Exhibit 10.5
[LOGO] NBA PROPERTIES, INC.
Spalding & Evenflo Companies, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter will confirm our agreement with respect to international
basketball league adoptions (i.e., payments to international basketball
leagues in return for league use of the Spalding/NBA official game basketball
as the official basketball of that league).
Reference is made to the agreement (the "Agreement") dated February 1, 1992
between NBA Properties, Inc. ("NBAP") and Spalding & Evenflo Companies, Inc.
("Spalding"). All capitalized terms used in this agreement and not defined
herein shall have the meanings ascribed to them in the Agreement.
We have agreed as follows:
1. For each Contract Year remaining during the term that Spalding increases
its sales of Licensed Products outside of the United States by no less than
[*] over the prior Contract Year, Spalding may direct up to [*] from any
subsequent international advertising and promotion dollars that would
otherwise accrue to NBAP pursuant to Paragraph 7(c) toward the funding
of international basketball league adoptions; provided that NBAP shall have
the right to approve, prior to adoption, the leagues Spalding proposes to
adopt under this agreement.
2. Spalding shall deliver to NBAP a full and detailed accounting of all
payments made to any international basketball league pursuant to this
agreement. In addition, Spalding shall use its best efforts to measure the
impact of such international basketball league adoptions and share such
information with NBAP.
[*] Denotes redaction. Redacted language has been separately
filed with the Securities and Exchange Commission pursuant to a
request for confidential treatment under Rule 406 of the Securities
Act of 1933.
3. All other terms and conditions of the Agreement shall remain in full force
and effect.
AGREED TO AND ACCEPTED: AGREED TO AND ACCEPTED:
SPALDING & EVENFLO COMPANIES, INC. NBA PROPERTIES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------- ---------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, President
Title: Director of International
Operations
This Agreement made and entered into this 1st day of February, 1992, by
and between NBA Properties, Inc. ("NBAP"), having its principal office at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and Spalding & Evenflo Companies,
Inc. on behalf of its Spalding Sports Worldwide division ("SPALDING"), having
its principal office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, witnesseth:
WHEREAS, NBAP has the exclusive right to license for commercial purposes,
the use of the names, logos, symbols, emblems, designs, uniforms and
identifications ("Marks") of the National Basketball Association ("NBA") and
the Member Teams thereof (collectively, the "Licensed Marks") on merchandise
and products and has the right to grant the licenses and rights hereunder;
WHEREAS, SPALDING is engaged in the business of manufacturing and selling,
among other products, basketballs and sports equipment; and
WHEREAS, SPALDING desires to use certain of the Licensed Marks in
connection with the manufacture, distribution, advertisement, promotion and
sale of basketballs, golf balls and leather bound executive accessories as
described below and to obtain advice and consultation in connection with the
manufacture, distribution and ultimate retail sale of such merchandise;
THEREFORE, in consideration of the premises and the mutual promises and
covenants herein contained, the parties
-2-
hereto agree as follows:
1. DEFINITIONS:
For the purposes hereof:
(a) "Licensed Products" mean only the merchandise described in Paragraph
4 hereof.
(b) "Premium" means anything given free or sold at substantially less
than 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 for other giveaway or
promotional purposes. Other giveaway or promotional purposes
include, but are not limited to, self-liquidating offers, sales
force incentives, and distribution of Licensed Products for retail
sale through distribution channels offering earned discounts or
"bonus" points based upon the extent of the consumers usage of the
offeror's product or service.
(c) "Net Sales" means the dollar amount of the gross sales of all
Licensed Products after deducting all standard discounts and
allowances and any bona fide credits for returns or defective goods
actually made or allowed. "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
-3-
incurred in manufacturing, selling, distributing or advertising
basketballs shall be deducted, nor shall any deduction be made for
uncollected accounts.
(d) "Contract Year" means a twelve (12) month accounting period
commencing February 1 and concluding January 31.
(e) "SPALDING Endorsers" mean the NBA players who are under contract to
SPALDING as of the execution hereof (currently ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇), as
well as such other NBA players as SPALDING may sign to endorsement
contracts from time-to-time during the term of this Agreement.
(f) "NBA Uniforms" mean such "Official" NBA team uniforms, warm-ups,
practicewear or NBA All-Star uniforms issued to SPALDING Endorsers
by their respective team or the NBA.
(g) "Game Photos" mean actual NBA game photographs in which a SPALDING
Endorser(s) is the principal subject of the photograph (although
other NBA players may be incidentally visible therein).
2. TERM
(a) This Agreement shall be for the period commencing on the 1st day of
February, 1992, and shall expire on the 31st day of January, 1997,
unless sooner terminated in accordance with the provisions hereof.
(b) During the period from [*]
-4-
NBAP agrees to negotiate exclusively with SPALDING as to the terms
of an extension or continuation of this Agreement. In the event
that SPALDING and NBAP are unable to agree to any extension or
continuation of this Agreement prior to [*] NBAP shall promptly notify
SPALDING in writing of the terms and conditions under which it is then
willing to enter into an extension or continuation with SPALDING.
SPALDING shall have a period of twenty (20) business days after its
receipt of this offer to accept it. If SPALDING does not accept the
offer, NBAP shall be free to enter into an agreement with any third
party with respect to the rights granted herein effective
upon the expiration of this Agreement, but only if such third party
agreement is on terms and conditions equal to or more favorable to
NBAP than those contained in NBAP's offer to SPALDING. If NBAP wishes
to enter into an agreement with a third party on terms less favorable
than those contained in NBAP's offer to SPALDING, then NBAP shall notify
SPALDING in writing of the terms and conditions of the proposed third
party agreement, and SPALDING shall have ten (10) business days from
its receipt of those terms and conditions to notify NBAP that it is
willing to enter into an agreement with NBAP on such terms and conditions,
in which case NBAP shall enter into said Agreement with SPALDING instead
-5-
of the third party. In the absence of such notice from SPALDING, NBAP
shall be free to enter into the third party agreement. The provisions
of this paragraph shall expire upon the expiration of this Agreement.
3. TERRITORY
The rights granted under this license shall be exercisable worldwide.
4. GRANT OF LICENSE
(a) Grant: (1) NBAP hereby grants to SPALDING the exclusive license
(subject to Paragraph 10 below), during the term and in the territory
hereof, to use the Licensed Marks in connection with the manufacture,
endorsement, advertisement, distribution, promotion, packaging and
sale of the products as specified below:
(i) The official NBA game basketball made from top quality, full grain
leather (the "Official Ball"). The Official Ball shall be
identified and described as the NBA "Official Game Ball" and shall
bear the facsimile signature of the Commissioner of the NBA
("Designation");
(ii) split leather basketballs;
(iii) synthetic leather basketballs;
(iv) full and youth-size rubber basketballs of varying price points;
(v) mini rubber-bladdered toy balls twenty-three
-6-
inches (23") or less in circumference ("mini-balls") in two styles
-- solid color panels and team color coordinated panels;
(vi) micro-mini balls nine inches (9") or less in circumference, or
other basketballs or simulated basketballs as may be developed by
SPALDING from time to time during the term hereof;
All basketballs upon which any Licensed ▇▇▇▇ is actually used shall be
collectively referred to as "NBA Basketballs", except with respect to
those basketballs which also bear the facsimile signature of SPALDING
Endorsers and which shall be referred to as "Autograph Balls". SPALDING
basketballs which do not bear any Licensed Marks shall be referred to as
"Generic Basketballs".
(vii) Top-Flite XL golf balls and custom retail grade golf balls ("Golf
Balls"); and
(viii) Basketball grain leather and/or synthetic basketball grain
leather binders, business card-file folders, business card holders
weekly desk diaries, pad binders, address books, courier
portfolios and such other common executive accessories as
SPALDING and NBAP may agree to ("Executive Accessories").
(2) In addition to the Licensed Marks, NBAP grants to SPALDING the right
to depict SPALDING Endorsers in
-7-
their NBA Uniforms, and to use Game Photos, solely in the packaging,
advertisement, promotion and sale of NBA Basketballs. SPALDING
acknowledges and agrees that nothing in the foregoing shall be construed
as granting to SPALDING any right to use the likeness and/or name of any
NBA player (except to the extent visible in Game Photos) and that all
such rights must be secured by SPALDING directly from such players.
(b) Limitations on License: No license is granted hereunder for the use of
the Licensed Marks for any purpose other than upon the Licensed Products
and in the advertisement and promotion thereof. SPALDING acknowledges
that the Licensed Products may not be used as a Premium (excluding
Generic Basketballs) except with the prior written approval of NBAP and
pursuant to SPALDING's execution of a separate Premium agreement with
NBAP in each instances. Nothing in this Agreement, however, shall
prohibit SPALDING from marketing the Licensed Products using creative
techniques which include but are not limited to periodic "specials",
"sales", or volume discount prices, as the market may require, so long as
all receipts are accounted for in Net Sales.
(c) Designs of Licensed Products: All designs of the Licensed Products
including any packages, containers or tags, shall be used solely in
furtherance of this Agreement, and such designs shall not be used in any
-8-
other respect by SPALDING nor shall SPALDING permit any third party to
use such designs.
5. BALL DESIGNATION & SPECIFICATIONS.
(a) On or before the commencement date of this Agreement, NBAP will
establish and declare the Official Ball as the exclusive Official NBA
Basketball. So long as SPALDING is in compliance with its obligations
under this Agreement, no other basketball or basketballs will be
permitted to be used in any games or official team activities conducted
under the schedule or auspices of the NBA during the term of this
Agreement.
(b) NBAP will cause the NBA to adopt and use exclusively the Official Balls
manufactured by SPALDING in all games scheduled and played under the
auspices of the NBA.
(c) All Official Balls shall be of standard manufacture, selected of the
best available materials, best workmanship and at all times be of such
weight, size and rebound, and other physical characteristics of
construction, as shall be reasonably specified by the Commissioner of
the NBA. Such characteristics shall not be changed without SPALDING
receiving at least one hundred eighty (180) days advance written notice
specifying the new applicable characteristics. The Official Balls shall,
unless changes are properly approved by the Commissioner of the NBA, be
of the same or better construction, composition and quality as
-9-
those used by the NBA during the 1991-92 season. Unless requested in
writing by NBAP, only the Official Ball shall be stamped by SPALDING with
the Designation.
(d) Each NBA Season during the term hereof, SPALDING 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 and freight free, [*] Balls stamped with
the appropriate team's name on the panel in the manner executed on team
balls used during the 1991-92 NBA Season. NBAP or any of the NBA teams
may purchase additional Official Balls from SPALDING at SPALDING's
then-lowest wholesale price plus a reasonable administration fee. At the
commencement of each Contract Year, SPALDING 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.
(e) With respect to Autograph Balls, to the extent such balls are stamped
with any Licensed ▇▇▇▇, the size and placement of such Marks shall be
suboridinate to that of the Autograph, and the relative size of the ▇▇▇▇
shall be substantially similar in proportion to the Autograph to ▇▇▇▇
proportions currently employed on Autograph Balls.
6. RATE AND TERMS OF PAYMENT.
(a) Rates: During the term of this Agreement and any per-
-10-
iod of disposal allowed hereunder, SPALDING shall pay NBAP an amount
equal to:
(i) [*] of the Net Sales of NBA Basketballs (except as
specified in subparagraph (a)(ii) below);
(ii) [*] of the Net Sales of Autograph Balls;
(iii) [*] of the Net Sales of all Generic Basketballs
(except as specified in subparagraph (a)(vi) below);
(iv) [*] of the Net Sales of all NBA-identified Golf
Balls and NBA-identified Executive Accessories used as a Premium;
(v) [*] of the Net Sales of all Autograph Balls used as a Premium;
(vi) [*] of the Net Sales of all Generic Basketballs used as a Premium;
(vii) [*] of the Net Sales of all NBA-identified Golf Balls;
(viii) [*] of the Net Sales of all NBA-identified Executive Accessories;
and
(ix) [*] of the Net Sales of all non-NBA-identified
executive accessories.
(b) Minimum Guaranteed Payment: SPALDING guarantees that its minimum royalty
payments to NBAP under Paragraph 4(a) for each Contract Year shall not
be less than
-11-
the amounts set opposite each such period.
CONTRACT YEAR MINIMUM PAYMENT
1st: Feb. 1, 1992 - Jan. 31, 1993 [*]
2nd: Feb. 1, 1993 - Jan. 31, 1994 [*]
3rd: Feb. 1, 1994 - Jan. 31, 1995 [*]
4th: Feb. 1, 1995 - Jan. 31, 1996 [*]
5th: Feb. 1, 1996 - Jan. 31, 1997 [*]
In addition, SPALDING agrees that if in any Contract Year its NBA
Basketball business drops below [*] of its total basketball business,
it will pay NBAP a [*] (i.e., NBA Basketball plus Generic Basketballs)
and its NBA Basketball business.
(c) Statement and Payments: (1) Quarterly - By the 25th day after the end of
each quarter, SPALDING shall furnish, on forms to be provided by NBAP,
full and accurate statements showing all information relating to Net
Sales for the preceding quarter and simultaneously with the submission
of such statement shall make all royalty payments thereon. Such
quarterly statements shall be furnished whether or not they reflect any
Net Sales. (2) Annual Certification - Within sixty (60) days following
the last day of each year during the term of this Agreement, SPALDING
shall forward to NBAP a statement certified by an official of SPALDING
detailing all sales of SPALDING basketballs for the preceding year. This
statement
-12-
shall specify U.S. and non-U.S. sales on a country-by-country basis.
(d) No Cross Collateralization: Royalty payments as provided under Paragraph
6(b) shall only be applied against the Minimum Guaranty for the Contract
Year in which the royalty payment accrued, i.e., any shortfall in a
given Contract Year or payment in excess of the minimum guaranteed
payment may not be off-set or credited against royalty payments for any
other Contract Year.
7. ADVERTISING AND PROMOTION.
In addition to all other amounts payable to NBAP hereunder SPALDING shall
(a) Pay NBAP an amount equal to [*] of Net Sales on all NBA Basketballs,
which amount shall be payable quarterly together with royalties payable
during that quarter and shall be expended by NBAP for advertising or
promotion activities in addition to those set forth below.
(b) Domestic. For each Contract Year, [*] (which NBAP will control
exclusively, but reasonably) for domestic advertising and promotional
purposes. The funds shall be used for such expenditures as summer camps
and leagues, point-of-purchase merchandising units, cooperative
advertising (Hoop Magazine, NBA Annual Schedules and Basketball Annual),
All-Star Weekend and League
-13-
Meeting parties and other appropriate social events, direct mail TV
campaign for NBA licensed products, etc. The specific allocation of
such funds, as well as the funds spent for international use under
Paragraph 7(c), shall be discussed by NBAP with SPALDING each year at a
meeting to be held no later than June 30th, although NBAP will make the
final decision on the use of all such funds.
(c) International. In addition to domestic promotional dollas, SPALDING will
spend international promotional dollars (which NBAP will control
exclusively, but reasonably) in an amount equal to the sum of [*] In no
event will SPALDING spend less than the amounts indicated below for each
Contract Year.
[*]
(d) In addition to the above, each NBA Season during the term hereof,
SPALDING shall donate to NBAP such quantity of SPALDING product (e.g.,
golf and tennis balls) as NBAP may reasonably request for use, or as
prizes awarded, in connection with tournaments staged
-14-
by NBAP (and sponsored by SPALDING) from time-to-time as part of
NBA special events such as the golf and tennis tournaments held
during League Meetings, Finals Celebration, etc. SPALDING
acknowledges that the extent of annual merchandise support will
be mutually determined by NBAP and SPALDING, but in no event will
it be less than the levels established for the 1991-92 NBA Season
i.e., approximately [*] to [*]).
(e) Each NBA Season, participate in NBAP's annual catalogs and shall
send necessary material for its advertisement therein, which
shall be at least one full page, and shall pay, as invoiced, for
such advertisement at the rate of [*] per page, which rate shall be
subject to a twenty percent (20%) increase per Contract Year
without notice.
8. MERCHANDISE SUPPORT, CREDIT.
(a) Each Contract Year, SPALDING will provide reasonable merchandise,
and merchandise support, as mutually determined by NBAP and
SPALDING but in no event less than the levels established for the
1991-92 NBA Season. More specifically, SPALDING will grant a
credit to NBAP toward the purchase of NBA Basketballs for use in
promotions supporting the NBA teams at the actual cost as of the
commencement of this Agreement, in an amount sufficient to ensure
that the same num-
-15-
ber of basketballs can be purchased in each year under this
Agreement, and it is agreed that the first year's credit shall be
[*] The price of such basketballs shall be manufacturer's cost and
shall not include a royalty.
(b) For each season during the term hereof, SPALDING will, at its
sole expense, furnish to each team a reasonable number of ball
carts and maintain same in working order.
(c) For each season during the term hereof, including 1992-93, NBAP
shall establish an NBA merchandising credit account on behalf of
SPALDING in the amount of [*], to be used by SPALDING during the term
of this Agreement for merchandising support (e.g., game tickets, products
from the then current NBAP direct mail catalog, and pre-game parties).
Recognizing the probability of price increases for game tickets,
the parties will meet annually to agree upon the amount of
merchandising credit under this Paragraph 8, using their best,
good-faith efforts to arrive at equitable increases to assure the
ability to purchase a similar number of game tickets under this
Paragraph 8.
9. ALL-STAR PACKAGES
NBAP shall provide SPALDING with [*] complimentary tickets for
each All-Star Weekend competition, as well as invitations to all
major, public, NBAP-controlled
-16-
social functions ("All-Star Packages"), held during the term hereof.
In addition to the foregoing, NBAP shall also provide SPALDING with an
additional [*] All-Star Packages for use by SPALDING's International
Operations.
10. NON-RESTRICTIVE GRANT.
(a) Nothing in this Agreement shall be construed to 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, 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 inflatable basketballs and golf balls.
(b) SPALDING acknowledges that NBAP shall not in any way be
restricted from licensing the use of the Licensed Marks in
connection with Executive Accessories other than basketball
grained accessories as described in Paragraph 4(a)(viii) and that
such licenses shall not be deemed a violation or breach of this
Agreement. By way of example, NBAP may license manufacturers
such as "Coach" or "Pendi" to do smooth leather or suede executive
accessories.
11. GOODWILL.
SPALDING recognizes the great value of the goodwill associated with
the Licensed Marks and acknowledges that the
-17-
goodwill attached thereto belongs to NBAP, the NBA and its Member
Teams, and that such Licensed Marks have secondary meanings in the
minds of the public. SPALDING shall not, during the term of this
Agreement or thereafter, attack the property rights of the Member
Teams, whether severally owned or held in association as the NBA, or
the property rights of NBAP, in and to the Licensed Marks, or attack
the validity, legality or enforceability of this Agreement.
12. PROTECTION OF RIGHTS.
SPALDING shall assist in the protection of the several and joint
rights of the Member Teams of the NBA and NBAP in and to the Licensed
Marks, and any copyright, trademark or service ▇▇▇▇ procured by
SPALDING with respect in and to the Licensed Marks, and any
copyrights, trademark or service ▇▇▇▇ procured by SPALDING with
respect thereto shall be procured for the benefit of and in NBAP's
name, but at SPALDING'S expense, and any copyright, trademark or
service ▇▇▇▇ affecting the Licensed Marks already procured or applied
for will be assigned to NBAP. In every instance wherein the logo of
the NBA or of its Member Teams is used, SPALDING shall cause to appear
on or within each Licensed Product sold under this license, by means
of a tag, label, imprint or other appropriate device, the encircled
"R" or "TM" notice or such other copyright, trademark or service ▇▇▇▇
notices as NBAP may from time to time designate. In addition, the
following
-18-
general notice 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 individual NBA Member Team Marks reproduced on this product
are trademarks which are the exclusive property of the respective
Teams and may not be used without the written consent of NBA
Properties, Inc."
SPALDING further agrees that all Licensed Products shall 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.
13. INDEMNIFICATIONS.
(a) SPALDING hereby agrees to be solely responsible for, defend, hold
harmless and indemnify the NBA, its Member Teams, NBAP and their
respective directors, governors, officers, employees and agents
from and against any claims, demands, causes of action or damages
(including attorneys' fees) arising out of: (i) the acts or
omissions of SPALDING, other than as a result of claims of
infringement in or to the Licensed Marks; or (ii) breach of this
Agreement by SPALDING, provided SPALDING is given immediate
written notice of and shall have the option to undertake and
conduct the defense of any such claim, demand or cause of action.
In any instance to which the foregoing indemnities pertain,
SPALDING shall keep NBAP fully advised of all developments and
shall not enter
-19-
into a settlement of such action or claim without NBAP's prior
written approval. SPALDING will obtain and maintain product liability
insurance, which policy shall be written for the benefit of SPALDING,
the NBA, its Member Teams, NBAP and their respective directors,
governors, officers, shareholders, employees and agents, against any
claims, demands or causes of action or damages (including attorneys'
fees) arising out of any alleged defects in such articles, or any use
thereof, in an amount and providing coverage satisfactory to NBAP.
Such insurance policy shall provide that it may not be canceled
without at least ten (10) days written notice to NBAP. SPALDING shall
deliver to NBAP promptly upon issuance of same, a full and complete
copy of such insurance policy and of all renewals thereof.
(b) NBAP hereby agrees to be solely responsible for, defend, hold harmless
and indemnify SPALDING, its directors, officers, employees and agents
from and against any claims, demands, causes of action or damages
(including attorneys' fees) arising out of: (i) a claim that the use
of the Licensed Marks as authorized in this Agreement violates or
infringes upon the alleged trademark, copyright or other rights of a
third party in or to the Licensed Marks; (ii) the acts or omissions
of NBAP; or (iii) the breach of this Agreement by NBAP, provided NBAP
is given im-
-20-
mediate written notice of and shall have the option to undertake and
conduct the defense of any such claim, demand or cause of action. In
any instance to which the foregoing indemnities pertain, SPALDING
shall cooperate fully with NBAP in all respects in connection with
any such defense.
14. QUALITY OF MERCHANDISE, SAMPLES.
The Licensed Products shall be of high standards of style, quality and
appearance. In order to assure NBAP that it is complying with such
standards, SPALDING shall, before selling or distributing any Licensed
Product, furnish to NBAP, at no charge, for its inspection and permanent
use two (2) samples of the Licensed Product, including all styles, colors
and variations, together with its labels, tags, cartons and containers
(including packaging and wrapping materials). SPALDING shall provide to
NBAP, at no charge, such additional samples as may be reasonably required
by NBAP (e.g., for use in NBAP's sales calls, display room, television
commercials, catalogs, mailers, trade shows) to promote the sale of NBA
Official Licensed Products. The Licensed Products, including the other
materials listed above, shall be approved in writing by NBAP (which
approval NBAP shall have the right to withhold in its discretion) before
SPALDING shall sell, distribute, advertise or use the same. In the event
of SPALDING's unapproved distribution of any product (or materials) bearing
the Licensed Marks NBAP shall have the
-21-
right to immediately revoke SPALDING's rights with respect to any
product(s) licensed under this Agreement and that such right of
revocation shall be without prejudice to any other rights NBAP may have
under this Agreement. Any article submitted and not disapproved within
thirty (30) days after receipt shall be deemed as having been approved.
After samples of the Licensed Products have been approved pursuant to
this paragraph, SPALDING shall not depart therefrom in any significant
respect without prior written consent by NBAP. In the event the quality,
appearance or style of any Licensed Product ceases to be acceptable to
NBAP, or in the event there is an occurrence or factor connected with any
such Licensed Product or SPALDING which, in the opinion of NBAP, reflects
unfavorably upon the professional, business or personal reputation of the
NBA, its Member Teams or NBAP, NBAP shall have the right in the
reasonable exercise of its sole discretion, to withdraw its approval of
such Licensed Product. Thereupon, SPALDING shall cease the use of the
Licensed Marks in the sale, distribution, advertising or use of such
Licensed Product immediately upon notice from NBAP, and within sixty (60)
days thereafter shall pay all amounts due NBAP pursuant to Paragraph
6(a). If there are other Licensed Products under this Agreement not
covered or affected by the foregoing two (2) sentences of this paragraph,
this Agreement shall remain in full force and effect as to those other
Licensed Prod-
-22-
ucts.
15. PROMOTIONAL MATERIALS.
SPALDING shall not use the Licensed Marks or any reproduction thereof in
any advertising, promotion or display material or in any other matter
whatsoever without prior written approval from NBAP and shall, whenever
possible, use and conform to package designs, hangtag and labels
suggested by NBAP. Under no circumstances shall "lotteries," "games of
chance" or any other type of promotion which NBAP believes reflects
unfavorably upon the NBA or its Member Teams be approved. All copy and
material using or tying in with Licensed Marks shall be submitted for
approval well in advance of production and allowing adequate time (not
less than ten (10) working days) for NBAP to approve, comment upon or
express disapproval thereof in its sole discretion and for any required
changes to be made.
16. DISTRIBUTION, COMPLIANCES.
(a) SPALDING shall exercise its best efforts to manufacture, distribute
and sell, within and throughout the territory hereof, the Licensed
Products in such manner as may be required to meet competition by
reputable manufacturers of similar articles. Use of distributors for
distribution of the Licensed Products shall only be pursuant to written
agreement (in a form and providing safeguards satisfactory to NBAP).
A copy of each such agreement must be furnished to
-▇▇-
▇▇▇▇. ▇▇▇▇▇▇▇▇ shall make and maintain adequate arrangements for the
distribution and timely delivery of Licensed Products to retailers
within and throughout such 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 contract. In the event NBAP advises SPALDING that a special
promotional effort is to take place in an individual store or chain,
SPALDING shall use its best efforts to sell the Licensed Product to
said store or chain. SPALDING further agrees to give the Licensed
Products wide distribution and will not sell Licensed Products to any
retail outlet within any area to the exclusion of other retail outlets
that may desire to purchase Licensed Products and whose credit rating
warrants such sale.
(b) SPALDING and NBAP shall at all times conduct all aspects of their
business in compliance with all applicable laws, government rules and
regulations (including, without limitation, those of the Federal
Trade Commission and the U.S. Consumer Product Safety Commission),
court and administrative decrees.
-24-
17. RECORDS, AUDITS.
SPALDING shall keep accurate books of account and records covering all
transactions relating to the license herein granted. NBAP and its
authorized representatives shall have the right at all reasonable hours of
the day, on reasonable prior notice, to examine and audit such books of
account and records and all other documents and material in SPALDINGS's
possession or under its control with respect to the subject matter and
terms of this Agreement, and shall have free and full access thereto for
such purposes and for the purpose of making extracts therefrom and copies
thereof. Should an audit by NBAP disclose a deficiency of more than three
percent (3%) between the amount found to be due NBAP and the amount
SPALDING actually paid or reported, the cost of the audit will be paid by
SPALDING along with the amount of the deficiency together with interest
thereon at the then current prime rate (as published in the Wall Street
Journal) from the date such amount became due until the date of the payment.
All such books of account and records shall be kept available for at least
two (2) years after the termination of this Agreement, or three (3) years
after the end of the fiscal year to which they relate, whichever is earlier.
SPALDING further agrees, in order to facilitate inspection of its books and
records with respect to amounts due, that it will designate a symbol or
number which will be used exclusively in connection
-25
with Licensed Products on which royalty payments are payable under this
Agreement and with no other products which SPALDING may manufacture, sell
or distribute, and that duplicates of all ▇▇▇▇▇▇▇▇ to customers with respect
to Licensed Products shall be kept for inspection as herein provided.
18. TERMINATION BY NBAP.
Without prejudice to any other rights, NBAP shall have the right to
terminate this Agreement at any time if:
(a) SPALDING shall fail to make any payment due hereunder or to deliver any
of the statements herein referred to, and if such default shall continue
for a period of ten (10) days after receipt of written notice of such
default is sent by certified or registered mail.
(b) SPALDING shall be unable to pay its liabilities when due, or shall make
any assignment for the benefit of creditors, or shall file or have filed
against it any petition under the United States Bankruptcy Code (which
petition is not dismissed within thirty (30) days of its filing), or be
adjudicated a bankrupt or insolvent, or if any receiver is appointed for
its business or property, or if any trustee in bankruptcy or insolvency
shall be appointed under the laws of the United States government or of a
state.
(c) SPALDING shall fail to perform or shall be in breach of any other terms
or condition of this Agreement and if such breach shall continue for a
period of thirty
-26
(30) days after written notice of such breach is sent by NBAP.
19. TERMINATION BY SPALDING.
Without prejudice to any other rights, SPALDING shall have the right
to terminate this Agreement at any time if:
(a) 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 breach is
sent by SPALDING.
(b) NBAP shall file or have filed against it any petition under the
United States Bankruptcy Code (which petition is not dismissed within
thirty (30) days of its filing), or be adjudicated a bankrupt or
insolvent, or if any receiver is appointed for its business or property,
or if any trustee in bankruptcy or insolvency shall be appointed under
the laws of the United States government or of a state.
(c) Either NBAP or the NBA is dissolved.
20. DISPOSAL OF STOCK.
After expiration or termination of this Agreement, SPALDING shall
have no further right to manufacture, advertise, distribute, sell or
otherwise deal in any articles which use the Licensed Marks except as
hereinafter provided. Upon expiration of this Agreement (but not upon
termination under Paragraphs 14 or 18 hereof),
-27-
SPALDING may dispose of Licensed Products which are on hand or in
process at the time of such expiration, but only in the normal course of
business and at regular selling prices for a period of one hundred eighty
(180) days thereafter, provided all payments then due are first made to
NBAP and statements and payments with respect to that one hundred eighty
(180) day period are thereafter made in accordance with Paragraph 6
hereof. NBAP shall have the option to conduct physical inventories before
termination and continuing until the end of the 180-day sell-off period
in order to ascertain or verify such inventory and/or statement. In the
event SPALDING refuses to permit such physical inventory, SPALDING shall
forfeit its right hereunder to dispose of its inventory.
21. FINAL STATEMENT.
Sixty (60) days before the expiration of this Agreement and ten (10)
days after any termination under Paragraphs 14 and 18, SPALDING will
furnish to NBAP a statement showing the number and description of
Licensed Products on hand or in process.
22. EFFECT OF EXPIRATION OR TERMINATION.
After expiration or termination of this Agreement for whatever
reason, SPALDING will refrain from further use of the Licensed Marks,
except as provided in Paragraph 20. In the event of termination of this
Agreement pursuant to Paragraph 18, all amounts due in payment of the
minimum guaranteed payment referred to in Paragraph 6(b)
-28-
for the balance of the Contract Year shall immediately, without notice or
demand, become due and payable, and without prejudice to any other rights
NBAP may have.
23. EQUITABLE RELIEF.
SPALDING acknowledges that the Licensed Marks possess a special, unique
and extraordinary character which makes difficult the assessment of the
monetary damage which would be sustained by the unauthorized use thereof.
SPALDING recognizes that irreparable injury would be caused by
unauthorized use of the Licensed Marks and agrees that injunctive and
other equitable relief would be appropriate in the event of a breach of
this Agreement, without the necessity of proving special damages or
posting a bond.
24. NOTICES.
All notices and statements to be given and all payments to be made
hereunder, shall be given or made at the respective addresses of the
parties as set forth below unless notification of a change of address is
given in writing:
▇▇. ▇▇▇▇ ▇▇▇▇▇ Attn: Vice President/
President General Manager
NBA Properties, Inc. Leisure Products Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Any notice of default or breach shall be sent by registered or certified
mail, return receipt requested and shall be deemed to have been given
three (3) days after
-29-
it is mailed appropriately addressed and posted.
25. NO JOINT VENTURE.
Nothing herein contained shall be construed to place the parties in the
relationship of partners or joint venturers and SPALDING shall have no power
to obligate or bind NBAP to a third party in any manner whatsoever.
26. USE OF PLAYERS.
This Agreement does not grant to SPALDING any rights with respect to the
use of the names and likenesses of NBA players (except as to Game Photos
approved for use by NBAP). SPALDING further acknowledges and agrees that it
shall not use the name and likeness of any player in such manner as to
constitute an endorsement of any Licensed Product unless SPALDING shall have
first obtained the express written consent of the subject player.
27. WARRANTIES.
Each party represents and warrants that it has the right and authority to
enter into this Agreement and to grant the rights and render the
performances hereunder.
28. NO WAIVER.
No failure on the part of either party to exercise any right under this
Agreement shall operate as a waiver thereof; nor shall either party's single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other rights.
-30-
29. 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 obtaining of
the American Arbitration Association, and judgment upon the award may be
entered in any court having jurisdiction. No other dispute or
disagreement between the parties (including, for example, any claim by
NBAP that SPALDING is using the Licensed Marks in a manner not authorized
by this Agreement or is otherwise in breach hereof) shall be settled by
arbitration. All decisions by NBAP relating to disapproval of any
Licensed Products or advertising, promotion or display material shall be
final and binding on SPALDING and shall not be subject to review in any
proceeding.
30. GOVERNING LAW, JURISDICTION.
This Agreement shall be construed in accordance with the laws of the
State of New York. Any claim arising hereunder (except as set forth in
Paragraph 29 above) shall be prosecuted in a court of competent jurisdiction
located within the City of New York and SPALDING consents to the
jurisdiction of such court and to the service of process by mail.
31. ASSIGNMENT, MODIFICATION.
This Agreement and any rights herein granted are personal to SPALDING and
shall not be assigned, sub-contracted,
-31-
sublicensed or encumbered, directly or indirectly, by law or by
contract, without the prior written consent of NBAP. Any transfer of a
controlling interest in SPALDING shall be deemed an assignment prohibited
by the preceding sentence. None of the provisions of this Agreement can
be waived or modified except expressly in writing signed by both parties,
and there are no representations, promises, agreements, warranties,
covenants or undertakings other than those contained herein.
32. SEVERABILITY.
In the event any provision of this Agreement is found to be void or
unenforceable, the remaining provisions shall continue in full force and
effect, and the void or unenforceable provision shall be deemed by the
parties as replaced in such form and substance as shall be legally valid
and as shall accomplish as near as possible the purpose and intent of the
invalid provision.
33. INTEGRATION.
This Agreement constitutes the entire agreement and understanding
between the parties hereto and cancels, terminates and supersedes any
prior agreement or understanding relating to the subject matter hereof
between SPALDING and the NBA, any Member Team thereof or NBAP. This
Agreement shall not be binding on NBAP until signed on its behalf by its
president or an officer of NBAP designated by him to sign same.
IN WITNESS WHEREOF, the parties have executed this Agree-
-32-
ment the day and year first written above.
SPALDING & EVENFLO COMPANIES, INC. NBA PROPERTIES, INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------- ------------------------------
▇. ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
President President
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
President/SPALDING Sports Worldwide Division
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
Vice President & General Manager
Leisure Products Group
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President - International Operations