FORM: NBAP
U.S./Int'l/Non-Apparel
NPR
LICENSEE: SPALDING SPORTS RETAIL PRODUCT LICENSE AGREEMENT
WORLDWIDE, a division of
Spalding & Evenflo Companies, Inc.
ADDRESS: 000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
THIS RETAIL PRODUCT LICENSE AGREEMENT is entered into by NBA Properties, Inc.
("NBAP"), with its principal office at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, and the licensee listed above ("LICENSEE") with regard to the commercial
use of certain names, logos, symbols, emblems, designs and uniforms and all
identifications, labels, insignia or indicia thereof (the "Marks") of the
National Basketball Association (the "NBA") and its Member Teams (collectively,
the "NBA Marks"). On the terms of this Agreement and subject to the attached
NBAP Standard Terms and Conditions, NBAP hereby grants to LICENSEE, and LICENSEE
hereby accepts:
1. the exclusive (except as otherwise expressly provided in this Agreement)
right and license to use, during the Term, the Marks of the Member Teams,
the silhouetted dribbler logo (the "NBA Logo") and Marks of the NBA, NBA
All-Star Weekend, NBA Playoffs and Finals and such other NBA special
events as are mutually agreed upon (collectively, the "Licensed Marks")
solely in connection with the manufacture, distribution, advertisement,
promotion and sale of the products described in Paragraph A below that
bear one or more of the Licensed Marks ("Licensed Products"); and
2. the non-exclusive right and license to use, during the Term, photographs
of NBA players who have entered into endorsement agreements with LICENSEE
or who do so during the Term ("LICENSEE Endorsers"), in their respective
NBA member team uniforms, warm-ups and practicewear and, if applicable,
NBA All-Star uniforms, and to incorporate such photographs of such
LICENSEE Endorsers into the packaging, advertisement, promotion and sale
of NBA Basketballs (as defined below). LICENSEE acknowledges that nothing
in this Agreement shall be construed as a grant from NBAP to LICENSEE with
respect to any right to use the likeness and/or name of any NBA player and
that all such rights must be secured by LICENSEE directly from such
players.
No license or right is granted for the use of the Licensed Marks for any purpose
other than on the Licensed Products and in the distribution, advertisement,
promotion and sale of the Licensed Products in accordance with this Agreement.
A. LICENSED PRODUCTS:
1. LICENSEE shall have the exclusive right and license to use the
Licensed Marks solely in connection with the manufacture,
distribution, advertisement, promotion and sale of the following
products:
(a) Official Game Ball of the NBA, made from top quality, full
grain leather. The Official Game Ball shall be identified and
described as the NBA "Official Game Ball" and shall bear the
facsimile signature of the Commissioner of the NBA (the
"Designation").
(b) Composite and synthetic leather basketballs in full (size 7)
and youth (sizes 5,6) sizes.
(c) Rubber basketballs in full (size 7) and youth (sizes 5,6)
sizes.
(d) Rubber mini-basketballs (23" or less in circumference).
(e) Rubber and vinyl micro-mini basketballs (9" or less in
circumference).
(f) Sets consisting of micro-mini plastic backboard (9"x l1") and
inflatable basketball (12 1/2" in circumference).
(g) Basketball-grain leather and synthetic leather executive
accessories (e.g., binders, pad binders, attaches, briefcases,
business card holders, wallets, checkbook covers, backpacks,
belt bags and courier portfolios) ("Executive Accessories").
(h) Golf balls ("NBA Golf Balls").
2. LICENSEE shall have the non-exclusive right and license to use the
Licensed Marks solely in connection with the manufacture,
distribution, advertisement, promotion and sale of the following
products:
(a) Combo packs consisting of micro-mini inflatable basketball
(12 1/2" in circumference), micro-mini plastic backboard (9"x
l1") and cotton tank jersey (manufactured by Xxxxx or such
other NBA licensee as determined by NBAP).
(b) Basketball-look binders and portfolio keepers made from
cardboard.
3. All basketballs upon which any Licensed Xxxx is used shall be
collectively referred to herein as "NBA Basketballs". Basketballs
sold by LICENSEE that do not bear any Licensed Marks (other than
WNBA-identified basketballs covered by the agreement between
LICENSEE and WNBA Enterprises, LLC ("WNBA Basketballs")) shall be
referred to herein as "Non-NBA Basketballs". All Executive
Accessories upon which any Licensed Xxxx is used shall be
collectively referred to herein as "NBA Executive Accessories".
Executive Accessories sold by LICENSEE that do not bear any Licensed
Marks shall be referred to herein as "Non-NBA Executive
Accessories".
4. LICENSEE acknowledges that the Official Game Ball of the Women's
National Basketball Association shall be a size 6 basketball.
Therefore, LICENSEE shall not in any manner market any size 6
basketballs bearing any of the Licensed Marks as "women's"
basketballs.
B. EXCLUSIVITY:
(i) Nothing in this Agreement shall prevent NBAP from granting any other
licenses and rights to other firms, companies, entities, groups or
individuals. Notwithstanding the foregoing, provided this Agreement
has not been terminated and LICENSEE remains in compliance with the
terms and conditions hereof, NBAP agrees that it will not grant to
any third party any licenses for the use of the Licensed Marks
within the Territory in connection with the manufacture or sale of
the products described in subparagraph 1 of Paragraph A of this
Agreement for delivery during the Term.
(ii) Notwithstanding the foregoing or anything to the contrary in this
Agreement, LICENSEE acknowledges that:
(a) LICENSEE's exclusive rights with respect to basketball-grain
leather Executive Accessories applies only within the sporting
goods (hard goods) class of brands. Accordingly, NBAP shall
not in any way be restricted from licensing the use of the
Licensed Marks in connection with leather Executive
Accessories to a non-sporting goods brand (e.g., a fashion
brand such as "Coach" or "Fendi") and such licenses shall not
be deemed a violation or breach of this Agreement;
(b) NBAP shall not in any way be restricted from licensing the use
of the Licensed Marks to any third party in connection with
non-inflatable mini and micro-mini basketballs for premium use
and such licenses shall not be deemed a violation or breach of
this Agreement;
2
(c) LICENSEE's exclusive rights with respect to sale of the
Licensed Products described in subparagraph 1(h) of Paragraph
A (i.e., NBA Golf Balls) shall be dependent upon LICENSEE
complying with the following provisions: (i) LICENSEE's
Sporting Goods Group shall at all times during the Term be
actively engaged in the sales and distribution of NBA Golf
Ball Licensed Products; (ii) LICENSEE must achieve the annual
minimum sales performance goals set forth in Schedule A
attached hereto; (iii) LICENSEE must manufacture and maintain
sufficient quantities of on-hand inventories of golf balls
featuring the NBA logo, all 29 NBA team logos, and Official
Game Ball graphics in order to meet retailer demand for such
products; and (iv) LICENSEE shall consider in good faith the
development of a full line of NBA licensed golf items (e.g.,
bags, clubs, accessories, etc.);
(d) if LICENSEE cannot meet an NBA team's reasonable timing or
pricing requirements for supplying mini-basketballs for a team
basketball promotion, such team shall be free to source the
mini-basketballs required for such promotion from up to three
(3) mutually agreed upon basketball manufacturers. LICENSEE
will offer the member teams mini-basketballs for use in such
team's promotional activities at a price equal to LICENSEE's
cost to manufacture the mini-basketballs plus a royalty to be
mutually agreed upon by NBAP and LICENSEE on a case by case
basis; and
(e) NBAP shall not in any way be restricted from licensing the
right to use the Licensed Marks to any third party in
connection with inflatable rubber mini-basketballs to be sold
in backboard/mini-basketball combinations and such licenses
shall not be deemed a violation or breach of this Agreement,
provided that the third party's logos do not appear in close
proximity to the NBA Logo on such products and, provided,
further that such third party gives LICENSEE the first
opportunity to manufacture the basketballs for such products
(if LICENSEE cannot provide the required basketballs to the
third party upon mutually agreeable terms then such third
party shall be free to source such basketballs from another
basketball manufacturer).
C. TERM:
(i) This Agreement shall be for the period commencing on February 1,
1997 and expiring on July 31, 2001, unless sooner terminated in
accordance with the provisions hereof (the "Term"). Notwithstanding
anything to the contrary in Paragraph 1(a) of the NBA Standard Terms
and Conditions attached hereto, the 1st Contract Year shall commence
February 1, 1997 and conclude July 31, 1997.
(ii) Unless this Agreement is sooner terminated, [*], NBAP agrees to
negotiate exclusively with LICENSEE as to the terms of an extension
or continuation of this Agreement. In the event that LICENSEE and
NBAP are unable to agree to any extension or continuation of this
Agreement prior [*], NBAP shall notify LICENSEE in writing, by not
later than [*], of the terms and conditions under which it is then
willing to enter into an extension or continuation with LICENSEE.
LICENSEE shall have a period of twenty (20) business days after its
receipt of this offer to accept it. If LICENSEE does not accept the
offer within such twenty (20) day period, NBAP shall be free (at its
option) to (1) market NBA-identified basketballs directly or (2)
enter into an agreement with any third party with respect to the
rights granted herein effective upon the expiration of this
Agreement. The provisions of this paragraph shall expire upon the
expiration of this Agreement.
D. TERRITORY: The Licensed Products may be distributed on a worldwide basis,
except with respect to the Licensed Products described in subparagraph 2
of Paragraph A above, which may only be distributed in the 00 Xxxxxx
Xxxxxx and the District of Columbia (the "Territory").
[*] Denotes redaction. Pending approval by the Securities and Exchange
Commission pursuant to a request for confidential treatment under Rule 24b-2 of
the Securities Exchange Act of 1934.
3
E. ROYALTY RATES: LICENSEE shall pay quarterly to NBAP a royalty equal to the
percentage of "Net Sales" (as defined in Paragraph 1 of the attached NBAP
Standard Terms and Conditions) listed below for the indicated Contract
Year:
1st Contract 2nd Contract 3rd Contract 4th and 5th
Year Year Year Contract Years
------------ ------------ ------------ --------------
NBA Basketballs [*] [*] [*] [*]
Non-NBA Basketballs [*] [*] [*] [*]
NBA Executive Accessories [*] [*] [*] [*]
Non-NBA Executive Accessories [*] [*] [*] [*]
In addition, LICENSEE agrees that if in any Contract Year its Net Sales of
NBA Basketballs accounts for less than [*] of its Net Sales of all
basketballs (i.e., NBA Basketballs and Non-NBA Basketballs), it will pay
NBAP [*] on the amount equal to the difference between [*].
F. MINIMUM GUARANTEES: LICENSEE guarantees that its aggregate annual royalty
payments to NBAP for each Contract Year under this Agreement shall not be
less than the amount set forth opposite such Contract Year:
U.S. International Canada
---- ------------- ------
1st Contract Year: [*] [*] [*]
2nd Contract Year: [*] [*] [*]
3rd Contract Year: [*] [*] [*]
4th Contract Year: [*] [*] [*]
5th Contract Year: [*] [*] [*]
X. XXXX DESIGNATION AND SPECIFICATIONS:
(i) The Official Game Ball shall be the exclusive Official NBA
Basketball for purposes of NBA league games and activities. So long
as LICENSEE is in compliance with its obligations under this
Agreement, no other basketball or basketballs will be authorized to
be used in any NBA games or official NBA team activities conducted
during the term of this Agreement.
(ii) The Official Game Balls shall, unless changes are properly approved
by the Commissioner of the NBA, be of the same or better
construction, composition and quality as those used by the NBA
during the 1996-97 NBA season. Unless requested in writing by NBAP,
only the Official Game Ball shall be stamped by LICENSEE with the
Designation.
H. ADVERTISING AND PROMOTION:
(i) In addition to all other amounts LICENSEE is required to pay to NBAP
hereunder, LICENSEE shall spend an amount equal to the percentage of
Net Sales listed below for the indicated Contract Year for
advertising and promotional activities:
U.S. International and Canada
---- ------------------------
1st, 2nd and 3rd Contract Years:
NBA Basketballs [*] [*]
Non-NBA Basketballs [*] [*]
NBA Golf Balls [*] [*]
4
NBA Executive Accessories [*] [*]
Non-NBA Executive Accessories [*] [*]
U.S. International and Canada
---- ------------------------
4th and 5th Contract Years:
NBA Basketballs [*] [*]
Non-NBA Basketballs [*] [*]
NBA Golf Balls [*] [*]
NBA Executive Accessories [*] [*]
Non-NBA Executive Accessories [*] [*]
The above-mentioned advertising and promotion funds shall be spent
on NBA and non-NBA media and events to promote the Licensed Products
and the NBA. The specific allocation of such funds to be spent on
domestic advertising and promotional activities shall be determined
jointly by NBAP and LICENSEE each Contract Year in accordance with
the procedures utilized under the agreement between NBAP and
LICENSEE dated February 1, 1992 (the "Prior Agreement"). The
specific allocation of such funds to be spent on international and
Canadian advertising and promotional activities shall be determined
in NBAP's sole reasonable discretion after NBAP's consultation with
LICENSEE. In no event shall the amount LICENSEE spends pursuant to
this Paragraph H(i) be less than the amounts indicated below for
each Contract Year (the "A&P Minimums"):
U.S. International Canada
---- ------------- ------
1st Contract Year: [*] [*] [*]
2nd Contract Year: [*] [*] [*]
3rd Contract Year: [*] [*] [*]
4th Contract Year: [*] [*] [*]
5th Contract Year: [*] [*] [*]
(ii) 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 inflatable products.
I. MERCHANDISE SUPPORT, CREDIT; ALL-STAR PACKAGES:
(i) Each Contract Year, LICENSEE will provide reasonable merchandise,
and merchandise support, as mutually determined by NBAP and LICENSEE
but in no event less than the levels established for the 1996-97 NBA
Season. More specifically, LICENSEE will grant a credit to NBAP
toward the purchase of NBA Basketballs for use in promotions at
LICENSEE's actual cost without a royalty (plus reasonable freight
charges) as of the commencement of this Agreement, in an amount
sufficient to ensure that the same number of basketballs can be
purchased in each Contract Year under this Agreement, and it is
agreed that the 1st Contract Year's credit shall be [*] and the 2nd
Contract Year's credit shall be [*].
(ii) Each NBA Season during the Term hereof, LICENSEE shall deliver to
each NBA team on or before September 30 (or at such other time(s) as
may be designated by NBAP), at no cost for the product or delivery
thereof to the team, [*] stamped with the appropriate team's name on
the panel in the manner executed on team balls used during the
1995-96 NBA Season. NBAP or any of the NBA teams may purchase
additional Official Game Balls from LICENSEE at LICENSEE's
then-lowest wholesale price plus a reasonable administration fee
applicable to NBAP and each team. At the commencement of each
Contract Year, LICENSEE shall furnish NBAP with a price list which
shall be applicable for all purchases made hereunder during the
Contract Year for which such list is furnished.
5
(iii) In addition to the above, each NBA Season during the term hereof,
LICENSEE shall donate to NBAP such quantity of LICENSEE product
(e.g., golf and tennis balls) as NBAP may reasonably request for
use, or as prizes awarded, in connection with tournaments staged by
NBAP (and sponsored by LICENSEE) from time-to-time as part of NBA
special events such as the golf and tennis tournaments held during
NBA League meetings, Finals Celebration, etc. LICENSEE acknowledges
that the extent of such annual merchandise support will be mutually
determined by NBAP and LICENSEE, but in no event will it be less
than the levels established for the 1996-97 NBA Season (i.e.,
approximately [*]).
(iv) For each NBA season during the Term, LICENSEE will, at its sole
expense, furnish to each team on or before September 30 (or at such
other time(s) as may be designated by NBAP), a reasonable number of
ball carts and maintain same in working order.
(v) LICENSEE, will, at its sole expense, provide NBAP with, laser
engraving machines for NBAP's use at up to three (3) NBA special
events (e.g., All Star Weekend) per Contract Year, along with an
engineer to operate, and provide service for, such machines at the
events. In addition, LICENSEE, will, at its sole expense, provide
NBAP with, upon NBAP's request, (1) a laser engraving machine for
NBAP's use at the NBA Store (as defined in Paragraph 11(g) in the
NBAP Standard Terms and Conditions attached hereto) and (2) the
appropriate training for NBA personnel that will initially be
responsible for operating the laser engraving machine at the NBA
Store; provided, however, that NBAP shall be responsible for
reimbursing LICENSEE for any actual costs incurred by LICENSEE in
providing (1) maintenance and service for the machine to be used at
the NBA Store and (2) any additional training for NBA personnel that
will be responsible for operating the machine at the NBA Store.
(vi) For each NBA season during the Term hereof, including 1996-97,
LICENSEE shall (1) receive, at no cost, [*] to NBA games and (2)
have the option to purchase up to [*] for use for business guests;
it being understood that LICENSEE shall receive a credit, in an
amount equal to the cost of the tickets purchased by LICENSEE
pursuant to clause (2) during a Contract Year, against LICENSEE's
additional promotional spending obligations under Paragraph J below
for such Contract Year.
(vii) NBAP shall provide LICENSEE with [*] for each All-Star Weekend
competition (other than the 1997 All-Star Weekend competition), as
well as [*] to major, public, NBAP-controlled social functions
("All-Star Packages"), held during the Term hereof. NBAP shall
provide LICENSEE with [*] All-Star Packages for the 1997 All-Star
Weekend competition.
J. ADDITIONAL PROMOTIONAL/MEDIA SUPPORT: In addition to all other amounts
LICENSEE is required to pay to NBAP or spend on advertising and
promotional activities under this Agreement, LICENSEE shall spend the
amounts listed below for the indicated Contract Year on "NBA-Controlled
Media" which includes a variety of print and electronic media vehicles or
on in-arena advertising, retail promotions or such other expenditures as
mutually agreed upon by the parties to promote sales of the Licensed
Products:
U.S. International and Canada
---- ------------------------
1st Contract Year: [*] [*]
2nd Contract Year: [*] [*]
3rd Contract Year: [*] [*]
4th Contract Year: [*] [*]
5th Contract Year: [*] [*]
The specific allocation of such promotional/media funds for each Contract
Year shall be as proposed by NBAP, subject to LICENSEE's approval (which
approval shall not be unreasonably withheld). LICENSEE acknowledges that
LICENSEE's spending obligations
6
pursuant to this Paragraph J are in addition to the amount that LICENSEE
would have normally spent on advertising and promotion and cooperative
advertising expenditures in support of its sales of Licensed Products
("Normal A&P Expenditures") and, for each Contract Year, LICENSEE agrees
to maintain its Normal A&P Expenditures at a level equal to not less than
seven and one-half percent (7 1/2%) of Net Sales of all basketballs sold
by LICENSEE; it being understood that LICENSEE's historical Normal A&P
Expenditures include spending on institutional product (i.e., promotion of
LICENSEE's basketballs at high schools and colleges).
K. SELLING PRACTICES: LICENSEE acknowledges NBAP's legitimate and reasonable
interest in protecting the value of the NBA Marks and maximizing the
effectiveness of its advertising, promotion and distribution efforts by
segmenting the classes of trade into which its licensees sell
NBAP-licensed products. Therefore, LICENSEE shall only sell Licensed
Products to a buyer that, to its best knowledge, (i) purchases Licensed
Products from LICENSEE solely for sale directly to the consumer and
operates a retail establishment that supports the high quality and image
of NBA officially licensed products with appropriate merchandising
displays, promotion and/or customer service, or (ii) sells to retailers
that support the high quality and image of NBA officially licensed
products with appropriate merchandising displays, promotion and/or
customer service. LICENSEE acknowledges that a failure to comply with the
selling practices set forth in this Paragraph shall cause significant harm
to NBAP's efforts to effectively and efficiently distribute NBAP-licensed
products.
AGREED TO AND ACCEPTED, subject AGREED TO AND ACCEPTED:
to and incorporating the attached NBAP
Standard Terms and Conditions which
the undersigned has read:
SPALDING SPORTS WORLDWIDE, a NBA PROPERTIES, INC.
division of Spalding & Evenflo Companies, Inc.
BY: /s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------- --------------------------
Xxxx X. Xxxxxxx Xxxxxx X. Xxxxxxxx
President/Spalding & Evenflo Companies, Inc. Senior Vice President,
Business Affairs
Dated: 2/3/97
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxxxx
President/SPALDING Sports Worldwide Division
By: /s/ Xxxx Xxxxxx
-------------------------------
Xxxx Xxxxxx
Managing Director U.S. Sporting Goods Group
7
NBAP STANDARD TERMS AND CONDITIONS
1. ADDITIONAL DEFINITIONS
For the purposes of this Agreement:
(a) "Contract Year" shall mean a twelve (12) month accounting period
commencing August 1 and concluding July 31.
(b) "Counterfeit Goods" shall mean and include: (i) goods that bear any
NBA Xxxx that has been reproduced and/or affixed without
authorization from NBAP; (ii) goods that bear any NBA Xxxx produced
by any source in excess of an amount ordered by an NBAP licensee;
and (iii) goods that bear any NBA Xxxx 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 total dollar amount of the gross sales of
all Licensed Products by LICENSEE, after deducting any bona-fide
credit or adjustment for returns or defective goods actually made
and all standard discounts and allowances actually and customarily
given to the trade. "Net Sales" do not include NBA Basketball Sales
to NBAP, the NBA, any NBA franchise, or any promotions pursuant to
this Agreement. In computing Net Sales, no direct or indirect
expenses or costs incurred in connection with paying royalties due
under this Agreement (including transferring funds for royalties or
converting currency into U.S. dollars) or manufacturing, selling,
distributing, importing or advertising the Licensed Products shall
be deducted, nor shall any deduction be made for uncollectible
accounts. Net 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 Net 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, Net 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.
2. TEAM REPRESENTATION; LIMITATIONS ON LICENSE
(a) Unless otherwise approved in writing by NBAP, each Licensed Product
(other than NBA Official Game Balls) must be manufactured and
offered for sale on LICENSEE'S standard terms in a version for each
Member Team.
(b) All designs of the Licensed Products, 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
except as may be required by NBAP. Notwithstanding the foregoing,
NBAP
8
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: (i) By the twenty-fifth (25th) day following
the end of each month, LICENSEE shall furnish (on forms provided by
NBAP) full and accurate statements (on an unit basis and on a
country-by-country basis to the extent such information can be
determined), certified by an officer of LICENSEE, showing all
information relating to the calculation of Net Sales for the
preceding month. Such monthly statements shall be furnished by
LICENSEE whether or not there are any Net Sales for that month.
LICENSEE shall make all quarterly royalty payments required under
this Agreement by the twenty-fifth (25th) day after the end of each
three-month period ("quarter"). Simultaneously with the submission
of such royalty payment, LICENSEE shall furnish NBAP with a
statement (on a country-by-country and unit basis) showing all
information relating to the calculation of Net Sales for the
preceding quarter; it being understood that where actual sales
information for a particular country cannot be determined, LICENSEE
shall use its best efforts to provide NBAP with a reasonable
estimate of the sales made in such country. The minimum amount of
royalties to be paid by LICENSEE by the end of each quarter with
respect to each Licensed Product category shall be the amount which,
when added to payments of royalties previously made for the Contract
Year with respect to such Licensed Product category, shall be equal
to one-fourth (25%) of the Minimum Guarantee for such Licensed
Product category for such Contract Year required under Paragraph F
above multiplied by the number of quarters then elapsed. Aggregate
royalties paid each Contract Year may exceed the Minimum Guarantee
for such Contract Year.
(ii) Within sixty (60) days following the last day of each Contract
Year during the Term of this Agreement, LICENSEE shall forward to
NBAP a statement certified by an official of LICENSEE detailing all
sales of LICENSEE basketballs for the preceding Contract Year. This
statement shall specify U.S. and non-U.S. sales on a
country-by-country basis.
(iii) All payments made by LICENSEE to NBAP under this Agreement
shall be made free and clear of, and without deduction or
withholding for or on account of, any income, stamp or other taxes,
charges, fees, deductions or withholdings. If any such taxes,
charges, fees, deductions or withholdings are required by law to be
withheld from any amounts payable to NBAP hereunder, the amounts so
payable shall be increased to the extent necessary to yield to NBAP
the amounts specified in this Agreement.
(iv) 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 (1) three percent (3%) per annum over the
highest prime rate (announced by Chase Manhattan Bank, New York
branch) prevailing during the period between the date the payment
first became due and the date such payment is actually paid or (2)
the highest rate permitted by law during the period between the date
the payment first became due and the date such payment is actually
paid. The receipt or acceptance by NBAP of any of the statements
furnished or royalties paid by LICENSEE (including the cashing of
any royalty checks) shall not preclude NBAP from questioning their
accuracy at any time, auditing LICENSEE's books and records pursuant
to Paragraph 12 or claiming any shortfall in royalty 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
9
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, and LICENSEE shall pay,
two thousand U.S. dollars (USD 2,000) for each instance of
non-compliance with this Paragraph.
(b) No Cross Collateralization: Any royalty payment for a unit of
Licensed Product sold shall only be applied against the Minimum
Guarantee for such Licensed Product for the Contract Year in which
the unit of such Licensed Product was sold (i.e., any shortfall in,
or payment in excess of, the Minimum Guarantee for a Contract Year
may not be offset or credited against the Minimum Guarantees for any
other Contract Year, against any other Licensed Product or against
any other NBA license (including premium license agreements entered
into pursuant to Paragraph 5 hereof) held by LICENSEE). If Minimum
Guarantees are stated separately for different categories of
Licensed Products or for different territories, royalty payments
resulting from Net Sales of a category of Licensed Product or in a
particular territory shall be applied only against the Minimum
Guarantee for such category of Licensed Product or territory.
4. RIGHTS RESERVED
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
LICENSEE shall not use, nor allow any third party to use, any Licensed
Product (excluding Non-NBA Basketballs) as a Premium without the prior
written authorization of NBAP pursuant to a separate agreement with NBAP
in each instance. In addition, no Premium shall be offered with the
Licensed Products without the prior written approval of NBAP. Nothing in
this Agreement shall prohibit LICENSEE from marketing Licensed Products
using creative techniques consistent with industry practice, including,
but not limited to, periodic "specials," "sales," or volume discount
prices, so long as all receipts are accounted for in Net Sales and in
accordance with this Agreement.
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) that
such NBA Marks have secondary meanings in the minds of the public.
LICENSEE shall not, during the Term or thereafter, challenge (y) the
property rights of the Member Teams, whether severally owned or held in
association as the NBA, or NBAP's property rights, in and to NBA Marks, or
(z) the validity, legality or enforceability of this Agreement.
7. PROTECTION OF RIGHTS
(a) Unauthorized Activities: LICENSEE shall promptly notify NBAP in
writing of any infringements of the Licensed Marks or the Licensed
Products or the sale of any Licensed Products outside the Territory
(e.g., unauthorized importation/exportation of goods) which may come
to LICENSEE'S attention. NBAP shall have the sole right to determine
whether or not any action shall be taken on account of any such
infringement or unauthorized importation/exportation. LICENSEE
agrees not to contact any third party, not to make any demands for
claims and not to institute any suit or action on account of such
infringement 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 Member Teams in and to the Licensed
Marks. 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
10
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. Notwithstanding the preceding sentence, in
the event and to the extent LICENSEE fails to meet its Minimum
Guarantees for a particular Contract Year, NBAP shall grant LICENSEE
a credit against such Minimum Guarantee obligation out of the net
amount (after deducting all costs and expenses of the litigation)
NBAP recovers in damages or other monetary relief that represent or
are intended to represent injury sustained by LICENSEE.
(c) Ownership of Marks: LICENSEE acknowledges that NBAP and/or the
Member Teams are the exclusive owners of the Licensed Marks. Any
intellectual property rights in the Licensed Marks that may accrue
to LICENSEE shall inure to the benefit of NBAP and shall be assigned
to NBAP upon its request. Any copyright, trademark, service xxxx or
other right used, created 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 uses or 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 xxxx
affecting or relating to the Licensed Marks already procured or
applied for shall be assigned to NBAP. LICENSEE shall supply NBAP
with any necessary supporting materials required to obtain copyright
or trademark registrations of any copyrights or trademarks required
to be assigned to NBAP under this Agreement.
(d) Notices, Labeling and Records: NBAP may from time-to-time designate
such copyright, trademark or service xxxx notices (including the
form, location and content of such notices) that LICENSEE shall
cause to appear on or within each Licensed Product sold, by means of
a tag, label, imprint or other appropriate device, in every instance
in which any Licensed xxxx is used. Commencing January 1, 1998, 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 (prior to
January 1, 1998, the general notice required by the Prior Agreement
must be included):
"The NBA and individual NBA member team identifications
reproduced on this product are trademarks and copyrighted
designs, and/or other forms of intellectual property, that are
the exclusive property of NBA Properties, Inc. and the
respective NBA member teams and may not be used, in whole or
in part, without the written consent of NBA Properties, Inc."
LICENSEE shall: (i) cause 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 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 first use in
each
11
country of each different Licensed Xxxx 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. 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 the NBA or the Member Teams.
8. INDEMNIFICATIONS; INSURANCE
(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 National Basketball Players
Association ("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 (other than as a result
of claims of infringement in the use of Licensed Marks pursuant to
the provisions of this Agreement), (ii) any breach of this Agreement
by LICENSEE, (iii) the manufacture, distribution, advertisement,
promotion, sale, possession or use of any Licensed Product
(including, but not limited to, claims relating to any defect
(whether obvious or hidden and whether or not present in any sample
approved by NBAP) in a Licensed Product or in any packaging or other
materials (including advertising materials), or to injuries to
persons or property, or to any infringement of any rights of any
other person or entity or to LICENSEE's 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. In any instance to which the
foregoing indemnities pertain, NBAP shall cooperate fully with and
assist LICENSEE in all respects in connection with any such defense.
LICENSEE shall reimburse NBAP for all reasonable out-of-pocket costs
actually incurred by NBAP in connection with such cooperation and
assistance. In any instance to which such indemnities pertain,
LICENSEE shall keep NBAP fully advised of all developments
pertaining to such
12
Claim and 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 has failed
to deliver to NBAP a certificate of such insurance evidencing
satisfactory coverage prior to NBAP's execution of this Agreement
(or fails to maintain such insurance in accordance with this
Paragraph), NBAP shall have the right to withdraw its consent to use
any or all of the Licensed Marks and/or 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, (ii) any act or omission of NBAP, or (iii) any
breach of this Agreement by NBAP, provided NBAP is given prompt
written notice of and shall have the option to undertake and conduct
the defense of any such Claim. In any instance to which the
foregoing indemnities pertain, LICENSEE shall cooperate fully with
and assist NBAP in all respects in connection with any such defense.
NBAP shall reimburse LICENSEE for all reasonable out-of-pocket
expenses actually incurred by LICENSEE in connection with such
cooperation and assistance. In any instance to which such
indemnities pertain, NBAP shall not enter into a settlement of such
Claim or admit liability or fault without LICENSEE's prior written
approval.
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
product bearing a Licensed Xxxx, 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
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 thirty (30) 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, or license to use, 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.
13
(b) Production Samples: Before selling or distributing any product
bearing a Licensed Xxxx, LICENSEE shall furnish NBAP with, at no
charge, for its permanent use, two (2) samples of the product from
the first production run of each manufacturer of the Licensed
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 any such
sample does not meet the requirements of this Xxxxxxxxx 0, XXXX
shall notify LICENSEE and such article shall be deemed disapproved
and all such articles shall be promptly destroyed. LICENSEE shall
also furnish NBAP, free of charge, with any additional pieces of
Licensed Product as may reasonably be requested 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. 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.
(c) Rejections and Non-Compliance: The rights granted under this
Agreement do not permit the sale of "seconds" or "irregulars." All
submissions or samples not approved by NBAP shall promptly be
destroyed by LICENSEE. LICENSEE shall advise NBAP regarding the time
and place of such destruction (in sufficient time to arrange for an
NBAP representative to witness such destruction, if NBAP so desires)
and such destruction shall be attested to in a certificate signed by
one of LICENSEE'S officers and submitted to NBAP within fifteen (15)
days of the date on which the sample was not approved. In the event
of LICENSEE'S unapproved or unauthorized manufacture, distribution,
use or sale of any products or materials bearing the Licensed Marks,
including promotional and advertising materials, or the failure of
LICENSEE to comply with Paragraphs 7(d), 7(f), 9, 11(c) or 11(e),
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 two thousand U.S. dollars (USD
2,000) for each instance (e.g., per unit) of noncompliance with this
Paragraph with respect to any article, product or materials 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 disapproved, 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.
(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 improperly or
violates any term of this Paragraph 9 or (iii) NBAP becomes aware of
something relating to 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
the reasonable exercise of its sole discretion, to withdraw its
approval of such Licensed Product. In the event of such withdrawal,
14
NBAP shall provide immediate written notice to LICENSEE and LICENSEE
shall cease the use of the Licensed Marks in connection with the
manufacture, 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. Within thirty
(30) days after LICENSEE's receipt of such notice, LICENSEE shall
pay all royalties and Minimum Guarantees due NBAP with respect to
the 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 Player Attributes (as defined
in Paragraph 19 hereof), or any reproduction of the Licensed Marks or
Player Attributes in any advertising, promotion or display material in
connection with any product 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 approved. All
advertising or promotional copy and material depicting or using the
Licensed Marks (including display 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 Xxxx xxx 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 and as a minimum
requirement shall use its best efforts to sell the Licensed Products
through at least one (1) major retail outlet for such Licensed
Product in each of the markets in which there is an NBA Member Team,
and to supply said retail outlet with all types, sizes and colors of
Licensed Products during the final third of each calendar year for
the Term of this Agreement. 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, subject to
the provisions set forth in this Agreement, refrain for any reason
from selling Licensed Products to any retail outlet within the
Territory that may desire to purchase Licensed Products and whose
credit rating and marketing image warrants such sale.
15
(b) If LICENSEE desires to have a third party manufacture or distribute
(if permitted under this Agreement) 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 or distribute. Attached as Schedule B is a true and
complete list of all third party manufacturers and distributors (if
permitted under this Agreement) currently authorized by NBAP. NBAP
shall have the right, in its sole discretion, to withhold approval
for such third party manufacture or distribution. If NBAP grants
approval for such third party manufacture or distribution, it may
grant such approval pursuant to an agreement (on a form supplied by
NBAP) to be entered into prior to such manufacture or distribution
among NBAP, LICENSEE and such manufacturer or distributor which
will, among other things, require that the third party manufacturer
or distributor 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 or distributors uses the Licensed Marks 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 or distributor 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, and shall require any third party
distributors (to whom LICENSEE is authorized to sell under this
Agreement) and any authorized sublicensees and distributors to stamp
on their invoices, a prominent legend that states that the Licensed
Products are allowed to be sold only within the Territory and only
to an end user. LICENSEE shall periodically, and at the request of
NBAP, inquire of its authorized distributors, 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
resale 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 or discounts to
salespeople, 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 that LICENSEE
has employed
16
selling or reporting methods which 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 faithfully comply with and adhere to NBAP's
shipping and distribution policies established from time-to-time.
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, labels and
shipping and distribution policies 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.
(g) LICENSEE acknowledges that NBAP intends to offer various NBA and/or
Member Team-identified products for sale in an NBAP-owned "showcase"
retail store ("NBA Store"). LICENSEE further acknowledges that it
will receive a variety of tangible and intangible benefits as a
result of having merchandise manufactured by LICENSEE displayed,
sold and promoted at the NBA Store. Therefore, LICENSEE shall, in
addition to and in consideration for the license granted under this
Agreement and in consideration of the benefits it will receive from
having merchandise displayed, sold and promoted at the NBA Store,
(i) upon the request of NBAP, perform contract manufacturing
services for NBAP in connection with the manufacture of products for
sale in the NBA Store on terms as mutually agreed upon by NBAP and
LICENSEE and (ii) offer Licensed Products to the NBA Store on terms
at least as favorable as those offered to LICENSEE's most preferred
high-volume customers, including price, priority of delivery,
discounts, cooperative or other advertising and promotional
allowances and other benefits (regardless of volume).
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, to examine and audit such books of account and records and all
other documents and materials in LICENSEE's possession or under its
control (including records of LICENSEE's parents, subsidiaries, affiliates
and third parties, if they are involved in activities which relate to this
Agreement) relating to this Agreement. NBAP shall have free and full
access for such purposes and for the purpose of making extracts and
copies. Should an audit by NBAP establish a deficiency between the amount
found to be due NBAP and the amount LICENSEE actually paid or reported,
the LICENSEE shall pay the amount of such deficiency, plus interest at the
then current prime rate (as announced by Chase Manhattan 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 three
percent (3%), 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
17
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
xxxxxxxx to customers with respect to Licensed Products. LICENSEE shall on
a quarterly basis 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 quarterly purchases of Licensed Products (broken down by unit
sales and in dollar volume by retailer). LICENSEE shall supply NBAP with
true and complete copies of any agreement it has entered into, or in the
future 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 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, but not including information as to LICENSEE'S
profits) 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
(a) 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:
(1) 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.
(2) LICENSEE shall fail to timely remit any payment of any nature
due to NBAP or any of its affiliates when due and shall fail
to cure a royalty non-payment within thirty (30) days (ten
(10) days for a payment default other than a royalty payment
default) of its receipt of written notice from NBAP; provided,
however, that after LICENSEE twice fails to timely remit any
such payment when due LICENSEE shall not have the right to
cure any subsequent payment default.
(3) LICENSEE 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.
(4) LICENSEE shall exhibit a pattern of frequent failure to make
timely delivery of sufficient quantities of the Licensed
Products to its retail accounts.
(5) LICENSEE (or any entity that controls LICENSEE or is
controlled by LICENSEE) now or in the future holds a license
from NBAP and such license is terminated by NBAP during the
Term.
(6) LICENSEE (i) delivers Licensed Products outside the Territory;
(ii) sells Licensed Products to a third party who LICENSEE
knows, or has reason to know, intends to deliver the Licensed
Products outside the Territory; or (iii) LICENSEE is in breach
of Paragraph 11(c).
(7) LICENSEE sells to any third party that LICENSEE knows, or has
reason to know, is altering or modifying the Licensed Products
prior to sale to the ultimate consumer.
(8) LICENSEE shall fail to perform or shall be in breach of any
other term or condition of this Agreement (other than a
payment default). A termination pursuant to this subparagraph
(8) shall take effect (i) thirty (30) days after written
notice of such
18
failure to perform or breach is sent by NBAP if such failure
to perform or breach can be Completely Cured (as defined
below) and such failure to perform or breach has not been
Completely Cured during such thirty (30) day period, or (ii)
immediately after written notice of such failure to perform or
breach is sent by NBAP if such failure to perform or breach
cannot be Completely Cured. For purposes of this subparagraph,
"Completely Cured" means that such failure to perform or
breach is cured so that, in the reasonable judgment of NBAP,
such failure to perform or breach will have had no effect on,
or caused no damage to, NBAP.
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 for the balance of the Contract Year, less the
royalties paid to NBAP through the date of termination.
(b) Without prejudice to any other rights LICENSEE may have pursuant to
this Agreement or otherwise, LICENSEE shall have the right to
terminate this Agreement at any time if:
(1) NBAP shall fail to perform or shall be in breach of any other
term or condition of this Agreement and if such breach shall
continue for a period of thirty (30) days after written notice
of such failure to perform or breach is sent by LICENSEE.
(2) NBAP 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.
(3) Either NBAP or the NBA is dissolved.
14. DISPOSAL OF STOCK; EFFECT OF TERMINATION
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 right to, nor allow third party to,
manufacture, advertise, distribute, sell, promote or otherwise deal in any
Licensed Products or use the Licensed Marks (and LICENSEE shall not engage
in any such activity) except as provided below. For a period of ninety
(90) days following the expiration (but not after the termination) of this
Agreement, LICENSEE may sell-off and deliver Licensed Products which are
on hand or in process 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 and in the normal course of business and at regular selling
prices, (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 Licensed Products under
this Paragraph. After such Sell-Off Period, all inventory on hand or in
process (including all promotional and packaging materials) will be
destroyed. LICENSEE shall have no sell-off rights in the event this
Agreement is terminated. After such termination, all inventory on hand or
in process (including all promotional and packaging materials) will be
destroyed. Any destruction of Licensed Product required pursuant to this
Agreement shall be attested to in a certificate signed by one of
LICENSEE's officers.
19
15. EQUITABLE RELIEF
LICENSEE acknowledges that NBAP is entering into this Agreement not only
in consideration of the royalties or other financial consideration 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 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. LICENSEE further acknowledges that: (i) its failure to
manufacture, advertise, distribute, sell and promote the Licensed Products
in accordance with this Agreement and (ii) the unauthorized or unapproved
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, LICENSEE agrees that, in the event of a breach
of this Agreement by LICENSEE, in addition to such other legal and
equitable rights and remedies as shall be available to NBAP, NBAP shall be
entitled to injunctive and other equitable relief, without the necessity
of proving damages or furnishing a bond or other security.
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.
19. NO 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 in advertising and promotional materials specifically approved by
NBAP. The license granted under this Agreement does not include, and shall
not be used to imply, a testimonial or endorsement of any Licensed
Products by any NBA player. LICENSEE shall not use Player Attributes in
any manner without first obtaining written authorization from the subject
player(s). LICENSEE shall not enter into any agreement with any NBA player
or any other person which would require that player or other person to
wear or use any Licensed Product or other product at any NBA game (either
courtside or in any locker room) or at practice; provided, however, that
NBAP acknowledges that LICENSEE has entered into an agreement with Xxxxxx
Xxxxxxxx that requires him to wear LICENSEE'S athletic footwear during NBA
games and that LICENSEE shall not be in breach of the foregoing provision
as a result of such agreement.
20
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 in
accordance with the terms and conditions of this Agreement. LICENSEE
represents and warrants that the Licensed Products and 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) 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. 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, all payment obligations
of LICENSEE hereunder shall be accelerated and immediately due and
payable, and all rights granted under this Agreement shall
immediately revert to NBAP.
(b) Waiver: None of the provisions of this Agreement can be waived or
modified except expressly by a writing signed by both panties. There
are no representations, promises, agreements, warranties, covenants
or undertakings by either party other than those contained in this
Agreement. No failure on the part of NBAP to exercise any right
under this Agreement shall operate as a waiver of such right; nor
shall any single or partial exercise of any right preclude any other
or further exercise or the exercise of any other rights.
(c) Survival: No expiration or termination of this Agreement shall
relieve LICENSEE of its obligation to pay NBAP any amounts due to
NBAP at the time of termination, regardless of whether these amounts
are then or thereafter payable. The provisions of Paragraphs 12 and
22(f) shall survive the expiration or termination of this Agreement.
(d) Adjustments: NBAP shall have the option to increase the Royalty
Rates in the event that, at any time during the Term, LICENSEE
agrees to pay or in fact pays an aggregate value with respect to any
other licensed sports league in excess of the aggregate value paid
to NBAP under this Agreement. From time-to-time at NBAP's request,
LICENSEE shall deliver a certificate to NBAP which sets forth the
royalty rates and any advertising and promotion contributions or any
other amounts LICENSEE pays to any other licensed sports league.
(e) Governing Law and Jurisdiction: This Agreement shall be construed in
accordance with the laws of the State of New York, USA, without
regard to its principles of
21
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 and NBAP consent to the jurisdiction of such
court and to the service of process by mail.
(f) Confidentiality: Neither party shall (nor shall they permit or cause
their employees or agents to) divulge, disseminate or publicize
information relating to this Agreement or the financial or other
terms of this Agreement (including any information on the
specifications or methods of reproduction of the Licensed Marks) 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. Notwithstanding the foregoing, LICENSEE shall be
permitted to divulge financial or other information relating to this
Agreement to a bona-fide prospective buyer of LICENSEE, provided
that LICENSEE requires the prospective buyer to enter into an
agreement pursuant to which the prospective buyer agrees to keep any
such financial or other information strictly confidential.
(g) Research: LICENSEE shall cooperate with NBAP's reasonable requests
for information in connection with conducting marketing tests,
surveys and other research ("Research"), provided that any
proprietary information so furnished shall be kept strictly
confidential by NBAP. If LICENSEE performs or causes to be performed
any Research primarily dedicated to evaluating or otherwise
assessing a Licensed Product (or any LICENSEE (non-NBA) product
offering similar to a Licensed Product), then copies of such
Research results shall be promptly provided to NBAP. As may be
reasonably requested by NBAP, LICENSEE shall provide NBAP (or NBAP's
designated third-party researcher) with any Research and information
that LICENSEE has or obtains regarding its retail accounts.
(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, when fully-executed,
shall constitute the entire agreement and understanding between the
parties and cancels, terminates and supersedes any prior agreement
or understanding relating to the subject matter of this Agreement
between LICENSEE and the NBA, any Member Team, NBAP or NBAE. The
headings in this Agreement are for reference purposes only and shall
not affect the interpretation of this Agreement. This Agreement
shall not be binding on NBAP until signed on its behalf by its
President or Senior Vice President, Business Affairs or such other
executive designated by the President to sign.
# # #
22
SCHEDULE A
SPALDING NBA GOLF BALL ANNUAL MINIMUM SALES PERFORMANCE GOALS:
[*]
23
SCHEDULE B
THIRD PARTY MANUFACTURERS:
[*]
24
