and
delivery by one or more of the Borrowers of a Letter of Credit Application on
the Administrative Agent's customary form (a "Letter of Credit Application"),
the Administrative Agent (or its affiliates) on behalf of the Lenders and in
reliance upon the agreement of the Lenders set forth in ss.4.1(d) and upon the
representations and warranties of the Borrowers contained herein, agrees, in its
individual capacity, to issue, extend and renew for the account of such Borrower
one or more standby or documentary letters of credit (individually, a "Letter of
Credit"), in such form as may be requested from time to time by the Borrowers
and agreed to by the Administrative Agent; provided, however, that (i) no Letter
of Credit shall be issued, renewed or extended later than ten (10) Business Days
prior to the Maturity Date, (ii) no documentary Letter of Credit shall have a
term longer than one hundred twenty (120) days, (iii) no Letter of Credit shall
be issued, renewed or extended in a face amount of less than $50,000 and (iv) no
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standby Letter of Credit shall be issued, renewed or extended without the
consent of each of the Lenders, provided further, that, on the tenth (10th) day
prior to the Maturity Date, each Letter of Credit then outstanding shall be
either (x) cash collateralized in an amount equal to 105% of the Maximum Drawing
Amount under such Letter of Credit or (y) secured by a "back-to-back" letter of
credit issued by a bank satisfactory to the Administrative Agent (in its sole
and absolute discretion), in an amount equal to 105% of the Maximum Drawing
Amount under such Letter of Credit (it being understood that from time to time
such cash collateral will be released, and such back-to-back letters of credit
may be reduced, to the extent that the Maximum Drawing Amount under such Letters
of Credit is reduced), and provided further, that, after giving effect to such
request, the sum of (A) the Maximum Drawing Amount on all Letters of Credit, (B)
all Unpaid Reimbursement Obligations, (C) the Acceptance Face Amount and (D) the
amount of all Loans outstanding shall not exceed the lesser of (1) the Total
Commitment and (2) the sum of (I) the Borrowing Base and (II) the Permitted
Overadvance Amount.
(b) Each Letter of Credit Application shall be completed to the
satisfaction of the Administrative Agent. In the event that any provision of any
Letter of Credit Application shall be inconsistent with any provision of this
Credit Agreement, then the provisions of this Credit Agreement shall, to the
extent of any such inconsistency, govern.
(c) Each Letter of Credit issued, extended or renewed hereunder
shall, among other things, provide for the payment of sight drafts, for honor
thereunder when presented in accordance with the terms thereof and when
accompanied by the documents described therein. Each Letter of Credit
Application and each Letter of Credit so issued, extended or renewed shall be
subject to the Uniform Customs and, to the extent not inconsistent therewith,
the laws of the State of Connecticut.
(d) Each Lender severally agrees that it shall be absolutely liable,
without regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever, to reimburse the Administrative Agent on demand
for such Lender's Commitment Percentage of each draft paid by the Administrative
Agent under each Letter of Credit (the extension of credit represented by each
Lender's obligations hereunder in respect of Letters of Credit being referred to
herein as such Lender's "Letter of Credit Participation").
(e) Each such payment made by a Lender shall entitle such Lender to
a portion of the Borrowers' Unpaid Reimbursement Obligation in an amount equal
to such payment. Each Lender shall share in accordance with its participating
interest in any interest which accrues pursuant to ss.4.3 and in any subsequent
payments of such Unpaid Reimbursement Obligations.
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(f) Any Letter of Credit to be issued hereunder may, at the request
of the Administrative Agent, and with the consent of any Lender, be issued by
such Lender pursuant to the provisions of this ss.4. In each such case, to the
extent applicable, references to the Administrative Agent in this ss.4 and any
other such reference relating to Letters of Credit shall, with respect to such
Letter of Credit, be deemed to be references to such issuing Lender.
ss.4.2. Bankers' Acceptance Facility.
(a) Subject to the terms and conditions set forth in this Credit
Agreement and the execution by the Borrowers of an Acceptance Agreement in the
Administrative Agent's customary form (the "Acceptance Agreement"), upon the
written request of the Borrowers, the Administrative Agent, on behalf of the
Lenders, and in reliance upon the agreement of the Lenders set forth in
ss.4.2(b) hereof and upon the representations and warranties of the Borrowers
contained herein, agrees, in its individual capacity, to discount Eligible
Drafts for the account of the Borrowers (all such accepted and discounted
Eligible Drafts whether heretofore or hereafter issued being referred to
individually as a "Bankers' Acceptance" and collectively as the "Bankers'
Acceptances"); provided, however, that (i) any Bankers' Acceptance issued shall
provide for a maturity date not longer than 120 days; (ii) in no event shall
such maturity extend beyond the Maturity Date; (iii) after giving effect to such
request, the sum of (A) the Maximum Drawing Amount (B) the Acceptance Face
Amount, (C) all Unpaid Reimbursement Obligations, and (D) the amount of any
Loans outstanding shall not exceed the lesser of the Borrowing Base and the
Total Commitment; and (iv) the Administrative Agent shall not accept an Eligible
Draft if the face amount of all outstanding drafts accepted by the
Administrative Agent which are of the type described in paragraph 7 of Section
13 of the Federal Reserve Act (12 U.S.C. ss.372), as amended from time to time,
or any successor statute, would cause the Administrative Agent to violate any
limitation imposed upon it under said paragraph or would cause the
Administrative Agent to violate such limitation if all such drafts were sold by
the Administrative Agent in the secondary market. To expedite the acceptance and
discounting of Eligible Drafts, the Borrowers shall provide to the
Administrative Agent fully executed drafts, which shall be blank as to dates and
amounts. The Borrowers may request the Administrative Agent to accept and
discount an Eligible Draft by submitting to the Administrative Agent at least
one (1) Business Day prior to the proposed date of acceptance and discounting a
bankers' acceptance application in the Administrative Agent's customary form,
completed to the satisfaction of the Administrative Agent and accompanied by
such documents as may be required by the Administrative Agent to establish that
the drafts to be accepted and discounted will (if accepted and endorsed by a
member bank of the Federal Reserve System) be eligible for discount by such
Federal Reserve Bank. The Administrative Agent shall make available to the
Borrowers at the time of acceptance of each Eligible Draft and upon the
satisfaction of the conditions set forth in ss.11 (but only in the case of the
first Loan or Credit Instrument to be made or issued hereunder) and ss.12
hereof, an
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amount equal to the discounted value of such Eligible Draft based on: (x) the
stated maturity date of such Eligible Draft, (y) the face amount of such
Eligible Draft, and (z) a rate (computed on the basis of a year of three hundred
sixty (360) days for the actual days elapsed) equal to the sum of (a) the per
annum average discount rate quoted to the Administrative Agent on the day an
Eligible Draft is presented for discount by the Administrative Agent's bankers'
acceptance traders for acceptances which are of the type described in paragraph
7 of section 13 of the Federal Reserve Act (12 U.S.C. ss.372), as amended from
time to time, or any successor statute and which approximate the face amount and
mature on the maturity date of such Eligible Draft plus (b) the Applicable
Commission (the "Bankers Acceptance Fee").
(b) Upon receipt of such bankers' acceptance application, the
Administrative Agent shall notify each Lender of its pro rata share of the
Bankers' Acceptance. Subject to the terms and conditions hereof, each Lender
severally agrees that it shall participate in any Bankers' Acceptances upon
notification by the Administrative Agent that it has received an application for
acceptance and discounting of an Eligible Draft in form and substance
satisfactory to the Administrative Agent. The Administrative Agent agrees to
furnish each Lender with a copy of each Bankers' Acceptance promptly after
issuance. Each Lender severally agrees that it shall be absolutely liable,
without regard to the occurrence of any Default or Event of Default or any other
condition precedent whatsoever to the extent of such Lender's Commitment
Percentage, to reimburse the Administrative Agent on demand for the amount of
each draft paid by the Administrative Agent under each Bankers' Acceptance to
the extent such amount is not reimbursed by the Borrowers pursuant to ss.4.3
hereof (such amount for a Lender being called herein the "Bankers' Acceptance
Participation" of such Lender).
(c) Each such payment made by a Lender shall be treated as the
purchase by such Lender of a participating interest in the Borrowers'
Reimbursement Obligation under ss.4.3 hereof in an amount equal to such payment.
Each Lender shall share in accordance with its participating interest in any
interest which accrues pursuant to ss.4.3 hereof.
(d) In addition to Administrative Agent's normal discount of
Bankers' Acceptances, the Borrowers shall pay to the Administrative Agent, for
the accounts of the Lenders in accordance with their respective Commitment
Percentages, a commission (the "Applicable Commission") for each Bankers'
Acceptance issued pursuant to this Credit Agreement at an annual rate on the
face amount of each Bankers' Acceptance equal to the Applicable Margin for LIBOR
Rate Loans on the face amount of each such Bankers' Acceptance; provided, that
at any time a Permitted Overadvance is outstanding, the commission for each
Bankers' Acceptance issued pursuant to this Credit Agreement shall be at an
annual rate on the face amount of each Bankers' Acceptance equal to the
Applicable Margin for LIBOR Rate Loans, plus one-
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quarter of one percent (0.25%) on the face amount of each such Bankers'
Acceptance.
ss.4.3. Reimbursement Obligation of the Borrowers. In order to
induce the Administrative Agent to issue, extend and renew each Credit
Instrument and the Lenders to participate therein, the Borrowers hereby jointly
and severally agree to reimburse or pay to the Administrative Agent, for the
account of the Administrative Agent or (as the case may be) the Lenders, with
respect to each Credit Instrument issued, extended or renewed by the
Administrative Agent hereunder,
(a) except as otherwise expressly provided in ss.4.3(b) and (c), on
each date that any draft presented under any Letter of Credit is honored by the
Administrative Agent, or the Administrative Agent otherwise makes a payment with
respect thereto, or, in the case of Bankers' Acceptances, on the maturity date
of such Bankers' Acceptances, (i) the amount paid by the Administrative Agent
under or with respect to such Letter of Credit, and, with respect to the
Bankers' Acceptances, the amount of such Bankers' Acceptance then maturing, and
(ii) the amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the Administrative Agent or any Lender in connection with
any payment made by the Administrative Agent or any Lender under, or with
respect to, such Credit Instrument.
(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the sum of the Maximum Drawing Amount plus the Acceptance
Face Amount, plus all Unpaid Reimbursement Obligations, an amount equal to such
difference, which amount shall be held by the Administrative Agent for the
benefit of the Lenders and the Administrative Agent as cash collateral for all
Reimbursement Obligations, and
(c) upon the termination of the Total Commitment, or the
acceleration of the Reimbursement Obligations with respect to all Credit
Instruments in accordance with ss.13, an amount equal to the then Maximum
Drawing Amount plus the Acceptance Face Amount, which amount shall be held by
the Administrative Agent for the benefit of the Lenders and the Administrative
Agent as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Administrative Agent at the
Administrative Agent's Head Office in immediately available funds. Interest on
any and all amounts remaining unpaid by the Borrowers under this ss.4.3 at any
time from the date such amounts become due and payable (whether as stated in
this ss.4.3, by acceleration or otherwise) until payment in full (whether before
or after judgment) shall be payable to the Administrative Agent on demand at the
rate specified in ss.5.10 for overdue principal on the Loans.
ss.4.4. Credit Instrument Payments. If any draft shall be presented
or other demand for payment shall be made under any Letter of
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Credit, the Administrative Agent shall notify the Borrowers of the date and
amount of the draft presented or demand for payment and of the date and time
when it expects to pay such draft or honor such demand for payment. Subject to
the provisions of ss.4.3(a) and the proviso set forth in ss.4.1(d), if the
Borrowers fail to reimburse the Administrative Agent as provided in ss.4.3 by
the date that such draft is honored or paid or other payment is made by the
Administrative Agent, or, with respect to Bankers' Acceptances, if the Borrowers
fail to reimburse the Administrative Agent upon the maturity of such Bankers'
Acceptances, the Administrative Agent may at any time thereafter notify the
Lenders of the amount of any such Unpaid Reimbursement Obligation. No later than
3:00 p.m. (Hartford time) on the Business Day next following the receipt of such
notice, each Lender shall make available to the Administrative Agent, at the
Administrative Agent's Head Office, in immediately available funds, such
Lender's Commitment Percentage of such Unpaid Reimbursement Obligation, together
with an amount equal to the product of (a) the average, computed for the period
referred to in clause (c) below, of the weighted average interest rate paid by
the Administrative Agent for federal funds acquired by the Administrative Agent
during each day included in such period, times (b) the amount equal to such
Lender's Commitment Percentage of such Unpaid Reimbursement Obligation, times
(c) a fraction, the numerator of which is the number of days that elapse from
and including the date the Administrative Agent paid the draft presented for
honor or otherwise made payment to the date on which such Lender's Commitment
Percentage of such Unpaid Reimbursement Obligation shall become immediately
available to the Administrative Agent, and the denominator of which is 360. The
responsibility of the Administrative Agent to the Borrowers and the Lenders
shall be only to determine that the documents (including each draft) delivered
under each Credit Instrument in connection with such presentment or other demand
for payment shall be in conformity in all respects with such Credit Instrument,
except for minor errors not affecting the plain meaning of the documents
presented and not susceptible to any claim by the Borrowers that the
presentation was nonconforming.
ss.4.5. Obligations Absolute. The Borrowers' joint and several
obligations under this ss.4 shall be absolute and unconditional under any and
all circumstances and irrespective of the occurrence of any Default or Event of
Default or any condition precedent whatsoever or any setoff, counterclaim or
defense to payment which either Borrower may have or have had against the
Administrative Agent, any Lender or any beneficiary of a Credit Instrument. The
Borrowers further agree with the Administrative Agent and the Lenders that the
Administrative Agent and the Lenders shall not be responsible for, and the
Borrowers' Reimbursement Obligations under ss.4.3 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
either Borrower, the beneficiary of
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any Credit Instrument or any financing institution or other party to which any
Credit Instrument may be transferred or any claims or defenses whatsoever of
either Borrower against the beneficiary of any Credit Instrument or any such
transferee. The Administrative Agent and the Lenders shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Credit
Instrument except for any such error, omission, interruption or delay resulting
solely from gross negligence or willful misconduct of the Administrative Agent
or the Lenders. Each Borrower agrees that any action taken or omitted by the
Administrative Agent or any Lender under or in connection with each Credit
Instrument and the related drafts and documents, if done in good faith, shall be
binding upon such Borrower and shall not result in any liability on the part of
the Administrative Agent or any Lender to such Borrower.
ss.4.6. Reliance by Issuer. To the extent not inconsistent with
ss.4.5, the Administrative Agent or any other issuing Lender having the rights
of the Administrative Agent pursuant to ss.4.1(f) hereof shall be entitled to
rely, and shall be fully protected in relying upon, any Credit Instrument,
draft, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Credit Agreement unless it
shall first have received such advice or concurrence of the Majority Lenders as
it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Credit Agreement in accordance
with a request of the Majority Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon the Lenders and all future
holders of the Revolving Credit Notes or of a Credit Instrument Participation.
ss.4.7. Letter of Credit Fees. The Borrowers shall, on the date of
issuance or any extension or renewal of any Letter of Credit and at such other
time or times as such charges are customarily made by the Administrative Agent,
pay a fee (in each case, a "Letter of Credit Fee") to the Administrative Agent
(i) in respect of each standby Letter of Credit equal to (A) one and one-half of
one percent (1.5%) per annum of the face amount of such Letter of Credit (for
the account of the Lenders) plus (B) the Administrative Agent's customary
issuance fee (for its own account), and (ii) in respect of each documentary
Letter of Credit equal to (A) the fees as set by the Administrative Agent plus
(B) the Administrative Agent's customary time negotiation fee per document
examination, each for the account of the Administrative Agent.
ss.4.8. Existing Letters of Credit. The Borrowers and the Lenders
agree that the letters of credit described on Schedule 4.8 hereto (the "Existing
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Letters of Credit"), which Existing Letters of Credit have previously been
issued by BankBoston or its affiliates for the account of the Borrowers, shall
be deemed Letters of Credit issued under and governed by this Credit Agreement,
that this Credit Agreement supersedes any and all prior agreements between the
Borrowers and BankBoston with respect to the Existing Letters of Credit, and
that all the Existing Letters of Credit shall be subject to and governed by the
terms of this Credit Agreement.
ss.5. CERTAIN GENERAL PROVISIONS
ss.5.1. Agents' Fees. The Borrowers shall pay to the Agents the fees
set forth in the Fee Letter.
ss.5.2. Funds for Payments.
(a) All payments of principal, interest, Reimbursement
Obligations, facility fees, Letter of Credit Fees and any other amounts due
hereunder or under any of the other Loan Documents shall be made to the
Administrative Agent, for the respective accounts of the Lenders and the
Administrative Agent, as applicable, at the Administrative Agent's Head Office
or at such other location in the Hartford, Connecticut area that the
Administrative Agent may from time to time designate, in each case in
immediately available funds.
(b) All payments by the Borrowers hereunder and under any of
the other Loan Documents shall be made without setoff or counterclaim and free
and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein unless
the Borrowers are compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrowers with respect to any amount payable
by it hereunder or under any of the other Loan Documents, the Borrowers will pay
to the Administrative Agent, for the account of the Lenders or (as the case may
be) the Administrative Agent, on the date on which such amount is due and
payable hereunder or under such other Loan Document, such additional amount in
Dollars as shall be necessary to enable the Lenders or the Administrative Agent
to receive the same net amount which the Lenders or the Administrative Agent
would have received on such due date had no such obligation been imposed upon
the Borrowers. The Borrowers will deliver promptly to the Administrative Agent
certificates or other valid vouchers for all taxes or other charges deducted
from or paid with respect to payments made by the Borrowers hereunder or under
such other Loan Document.
ss.5.3. Computations. All computations of interest on the Loans and
of facility fees, Bankers' Acceptances Fees, Letter of Credit Fees or other fees
shall, unless otherwise expressly provided herein, be based on a 360-day
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year and paid for the actual number of days elapsed. Except as otherwise
provided in the definition of the term "Interest Period" with respect to LIBOR
Rate Loans, whenever a payment hereunder or under any of the other Loan
Documents becomes due on a day that is not a Business Day, the due date for such
payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension. The outstanding amount of the Loans as
reflected on the Note Records from time to time shall be considered correct and
binding on each Borrower unless within five (5) Business Days after receipt of
any notice by the Administrative Agent or any of the Lenders of such outstanding
amount, the Administrative Agent or such Lender shall notify the Borrowers to
the contrary.
ss.5.4. Inability to Determine LIBOR Rate. In the event, prior to
the commencement of any Interest Period relating to any LIBOR Rate Loan, the
Administrative Agent shall determine or be notified by the Majority Lenders that
adequate and reasonable methods do not exist for ascertaining the LIBOR Rate
that would otherwise determine the rate of interest to be applicable to any
LIBOR Rate Loan during any Interest Period, the Administrative Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrowers and the Lenders) to the Borrowers and the Lenders. In
such event (a) any Loan Request or Conversion Request with respect to LIBOR Rate
Loans shall be automatically withdrawn and shall be deemed a request for Base
Rate Loans, (b) each LIBOR Rate Loan will automatically, on the last day of the
then current Interest Period relating thereto, become a Base Rate Loan, and (c)
the obligations of the Lenders to make LIBOR Rate Loans shall be suspended until
the Administrative Agent or the Majority Lenders determines that the
circumstances giving rise to such suspension no longer exist, whereupon the
Administrative Agent shall so notify the Borrowers and the Lenders.
ss.5.5. Illegality. Notwithstanding any other provisions herein, if
any present or future law, regulation, treaty or directive or in the
interpretation or application thereof shall make it unlawful for any Lender to
make or maintain LIBOR Rate Loans, such Lender shall forthwith give notice of
such circumstances to the Borrowers and the other Lenders and thereupon (a) the
commitment of such Lender to make LIBOR Rate Loans or convert Loans of another
Type to LIBOR Rate Loans shall forthwith be suspended and (b) such Lender's
Loans then outstanding as LIBOR Rate Loans, if any, shall be converted
automatically to Base Rate Loans on the last day of each Interest Period
applicable to such LIBOR Rate Loans or within such earlier period as may be
required by law. The Borrowers hereby agree promptly to pay the Administrative
Agent for the account of such Lender, upon demand by such Lender, any additional
amounts necessary to compensate such Lender for any costs incurred by such
Lender in making any conversion in accordance with this ss.5.5, including any
interest or fees payable by such Lender to lenders of funds obtained by it in
order to make or maintain its LIBOR Loans hereunder.
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ss.5.6. Additional Costs, Etc. If any future applicable law or any
change in any present law, which expression, as used herein, includes statutes,
rules and regulations thereunder and interpretations thereof by any competent
court or by any governmental or other regulatory body or official charged with
the administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or the Administrative Agent by any central bank
or other fiscal, monetary or other authority (whether or not having the force of
law), shall:
(a) subject any Lender or the Administrative Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature with respect
to this Credit Agreement, the other Loan Documents, any Credit Instruments, such
Lender's Commitment or the Loans (other than taxes based upon or measured by the
income or profits of such Lender or the Administrative Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Lender of the principal of or the
interest on any Loans or any other amounts payable to any Lender or the
Administrative Agent under this Credit Agreement or any of the other Loan
Documents, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or letters of credit issued by,
or commitments of an office of any Lender, or
(d) impose on any Lender or the Administrative Agent any other
conditions or requirements with respect to this Credit Agreement, the other Loan
Documents, any Credit Instruments, the Loans, such Lender's Commitment, or any
class of loans, letters of credit, bankers' acceptances or commitments of which
any of the Loans or such Lender's Commitment forms a part, and the result of any
of the foregoing is
(i) to increase the cost to any Lender of making, funding,
issuing, renewing, extending or maintaining any of the Loans or
such Lender's Commitment or any Credit Instrument, or
(ii) to reduce the amount of principal, interest,
Reimbursement Obligation or other amount payable to such Lender
or the Administrative Agent hereunder on account of such
Lender's Commitment, any Credit Instrument or any of the Loans,
or
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(iii) to require such Lender or the Administrative Agent to
make any payment or to forego any interest or Reimbursement
Obligation or other sum payable hereunder, the amount of which
payment or foregone interest or Reimbursement Obligation or
other sum is calculated by reference to the gross amount of any
sum receivable or deemed received by such Lender or the
Administrative Agent from the Borrowers hereunder,
then, and in each such case, the Borrowers will, upon demand made by such Lender
or (as the case may be) the Administrative Agent at any time and from time to
time and as often as the occasion therefor may arise, pay to such Lender or the
Administrative Agent such additional amounts as will be sufficient to compensate
such Lender or the Administrative Agent for such additional cost, reduction,
payment or foregone interest or Reimbursement Obligation or other sum.
ss.5.7. Capital Adequacy. If any present or future law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) or the interpretation thereof by a court or governmental authority
with appropriate jurisdiction affects the amount of capital required or expected
to be maintained by any Lender or the Administrative Agent or any corporation
controlling such Lender or the Administrative Agent and such Lender or the
Administrative Agent determines that the amount of capital required to be
maintained by it is increased by or based upon the existence of such Lender's or
the Administrative Agent's commitment with respect to any Loans, Credit
Instrument Participations or Credit Instruments, then such Lender or the
Administrative Agent may notify the Borrowers of such fact. To the extent that
the costs of such increased capital requirements are not reflected in the Base
Rate (if relating to Loans or Unpaid Reimbursement Obligations) or the Bankers'
Acceptance Fee (if relating to the Bankers' Acceptances), the Borrowers and such
Lender or (as the case may be) the Administrative Agent shall thereafter
negotiate in good faith, within thirty (30) days of the day on which the
Borrowers receive such notice, an adjustment payable hereunder that will
adequately compensate such Lender or the Administrative Agent in light of these
circumstances. If the Borrowers and such Lender or the Administrative Agent are
unable to agree to such adjustment within thirty (30) days of the date on which
the Borrowers receive such notice, then commencing on the date of such notice
(but not earlier than the effective date of any such increased capital
requirement), the fees payable hereunder shall increase by an amount that will,
in such Lender's or the Administrative Agent's reasonable determination, provide
adequate compensation. Each Lender and the Administrative Agent shall allocate
such cost increases among its customers in good faith and on an equitable basis.
ss.5.8. Certificate. A certificate setting forth any additional
amounts payable pursuant to ss.ss.5.6 or 5.7 and a brief explanation of such
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amounts which are due, submitted by any Lender or the Administrative Agent to
the Borrowers, shall be conclusive, absent manifest error, that such amounts are
due and owing.
ss.5.9. Indemnity. Each Borrower agrees to indemnify each Lender and
to hold each Lender harmless from and against any loss, cost or expense
(including loss of anticipated profits) that such Lender may sustain or incur as
a consequence of (a) default by the Borrowers in payment of the principal amount
of or any interest on any LIBOR Rate Loans as and when due and payable,
including any such loss or expense arising from interest or fees payable by such
Lender to lenders of funds obtained by it in order to maintain its LIBOR Rate
Loans, (b) default by the Borrowers in making a borrowing or conversion after
the Borrowers have given (or is deemed to have given) a Loan Request, notice or
a Conversion Request relating thereto in accordance with ss.2.6 or ss.2.7 or (c)
the making of any payment of a LIBOR Rate Loan or the making of any conversion
of any such Loan to a Base Rate Loan on a day that is not the last day of the
applicable Interest Period with respect thereto, including interest or fees
payable by such Lender to lenders of funds obtained by it in order to maintain
any such Loans.
ss.5.10. Interest After Default.
(a) Overdue principal and (to the extent permitted by applicable
law) interest on the Loans and all other overdue amounts payable hereunder or
under any of the other Loan Documents shall bear interest compounded monthly and
payable on demand at a rate per annum equal to three percent (3%) above the Base
Rate from time to time in effect plus the Applicable Margin until such amount
shall be paid in full (after as well as before judgment).
(b) During the continuance of any Event of Default arising as a
result of the failure by the Borrowers to pay any principal or interest due and
payable hereunder, the principal of the Loans not overdue shall, until such
Event of Default has been cured or remedied or such Event of Default has been
waived by the Majority Lenders pursuant to ss.26, bear interest at a rate per
annum equal to the rate of interest applicable to overdue principal pursuant to
ss.5.10(a) hereof.
ss.5.11. Concerning Joint and Several Liability of the Borrowers.
(a) Each of the Borrowers is accepting joint and several liability
hereunder in consideration of the financial accommodations to be provided by the
Administrative Agent and the Lenders under this Agreement, for the mutual
benefit, directly and indirectly, of each of the Borrowers and in consideration
of the undertakings of each of the Borrowers to accept joint and several
liability for the obligations of each of them.
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(b) Each of the Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with each other Borrower, with respect to the
payment and performance of all of the Obligations, it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of all of the Borrowers without preferences or distinction among
them.
(c) If and to the extent that any of the Borrowers shall fail to
make any payment with respect to any of the Obligations as and when due or to
perform any of such Obligations in accordance with the terms thereof, then in
each such event each other Borrower will make such payment with respect to, or
perform, such Obligation.
(d) The obligations of each Borrower under the provisions of this
ss.5.11 constitute the absolute and unconditional obligations of such Borrower
enforceable against it to the full extent permitted under the terms hereof,
irrespective of the validity, regularity or enforceability of this Agreement or
any other circumstance whatsoever.
(e) Each Borrower hereby waives notice of acceptance of its joint
and several liability, notice of the Loans made under this Agreement, notice of
the occurrence of any Default or Event of Default, or of any demand for any
payment under this Agreement, notice of any action at any time taken or omitted
by the Administrative Agent or the Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
all demands, notices and other formalities of every kind in connection with this
Agreement. Each Borrower hereby assents to, and waives notice of, any extension
or postponement of the time for the payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by the Administrative Agent or the Lenders at any time or times
in respect of any default by either Borrower in the performance or satisfaction
of any term, covenant, condition or provision of this Agreement, any and all
other indulgences whatsoever by the Administrative Agent or the Lenders in
respect of any of the obligations hereunder, and the taking, addition,
substitution or release, in whole or in part, at any time or times, of any
security for any of such obligations or the addition, substitution or release,
in whole or in part, of either Borrower. Without limiting the generality of the
foregoing, each Borrower assents to any other action or delay in acting or
failure to act on the part of the Administrative Agent or the Lenders including,
without limitation, any failure strictly or diligently to assert any right or to
pursue any remedy or to comply fully with applicable laws or regulations
thereunder, which might, but for the provisions of this ss.5.11, afford grounds
for terminating, discharging or relieving such Borrower, in whole or in part,
from any of its Obligations under this ss.5.11, it being the intention of each
Borrower that, so long as any of the Obligations remain unsatisfied, the
Obligations of such Borrower under this ss.5.11 shall not be discharged except
by performance and then only to the extent of such performance. The joint and
several liability
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of the Borrowers hereunder shall continue in full force and effect
notwithstanding any absorption, merger, amalgamation or any other change
whatsoever in the name, membership, constitution or place of formation of either
Borrower or the Administrative Agent or the Lenders. If at any time, any
payment, or any part thereof, made in respect of any of the Obligations, is
rescinded or must otherwise be restored or returned by the Administrative Agent
or the Lenders upon the insolvency, bankruptcy or reorganization of any of the
Borrowers, or otherwise, the provisions of this ss.5.11 will forthwith be
reinstated in effect, as though such payment had not been made.
ss.5.12. Interest.
(a) In no event shall the amount of interest due or payable
hereunder or under the Notes exceed the maximum rate of interest allowed by
applicable law and, in the event any such payment is inadvertently made by the
Borrowers or inadvertently received by the Administrative Agent or any Lender,
then such excess sum shall be credited as a payment of principal, unless the
Borrowers shall notify the Administrative Agent or such Lender in writing that
it elects to have such excess returned forthwith. It is the express intent
hereof that the Borrowers not pay and none of the Administrative Agent or the
Lenders receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrowers under applicable law.
(b) Notwithstanding the use by the Lenders of the Base Rate and the
LIBOR Rate as reference rates for the determination of interest on the Loans,
the Lenders shall be under no obligation to obtain funds from any particular
source in order to charge interest to the Borrowers at interest rates related to
such reference rates.
ss.6. COLLATERAL SECURITY. The Obligations shall be secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in all of the assets of the Borrowers and their
respective Subsidiaries including, without limitation, the assignment of the
Life Insurance Policy, the pledge of 51% of the issued and outstanding capital
stock of Starter Europe and 26% of the issued and outstanding capital stock of
Far East pursuant to the terms of the Security Documents to which the Borrowers
are a party. In addition, the obligations of Starter Europe under its Guaranty
will be secured by a perfected first priority security interest in 25% of all of
the issued and outstanding capital stock of Far East pursuant to the terms of
the Security Documents to which Starter Europe is a party.
ss.7. REPRESENTATIONS AND WARRANTIES. Each Borrower represents and
warrants to the Lenders, the Administrative Agent and the Syndication Agent as
follows:
ss.7.1. Corporate Authority; Ownership.
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(a) Incorporation; Good Standing. Each Borrower and its Subsidiaries
(i) is a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation, (ii) has all requisite corporate power
to own its property and conduct its business as now conducted and as presently
contemplated, and (iii) is in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction where a failure to be so
qualified would have a materially adverse effect on the business, assets or
financial condition of such Borrower or its Subsidiary.
(b) Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which each Borrower or any of
its Subsidiaries is or is to become a party, and the performance by each such
Person of all of its agreements and obligations under each of such documents,
and the transactions contemplated hereby and thereby (i) are within the
corporate authority of each such Person, (ii) have been duly authorized by all
necessary corporate proceedings, (iii) do not conflict with or result in any
breach or contravention of any provision of law, statute, rule or regulation to
which such Borrower or any of its Subsidiaries is subject or any judgment,
order, writ, injunction, license or permit applicable to such Person, (iv) do
not conflict with any provision of the corporate charter or bylaws of, any
agreement or other instrument binding upon, or trust agreement of, such Person
and (v) do not require any approval, consent, order, authorization or license
by, or giving notice to, or taking any other action with respect to, any
governmental or regulatory authority or agency under any provision of any
applicable law.
(c) Enforceability. The execution and delivery of this Credit
Agreement and the other Loan Documents to which each Borrower or any of its
Subsidiaries is or is to become a party will result in valid and legally binding
obligations of such Person enforceable against such Person in accordance with
the respective terms and provisions hereof and thereof, except as enforceability
is limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors' rights and
except to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
ss.7.2. No Business Activity; Subsidiaries. Except as set forth on
Schedule 7.2, neither Borrower owns or holds of record and/or beneficially
(whether directly or indirectly) any shares of any class in the capital of any
other corporations or any legal and/or beneficial interests in any corporation,
partnership, limited liability company, business trust or joint venture or in
any other unincorporated trade or business enterprise.
ss.7.3. Governmental Approvals. The execution, delivery and
performance by each Borrower and its Subsidiaries of any of the Loan Documents
to which such Borrower or any of its Subsidiaries is or is to become a party and
the transactions contemplated hereby and thereby do not require the
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approval or consent of, or filing with, any governmental agency or authority
other than those already obtained. Each of the Borrowers holds all licenses,
permits and other certificates required for the operation of its business. Each
of the Borrowers is in compliance in all respects with all applicable state and
Federal filing and operating requirements, including all regulations governing
equal employment opportunity.
ss.7.4. Title to Properties; Leases. Except as indicated on Schedule
7.4 hereto, each Borrower and its Subsidiaries own all of the assets reflected
in the balance sheets of the Borrowers and their Subsidiaries as at the Balance
Sheet Date or acquired since that date (except property and assets sold or
otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances except
Permitted Liens.
ss.7.5. Financial Statements.
(a) There has been furnished to each of the Lenders the Form 10K
filing of the Borrowers for the fiscal year ended December 31, 1996, (which
includes audited consolidated statements of income of the Borrowers and their
respective Subsidiaries for the fiscal year then ended), with an unqualified
opinion by Ernst & Young. Such balance sheets and statements of income of the
Borrowers and their respective Subsidiaries shall have been prepared in
accordance with generally accepted accounting principles and fairly present the
financial condition of the Borrowers and their respective Subsidiaries as at the
close of business on the date thereof and the results of operations for the
fiscal year then ended. There are no contingent liabilities of either Borrower
or any of its Subsidiaries as of such date involving material amounts, known to
the officers of such Person, which were not disclosed in such balance sheets and
the notes related thereto.
(b) There has been furnished to each of the Lenders unaudited
consolidated balance sheets and consolidated and combined statements of income
of the Borrowers and their respective Subsidiaries, each as at the Balance Sheet
Date. Such balance sheets and statements of income of the Borrowers and their
respective Subsidiaries shall have been internally prepared and fairly present
the financial condition of the Borrowers and their respective Subsidiaries as at
the close of business on the date thereof. There are no contingent liabilities
of either Borrower or any of its Subsidiaries as of such date involving material
amounts known to the officers of such Person which were not disclosed in such
balance sheets of the Borrowers and their respective Subsidiaries.
ss.7.6. No Material Changes, Etc. Since the Balance Sheet Date there
has occurred no materially adverse change in the financial condition or business
of either Borrower or any of its Subsidiaries as shown on or reflected in
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the balance sheets of the Borrowers and their respective Subsidiaries as at the
Balance Sheet Date, or the statements of income for the fiscal year then ended,
other than changes in the ordinary course of business that have not had any
materially adverse effect either individually or in the aggregate on the
business or financial condition of the Borrowers or any of their respective
Subsidiaries. Since the Balance Sheet Date, neither Borrower has made any
Distributions.
ss.7.7. Franchises, Patents, Copyrights, Etc. Each Borrower and each
of its Subsidiaries possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted without
known conflict with any rights of others.
ss.7.8. Litigation. Except as set forth on Schedule 7.8, there are
no actions, suits, proceedings or investigations of any kind pending or, to the
best knowledge of the Borrowers after due inquiry, threatened against either
Borrower or any of its Subsidiaries or before any court, tribunal or
administrative agency or board that, if adversely determined, might, either in
any case or in the aggregate, materially adversely affect the properties,
assets, financial condition or business of either Borrower or its Subsidiaries
or materially impair the right of such Borrower or any of its Subsidiaries to
carry on business substantially as now conducted by them, or result in any
substantial liability not adequately covered by insurance, or for which adequate
reserves are not maintained on the balance sheet of such Borrower and its
Subsidiaries, or which question the validity of this Credit Agreement or any of
the other Loan Documents or any action taken or to be taken pursuant hereto or
thereto.
ss.7.9. No Materially Adverse Contracts, Etc. Neither Borrower or
any Subsidiary of such Borrower is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or regulation that has
or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of any of such Persons. Neither Borrower
or any Subsidiary of such Borrower is a party to any contract or agreement that
has or is expected, in the judgment of such Borrower's officers, to have any
materially adverse effect on the business any of such Persons.
ss.7.10. Compliance with Other Instruments, Laws, Etc. Neither
Borrower or any Subsidiary of such Borrower is in violation of any provision of
their respective charter documents, bylaws, or any agreement or instrument to
which any of them may be subject or by which any of them or any of their
properties may be bound or any decree, order, judgment, statute, license, rule
or regulation, in any of the foregoing cases in a manner that could result in
the imposition of substantial penalties or materially and adversely affect the
financial condition, properties or business of any of such Persons.
ss.7.11. Tax Status. Each Borrower and each of its Subsidiaries (a)
has made or filed all federal and state income and all other tax returns,
reports
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and declarations required by any jurisdiction to which any of them is
subject, (b) has paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate proceedings and (c) has
set aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and to the best knowledge of
such Borrower after due and diligent inquiry, there is no basis for any such
claim.
ss.7.12. No Event of Default. No Default or Event of Default has
occurred and is continuing.
ss.7.13. Holding Company and Investment Company Acts. Neither
Borrower or any Subsidiary of such Borrower is a "holding company", or a
"subsidiary company" of a "holding company", or an affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935; nor is it an "investment company", or an "affiliated company" or a
"principal underwriter" of an "investment company", as such terms are defined in
the Investment Company Act of 1940.
ss.7.14. Absence of Financing Statements, Etc. Except with respect
to Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Borrowers or any of their respective
Subsidiaries or any rights relating thereto.
ss.7.15. Perfection of Security Interest. All filings, assignments,
pledges and deposits of documents or instruments have been made and all other
actions have been taken that are necessary or advisable, under applicable law,
to establish and perfect the Administrative Agent's security interest in the
Collateral. The Collateral and the Administrative Agent's rights with respect to
the Collateral are not subject to any setoff, claims, withholdings or other
defenses. The Borrowers and their Subsidiaries are the owners of their
respective Collateral free from any lien, security interest, encumbrance and any
other claim or demand, except for Permitted Liens.
ss.7.16. Certain Transactions. Except as set forth on Schedule 7.16,
none of the officers, directors, or employees of the Borrowers or any of their
respective Subsidiaries is presently a party to any transaction with either
Borrower or any of its Subsidiaries (other than for services as employees,
officers and directors or for management services), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
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requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrowers, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial interest
or is an officer, director, trustee or partner.
ss.7.17. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions. Each Borrower has
heretofore delivered to the Administrative Agent the most recently completed
annual report, Form 5500, with all required attachments, and actuarial statement
required to be submitted under ss.103(d) of ERISA, with respect to each
Guaranteed Pension Plan.
(b) Terminability of Welfare Plans. Under each Employee Benefit Plan
which is an employee welfare benefit plan within the meaning of ss.3(1) or
ss.3(2)(B) of ERISA, no benefits are due unless the event giving rise to the
benefit entitlement occurs prior to plan termination (except as required by
Title I, Part 6 of ERISA). The Borrowers or an ERISA Affiliate, as appropriate,
may terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of the
Borrowers or such ERISA Affiliate without liability to any Person.
(c) Guaranteed Pension Plans. Each contribution required to be made
to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien provisions
of ss.302(f) of ERISA, or otherwise, has been timely made. No waiver of an
accumulated funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan. No liability to the PBGC
(other than required insurance premiums, all of which have been paid) has been
incurred by either Borrower, or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or
any other event or condition which presents a material risk of termination of
any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each
Guaranteed Pension Plan (which in each case occurred within twelve months of the
date of this representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of ss.4001 of ERISA did not exceed
the aggregate value of the assets of all such Guaranteed Pension Plans,
disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities.
(d) Multiemployer Plans. Neither Borrower nor any ERISA Affiliate
has incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from
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such Multiemployer Plan under ss.4201 of ERISA or as a result of a sale of
assets described in ss.4204 of ERISA. Neither Borrower or any ERISA Affiliate
has been notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of ss.4241 or ss.4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under ss.4041A of
ERISA.
ss.7.18. Regulations U and X. The proceeds of the Loans shall be
used (i) to refinance on the Effective Date all of the Indebtedness of the
Borrowers to the Administrative Agent and other lenders under that certain 1996
Amended and Restated Commercial Revolving Loan and Security Agreement dated as
of October 7, 1996, (ii) to refinance on the Effective Date all of the
Indebtedness of the Borrowers to First Union Bank of Connecticut, (iii) for
working capital and general corporate purposes and (iv) to make the Permitted
Acquisitions. The Borrowers will obtain Credit Instruments solely for general
working capital and general corporate purposes. No portion of any Loan is to be
used, and no portion of any Credit Instrument is to be obtained, for the purpose
of purchasing or carrying any "margin security" or "margin stock" as such terms
are used in Regulations U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221 and 224.
ss.7.19. Environmental Compliance. Each Borrower has taken all
reasonable steps to investigate the past and present condition and usage of the
Real Estate and the operations conducted thereon and, based upon such
investigation, has determined that:
(a) Neither Borrower or any Subsidiary of such Borrower, or any
operator of the Real Estate or any operations thereon, is in violation, or
alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to health,
safety or the environment (hereinafter "Environmental Laws"), which
violation would have a material adverse effect on the environment or the
business, assets or financial condition of such Borrower and any of its
Subsidiaries;
(b) Neither Borrower or any Subsidiary of such Borrower, has
received notice from any third party including, without limitation: any
federal, state or local governmental authority, (i) that any one of them
has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B
(1986); (ii) that
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any hazardous waste, as defined by 42 U.S.C. ss. 9601(5), any hazardous
substances as defined by 42 U.S.C. ss. 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. ss.9601(33) and any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by
any Environmental Laws ("Hazardous Substances") which any one of them has
generated, transported or disposed of has been found at any site at which
a federal, state or local agency or other third party has conducted or has
ordered that such Borrower or any of its Subsidiaries conduct a remedial
investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any
third party's incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances;
(c) (i) no portion of the Real Estate has been used for the
handling, processing, storage or disposal of Hazardous Substances except
in accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is
located on any portion of the Real Estate; (ii) in the course of any
activities conducted by the Borrowers, their Subsidiaries or operators of
their respective properties, no Hazardous Substances have been generated
or are being used on the Real Estate except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e. any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the
properties of the Borrowers or their Subsidiaries, which releases would
have a material adverse effect on the value of any of the Real Estate or
adjacent properties or the environment; (iv) to the best of the Borrowers'
knowledge, there have been no releases on, upon, from or into any of the
Real Estate which, through soil or groundwater contamination, may have
come to be located on, and which would have a material adverse effect on
the value of, the Real Estate and there is no asbestos contamination on
any of the Real Estate which would result in a violation of applicable
Environmental Laws or which would require removal under such Environmental
Laws; and (v) in addition, any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite only by
carriers having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which
transporters and facilities have been and are, to the best of the
Borrowers' knowledge, operating in compliance with such permits and
applicable Environmental Laws; and
(d) Neither Borrower or any Subsidiary of such Borrower or any of
the other Real Estate is subject to any applicable environmental law
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requiring the performance of Hazardous Substances site assessments,
or the removal or remediation of Hazardous Substances, or the giving of
notice to any governmental agency or the recording or delivery to other
Persons of an environmental disclosure document or statement by virtue of
the transactions set forth herein and contemplated hereby or to the
effectiveness of any other transactions contemplated hereby.
ss.7.20. Fiscal Year. Each fiscal year of each Borrower and each of
its Subsidiaries begins on January 1 of each calendar year and ends on December
31 of such calendar year.
ss.7.21. Other Representations. Each of the representations and
warranties made by each of the Borrowers or any other Person in any of the Loan
Documents to which any such Person is a party, was true and correct in all
material respects when made and continues to be true and correct in all material
respects on the Effective Date, except to the extent that any of such
representations and warranties may have been affected by the consummation of the
transactions contemplated and permitted or required by the Loan Documents.
ss.7.22. Bank Accounts. Schedule 7.22 sets forth the account numbers
and locations of all bank and deposit accounts of the Borrowers or any of the
Subsidiaries of the Borrowers.
ss.7.23. Solvency. As of the Effective Date and after giving effect
to the transactions contemplated by the Loan Documents, (i) the property of the
Borrowers and their Subsidiaries, at a fair valuation, will exceed their debts;
(ii) the capital of the Borrowers and their Subsidiaries will not be
unreasonably small to conduct their businesses; (iii) the Borrowers and their
Subsidiaries will not have incurred debts, or have intended to incur debts,
beyond their ability to pay such debts as they mature; and (iv) the present
fair, saleable value of the assets of the Borrowers and their Subsidiaries will
be materially greater than the amount that will be required to pay their
probable liabilities (including debts) as they become absolute and matured. For
purposes of this Section 7.23, "debt" means any liability on a claim, and
"claim" means (i) the right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
undisputed, legal, equitable, secured or unsecured, or (ii) the right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, undisputed, secured or
unsecured.
ss.7.24. Full Disclosure. There is no material fact or condition
relating to the Loan Documents or the financial condition, business or property
of either Borrower which could have a materially adverse effect on the business
or operations of such Borrower and which has not been related, in writing, to
the Lenders. All information heretofore furnished by either Borrower to any
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Lender or the Administrative Agent in connection with the Loan Documents was,
and all such information hereafter furnished by either Borrower to any Lender or
Administrative Agent will be, true and accurate in all material respects or
based on reasonable estimates on the date as of which such information is stated
or certified.
ss.8. AFFIRMATIVE COVENANTS OF THE BORROWERS. Each Borrower covenants and
agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Credit
Instrument or Note is outstanding or any Lender has any obligation to make any
Loans or the Administrative Agent has any obligation to issue, extend or renew
any Credit Instrument:
ss.8.1. Punctual Payment. The Borrowers will duly and punctually pay
or cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the facility fees, the Agents' fees, the Letter of Credit Fees and
all other amounts provided for in this Credit Agreement and the other Loan
Documents to which either Borrower or any of its Subsidiaries is a party, all in
accordance with the terms of this Credit Agreement and such other Loan
Documents.
ss.8.2. Maintenance of Office. Each Borrower will maintain its chief
executive office at the address set forth in the preamble to this Credit
Agreement, or at such other place in the United States of America as such
Borrower shall designate upon written notice to the Administrative Agent, where
notices, presentations and demands to or upon such Borrower in respect of the
Loan Documents to which such Borrower is a party may be given or made.
ss.8.3. Records and Accounts. Each Borrower will (a) keep, and cause
each of its Subsidiaries to keep, true and accurate records and books of account
in which full, true and correct entries will be made and (b) maintain adequate
accounts and reserves for all taxes (including income taxes), depreciation,
depletion, obsolescence and amortization of its properties and the properties of
its Subsidiaries, contingencies, and other reserves.
ss.8.4. Financial Statements, Certificates and Information. Each
Borrower will deliver to each of the Lenders (other than with respect to
ss.8.4(g) hereof which shall be delivered to the Administrative Agent only):
(a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of the Borrowers, the
consolidated and the consolidating balance sheets of the Borrowers and
their Subsidiaries, as at the end of such year, and the related
consolidated and consolidating statements of income and statements of cash
flow, for such year, each setting forth in comparative form the figures
for the previous fiscal year and all such statements to be in reasonable
detail, prepared in accordance with generally accepted accounting
principles, and audited without qualification (other than a qualification
regarding
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changes in generally accepted accounting principles) by Ernst & Young
(with respect to the consolidated statements only) or by other independent
certified public accountants satisfactory to the Administrative Agent,
together with a written statement from such accountants to the effect that
they have read a copy of this Credit Agreement, and that, in making the
examination necessary to said certification, they have obtained no
knowledge of any Default or Event of Default, or, if such accountants
shall have obtained knowledge of any then existing Default or Event of
Default they shall disclose in such statement any such Default or Event of
Default, together with any and all management letters to the Borrowers
from Borrowers' independent certified public accountants during such
fiscal year; provided that such accountants shall not be liable to the
Lenders for failure to obtain knowledge of any Default or Event of
Default;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of the
Borrowers, copies of the unaudited consolidated and consolidating balance
sheets of the Borrowers and their Subsidiaries, as at the end of such
quarter, and the related consolidated and consolidating statements of
income and consolidated statements of cash flow for the portion of
Borrowers' fiscal year then elapsed, all in reasonable detail and prepared
in accordance with generally accepted accounting principles for interim
statements, together with a certification by the principal financial or
accounting officer of each Borrower that the information contained in such
financial statements fairly presents the financial position of the
Borrowers and their Subsidiaries on the date thereof (subject to year-end
adjustments);
(c) as soon as practicable, but in any event not later than twenty
(20) days after the end of each calendar month, management prepared
unaudited consolidated and consolidating monthly financial statements of
the Borrowers and their Subsidiaries for such month;
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
chief financial officer, controller or senior vice-president-finance of
each Borrower in substantially the form of Exhibit B hereto and setting
forth in reasonable detail computations evidencing compliance with the
covenants contained in ss.10 and (if applicable) reconciliations to
reflect changes in generally accepted accounting principles since the
Balance Sheet Date;
(e) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission by either Borrower or sent to the stockholders of either
Borrower, including, without limitation any 10K or 10Q filing;
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(f) within fifteen (15) days after the end of each fiscal month (or
within three (3) Business Days after the end of each calendar week if a
Permitted Overadvance is outstanding or was outstanding during the
immediately preceding calendar week), a Borrowing Base Report setting
forth the Borrowing Base as at the end of such fiscal month or calendar
week (as the case may be), certified by the chief financial officer or
president of each of the Borrowers;
(g) within fifteen (15) days after the end of each calendar month,
an Accounts Receivable aging report, an inventory report, a charge-back
aging report and a backlog report, each in form and detail satisfactory to
the Administrative Agent;
(h) As soon as available, and in any event, within forty-five (45)
days after the end of each fiscal year of the Borrowers, projections for
the coming fiscal year on a month-by-month basis in such form as the
Borrowers have previously submitted to its bank lenders, detailing each
item of income and expenditure for such month, and on a cumulative
year-to-date basis from the commencement of such fiscal year, which
projections shall include, without limitation, balance sheets, projected
Letter of Credit and Bankers' Acceptance usage and any and all anticipated
Capital Expenditures; and
(i) from time to time such other financial data and information
(including accountants, management letters) as the Administrative Agent or
any Lender may reasonably request.
ss.8.5. Notices.
(a) Defaults. Each Borrower will promptly notify the Administrative
Agent and each of the Lenders in writing of the occurrence of any Default
or Event of Default. If any Person shall give any notice or take any other
action in respect of a claimed default (whether or not constituting an
Event of Default) under this Credit Agreement or any other note, evidence
of indebtedness, indenture or other obligation to which or with respect to
which such Borrower or any of its Subsidiaries is a party or Borrower,
whether as principal, guarantor, surety or otherwise, such Borrower shall
forthwith give written notice thereof to the Administrative Agent and each
of the Lenders, describing the notice or action and the nature of the
claimed default.
(b) Environmental Events. Each Borrower will promptly give notice to
the Administrative Agent and each of the Lenders (i) of any violation of
any Environmental Law that such Borrower or any of its Subsidiaries
reports in writing or is reportable by such Person in writing (or for
which any written report supplemental to any oral report is made) to any
federal, state or local environmental agency and (ii) upon becoming
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aware thereof, of any inquiry, proceeding, investigation, or other action,
including a notice from any agency of potential environmental liability,
or any federal, state or local environmental agency or board, that has the
potential to materially affect the assets, liabilities, financial
conditions or operations of such Borrower or any of its Subsidiaries, or
the Administrative Agent's mortgages, deeds of trust or security interests
pursuant to the Security Documents.
(c) Notification of Claims against Collateral. Each Borrower will,
immediately upon becoming aware thereof, notify the Administrative Agent
and each of the Lenders in writing of any setoff, claims (including, with
respect to any Real Estate, environmental claims), withholdings or other
defenses to which any Collateral having a fair value, either, singularly
or in the aggregate in excess of $500,000 is subject, or the
Administrative Agent's rights with respect to any such Collateral, is
subject.
(d) Notifications Re: Material License Agreements. Each Borrower
will, immediately upon becoming aware thereof, notify the Administrative
Agent and each of the Lenders in writing of any event which constitutes a
default by any Person or any of its Subsidiaries under any Material
License Agreement and will immediately forward to the Administrative Agent
and each of the Lenders copies of any communication received by such
Person from any licensor claiming any irregularity or default under any
Material License Agreement. In addition, if either Borrower or any of its
Subsidiaries enters into any amendment of any Material License Agreement
in any material respect, the Borrowers shall immediately provide the
Administrative Agent with copies of such amendment.
(e) Notice of Litigation and Judgments. Each Borrower will, and will
cause each of its Subsidiaries to, give notice to the Administrative Agent
and each of the Lenders in writing within fifteen (15) days of becoming
aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting such Borrower or any of its
Subsidiaries or to which such Borrower or any of its Subsidiaries is or
becomes a party involving an uninsured claim against such Borrower or any
of its Subsidiaries that could reasonably be expected to have a materially
adverse effect on such Borrower or any of its Subsidiaries and stating the
nature and status of such litigation or proceedings. Each Borrower will,
and will cause each of its Subsidiaries to, give notice to the
Administrative Agent and each of the Lenders, in writing, in form and
detail satisfactory to the Administrative Agent, within ten (10) days of
any judgment not covered by insurance, final or otherwise, against such
Borrower or any of its Subsidiaries in an amount in excess of $500,000.
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ss.8.6. Corporate Existence; Maintenance of Properties. Each
Borrower will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence, rights and franchises and
those of its Subsidiaries. It (a) will cause all of its properties and those of
its Subsidiaries used or useful in the conduct of its business or the business
of its Subsidiaries to be maintained and kept in operating condition, repair and
working order and supplied with all necessary equipment, (b) will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of such Borrower may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times, and (c) will, and will cause each of its Subsidiaries
to, continue to engage primarily in the businesses now conducted by them and in
related businesses.
ss.8.7. Insurance. Each Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent. Starter will pay all premiums when due on the Life
Insurance Policy and properly notify the Administrative Agent in writing of the
death of the individual covered by the Life Insurance Policy. In the event of
the death of such individual, regardless of whether an Event of Default shall
have occurred and be continuing, the Borrowers agree that the Administrative
Agent may, upon three Business Days prior written notice to the Borrowers, apply
the proceeds of the Life Insurance Policy as a mandatory prepayment of the
amounts payable hereunder and the other Loan Documents in such order of priority
as is contemplated in ss.13.4.
ss.8.8. Taxes. Each Borrower will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if such Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto; and provided further that such Borrower
and each Subsidiary of such Borrower will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
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ss.8.9. Inspection of Properties and Books, Etc.
(a) General. Upon five (5) Business Days' prior notice by the
Administrative Agent or any of the Lenders to the Borrowers, each Borrower
shall permit the Lenders, through the Administrative Agent or any of the
Lenders' other designated representatives, to visit and inspect any of the
properties of such Borrower or any of its Subsidiaries, to examine the
books of account of such Borrower and its Subsidiaries (and to make copies
thereof and extracts therefrom), and to discuss the affairs, finances and
accounts of such Borrower and its Subsidiaries with, and to be advised as
to the same by, its and their officers, all during normal business hours
and at such reasonable intervals as the Administrative Agent or any Lender
may reasonably request.
(b) Collateral Reports. No more than twice each calendar year
(unless an Event of Default shall have occurred and be continuing, then as
and when requested by the Administrative Agent), upon the request of the
Administrative Agent, the Borrowers will cooperate with the Administrative
Agent in connection with the preparation of a report of an independent
collateral auditor satisfactory to the Administrative Agent (which may be
affiliated with one of the Lenders) with respect to the Accounts
Receivable and inventory components included in the Borrowing Base, which
report shall indicate whether or not the information set forth in the
Borrowing Base Report most recently delivered is accurate and complete in
all material respects based upon a review by such auditors of the Accounts
Receivable (including verification with respect to the amount, aging,
identity and credit of the respective account debtors and the billing
practices of the Borrowers and their applicable Subsidiaries) and
inventory (including verification as to the value, location and respective
types). All such collateral value reports shall be conducted and made at
the expense of the Borrowers.
(c) Environmental Assessments. At any time after an Event of Default
shall have occurred and is continuing, or, whether or not an Event of
Default shall have occurred and be continuing, at any time after the
Administrative Agent or any Lender shall receive notice of any Spill,
Release or threatened Release (each as defined under CERCLA) of Hazardous
Substances from either Borrower, or shall have received notice from any
other source deemed reliable by the Administrative Agent or such Lender
that a Spill or Release of Hazardous Substances may have occurred, the
Administrative Agent may, from time to time, in its discretion for the
purpose of assessing and ensuring the value of any Real Estate, obtain one
or more environmental assessments or audits of such Real Estate prepared
by a hydrogeologist, an independent engineer or other qualified consultant
or expert approved by the Administrative Agent to evaluate or confirm (i)
whether any Hazardous Materials are present in the soil or water at such
Real Estate and (ii) whether the use and
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operation of such Real Estate complies with all Environmental Laws.
Environmental assessments may include without limitation detailed visual
inspections of such Real Estate including any and all storage areas,
storage tanks, drains, dry wells and leaching areas, and the taking of
soil samples, surface water samples and ground water samples, as well as
such other investigations or analyses as the Administrative Agent deems
appropriate. The Administrative Agent shall give the Borrower prior notice
of such environmental assessments and such environmental assessments shall
be conducted and made at the expense of the Borrowers.
(d) Communications with Accountants. Each Borrower authorizes the
Administrative Agent and, if accompanied by the Administrative Agent, the
Lenders to communicate directly with such Borrower's independent certified
public accountants and authorizes such accountants to disclose to the
Administrative Agent and the Lenders any and all financial statements and
other supporting financial documents and schedules including copies of any
management letter with respect to the business, financial condition and
other affairs of such Borrower or any of its Subsidiaries. At the request
of the Administrative Agent, such Borrower shall deliver a letter
addressed to such accountants instructing them to comply with the
provisions of this ss.8.9(d).
ss.8.10. Compliance with Laws, Contracts, Licenses, and Permits.
Each Borrower will, and will cause each of its Subsidiaries to, (a) comply in
all material respects with the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, (b) comply with the
provisions of its charter documents and by-laws, (c) comply in all material
respects with all agreements and instruments by which it or any of its
properties may be bound, including without limitation, the Material License
Agreements, and (d) comply in all material respects with all applicable decrees,
orders, and judgments. If any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any government shall
become necessary or required in order that such Borrower or any of its
Subsidiaries may fulfill any of its obligations hereunder or any of the other
Loan Documents to which such Borrower or such Subsidiary is a party, such
Borrower will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
such Borrower or such Subsidiary to obtain such authorization, consent,
approval, permit or license and furnish the Administrative Agent and the Lenders
with evidence thereof. Without limiting the foregoing, each Borrower will
continuously hold all permits and licenses required for the operation of its
business, including, without limitation all licenses, permits and other
certificates required by any Federal, state or local authority in connection
with the ownership and operation of its business.
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ss.8.11. Employee Benefit Plans. Each Borrower will, and will cause
each of its Subsidiaries to, (i) promptly upon filing the same with the
Department of Labor or Internal Revenue Service, furnish to the Administrative
Agent a copy of the most recent actuarial statement required to be submitted
under ss.103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon
receipt or dispatch, furnish to the Administrative Agent any notice, report or
demand sent or received in respect of a Guaranteed Pension Plan under ss.ss.302,
4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under ss.ss.4041A, 4202, 4219, 4242, or 4245 of ERISA.
ss.8.12. Use of Proceeds. Each Borrower will use the proceeds of the
Loans solely (i) to refinance on the Effective Date all of the Indebtedness of
the Borrowers to the Administrative Agent and other lenders under that certain
1996 Amended and Restated Commercial Revolving Loan and Security Agreement dated
as of October 7, 1996, (ii) to refinance on the Effective Date all of the
Indebtedness of the Borrowers to First Union Bank of Connecticut, (iii) for
working capital and general corporate purposes and (iv) to make the Permitted
Acquisitions. The Borrowers will obtain Credit Instruments solely for general
working capital and general corporate purposes.
ss.8.13. Business. Each Borrower will, and will cause each of its
Subsidiaries to, engage in the same or similar or related business as that
conducted on the Effective Date.
ss.8.14. Further Assurances. Each Borrower will, and will cause each
of its Subsidiaries to, cooperate with the Lenders and the Administrative Agent
and execute such further instruments and documents as the Lenders or the
Administrative Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Credit Agreement and the other Loan
Documents.
ss.8.15. Payment of Wages. The Borrowers and each of their
Subsidiaries shall at all times comply, in all material respects, with the
requirements of the Fair Labor Standards Act, as amended, including, without
limitation, the provisions of such Act relating to the payment of minimum and
overtime wages as the same may become due from time to time.
ss.8.16. Cash Management System. The Borrowers will, and will cause
each of their Subsidiaries to, utilize and maintain the Cash Management System
for all deposits made by any of them. The Cash Management System shall be
operated solely for the business of the Borrowers and their Subsidiaries.
ss.8.17. Bank Accounts. The Borrowers will, and will cause each of
its Subsidiaries to, together with the employees, agents and other Persons
acting on behalf of the Borrowers or such Subsidiary, receive and hold in trust
for the Administrative Agent and the Lenders all payments constituting
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proceeds of Accounts Receivable or other Collateral which come into their
possession or under their control and, immediately upon receipt thereof, deposit
such payments in the form received, with any appropriate endorsements, in one of
the accounts designated as a central depository account on Schedule 7.22.
ss.8.18. Lender Meeting. The Borrowers will, and will cause each of
their Subsidiaries to, if requested by the Administrative Agent, participate in
a meeting of the Lenders once during each fiscal year to be held at a location
and a time selected by the Borrowers and acceptable to the Agents and Lenders.
ss.9. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. Each Borrower covenants
and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Credit
Instrument or Note is outstanding or any Lender has any obligation to make any
Loans or the Administrative Agent has any obligation to issue, extend or renew
any Credit Instrument:
ss.9.1. Restrictions on Indebtedness. Neither Borrower will, and
will not permit any of its Subsidiaries to, create, incur, assume, guarantee or
be or remain liable, contingently or otherwise, with respect to any Indebtedness
other than:
(a) Indebtedness to the Lenders and the Administrative Agent arising
under any of the Loan Documents;
(b) current liabilities of such Borrower or such Subsidiary incurred
in the ordinary course of business not incurred through (i) the borrowing
of money, or (ii) the obtaining of credit except for credit on an open
account basis customarily extended and in fact extended in connection with
normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of ss.8.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which such Borrower or
such Subsidiary shall at the time in good faith be prosecuting an appeal
or proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
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(f) obligations under Capitalized Leases not exceeding $3,000,000 in
aggregate amount for all Borrowers and their respective Subsidiaries with
respect to any fiscal year;
(g) unsecured direct Indebtedness for borrowed money (excluding any
guaranty or other contingent obligations) in an aggre; andamount not to
exceed $5,000,000 at any time
(h) Indebtedness existing on the date hereof and listed and
described on Schedule 9.1 hereto.
ss.9.2. Restrictions on Liens. Neither Borrower will, and will not
permit any of its Subsidiaries to, (a) create or incur or suffer to be created
or incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the
income or profits therefrom for the purpose of subjecting the same to the
payment of Indebtedness or performance of any other obligation in priority to
payment of its general creditors; (c) acquire, or agree or have an option to
acquire, any property or assets upon conditional sale or other title retention
or purchase money security agreement, device or arrangement; (d) suffer to exist
for a period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid might by
law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; (e) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; or (f) enter into or permit to exist any
arrangement or agreement which directly or indirectly prohibits either Borrower
from creating or incurring any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind, other than pursuant to the
Security Documents; provided that such Borrower and any Subsidiary of such
Borrower may create or incur or suffer to be created or incurred or to exist:
(i) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties
other than Real Estate to secure claims for labor, material or
supplies in respect of obligations not overdue;
(ii) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(iii) liens on properties other than Real Estate in respect of
judgments or awards, the Indebtedness with respect to which is
permitted by ss.9.1(d);
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(iv) liens of carriers, warehousemen, mechanics and
materialmen, and other like liens on properties other than Real
Estate, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue;
(v) encumbrances on Real Estate consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto,
landlord's or lessor's liens under leases to which such Borrower or
a Subsidiary of such Borrower is a party, and other minor liens or
encumbrances none of which in the opinion of such Borrower
interferes materially with the use of the property affected in the
ordinary conduct of the business of such Borrower and its
Subsidiaries, which defects do not individually or in the aggregate
have a materially adverse effect on the business of such Borrower
individually or of such Borrower and its Subsidiaries on a
consolidated basis;
(vi) liens existing on the date hereof and listed on Schedule
9.2 hereto;
(vii) purchase money security interests in or purchase money
mortgages on real or personal property other than Real Estate
acquired after the date hereof to secure purchase money Indebtedness
of the type and amount permitted by ss.9.1(g), incurred in
connection with the acquisition of such property, which security
interests or mortgages cover only the real or personal property so
acquired; and
(viii) liens in favor of the Administrative Agent for the
benefit of the Lenders and the Administrative Agent under the Loan
Documents.
ss.9.3. Restrictions on Investments. Neither Borrower will, and will
not permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment except:
(a) Investments in marketable direct or guaranteed obligations of
the United States of America that mature within one (1) year from the date
of purchase by such Borrower;
(b) Investments in demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total assets
in excess of $2,000,000,000;
(c) Investments in securities commonly known as "commercial paper"
issued by a corporation organized and existing under the laws of the
United States of America or any state thereof that at the time of
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purchase have been rated and the ratings for which are not less than "P 1" if
rated by Moody's Investors Services, Inc., and not less than "A 1" if rated by
Standard and Poor's;
(d) Investments existing on the date hereof and listed on Schedule
9.3 hereto;
(e) Investments in the form of loans to employees of either
Borrower, other than to David Beckerman or any family member of David
Beckerman, not to exceed $100,000 in the aggregate at any time;
(f) Investments constituting the Permitted Acquisitions;
(g) Investments in Starter Europe in an aggregate amount not to
exceed $500,000 at any time and which are used for general working capital
purposes only;
(h) extensions of trade credit in the ordinary course of business.
ss.9.4. Distributions. The Borrowers will not make any
Distributions; provided, that so long as no Default or Event of Default shall
have occurred and be continuing under the Loan Documents (or would result
therefrom), the Borrowers may make Distributions under (a) the Starter
Corporation Stock Option Plan dated as of January 27, 1993, (b) the Starter
Employee Stock Purchase Plan dated as of June 29, 1994, and (c) the Starter
Non-Employee Director Stock Option Plan dated as of May 24, 1994, a copy of each
of which has previously been delivered to the Administrative Agent.
ss.9.5. Merger, Consolidation and Disposition of Assets.
(a) Neither of the Borrowers will, and will not permit any of their
respective Subsidiaries to, become a party to any merger or consolidation,
or agree to or effect any asset acquisition or stock acquisition (other
than the acquisition of assets in the ordinary course of business
consistent with past practices) except (i) the merger or consolidation of
one or more of the Subsidiaries of the Borrowers with and into either
Borrower, (ii) the merger or consolidation of two or more Subsidiaries of
the Borrowers or (iii) any Investments permitted by the terms hereof.
(b) Neither Borrower will, and will not permit any of its
Subsidiaries to, become a party to or agree to or effect any Asset Sale
without the prior written consent of each of the Lenders.
ss.9.6. Sale and Leaseback. Neither Borrower will, and neither will
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby such Borrower or any Subsidiary of such Borrower shall sell
or transfer any property owned by it in order then or thereafter to lease such
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property or lease other property that such Borrower or any Subsidiary of such
Borrower intends to use for substantially the same purpose as the property being
sold or transferred.
ss.9.7. Business. Neither Borrower will, and neither will permit any
of its Subsidiaries to, (a) engage in any business other than (i) the business
engaged in by such Person on the Effective Date, and similar and related
businesses and (ii) such other lines of business as may be consented to the
Administrative Agent and the Lenders or (b) enter into any management agreement
with any Person except as permitted hereunder.
ss.9.8. Compliance with Environmental Laws. Neither Borrower will,
and neither will permit any of its Subsidiaries to conduct any activity at any
Real Estate or use any Real Estate in any manner that would violate any
Environmental Law or bring such Real Estate in violation of any Environmental
Law, including (a) using any of the Real Estate or any portion thereof for the
handling, processing, storage or disposal of Hazardous Substances in a manner
that would violate Environmental Laws, (b) causing or permitting to be located
on any of the Real Estate any underground tank or other underground storage
receptacle for Hazardous Substances in a manner that would violate Environmental
Laws, (c) generating of any Hazardous Substances on any of the Real Estate in a
manner that would violate Environmental Laws, or (d) conducting of any activity
at any Real Estate or use any Real Estate in any manner so as to cause a release
(i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing or dumping) or threatened
release of Hazardous Substances on, upon or into the Real Estate in a manner
that would violate Environmental Laws.
ss.9.9. Employee Benefit Plans. Neither Borrower, nor any of its
Subsidiaries or any ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of
ss.406 of ERISA or ss.4975 of the Code which could result in a material
liability for such Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in ss.302 of ERISA, whether
or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of such
Borrower or any of its Subsidiaries pursuant to ss.302(f) or ss.4068 of
ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of ss.4001 of ERISA) of all
Guaranteed
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Pension Plans exceeding the value of the aggregate assets of such Plans,
disregarding for this purpose the benefit liabilities and assets of any
such Plan with assets in excess of benefit liabilities.
ss.9.10. Additional Shares. Neither Borrower will at any time, nor
will either Borrower cause or permit any of its Subsidiaries at any time, to
sell or offer to sell any shares of any class of capital stock, or any other
securities, of such Borrower or any Subsidiary without the prior written consent
of the Majority Lender; provided, that either Borrower may issue and sell shares
of any class of capital stock having a fair market value (as reasonably
determined by the Administrative Agent) not in excess of $5,000,000 in
connection with a Permitted Acquisition.
ss.9.11. Change of Fiscal Year. Neither Borrower nor any of its
Subsidiaries shall change its fiscal year without the prior written consent of
the Majority Lenders, provided that, such consent shall not be unreasonably
withheld.
ss.9.12. Total Commitment Amount. The Borrowers shall not cause or
permit the sum of the outstanding amount of all Loans, the Maximum Drawing
Amount, the Acceptance Face Amount and all Unpaid Reimbursement Obligations to
exceed the lesser of (a) Total Commitment and (b) the sum of (i) the Borrowing
Base and (ii) the Permitted Overadvance Amount.
ss.9.13. Accounting Practices. Neither Borrower nor any of its
Subsidiaries shall effect any significant change in its accounting practices or
treatment except as may be permitted or required by generally accepted
accounting principles and only after prior written notice to the Agents.
ss.9.14. Limitation on Other Restrictions on Amendment of Loan
Documents. Neither Borrower will, and will not permit any of its Subsidiaries
to, enter into, suffer to exist or become or remain subject to any agreement or
instrument to which such Person is a party or by which such Person or any
property of such Person (now owned or hereafter acquired) may be subject or
bound, except for the Loan Documents, that would prohibit or restrict in any
manner (directly or indirectly and including by way of covenant representation
or warranty or event of default), or require the consent of any Person to, any
amendment to, or waiver or consent to departure from the terms of, any of the
Loan Documents.
ss.10. FINANCIAL COVENANTS OF THE BORROWERS. Each Borrower covenants and
agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Credit
Instrument or Note is outstanding or any Lender has any obligation to make any
combined Loans or the Administrative Agent has any obligation to issue, extend
or renew any Credit Instrument:
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ss.10.1. Liabilities to Worth Ratio. The Borrowers will not permit
the ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth
for any fiscal quarter ending during any period described in the table set forth
below to exceed the ratio set forth opposite such period below:
Period Ratio
------ -----
Effective Date through March 31, 1997 1.00 to 1
April 1, 1997 through September 30, 1997 1.75 to 1
October 1, 1997 through March 31, 1998 1.00 to 1
April 1, 1998 through September 30, 1998 1.75 to 1
October 1, 1998 through March 31, 1999 1.00 to 1
April 1, 1999 through September 30, 1999 1.75 to 1
October 1, 1999 through March 31, 2000 1.00 to 1
April 1, 2000 and thereafter 1.75 to 1
ss.10.2. EBIT to Total Interest Expense Ratio. The Borrowers will
not permit the ratio of Earnings Before Interest and Taxes to Consolidated Total
Interest Expense for any period of four (4) consecutive fiscal quarters of the
Borrowers ending on the dates set forth below to be less than the ratio set
forth opposite such date below:
Date Ratio
---- -----
March 31, 1997 1.50 to 1
June 30, 1997 1.20 to 1
September 30, 1997 1.50 to 1
December 31, 1997 1.50 to 1
March 31, 1998 1.45 to 1
June 30, 1998 1.60 to 1
September 30, 1998 1.60 to 1
December 31, 1998 and thereafter 1.75 to 1
ss.10.3. Capital Expenditures; Capitalized Leases. The Borrowers
will not make, or permit any Subsidiary of the Borrowers to make, Capital
Expenditures plus Capitalized Lease expenditures (including the "face amount" of
Capitalized Leases) in any fiscal year that exceed, in the aggregate for all
Borrowers and their Subsidiaries $3,000,000 for such fiscal year (excluding any
such expenditures made in connection with the computer system upgrade as set
forth on Schedule 9.1 hereto).
ss.10.4. Net Income. The Borrowers will not permit Consolidated Net
Income for any fiscal year to be less than $1.00.
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ss.11. CONDITIONS TO EFFECTIVE DATE. The obligations of the Lenders to
amend and restate the Original Loan Agreement and to make the initial Loans and
of the Administrative Agent to issue any initial Credit Instrument, shall be
subject to the satisfaction of the following conditions precedent on or prior to
May 16, 1997:
ss.11.1. Loan Documents. Each of the Loan Documents shall have been
duly executed and delivered by the respective parties thereto, shall be in full
force and effect and shall be in form and substance satisfactory to each of the
Lenders. Each Lender shall have received a fully executed copy of each such
document, certified as true and correct by the Borrowers.
ss.11.2. Certified Copies of Charter Documents. Each of the Agents
shall have received from each Borrower and each of its Subsidiaries a copy,
certified by a duly authorized officer of such Person to be true and complete on
the Effective Date, of each of (a) its charter or other incorporation documents
as in effect on such date of certification, and (b) its by-laws as in effect on
such date.
ss.11.3. Corporate, Action. All corporate action necessary for the
valid execution, delivery and performance by each Borrower and each of its
Subsidiaries of this Credit Agreement and the other Loan Documents to which it
is or is to become a party shall have been duly and effectively taken, and
evidence thereof satisfactory to the Agents shall have been provided to each of
the Agents.
ss.11.4. Incumbency Certificates. Each of the Agents shall have
received from each Borrower and each of the Borrowers' Subsidiaries an
incumbency certificate, dated as of the Effective Date, signed by a duly
authorized officer of such Person, and giving the name and bearing a specimen
signature of each individual who shall be authorized: (a) to sign, in the name
and on behalf of Person, each of the Loan Documents to which such Person is or
is to become a party; (b) in the case of such Borrower, to make Loan Requests
and apply for Credit Instruments; and (c) to give notices and to take other
action on such Persons behalf under the Loan Documents.
ss.11.5. Legality of Transactions. No change in applicable law shall
have occurred as a consequence of which it shall have become and continue to be
unlawful (a) for any Lender or the Administrative Agent to perform any of its
agreements or obligations under any of the Loan Documents to which any such
Person is a party on the Effective Date or (b) for either Borrower or any of its
Subsidiaries to perform any of its agreements or obligations under any of the
Loan Documents to which it is a party on the Effective Date.
ss.11.6. Validity of Liens. The Security Documents shall be
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable first (except for Permitted Liens
entitled
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to priority under applicable law) security interest in and lien upon the
Collateral. All filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Administrative Agent to protect and
preserve such security interests shall have been duly effected. The
Administrative Agent shall have received evidence thereof in form and substance
satisfactory to the Administrative Agent.
ss.11.7. UCC Search Results. The Administrative Agent shall have
received UCC searches with respect to the Collateral, indicating no liens other
than Permitted Liens and otherwise in form and substance satisfactory to the
Administrative Agent.
ss.11.8. Certificates of Insurance. The Administrative Agent shall
have received (a) a certificate of insurance from an independent insurance
broker dated as of the Effective Date, identifying insurers, types of insurance,
insurance limits, and policy terms, and otherwise describing the insurance
obtained and endorsed to the Administrative Agent for the benefit of the Lenders
and (b) certified copies of all policies evidencing such insurance (or
certificates therefore signed by the insurer or an agent authorized to bind the
insurer).
ss.11.9. Proceedings and Documents. All corporate, partnership,
governmental and other proceedings in connection with the transactions
contemplated by the Loan Documents and all instruments and documents incidental
thereto, shall be in form and substance reasonably satisfactory to the Lenders
and the Lenders shall have received all such counterpart originals or certified
or other copies of all such instruments and documents as the Lenders shall have
reasonably requested.
ss.11.10. Financial Condition. The Lenders shall be satisfied that
the financial statements referred to in ss.7.5 fairly present the business and
financial condition of the Borrowers, as at and for the periods ending on the
respective dates thereof, and that, except for changes described in writing to
the Lenders and acceptable to them, there has been no material adverse change in
the assets, business or financial condition of either Borrower since the
applicable dates set forth in ss.7.5 hereof.
ss.11.11. Opinion of Counsel. Each of the Lenders and the Agents
shall have received a favorable legal opinion addressed to the Lenders and the
Agents, dated as of the Effective Date, in form and substance satisfactory to
the Lenders and the Agents, from:
(a) Cummings & Lockwood, counsel to the Borrowers and their
Subsidiaries; and
(b) Apperson, Crump, Duzane & Maxwell, PLC, Tennessee counsel to the
Borrowers and their Subsidiaries.
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ss.11.12. Payment of Agents' Fees. The Borrowers shall have paid the
fees to the Agents pursuant to ss.5.1.
ss.11.13. Payoff Letters. The Administrative Agent shall have
received payoff letters from Bank of Boston Connecticut and First Union Bank of
Connecticut, indicating the amount of the loan obligations of the Borrowers to
such Persons to be discharged on the Effective Date and an acknowledgment by
such Persons that upon receipt of such funds it will forthwith execute and
deliver to the Administrative Agent for filing all termination statements and
take such other actions as may be necessary to discharge all mortgages, deeds of
trust and security interests granted by the Borrowers or any of their
Subsidiaries in favor of such Persons.
ss.11.14. Disbursement Instructions. The Administrative Agent shall
have received disbursement instructions from the Borrowers, indicating that a
portion of the proceeds of the Loans, in an amount equal to the aggregate loan
obligations of the Borrowers to Bank of Boston Connecticut and First Union Bank
of Connecticut are to be paid to such Persons.
ss.11.15. Cash Management System. The Borrowers shall have created a
cash management system (the "Cash Management System") satisfactory to the
Administrative Agent, and all agreements related thereto shall have been
delivered to the Administrative Agent and shall be satisfactory to the
Administrative Agent.
ss.11.16. Borrowing Base Report. The Administrative Agent shall have
received from the Borrowers the initial Borrowing Base Report as of the
Effective Date.
ss.11.17. Accounts Receivable Agent Report. The Administrative
Agents shall have received from the Borrowers the most recent Accounts
Receivable aging report of the Borrowers and their Subsidiaries dated as of a
date which shall be no more than fifteen (15) days prior to the Effective Date
and the Borrowers shall notify the Administrative Agent in writing on the
Effective Date of any material deviation from the Accounts Receivable values
reflected in such Accounts Receivable aging report and shall provide the
Administrative Agent with such supplementary documentation as the Administrative
Agent may reasonably request.
ss.11.18. Field Exams. The Lenders shall have received copies of the
field exams conducted by M.R. Weiser, the Lender's commercial financial
examiners, such exams to be in form, substance and detail satisfactory to the
Lenders in all respects.
ss.11.19. Consents. These Original Banks that will not be a party to
this Credit Agreement shall have consented in writing to the transactions
contemplated hereby on terms satisfactory to the Administrative Agent.
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ss.12. CONDITIONS TO ALL BORROWINGS. The obligations of the Lenders to
make any Loan, and the Administrative Agent to issue, extend or renew any Credit
Instrument in each case whether on or after the Effective Date, shall also be
subject to the satisfaction of the following conditions precedent:
ss.12.1. Representations True; No Event of Default. Each of the
representations and warranties of the Borrowers and their Subsidiaries contained
in this Credit Agreement, the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with this Credit Agreement
shall be true as of the date as of which they were made and shall also be true
at and as of the time of the making of such Loan or the issuance, extension or
renewal of such Credit Instrument, with the same effect as if made at and as of
that time (except to the extent of changes resulting from transactions
contemplated or permitted by this Credit Agreement and the other Loan Documents
and changes occurring in the ordinary course of business that singly or in the
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
ss.12.2. No Legal Impediment. No change shall have occurred in any
law or regulations thereunder or interpretations thereof that in the reasonable
opinion of any Lender would make it illegal for such Lender to make such Loan or
participate in the issuance, extension or renewal of such Credit Instrument, or
in the opinion of the Administrative Agent would make it illegal for the
Administrative Agent to issue, extend or renew such Credit Instrument.
ss.12.3. Governmental Regulation. Each Lender shall have received
such statements in substance and form reasonably satisfactory to such Lender as
such Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
ss.12.4. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Credit Agreement, the other Loan
Documents and all other documents incident thereto shall be satisfactory in
substance and in form to the Lenders and to the Administrative Agent and the
Administrative Agent's Special Counsel, and the Lenders, the Administrative
Agent and such counsel shall have received all information and such counterpart
originals or certified or other copies of such documents as the Administrative
Agent may reasonably request.
ss.12.5. Borrowing Base Report. The Administrative Agent shall have
received from the Borrowers the most recent Borrowing Base Report required to be
delivered to the Administrative Agent in accordance with ss.8.4(f) and, if
requested by the Administrative Agent, a Borrowing Base Report dated within five
(5) days of the Drawdown Date of the requested Loan.
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ss.13. EVENTS OF DEFAULT; ACCELERATION; ETC.
ss.13.1. Events of Default and Acceleration. If any of the following
events ("Events of Default" or, if the giving of notice or the lapse of time or
both is required, then, prior to such notice or lapse of time, "Defaults") shall
occur:
(a) Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;
(b) either Borrower or any of its Subsidiaries shall fail to pay any
interest on the Loans, the facility fee, the Bankers' Acceptances Fees,
the Agents' fees, the Letter of Credit Fees or other sums due hereunder or
under any of the other Loan Documents, after the same shall become due and
payable, whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;
(c) either Borrower shall fail to comply with any of its covenants
contained in ss.ss. 8, 9 or 10;
(d) either Borrower or any of its Subsidiaries shall fail to perform
any term, covenant or agreement contained herein or in any of the other
Loan Documents (other than those specified elsewhere in this ss.13.1) for
thirty (30) days after written notice of such failure has been given to
such Borrower by the Administrative Agent;
(e) any representation or warranty of either Borrower or any of its
Subsidiaries in this Credit Agreement or any of the other Loan Documents
or in any other document or instrument delivered pursuant to or in
connection with this Credit Agreement shall prove to have been false in
any material respect upon the date when made or deemed to have been made
or repeated;
(f) either Borrower or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace (not to exceed thirty
(30) days), any obligation in excess of $500,000 for borrowed money or
credit received or in respect of any Capitalized Leases, or fail to
observe or perform any material term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing an amount
presently outstanding in excess of $500,000 in respect of borrowed money
or credit received or in respect of any Capitalized Leases for such period
of time as would permit (assuming the giving of appropriate notice if
required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof;
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(g) either Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its inability
to pay or generally fail to pay its debts as they mature or become due, or
shall petition or apply for the appointment of a trustee or other
custodian, liquidator or receiver of such Borrower or any of its
Subsidiaries or of any substantial part of the assets of such Borrower or
any of its Subsidiaries or shall commence any case or other proceeding
relating to such Borrower or any of its Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against such Borrower
or any of its Subsidiaries and such Borrower or any of its Subsidiaries
shall indicate its approval thereof, consent thereto, acquiescence therein
or otherwise remain undismissed for a period of sixty (60) days;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating either Borrower or any
of its Subsidiaries bankrupt or insolvent, or approving a petition in any
such case or other proceeding, or a decree or order for relief is entered
in respect of such Borrower or any Subsidiary of such Borrower in an
involuntary case under federal bankruptcy laws as now or hereafter
constituted (which order is not dismissed within sixty (60) days after the
entry thereof);
(i) there shall remain in force, undischarged, unsatisfied, unstayed
for more than thirty (30) days, whether or not consecutive, any final
judgment (unless bonded pending appeal) against the Borrowers or any of
their Subsidiaries that, with other outstanding final judgments,
undischarged, against the Borrowers or any of their Subsidiaries exceeds
in the aggregate $500,000;
(j) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof
or with the express prior written agreement, consent or approval of the
Lenders, or any action at law, suit or in equity or other legal proceeding
to cancel, revoke or rescind any of the Loan Documents shall be commenced
by or on behalf of either Borrower or any of its Subsidiaries party
thereto or any of their respective stockholders, or any court or any other
governmental or regulatory authority or agency of competent jurisdiction
shall make a determination that, or issue a judgment, order, decree or
ruling to the effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the terms thereof;
(k) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Majority Lenders shall have
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determined in their reasonable discretion that such event reasonably could
be expected to result in liability of the Borrowers or any of their
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate
amount exceeding $1,000,000 and such event in the circumstances occurring
reasonably could constitute grounds for the termination of such Guaranteed
Pension Plan by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Guaranteed Pension
Plan; or a trustee shall have been appointed by the United States District
Court to administer such Plan; or the PBGC shall have instituted
proceedings to terminate such Guaranteed Pension Plan;
(l) either Borrower or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of
its business and such order shall continue in effect for more than thirty
(30) days;
(m) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty, which in any such case causes, for more than fifteen
(15) consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of either Borrower or any of its
Subsidiaries if such event or circumstance is not covered by business
interruption insurance and would have a material adverse effect on the
business or financial condition of such Borrower or such Subsidiary;
(n) the Borrowers or any of their Subsidiaries shall be indicted for
a federal crime, a punishment for which could include the forfeiture of
any assets of the Borrowers or such Subsidiaries, such assets of the
Borrowers or such Subsidiaries having a fair market value in excess of
$100,000;
(o) the Borrowers or any of their Subsidiaries shall be in default
under any Material License Agreement and such default shall not have been
cured to the satisfaction of the licensor under such Material License
Agreement, or any of such Material License Agreements shall have been
terminated or not renewed (other than Material License Agreements which
relate to specific special events (i.e. Olympics) that mature by their
terms);
(p) the Borrowers or any of their Subsidiaries shall lose any other
license, permit, lease or other agreement, the loss of which would
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on either Borrower or any of its Subsidiaries;
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(q) David Beckerman shall, at any time, legally or beneficially own
less than fifty-one percent (51%) of the issued and outstanding capital
stock of Starter, on a fully diluted basis; or
(r) Starter and/or the wholly owned Subsidiaries of Starter shall,
at any time, legally or beneficially own less than one hundred percent of
the issued and outstanding capital stock of each of Starter Galt, Starter
Europe, Far East and Starter Outlet on a fully diluted basis;
then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Majority Lenders shall, by
notice in writing to the Borrowers declare all amounts owing with respect to
this Credit Agreement, the Notes and the other Loan Documents and all
Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrowers; provided
that in the event of any Event of Default specified in ss.ss.13.1(g), 13.1(h) or
13.1(k), all such amounts shall become immediately due and payable automatically
and without any requirement of notice from the Administrative Agent or any
Lender; provided further that in the event of any Event of Default specified in
ss.ss.13.1(g), 13.1(h) or 13.1(k), the Total Commitments of the Lenders shall
immediately terminate and all such amounts owing shall become immediately due
and payable automatically and without any requirement of notice from the
Administrative Agent or the Lenders. No remedy herein conferred upon the Lenders
is intended to be exclusive of any other remedy and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or any other
provision of law.
ss.13.2. Termination of Commitments. If any one or more of the
Events of Default specified in ss.13.1(g), ss.13.1(h) or ss.13.1(j) shall occur,
any unused portion of the Total Commitment hereunder shall forthwith terminate
and each of the Lenders shall be relieved of all further obligations to make
Loans to the Borrowers and the Administrative Agent shall be relieved of all
further obligations to issue, extend or renew Credit Instruments and the
Borrowers shall pay to the Administrative Agent an amount equal to the sum of
the Maximum Drawing Amount, plus the Acceptance Face Amount, plus all Unpaid
Reimbursement Obligations to be held by the Administrative Agent as cash
collateral as contemplated by ss.4.3(c). If any other Event of Default shall
have occurred and be continuing, or if on any Drawdown Date or other date for
issuing, extending or renewing any Credit Instrument the conditions precedent to
the making of the Loans to be made on such Drawdown Date or (as the case may be)
to issuing, extending or renewing such Credit Instrument on such date are not
satisfied, the Administrative Agent may and, upon the request of the Majority
Lenders, shall, by notice to the Borrowers, terminate the unused portion of the
credit hereunder, and upon such notice being given such unused portion of the
credit hereunder shall terminate immediately and each of the
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Lenders shall be relieved of all further obligations to make Loans and the
Administrative Agent shall be relieved of all further obligations to issue,
extend or renew Credit Instruments and the Borrowers shall pay to the
Administrative Agent an amount equal to the sum of the Maximum Drawing Amount,
plus the Acceptance Face Amount, plus all Unpaid Reimbursement Obligations to be
held by the Administrative Agent as cash collateral as contemplated by
ss.4.3(c). No termination of the credit hereunder shall relieve either Borrower
or any of its Subsidiaries of any of the Obligations.
ss.13.3. Remedies. In case any one or more of the Events of Default
shall have occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to ss.13.1, each Lender, if owed
any amount with respect to the Loans or the Reimbursement Obligations, may, with
the consent of the Majority Lenders but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Lender are evidenced, and,
if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such
Lender. No remedy herein conferred upon any Lender or the Administrative Agent
or the holder of any Note or purchaser of any Credit Instrument Participation is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.
ss.13.4. Distribution of Collateral Proceeds. In the event that the
Administrative Agent receives the proceeds of the Life Insurance Policy or in
the event that, following the occurrence or during the continuance of any
Default or Event of Default, the Administrative Agent or any Lender, as the case
may be, receives any monies in connection with the enforcement of any of the
Security Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Administrative Agent for or in respect of all
reasonable costs, expenses, disbursements and losses which shall have been
incurred or sustained by the Administrative Agent in connection with the
collection of such monies by the Administrative Agent, for the exercise,
protection or enforcement by the Administrative Agent of all or any of the
rights, remedies, powers and privileges of the Administrative Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Administrative Agent against any taxes or liens which by law shall have,
or may have, priority over the rights of the Administrative Agent to such
monies;
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(b) Second, to all other Obligations in such order or preference as
the Majority Lenders may determine; provided, however, that distributions
in respect of such obligations shall be made (i) pari passu among
Obligations with respect to the Agents' fees payable pursuant to ss.5.1
and all other Obligations and (ii) Obligations owing to the Lenders with
respect to each type of Obligation such as interest, principal, fees and
expenses, shall be made among the Lenders pro rata; and provided, further,
that the Administrative Agent may in its discretion make proper allowance
to take into account any Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Lenders and the Administrative
Agent of all of the Obligations, to the payment of any obligations
required to be paid pursuant to ss.9-504(1)(c) of the Uniform Commercial
Code of the State of Connecticut as in effect from time to time; and
(d) Fourth, the excess, if any, shall be returned to the Borrowers
or to such other Persons as are entitled thereto.
ss.14. SETOFF. Regardless of the adequacy of any collateral, during
the continuance of any Event of Default, any deposits or other sums credited by
or due from any of the Lenders to either Borrower and any securities or other
property of such Borrower in the possession of such Lender may be applied to or
set off by such Lender against the payment of Obligations and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of such Borrower to such Lender. Each of the
Lenders agrees with each other Lender that (a) if an amount to be set off is to
be applied to Indebtedness of the Borrowers to such Lender, other than
Indebtedness evidenced by the Notes held by such Lender or constituting
Reimbursement Obligations owed to such Lender, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by all such
Notes held by such Lender or constituting Reimbursement Obligations owed to such
Lender, and (b) if such Lender shall receive from either Borrower, whether by
voluntary payment, exercise of the right of setoff, counterclaim, cross action,
enforcement of the claim evidenced by the Notes held by, or constituting
Reimbursement Obligations owed to, such Lender by proceedings against such
Borrower at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Note or Notes held by, or Reimbursement
Obligations owed to, such Lender any amount in excess of its ratable portion of
the payments received by all of the Lenders with respect to the Notes held by,
and Reimbursement Obligations owed to, all of the Lenders, such Lender will make
such disposition and arrangements with the other Lenders with respect to such
excess, either by way of distribution, pro tanto assignment of claims,
subrogation or otherwise as shall result in each Lender receiving in respect of
the Notes held by it or Reimbursement Obligations owed
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to it, its proportionate payment as contemplated by this Credit Agreement;
provided that if all or any part of such excess payment is thereafter recovered
from such Lender, such disposition and arrangements shall be rescinded and the
amount restored to the extent of such recovery, but without interest.
ss.15. THE AGENTS.
ss.15.1. Authorization. The Administrative Agent is authorized to
take such action on behalf of each of the Lenders and to exercise all such
powers as are hereunder and under any of the other Loan Documents and any
related documents delegated to the Administrative Agent, together with such
powers as are reasonably incident thereto, provided that no duties or
responsibilities not expressly assumed herein or therein shall be implied to
have been assumed by the Administrative Agent. The relationship between the
Administrative Agent and the Lenders is and shall be that of agent and principal
only, and nothing contained in this Credit Agreement or any of the other Loan
Documents shall be construed to constitute the Administrative Agent as a trustee
for any Lender. The Syndication Agent shall have no independent powers, duties
or obligations under this Credit Agreement.
ss.15.2. Employees and Agents. The Administrative Agent may exercise
its powers and execute its duties by or through employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Credit Agreement and the other
Loan Documents. The Administrative Agent may utilize the services of such
Persons as the Administrative Agent in its sole discretion may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrowers.
ss.15.3. No Liability. Neither the Administrative Agent nor any of
its shareholders, directors, officers or employees nor any other Person
assisting them in their duties nor any agent or employee thereof, shall be
liable for any waiver, consent or approval given or any action taken, or omitted
to be taken, in good faith by it or them hereunder or under any of the other
Loan Documents, or in connection herewith or therewith, or be responsible for
the consequences of any oversight or error of judgment whatsoever, except that
the Administrative Agent or such other Person, as the case may be, shall be
liable for losses due to its willful misconduct or gross negligence.
ss.15.4. No Representations. The Administrative Agent shall not be
responsible for the execution or validity or enforceability of this Credit
Agreement, the Notes, any Credit Instrument, any of the other Loan Documents or
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes, or for the value of any such collateral security or for
the validity, enforceability or collectability of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or
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instrument hereafter furnished to it by or on behalf of the Borrowers or any of
their Subsidiaries, or, except as expressly provided for herein, be bound to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Notes or to
inspect any of the properties, books or records of the Borrowers or any of their
Subsidiaries. The Administrative Agent shall not be bound to ascertain whether
any notice, consent, waiver or request delivered to it by the Borrowers or any
holder of any of the Notes shall have been duly authorized or is true, accurate
and complete. The Administrative Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Lenders, with respect to the credit worthiness or financial
condition of the Borrowers or any of their Subsidiaries. Each Lender
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Credit Agreement.
ss.15.5. Payments.
(a) A payment by the Borrowers to the Administrative Agent hereunder
or any of the other Loan Documents for the account of any Lender shall
constitute a payment to such Lender. The Administrative Agent agrees
promptly to distribute to each Lender such Lender's pro rata share of
payments received by the Administrative Agent for the account of the
Lenders except as otherwise expressly provided herein or in any of the
other Loan Documents.
(b) If in the opinion of the Administrative Agent the distribution
of any amount received by it in such capacity hereunder, under the Notes
or under any of the other Loan Documents might involve it in liability, it
may refrain from making distribution until its right to make distribution
shall have been adjudicated by a court of competent jurisdiction. If a
court of competent jurisdiction shall adjudge that any amount received and
distributed by the Administrative Agent is to be repaid, each Person to
whom any such distribution shall have been made shall either repay to the
Administrative Agent its proportionate share of the amount so adjudged to
be repaid or shall pay over the same in such manner and to such Persons as
shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Credit Agreement or any of the other Loan Documents, any Lender that fails
(i) to make available to the Administrative Agent its pro rata share of
any Loan or to purchase a Credit Instrument Participation or (ii) to
comply with the provisions of ss.15 with respect to making dispositions
and arrangements with the other Lenders, where such Lender's share of any
payment received, whether by setoff or otherwise, is in excess of its pro
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rata share of such payments due and payable to all of the Lenders, in each
case as, when and to the full extent required by the provisions of this
Credit Agreement, shall be deemed delinquent (a "Delinquent Lender") and
shall be deemed a Delinquent Lender until such time as such delinquency is
satisfied. A Delinquent Lender shall be deemed to have assigned any and
all payments due to it from the Borrowers, whether on account of
outstanding Loans, Unpaid Reimbursement Obligations, interest, fees or
otherwise, to the remaining nondelinquent Lenders for application to, and
reduction of, their respective pro rata shares of all outstanding Loans
and Unpaid Reimbursement Obligations. The Delinquent Lender hereby
authorizes the Administrative Agent to distribute such payments to the
nondelinquent Lenders in proportion to their respective pro rata shares of
all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent
Lender shall be deemed to have satisfied in full a delinquency when and
if, as a result of application of the assigned payments to all outstanding
Loans and Unpaid Reimbursement Obligations of the nondelinquent Lenders,
the Lenders' respective pro rata shares of all outstanding Loans and
Unpaid Reimbursement Obligations have returned to those in effect
immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
ss.15.6. Holders of Notes. The Administrative Agent may deem and
treat the payee of any Note or the purchaser of any Credit Instrument
Participation as the absolute owner or purchaser thereof for all purposes hereof
until it shall have been furnished in writing with a different name by such
payee or by a subsequent holder, assignee or transferee.
ss.15.7. Indemnity. The Lenders ratably agree hereby to indemnify
and hold harmless the Administrative Agent from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Administrative Agent has not been
reimbursed by the Borrowers as required by ss.16), and liabilities of every
nature and character arising out of or related to this Credit Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Administrative Agent's actions taken
hereunder or thereunder, except to the extent that any of the same shall be
directly caused by the Administrative Agent's willful misconduct or gross
negligence.
ss.15.8. Agents as Lenders. In their respective individual
capacities, BankBoston and CoreStates shall each have the same obligations and
the same rights, powers and privileges in respect to its respective Commitment
and the Loans made by it, and as the holder of any of the Notes and as the
purchaser of any Credit Instrument Participation, as it would have were it not
also the Administrative Agent and Syndication Agent, respectively.
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ss.15.9. Resignation. The Administrative Agent may resign at any
time by giving sixty (60) days' prior written notice thereof to the Lenders and
the Borrowers. Upon any such resignation, the Majority Lenders shall have the
right to appoint a successor Administrative Agent. Unless a Default or Event of
Default shall have occurred and be continuing, such successor Administrative
Agent shall be reasonably acceptable to the Borrowers. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a financial institution having a rating of
not less than [A] or its equivalent by Standard & Poor's Corporation. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation, the provisions of this Credit
Agreement and the other Loan Documents shall continue in effect for its benefit
in respect of any actions taken or omitted to be taken by it while it was acting
as Administrative Agent.
ss.15.10. Notification of Defaults and Events of Default. Each
Lender hereby agrees that, upon learning of the existence of a Default or an
Event of Default, it shall promptly notify the Administrative Agent thereof. The
Administrative Agent hereby agrees that upon receipt of any notice under this
ss.15.10 it shall promptly notify the other Lenders of the existence of such
Default or Event of Default.
ss.15.11. Duties in the Case of Enforcement. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Administrative Agent
shall, if (a) so requested by the Majority Lenders and (b) the Lenders have
provided to the Administrative Agent such additional indemnities and assurances
against expenses and liabilities as the Administrative Agent may reasonably
request, proceed to enforce the provisions of the Security Documents authorizing
the sale or other disposition of all or any part of the Collateral and exercise
all or any such other legal and equitable and other rights or remedies as it may
have in respect of such Collateral. The Majority Lenders may direct the
Administrative Agent in writing as to the method and the extent of any such sale
or other disposition, the Lenders hereby agreeing to indemnify and hold the
Administrative Agent, harmless from all liabilities incurred in respect of all
actions taken or omitted in accordance with such directions, provided that the
Administrative Agent need not comply with any such direction to the extent that
the Administrative Agent reasonably believes the Administrative Agent's
compliance with such direction to be unlawful or commercially unreasonable in
any applicable jurisdiction.
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ss.16. EXPENSES. The Borrowers agree to pay (a) the reasonable costs of
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (b) any taxes (including
any interest and penalties in respect thereto) payable by the Administrative
Agent, any of the Lenders or any of their affiliates (other than taxes based
upon the Administrative Agent's, any Lender's or any affiliate's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrowers hereby agreeing to indemnify the Administrative Agent, each Lender and
each affiliate with respect thereto), (c) the reasonable fees, expenses and
disbursements of the Administrative Agent's Special Counsel or any local counsel
to the Administrative Agent incurred in connection with the preparation,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, and amendments, modifications,
approvals, consents or waivers hereto or hereunder, (d) the fees, expenses and
disbursements incurred by the Administrative Agent in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, including all commercial finance
examination charges, (e) any fees, costs, expenses and bank charges, including
bank charges for returned checks, incurred by the Administrative Agent in
establishing, maintaining or handling agency accounts, lock box accounts and
other accounts for the collection of any of the Collateral; (f) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, which attorneys may be employees of any Lender or the Administrative
Agent, and reasonable consulting, accounting, appraisal, investment banking and
similar professional fees and charges) incurred by any Lender, the
Administrative Agent or any of their affiliates in connection with (i) the
enforcement of or preservation of rights under any of the Loan Documents against
the Borrowers or any of their Subsidiaries or the administration thereof after
the occurrence of a Default or Event of Default and (ii) any litigation,
proceeding or dispute whether arising hereunder or otherwise, in any way related
to any Lender's, the Administrative Agent's or any of their affiliates
relationship with the Borrowers or any of their Subsidiaries and (g) all
reasonable fees, expenses and disbursements of any Lender or the Administrative
Agent incurred in connection with UCC searches, UCC filings or mortgage
recordings. The covenants of this ss.16 shall survive payment or satisfaction of
all other Obligations.
ss.17. INDEMNIFICATION. The Borrowers agree to indemnify and hold harmless
the Administrative Agent, the Lenders and their affiliates from and against any
and all claims, actions and suits whether groundless or otherwise, and from and
against any and all liabilities, losses, damages and expenses of every nature
and character arising out of this Credit Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without limitation,
(a) any actual or proposed use by the Borrowers or any of their Subsidiaries of
the proceeds of any of the Loans or any Letters of Credit, (b) any actual or
alleged infringement of any patent, copyright, trademark,
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service mark or similar right of the Borrowers or any of their Subsidiaries
comprised in the Collateral, (c) the Borrowers or any of their Subsidiaries
entering into or performing this Credit Agreement or any of the other Loan
Documents or (d) with respect to the Borrowers and their Subsidiaries and their
respective properties and assets, the violation of any Environmental Law, the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such investigation,
litigation or other proceeding. In litigation, or the preparation therefor, the
Lenders, the Administrative Agent and their affiliates shall be entitled to
select their own counsel and, in addition to the foregoing indemnity, the
Borrowers agree to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of the Borrowers under this
ss.17 are unenforceable for any reason, the Borrowers hereby agree to make the
maximum contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The covenants contained in this ss.17 shall
survive payment or satisfaction in full of all other Obligations provided,
however, that the Borrowers and their Subsidiaries shall have no obligation
hereunder to the Administrative Agent or any Lender with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of the
Administrative Agent or any such Lender.
ss.18. SURVIVAL OF COVENANTS, ETC. All covenants, agreements,
representations and warranties made herein, in the Notes, in any of the other
Loan Documents or in any documents or other papers delivered by or on behalf of
the Borrowers or any of their Subsidiaries pursuant hereto shall be deemed to
have been relied upon by the Lenders and the Administrative Agent,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by the Lenders of any of the Loans and the
issuance, extension or renewal of any Credit Instrument, as herein contemplated,
and shall continue in full force and effect so long as any Credit Instrument or
amount due under this Credit Agreement or the Notes or any of the other Loan
Documents remains outstanding or any Lender has any obligation to make any Loans
hereunder or the Administrative Agent has any obligation to issue, extend or
renew any Credit Instrument, and for such further time as may be otherwise
expressly specified in this Credit Agreement. All statements contained in any
certificate or other paper delivered to any Lender or the Administrative Agent
at any time by or on behalf of either Borrower or any of its Subsidiaries
pursuant hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by such Borrower or such Subsidiary
hereunder.
<PAGE>
-62-
ss.19. ASSIGNMENT AND PARTICIPATION.
ss.19.1. Conditions to Assignment by Lenders. Except as provided
herein, each Lender may assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Credit Agreement
(including all or a portion of its Commitment Percentage and Commitment and the
same portion of the Loans at the time owing to it and the Notes held by it and
its participation interest in the risk relating to any Credit Instrument);
provided that (a) the Administrative Agent shall have given its prior written
consent to such assignment (such consent not be unreasonably withheld), (b) each
such assignment shall be of a constant, and not a varying, percentage of all the
assigning Lender's rights and obligations under this Credit Agreement, (c) each
assignment shall be in an amount not less than $10,000,000, and (d) the parties
to such assignment shall execute and deliver to the Administrative Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit C hereto (an "Assignment and
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder, and (ii) the assigning Lender shall, to the extent provided in such
assignment and upon payment to the Administrative Agent of the registration fee
referred to in ss.19.3, be released from its obligations under this Credit
Agreement.
ss.19.2. Certain Representations and Warranties; Limitations;
Covenants. By executing and delivering an Assignment and Acceptance, the parties
to the assignment thereunder confirm to and agree with each other and the other
parties hereto as follows: (a) other than the representation and warranty that
it is the legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto; (b) the assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrowers and their Subsidiaries or any other
Person primarily or secondarily liable in respect of any of the Obligations, or
the performance or observance by the Borrowers and their Subsidiaries or any
other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Credit Agreement or any of
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; (c) such assignee confirms that it has received a copy of
this Credit Agreement, together with copies of the most recent financial
<PAGE>
-63-
statements referred to in ss.7.5 and ss.8.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (d) such assignee will,
independently and without reliance upon the assigning Lender, the Administrative
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Credit Agreement; (e) such assignee
represents and warrants that it is an Eligible Assignee; (f) such assignee
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Credit Agreement and the other
Loan Documents as are delegated to the Administrative Agent by the terms hereof
or thereof, together with such powers as are reasonably incidental thereto; (g)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Credit Agreement are required to be
performed by it as a Lender; (h) such assignee represents and warrants that it
is legally authorized to enter into such Assignment and Acceptance; and (i) such
assignee acknowledges that it has made arrangements with the assigning Lender
satisfactory to such assignee with respect to its pro rata share of Letter of
Credit Fees in respect of outstanding Credit Instruments.
ss.19.3. Register. The Administrative Agent shall maintain a copy of
each Assignment and Acceptance delivered to it and a register or similar list
(the "Register") for the recordation of the names and addresses of the Lenders
and the Commitment Percentage of, and principal amount of the Loans owing to,
and Credit Instrument Participations purchased by, the Lenders from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrowers and the Lenders at any reasonable time and from time
to time upon reasonable prior notice. Upon each such recordation, the assigning
Lender agrees to pay to the Administrative Agent a registration fee in the sum
of $2,500.00.
ss.19.4. New Notes. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Administrative Agent shall (a) record the information
contained therein in the Register, and (b) give prompt notice thereof to the
Borrowers and the Lenders (other than the assigning Lender). Within five (5)
Business Days after receipt of such notice, the Borrowers, at their own expense,
shall execute and deliver to the Administrative Agent, in exchange for each
surrendered Note, a new Note to the order of such Eligible Assignee in an amount
equal to the amount assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained some portion
of its obligations hereunder, a new Note to the order of the assigning Lender in
an amount equal to the amount retained by it hereunder. Such new
<PAGE>
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Notes shall provide that they are replacements for the surrendered Notes, shall
be in an aggregate principal amount equal to the aggregate principal amount of
the surrendered Notes, shall be dated the effective date of such in Assignment
and Acceptance and shall otherwise be substantially the form of the assigned
Notes. Within five (5) days of issuance of any new Notes pursuant to this
ss.19.4, the Borrowers shall deliver an opinion of counsel, addressed to the
Lenders and the Administrative Agent, relating to the due authorization,
execution and delivery of such new Notes and the legality, validity and binding
effect thereof, in form and substance satisfactory to the Lenders. The
surrendered Notes shall be canceled and returned to the Borrowers.
ss.19.5. Participations. Each Lender may sell participations to one
or more banks or other entities in all or a portion of such Lender's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
that (a) each such participation shall be in an amount of not less than
$5,000,000 or multiples thereof, (b) any such sale or participation shall not
affect the rights and duties of the selling Lender hereunder to the Borrowers,
(c) the only rights granted to the participant pursuant to such participation
arrangements with respect to waivers, amendments or modifications of the Loan
Documents shall be the rights to approve waivers, amendments or modifications
that would reduce the principal of or the interest rate on any Loans, extend the
term or increase the amount of the Commitment of such Lender as it relates to
such participant, reduce the amount of any facility fees, Letter of Credit Fees
or Bankers' Acceptance Fees to which such participant is entitled or extend any
regularly scheduled payment date for principal or interest, and (d) so long as
not Event of Default shall have occurred and be continuing, the Borrowers shall
have given their prior consent to such participation (such consent not to be
unreasonably withheld or delayed); further, provided, that if BankBoston or any
successor Administrative Agent sells participations and such sale or sales
causes such Person's Commitment Percentage less the participations sold by such
Person to be less than ten percent (10%), then the Administrative Agent shall
resign as Administrative Agent in accordance with ss.15.9 hereof.
ss.19.6. Disclosure. The Borrowers agree that in addition to
disclosures made in accordance with standard and customary banking practices any
Lender may disclose information obtained by such Lender pursuant to this Credit
Agreement to assignees or participants and potential assignees or participants
hereunder; provided that such assignees or participants or potential assignees
or participants shall agree (a) to treat in confidence such information, (b) not
to disclose such information to a third party and (c) not to make use of such
information for purposes of transactions unrelated to such contemplated
assignment or participation.
ss.19.7. Assignee or Participant Affiliated with the Borrowers. If
any assignee Lender is an Affiliate of the Borrowers, then any such assignee
Lender shall have no right to vote as a Lender hereunder or under any of the
other Loan Documents for purposes of granting consents or
<PAGE>
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waivers or for purposes of agreeing to amendments or other modifications to any
of the Loan Documents or for purposes of making requests to the Administrative
Agent pursuant to ss.13.1 or ss.13.2, and the determination of the Majority
Lenders shall for all purposes of this Agreement and the other Loan Documents be
made without regard to such assignee Lender's interest in any of the Loans. If
any Lender sells a participating interest in any of the Loans or Reimbursement
Obligations to a participant, and such participant is an Borrower or an
Affiliate of an Borrower, then such transferor Lender shall promptly notify the
Administrative Agent of the sale of such participation. A transferor Lender
shall have no right to vote as a Lender hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or modifications to any of the Loan Documents or for
purposes of making requests to the Administrative Agent pursuant to ss.13.1 or
ss.13.2 to the extent that such participation is beneficially owned by either
Borrower or any Affiliate of such Borrower, and the determination of the
Majority Lenders shall for all purposes of this Agreement and the other Loan
Documents be made without regard to the interest of such transferor Lender in
the Loans to the extent of such participation.
ss.19.8. Miscellaneous Assignment Provisions. If any assignee Lender
is not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrowers and the Administrative Agent certification as to its exemption
from deduction or withholding of any United States federal income taxes. If
BankBoston or any successor Administrative Agent transfers any of its interest,
rights and obligations under this Credit Agreement and such transfer causes such
Person's Commitment Percentage to be less than ten percent (10%), the
Administrative Agent shall, in consultation with the Borrowers and with the
consent of the Borrowers and the Majority Lenders, (a) appoint another Lender to
act as a reference bank hereunder and (b) resign as Administrative Agent in
accordance with ss.15.9 hereof. Anything contained in this ss.19 to the contrary
notwithstanding, any Lender may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Lenders organized under ss.4 of
the Federal Reserve Act, 12 U.S.C. ss.341. No such pledge or the enforcement
thereof shall release the pledgor Lender from its obligations hereunder or under
any of the other Loan Documents.
ss.19.9. Assignment by Borrowers. Neither Borrower shall assign or
transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Lenders.
ss.20. NOTICES, ETC. Except as otherwise expressly provided in this Credit
Agreement, all notices and other communications made or required to be given
pursuant to this Credit Agreement or the Notes or any Letter of Credit
Application shall be in writing and shall be delivered in hand, mailed by United
<PAGE>
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States registered or certified first class mail, postage prepaid, sent by
overnight courier, or sent by telegraph, telecopy, facsimile or telex and
confirmed by delivery via courier or postal service, addressed as follows:
(a) if to the Borrowers, 370 James Street, New Haven, Connecticut
06513, Attention: Mr. John C. Warfel, Senior Vice President, or at such
other address for notice as the Borrowers shall last have furnished in
writing to the Person giving the notice;
(b) if to the Administrative Agent, at 127 Church Street, New Haven,
Connecticut 06510, Attention: Christina P. Clark, Vice President, or such
other address for notice as the Administrative Agent shall last have
furnished in writing to the Person giving the notice;
(c) if to the Syndication Agent, at 1345 Chestnut Street, P.O. Box
7618, Philadelphia, Pennsylvania 19101, Attention: Irene Rosen Marks, Vice
President, or such other address for notice as the Syndication Agent shall
last have furnished in writing to the Person giving the notice; and
(d) if to any Lender, at such Lender's address set forth on Schedule
1 hereto, or such other address for notice as such Lender shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
ss.21. GOVERNING LAW. THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS, ARE CONTRACTS
UNDER THE LAWS OF THE STATE OF CONNECTICUT AND SHALL FOR ALL PURPOSES BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF
CONNECTICUT (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CONNECTICUT OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWERS IN ACCORDANCE WITH GOVERNING LAW AT THE ADDRESS
SPECIFIED IN SS.21. EACH BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT IN THE STATE OF
<PAGE>
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CONNECTICUT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
ss.22. HEADINGS. The captions in this Credit Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
ss.23. COUNTERPARTS. This Credit Agreement and any amendment hereof may be
executed in several counterparts and by each party on a separate counterpart,
each of which when executed and delivered shall be an original, and all of which
together shall constitute one instrument. In proving this Credit Agreement it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
ss.24. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents
executed in connection herewith or therewith express the entire understanding of
the parties with respect to the transactions contemplated hereby. Neither this
Credit Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in ss.26.
ss.25. WAIVER OF JURY TRIAL. Each Borrower, as an inducement to the
Administrative Agent and the Lenders to enter into this Credit Agreement, hereby
waives its right to a jury trial with respect to any action or claim arising out
of any dispute in connection with this Credit Agreement, the Notes or any of the
other Loan Documents, any rights or obligations hereunder or thereunder or the
performance of which rights and obligations. Except as prohibited by law, each
Borrower hereby waives any right it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary or
punitive damages or any damages other than, or in addition to, actual damages.
Each Borrower (a) certifies that no representative, agent or attorney of any
Lender or the Administrative Agent has represented, expressly or otherwise, that
such Lender or the Administrative Agent would not, in the event of litigation,
seek to enforce the foregoing waivers and (b) acknowledges that the
Administrative Agent and the Lenders have been induced to enter into this Credit
Agreement, the other Loan Documents to which it is a party by, among other
things, the waivers and certifications contained herein.
ss.26. CONSENTS, AMENDMENTS, WAIVERS, ETC. Neither this Credit Agreement,
any of the Loan Documents, nor any term hereof or thereof may be amended, nor
may any provision hereof or thereof be waived, except by an instrument in
writing signed by the Majority Lenders and, in the case of an amendment, by the
Borrowers, except that in the event of (a) any increase in the amount of any
Commitment (other than by way of assignment pursuant to Section 19 hereof), (b)
any delay or extension in the terms of or any scheduled reduction or increase of
Commitments or repayment of the Loans as provided in Section 2.1 hereof, (c) any
reduction in principal, interest or fees due hereunder or postponement of the
payment thereof, (d) any release of Starter Outlet from the obligations under
its Guaranty or the release of any portion of the Collateral
<PAGE>
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for the Loans except as permitted in Section 9.5 hereof, (e) any waiver of any
Default or Event of Default due to the failure by the Borrowers to pay any sum
due to any of the Lenders hereunder, (f) any amendment of the definition of
Permitted Overadvance Amount, (g) any amendment or waiver to the frequency of
the delivery of Borrowing Base reports under ss.8.4(f), (h) any amendment by
more than twenty percent (20%) of the amount of the Clean Down Amount in ss.2.1
hereof, (i) any amendment of this Section 26 or of the definition of Majority
Lenders or of any portion of this Credit Agreement as they relate to the
relative priorities of payment among the Obligations, or (j) any amendment of
the advance rates under the Borrowing Base, any amendment or waiver of consent
may be made only by an instrument in writing signed by each of the Lenders and,
in the case of an amendment, by the Borrowers. Any amendment to any provision
hereunder or under any other Loan Document governing the rights, obligations or
liabilities of the Administrative Agent or the Syndication Agent, including,
without limitation, Bankers' Acceptance Fees or of the amount of the Agents'
fees or any Letter of Credit Fees payable for the Administrative Agent's
account, in each case in its capacity as such, will be effective only if any
instrument in writing has been signed by such affected Person. No waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of the
Administrative Agent or any Lender in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon
the Borrowers shall entitle the Borrowers to other or further notice or demand
in similar or other circumstances.
ss.27. SEVERABILITY. The provisions of this Credit Agreement are severable
and if any one clause or provision hereof shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction, and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision of this Credit
Agreement in any jurisdiction.
ss.28. LIMITATION OF LIABILITY. EXCEPT AS PROHIBITED BY APPLICABLE LAW,
EACH BORROWER WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY
PROCEEDING REFERRED TO IN SS.25 ANY SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER (A)
CERTIFIES THAT NONE OF THE ADMINISTRATIVE AGENT, THE DOCUMENTATION AGENT OR ANY
LENDER OR ANY REPRESENTATIVE, AGENT, OR ATTORNEY OF SUCH PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH PERSON WOULD NOT, IN THE EVENT OF ANY
PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT, IN
ENTERING INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH SUCH
<PAGE>
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PERSON IS A PARTY, THAT SUCH PERSON IS RELYING UPON, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SS.28.
SS.29. COMMERCIAL TRANSACTION; PREJUDGMENT REMEDY WAIVER. EACH BORROWER
REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS ARE A PART IS A "COMMERCIAL TRANSACTION"
WITHIN THE MEANING OF CHAPTER 903A OF CONNECTICUT GENERAL STATUTES, AS AMENDED.
EACH BORROWER HEREBY WAIVES ITS RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT
ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS 52-278A ET. SEQ. AS AMENDED OR
UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT
REMEDIES THE ADMINISTRATIVE AGENT OR THE LENDERS MAY EMPLOY TO ENFORCE THEIR
RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS. EACH BORROWER
ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT'S ATTORNEY AND/OR ANY LENDER'S
ATTORNEY MAY, PURSUANT TO CONN. GEN. STAT. SS.52-278f, ISSUE A WRIT FOR A
PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. EACH BORROWER ACKNOWLEDGES
AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A
WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE ADMINISTRATIVE AGENT AND THE
LENDERS ACKNOWLEDGE SUCH BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO THE
ISSUANCE OF SAID WRIT.
ss.30. EFFECTIVE DATE. This Credit Agreement shall become effective among
the parties hereto as of the Effective Date. Until the Effective Date, the terms
of the Original Loan Agreement, shall remain in full force and effect.
<PAGE>
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IN WITNESS WHEREOF, the undersigned have caused this Credit Agreement to
be duly executed as of the date first set forth above.
STARTER CORPORATION
By: /s/ John [ILLEGIBLE]
-----------------------------
Its SVP
STARTER GALT, INC.
By: /s/ [ILLEGIBLE]
-----------------------------
Its SVP
BANK OF BOSTON CONNECTICUT,
individually and as Administrative Agent
By: /s/ Christina P. [ILLEGIBLE]
-----------------------------
Its Vice President
CORESTATES BANK, N.A.,
individually and as Syndication Agent
By:
-----------------------------
Its
PEOPLE'S BANK
By: /s/ [ILLEGIBLE]
-----------------------------
Its Vice Pres
<PAGE>
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IN WITNESS WHEREOF, the undersigned have caused this Credit Agreement to
be duly executed as of the date first set forth above.
STARTER CORPORATION
By:
-----------------------------
Its
STARTER GALT, INC.
By:
-----------------------------
Its
BANK OF BOSTON CONNECTICUT,
individually and as Administrative Agent
By:
-----------------------------
Its
CORESTATES BANK, N.A.,
individually and as Syndication Agent
By: /s/ Irene Rosen Marks
-----------------------------
Its Vice President
PEOPLE'S BANK
By:
-----------------------------
Its Vice Pres
<PAGE>
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NATIONAL BANK OF CANADA
By: /s/ [Illegible]
-----------------------------
Its V.P.
By: /s/ [Illegible]
-----------------------------
Its AVP
SANWA BUSINESS CREDIT CORPORATION
By:
-----------------------------
Its
KEYBANK NATIONAL ASSOCIATION
By:
-----------------------------
Its
BTM CAPITAL CORPORATION
By:
-----------------------------
Its
FIRSTRUST SAVINGS BANK
By:
-----------------------------
Its
<PAGE>
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NATIONAL BANK OF CANADA
By:
-----------------------------
Its
SANWA BUSINESS CREDIT CORPORATION
By: /s/ [Illegible]
-----------------------------
Its Vice President
KEYBANK NATIONAL ASSOCIATION
By:
-----------------------------
Its
BTM CAPITAL CORPORATION
By:
-----------------------------
Its
FIRSTRUST SAVINGS BANK
By:
-----------------------------
Its
<PAGE>
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NATIONAL BANK OF CANADA
By:
-----------------------------
Its
SANWA BUSINESS CREDIT CORPORATION
By:
-----------------------------
Its
KEYBANK NATIONAL ASSOCIATION
By: /s/ [Illegible]
-----------------------------
Its Vice President
BTM CAPITAL CORPORATION
By:
-----------------------------
Its
FIRSTRUST SAVINGS BANK
By:
-----------------------------
Its
<PAGE>
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NATIONAL BANK OF CANADA
By:
--------------------------------
Its
By:
--------------------------------
Its
SANWA BUSINESS CREDIT CORPORATION
By:
--------------------------------
Its
KEYBANK NATIONAL ASSOCIATION
By:
--------------------------------
Its
BTM CAPITAL CORPORATION
By: /s/ [Illegible]
--------------------------------
Its Assistant Managing Director
FIRSTRUST SAVINGS BANK
By:
--------------------------------
Its
<PAGE>
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NATIONAL BANK OF CANADA
By:
------------------------------------
Its
By:
------------------------------------
Its
SANWA BUSINESS CREDIT CORPORATION
By:
------------------------------------
Its
KEYBANK NATIONAL ASSOCIATION
By:
------------------------------------
Its
BTM CAPITAL CORPORATION
By: /s/ [Illegible]
------------------------------------
Its Assistant Managing Director
FIRSTRUST SAVINGS BANK
By: /s/ Richard F. [ILLEGIBLE]
------------------------------------
Its Chief Credit [ILLEGIBLE] Officer
EXHIBIT 11
STARTER CORPORATION
Statement re: Computation of Net Loss Per Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
Net Loss per Share
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average shares outstanding 27,853,258 26,840,977 27,830,176 26,838,528
Net loss $ (4,655) $ (3,224) $ (7,817) $ (5,199)
=========== =========== =========== ===========
Per share amount $ (.17) $ (.12) $ (.28) $ (.19)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of STARTER Corporation for the quarter ended June 30, 1997,
as set forth in its quarterly report on Form 10-Q for such quarter, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,489
<SECURITIES> 0
<RECEIVABLES> 48,317
<ALLOWANCES> (3,000)
<INVENTORY> 90,396
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<DEPRECIATION> (8,748)
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0
0
<COMMON> 278
<OTHER-SE> 96,218
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<CGS> 83,272
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<INCOME-TAX> (5,210)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,817)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> 0
</TABLE>
