-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JJo7KWoYIAlIV/iy7z3sm6ic1UzAR34fF8Y/BkUkPZlemUnK942xW2dH7D8uDNBb iNRfgkCHpUuVwxPBDJrY2w== 0000903893-96-000811.txt : 19961016 0000903893-96-000811.hdr.sgml : 19961016 ACCESSION NUMBER: 0000903893-96-000811 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NANTUCKET INDUSTRIES INC CENTRAL INDEX KEY: 0000069623 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 580962699 STATE OF INCORPORATION: DE FISCAL YEAR END: 0225 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08509 FILM NUMBER: 96643556 BUSINESS ADDRESS: STREET 1: 105 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 212-889-5656 MAIL ADDRESS: STREET 1: 105 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: NANTUCKET LINGERIE INC DATE OF NAME CHANGE: 19690715 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31,1996 Commission File Number: 1-8509 NANTUCKET INDUSTRIES, INC. -------------------------- (Exact name of registrant as specified in its charter) Delaware 58-0962699 -------- ---------- (State of other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 105 Madison Avenue, New York, New York 10016 - -------------------------------------- ----- (Address of principal executive offices) (Zip Code) (212)889-5656 ------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. X YES NO --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: As of September 30, 1996, the Registrant had outstanding 3,238,796 shares of common stock not including 3,052 shares classified as Treasury Stock. NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------- QUARTERLY REPORT ---------------- QUARTER ENDED AUGUST 31, 1996 ----------------------------- I N D E X --------- PAGE ---- Part I.- FINANCIAL INFORMATION --------------------- Consolidated balance sheets 3 Consolidated statements of operations 4 Consolidated statements of cash flows 5 Notes to consolidated financial statements 6 - 8 Management's discussion and analysis of financial condition and results of operations 9 - 10 Part II.- OTHER INFORMATION 11 - 12 ----------------- Signature 13 2 NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
AUGUST 31, March 2, 1996 1996 --------------------- --------------------- (unaudited) (1) ASSETS CURRENT ASSETS Cash $15,085 $15,085 Accounts receivable, less allowance for doubtful accounts of $91,000 and $40,000, respectively 4,858,194 4,417,033 Inventories (Note 2) 9,186,869 10,156,639 Other current assets 675,659 729,145 --------------------- --------------------- Total current assets 14,735,807 15,317,902 PROPERTY, PLANT AND EQUIPMENT - NET 3,277,938 3,498,825 OTHER ASSETS,NET 292,983 38,413 --------------------- --------------------- $18,306,728 $18,855,140 ===================== ===================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt (Note 6) $420,000 $1,275,000 Accounts payable 1,094,315 1,721,852 Accrued salaries and employee benefits 280,510 383,595 Accrued unusual charge (Note 5) 465,000 465,000 Accrued expenses and other liabilities 378,555 392,789 Accrued royalties 281,447 249,792 Income taxes payable 1,909 2,934 --------------------- --------------------- Total current liabilities 2,921,736 4,490,962 LONG-TERM DEBT (Note 6) 7,747,580 8,428,782 ACCRUED UNUSUAL CHARGE (Note 5) 474,875 678,879 CONVERTIBLE SUBORDINATED DEBT (Note 4) 2,760,000 - --------------------- --------------------- 13,904,191 13,598,623 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (Note 4) Preferred stock, $.10 par value; 500,000 shares authorized, of which 5,000 shares have been designated as non-voting convertible and are issued and outstanding 500 500 Common stock, $.10 par value; authorized 6,000,000 shares; issued 3,241,848 324,185 299,185 Additional paid-in capital 12,364,503 11,556,386 Deferred issuance cost (191,697) Accumulated deficit (8,075,017) (6,579,617) --------------------- --------------------- 4,422,474 5,276,454 Less 3,052 shares at August 31, 1996 and 3,052 at March 2, 1996 of common stock held in treasury, at cost 19,937 19,937 --------------------- --------------------- 4,402,537 5,256,517 --------------------- --------------------- $18,306,728 $18,855,140 ===================== ===================== (1) Derived from audited financial statements The accompanying notes are an integral part of these statements.
3 NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Twenty-six Weeks Ended Thirteen Weeks Ended --------------------------------- --------------------------------- AUGUST 31, August 26, AUGUST 31, August 26, 1996 1995 1996 1995 --------------- ---------------- --------------- ---------------- Net sales $14,662,655 $17,853,238 $7,974,742 $7,360,502 Cost of sales 11,880,131 13,121,959 6,168,991 5,235,817 --------------- ---------------- --------------- ---------------- Gross profit 2,782,524 4,731,279 1,805,751 2,124,685 Selling, general and administrative expenses 3,723,534 3,771,712 1,958,051 1,752,686 --------------- ---------------- --------------- ---------------- Operating (loss) profit (941,010) 959,567 (152,300) 371,999 Interest expense 554,390 655,494 282,701 324,167 --------------- ---------------- --------------- ---------------- Net (loss) income (1,495,400) 304,073 (435,001) 47,832 =============== ================ =============== ================ Net (loss) income per share ($0.51) $0.10 ($0.15) $0.02 =============== ================ =============== ================ Weighted average common shares outstanding 3,010,774 2,982,296 3,032,752 2,983,318 =============== ================ =============== ================ The accompanying notes are an integral part of these statements.
4 NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Twenty-six Weeks Ended ------------------------------------------ AUGUST 31, August 26, 1996 1995 ------------------- ------------------- Cash flows from operating activities Net (loss) income ($1,495,400) $304,073 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities Depreciation and amortization 152,434 181,903 Provision for doubtful accounts 60,000 60,000 Treasury stock issued in compliance with credit agreement - 9,125 Provision for obsolete and slow moving inventory 265,000 120,000 (Increase) decrease in assets Accounts receivable (501,161) 721,152 Inventories 704,770 (635,885) Other current assets 53,486 131,968 (Decrease) increase in liabilities Accounts payable (627,537) (1,199,894) Accrued expenses and other liabilities (85,663) (464,203) Income taxes payable (1,025) - Accrued unusual charge (204,004) (189,585) ------------------- ------------------- Net cash used in operating activities (1,679,100) (961,346) ------------------- ------------------- Cash flows from investing activities Removals (additions) to property, plant and equipment 68,453 (73,115) Decrease in other assets 990 63,368 ------------------- ------------------- Net cash provided by (used in) investing activities 69,443 (9,747) ------------------- ------------------- Cash flows from financing activities Payments of short-term debt (800,000) - Issuance of common stock 641,419 - Proceeds from long-term debt 2,760,000 - Increase in deferred finance costs (255,560) - Net proceeds from sale of treasury stock - 250 (Repayments) borrowings under line of credit agreement, net (736,202) 970,747 ------------------- ------------------- Net cash provided by financing activities 1,609,657 970,997 ------------------- ------------------- NET INCREASE (DECREASE) IN CASH 0 ($96) Cash at beginning of period 15,085 32,049 ------------------- ------------------- Cash at end of period $15,085 $31,953 =================== =================== SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION: Cash paid during the period: Interest $494,675 $610,601 =================== =================== Income taxes - - =================== =================== The accompanying notes are an integral part of these statements
5 NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TWENTY-SIX WEEKS ENDED AUGUST 31, 1996 AND AUGUST 26, 1995 (unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS The consolidated balance sheet as of August 31, 1996 and the consolidated statements of operations for the twenty-six and thirteen week periods and statements of cash flows for the twenty-six weeks ended August 31, 1996 and August 26, 1995 have been prepared by the Company without audit. In the opinion of management, all adjustments (consisting of only normal recurring accruals) necessary for a fair presentation of the financial position of the Company and its subsidiaries at August 31, 1996 and the results of their operations for the twenty-six and thirteen week periods and cash flows for the twenty-six weeks ended August 31, 1996 and August 26, 1995 have been made on a consistent basis. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1996 Annual Report on Form 10-K. The results of operations for the periods presented are not necessarily indicative of the operating results for the full year. 2. INVENTORIES Inventories are summarized as follows: August 31, August 26, 1996 1995 ---- ---- Raw materials $ 1,469,835 $ 1,895,724 Work in process 4,161,763 5,848,226 Finished goods 3,555,271 3,756,131 ----------------- ---------------- $ 9,186,869 $ 11,500,081 ----------------- ---------------- 6 NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TWENTY-SIX WEEKS ENDED AUGUST 31, 1996 AND AUGUST 26, 1995 (continued) (unaudited) 3. INCOME TAXES At August 31, 1996 the Company had a net deferred tax asset in excess of $5,500,000 which is fully reserved until it can be utilized to offset deferred tax liabilities or realized against taxable income. The Company had a net operating loss carryforward for book and tax purposes of approximately $12,000,000. Accordingly, no provision for income taxes has been reflected in the accompanying financial statements. Certain tax regulations relating to the change in ownership may limit the Company's ability to utilize its net operating loss carryforward if the ownership change, as computed under such regulations, exceeds 50%. Through August 31, 1996 the change in ownership was approximately 46%. 4. PRIVATE PLACEMENT On August 15, 1996, the Company completed a $3.5 million private placement with an investment partnership. Terms of this transaction included the issuance of 250,000 shares and $2,760,000 12.5% convertible subordinated debentures which are due August 15, 2001. The convertible subordinated debentures are secured by a second mortgage on the Company's manufacturing and distribution facility located in Carterville, GA. The debentures are convertible into the Company's common stock over the next five years as follows: Conversion Conversion Shares Price Currently Convertible 305,000 $3.83 After June 15, 1997 318,370 $5.00 The agreement grants the investor certain registration rights for the shares issued and the Conversion Shares to be issued. The difference between the purchase price of the shares issued and their fair market value aggregated $197,500. This was reflected as deferred issue costs and will be amortized over the expected 5 year term of the subordinated convertible debentures. Costs associated with this private placement aggregated $360,000 including $104,000 related to the shares issued which have been charged to paid in capital. The remaining balance of $256,000 will be amortized over the 5 year term of the debentures 7 The Company utilized $533,333 of the proceeds to prepay all of its obligations pursuant to its Credit Agreement dated March 21, 1994 with Chemical Bank. 5. UNUSUAL CHARGE In March, 1994, the Company terminated the employment contracts of its Chairman and Vice Chairman. In accordance with the underlying agreement, they will be paid an aggregate of approximately $400,000 per year in severance, as well as certain other benefits, through February 28, 1999. The present value of these payments, $1,915,000, was accrued at February 26, 1994. Through August 31, 1996, $975,000 of this accrual has been paid; $770,000 through March 2, 1996 and $205,000 in the current fiscal year through August 31, 1996 6. CREDIT AGREEMENT AMENDMENT On May 31, 1996, the Company amended its Loan and Security Agreement with Congress Financial Corporation dated March 24, 1994. This amendment provided (a) $ 251,000 in additional equipment term loan financing, (b) extension of the repayment period for all outstanding equipment term loans, (c) supplemental revolving loan availability from March 1st through June 30th of each year and (d) extension of the renewal date to March 20, 1998. 8 NANTUCKET INDUSTRIES, INC. -------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- Sales Net sales for the six months ended August 31, 1996 decreased 18% from prior year levels to $14,663,000. This decline reflects the planned inventory reductions by Nantucket's customers during the first fiscal quarter of the current fiscal year in anticipation of the introduction of Brittania by Levi's line. In the second fiscal quarter, sales increased $738,000 over prior year levels, generally reflecting the initial shipments of this exciting new product designation. Sales of the Company's GUESS? products decreased slightly from prior year levels, reflecting a transition from the close-out of slow moving products to the Company's new GUESS? Essentials line. In the second quarter of the current fiscal year, Nantucket shipped two GUESS? Essentials product groups and initial shipments of the third group were made in September, 1996. Gross Margin Gross profit margins for the six months ended August 31, 1996 decreased from prior year levels of 27% to 19%. Gross profit margins for the second quarter decreased from 29% to 23%. This decline is a result of increased manufacturing variances associated with additional processing costs of imported garments coupled with the impact of fully reserved close-out sales of the GUESS? product during the first and second quarters. Selling, general and administrative expenses Selling, general and administrative expenses for the six months ended August 31, 1996 reflect a slight decrease of $48,000 from prior year levels to $3,724,000. Increases in fixed expenses for the period of $300,000 were offset by decreases in variable selling expenses of $348,000. Second quarter expenses increased by $205,000 to $1,958,000 compared to $1,753,000 from the second quarter of the prior year. This increase is due to a reduction in prior year expenses of $102,000 as a result of an insurance claim settlement and an increase in administrative management staffing in the current year. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- In March, 1994 the Company was successful in refinancing its credit agreements with (i) a three year $15,000,000 revolving credit facility with Congress Financial, (ii) a $2,000,000 Term Loan Agreement with Chemical Bank and (iii) an additional $1,500,000 Term Loan with Congress replacing the Industrial Revenue Bond financing of the Cartersville, Georgia manufacturing plant. Additionally, the Company has increased its equity over the past three years through (i) a $1,000,000 investment by the Management Group (ii) the $2.9 million sale of 490,000 shares of common treasury stock to GUESS?, Inc. and certain of its affiliates and (iii) the $3.5 million private placement which included the issuance of 250,000 shares and $2,760,000 convertible subordinated debentures. These transactions, combined with its stronger credit facilities enhanced the Company's liquidity and capital resources. Under the terms of the $2,000,000 Term Loan Agreement with Chemical Bank, scheduled installments of $500,000 each were due on December 15, 1995 and March 15, 1996. As of December 15, 1995 the Company agreed to an amendment providing for payments of $100,000 each on December 31, 1995 and January 31, 1996, with the remaining $800,000 to be paid in 15 equal installments which commenced March 31, 1996. In August, 1996, the Company utilized $533,333 of the proceeds from the private placement to prepay all of its obligations with Chemical Bank. The Company believes that the Congress credit facility provides adequate financing flexibility to fund its operations at current levels. Working capital increased $987,000 from year-end levels to $11,814,000. Proceeds from the issuance of common stock and subordinated convertible debt were used to prepay the short-term debt to Chemical Bank, reduced accounts payable and reduce the long term debt under the Congress revolving credit facility. A decrease in inventory levels of $970,000 was offset by an increase in accounts receivable of $441,000. The Company believes that the moderate rate of inflation over the past few years has not had significant impact on sales or profitability. 10 PART II ------- ITEM 1. LEGAL PROCEEDINGS None - ------- ----------------- ---- ITEM 2. CHANGES IN SECURITIES None - ------- --------------------- ---- ITEM 3. DEFAULTS UPON SENIOR SECURITIES None - ------- ------------------------------- ---- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------- --------------------------------------------------- (a) The Company held a Special Meeting of Stockholders in Lieu of Annual Meeting on October 7, 1996 (b) Not applicable (c) At the stockholders meeting (i) the number of directors constituting the Board of Directors was set at nine (9), by a vote of 2,328,734 shares for and 203,402 shares against; (ii) the Company's nominees for director were elected by the following votes: Votes Votes to Nominee in Favor Withhold Authority ------- -------- ------------------ Donald Gold 2,328,734 203,402 Roger A. Williams 2,331,119 201,017 Ronald S. Hoffman 2,330,699 201,437 (iii) the stockholders approved a motion to amend the Company's Certificate of Incorporation to increase the authorized shares of Common Stock from six million (6,000,000) shares with $.10 par value to twenty million (20,000,000) shares with $.10 par value. Such motion was approved by a vote of 2,250,130 shares in favor and 272,476 shares against; (iv) the stockholders approved a motion to amend the Company's Certificate of Incorporation to reduce certain voting requirements of the Board of Directors necessary for approval of a business transaction with Related Persons. Such motion was approved by a vote of 1,861,007 shares in favor and 51,854 shares against and 619,875 shares abstaining; (v) the stockholders approved a motion to ratify the appointment of Grant Thornton LLP, independent certified accountants, to audit the consolidated financial statements of 11 the Company for the fiscal year ending February, 1997. Such motion was approved by a vote of 2,519,503 shares in favor and 10,315 shares against and 2,918 shares abstaining. ITEM 5. OTHER INFORMATION - ------- ----------------- As of September 30, 1996 the Company signed a license agreement with Brittania Sportswear Limited, a subsidiary of Levi Strauss & Co. effective as of January 1, 1997. This license agreement extended the Company's license through December 31, 1999 for the manufacture and sale of men's underwear and loungewear under the "BRITTANIA" trademark. On October 9, 1996 the Company signed an amendment to its license agreement with GUESS?, Inc. effective as of June 1, 1996. This amendment (a) omitted the Company's license for men's underwear product, (b) formalized certain terms and conditions on the manner the Company conducts business with the GUESS? owned stores and (c) established minimum sales levels and royalties for the renewal term which will expire May 31, 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- Item 6(a) Exhibits (10)(e)(iii) Filed Herewith License Agreement between the Company and Brittania Sportswear Limited, a subsidiary of Levi Strauss & Co. effective as of January 1, 1997 extending the Company's license through December 31, 1999 for the manufacture and sale of men's underwear and loungewear under the "BRITTANIA" trademark (10)(bb)(i) Filed Herewith Amendment to License Agreement with GUESS?, Inc. and the Company effective as of June 1, 1996 with respect to the "GUESS?" trademark. (27) Financial Data Schedule Filed Herewith Item 6(b) Reports on Form 8-K A report dated August 29, 1996 was filed during the quarter which ended August 31, 1996. Such report outlined the $3.5 million private placement transaction. No financial statements were filed as part of that report. 12 SIGNATURE --------- Pursuant to the requirements of the `Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NANTUCKET INDUSTRIES, INC. (Registrant) By: October 14, 1996 s/Ronald S. Hoffman ------------------- Vice President - Finance (Chief Accounting Officer) 13 EX-10.E.III 2 LICENSE AGREEMENT Exhibit 10(e)(iii) NANTUCKET INDUSTRIES, INC. LICENSE AGREEMENT ----------------- This License Agreement (the "Agreement") is effective as of the 1st day of January, 1997 (the "Effective Date"), by and between Brittania Sportswear Limited (A subsidiary of Levi Strauss & Co.), a California corporation with its principal office at 500 Naches Ave. SW, Renton, Washington, 98055 (hereinafter called "Licensor") and Nantucket Industries, Inc., a Delaware corporation with its principal office at 105 Madison Avenue, New York, NY, 10016 (hereinafter called "Licensee"). R E C I T A L S: ---------------- WHEREAS, Brittania Sportswear Limited, and its predecessor companies have manufactured garments, particularly blue jeans and other casual clothing, for many years; and WHEREAS, for many years the trademarks and distinctive features of Licensor's products have come to be recognized by the consuming public as constituting a desirable image of superior quality and thus possess considerable value and goodwill; and WHEREAS, Licensor is well-established in marketing apparel and presently distributes garments to numerous retail outlets having a reputation for quality, service and dependability; and WHEREAS, Licensee has manufactured and sold underwear in the USA for nearly 40 years, and has attained a reputation for quality and dependability with respect to such articles; and WHEREAS, Licensee possesses marketing experience for the distribution of these products; and 1 WHEREAS, the primary purpose of Licensor's BRITTANIA(R) accessory licensing program is to provide a unique line of accessories bearing the BRITTANIA(R) trademarks which complements Licensor's product lines. NOW, THEREFORE, in consideration of the premises and of the following promises, the parties hereto hereby agree as follows: ARTICLE 1. DEFINITIONS ---------------------- A. "Net Sales" shall mean gross receipts generated from the sale of the Products (as defined below), less customary discounts and allowances allowed and less any credits for returns, transportation charges allowed on returns, or other credits. B. "Net Sales Price" shall mean the wholesale billing price to customers or distributors, less customary discounts and allowances allowed and less any credits for returns, transportation charges allowed on returns, or other credits. C. "Products" shall mean those products set forth on Schedule B hereto. D. "Trademarks" shall mean the trademark BRITTANIA(R) and the various BRITTANIA(R) logos and distinctive marks as set forth on Schedule A hereto. Should Licensor, during the term of this Agreement, develop additional registered or unregistered marks which, in the judgment of Licensor, are appropriate for use by Licensee, Licensor may extend this Agreement to incorporate such marks. E. "Territory" shall mean the United States of America, including its territories, overseas possessions and military bases. ARTICLE 2. LICENSE GRANT ------------------------ 2 A. Licensor grants to Licensee the exclusive right to use the Trademarks on and in connection with the manufacture, sale, distribution and advertising of the Products in the Territory to those stores pre-approved by Licensor per Article 11 below for the period and upon the terms and conditions hereinafter set forth. ARTICLE 3. TERM OF AGREEMENT ---------------------------- A. This Agreement shall continue in full force and effect from January 1, 1997 until December 31, 1999, unless sooner terminated by the mutual agreement of both Licensor and Licensee; provided, however, that: (1) If at any time Licensor or Licensee shall become bankrupt, insolvent or make any assignment for the benefit of creditors, the other party, as the case may be, shall have the right to immediately terminate this Agreement. (2) If either party shall cause or permit any material breach of this Agreement, the other party shall have the right to terminate this Agreement by written notice to the party causing or permitting the material breach which notice shall specify the alleged breach, and said termination shall be effective ninety (90) days after the receipt of such notice, unless prior thereto such default or breach shall have been cured and thereafter royalties shall be due and payable only on the basis of Net Sales actually made. (3) If at any time, any person who is not, at the date hereof, an officer or a director of Licensee becomes, directly or indirectly, the owner of 50% or more of the total outstanding common stock of the company, and active control of the Licensee passes to any party other than those persons currently in active control of the Licensee, then Licensor shall, within 30 days of receiving written notice of such acquisition of stock, or of Licensor becoming aware of such change in ownership or control, shall have the right to terminate this Agreement. 3 B. The rights and remedies set forth in this article shall not be exhaustive and are in addition to any other rights and remedies provided by law. C. During the term of this Agreement, at the request of either party holding a good faith belief that this Agreement should be replaced by an arrangement or organization better providing for the mutual benefit of both, the parties shall meet to discuss such possible replacement. D. Unless earlier terminated in accordance with the provisions of this Article 3, this Agreement may be renewed as set forth in Article 14 below. E. Article 13 below shall survive the termination of this Agreement. ARTICLE 4. ROYALTIES -------------------- A. For purposes of this Agreement, an item shall be considered "sold" upon the date when such item is billed or invoiced, shipped, consigned or paid for, whichever event occurs first. B. The annual royalty percentage shall be four percent (4%) of the Net Sales Price of Products sold by Licensee under the terms of this Agreement. C. The annual royalty percentages expressed as a percentage of Net Sales of Products are set forth in Schedule E. Commencing January 1, 1997 Licensee shall remain current, on a quarterly basis, on the minimum royalty amounts for the contract period as set forth in Schedule E. For example, in the first period annual period (1997), at the end of the first quarter, royalty payments made shall equal or exceed the stated annual minimum for that quarter (1997, I), at the end of the second quarter total royalties paid under the contract shall equal or exceed the accumulated minimum royalties for that annual period through the second quarter (1997, II), at the end of the third quarter of the first annual period total royalties paid shall equal or exceed the 4 accumulated minimum royalties for that annual period through the third quarter (1997, III), and so on through the contract period. Thus, if the total minimum royalty due is achieved and paid prior to the end of the Initial term of this Agreement, the only royalties due throughout the remainder of the term shall be those calculated on the basis of a percentage of Net Sales. D. Within thirty (30) days after the end of each month, a report shall be made by Licensee to Licensor setting forth the number and type of Products which have been sold during the preceding month and also showing the Net Sales Price of such Products and other information on an appropriate form, such as the monthly sales report attached hereto as Schedule C.1. E. Licensee shall make royalty payments to Licensor for sold Products within thirty (30) days after the end of each calendar quarter and shall submit an appropriate form, such as the quarterly royalty remittance report attached hereto as Schedule D, for all Products sold. Interest shall accrue and be payable by Licensee on royalties earned by Licensor, beginning on the thirty-first (31st) day after the completion of each quarter in which the Products were invoiced and for which royalties are due. Interest shall be calculated on a floating basis of one percent (1%) over the commercial reference rate in effect at the end of each month at Citibank, New York. F. The annual minimum royalty to be paid during the term of the Agreement is shown in Schedule E. ARTICLE 5. WARRANTY AND INDEMNITY --------------------------------- A. Licensee warrants that the Products shall be of good quality in design, material, and workmanship, and that they shall be suitable for their intended purposes; that no injurious, poisonous, deleterious or toxic substances or materials will be used in or on the Products; that the Products in normal and proper use will not harm the user thereof; and that the 5 Products will be manufactured, sold and distributed in strict compliance with all applicable laws and regulations. Licensee agrees to defend, indemnify and hold Licensor harmless against any liabilities and expenses arising out of use by any person of Products sold by Licensee. Similarly, Licensor will defend, indemnify and hold Licensee harmless from all product liability on any other products bearing the Trademarks not manufactured, sold, distributed or advertised by the Licensee, and Licensee shall give Licensor prompt notice in writing of all such suits, claims or other actions or proceedings brought against it. B. Licensee agrees to defend, indemnify and hold Licensor harmless against any liabilities and expenses arising from the infringement of a patent or copyright caused by the manufacture, advertisement or sale of the Products. C. Licensor will promptly notify Licensee in writing of all suits, claims or other actions or proceedings brought against Licensor and against which Licensee has agreed to defend, indemnify and hold Licensor harmless. Licensee at its sole expense agrees to defend the same; provided, however, that Licensor shall have given Licensee prompt notice in writing and shall have given Licensee all pertinent information in Licensor's possession to enable and permit Licensee to defend. D. Licensee shall procure and maintain at its own expense in full force and effect at all times during which the Products are being sold and for three (3) years after the sales are complete, a Commercial General Liability Insurance with limits and conditions set as follows: throughout the term of the Agreement, Licensee will carry a Commercial General Liability Insurance on an Occurrence Basis with a Combined Single Limit for Bodily Injury and Property Damage of not less than $1,500,000 for each Occurrence and to include Blanket Contractual Liability, Product/ Completed Operations, Advertising Injury and Personal Injury Liability. It is agreed that such insurance limits may be provided by both a primary and excess policy totaling 6 not less than $1,500,000 per occurrence/ $3,000,000 annual aggregate. This is not a limit of Licensee's liability. It is agreed that the Licensee will provide the Licensor with a certificate of insurance evidencing such coverage within ten (10) days of executing this Agreement, naming Brittania Sportswear Limited, Levi Strauss & Co., and their respective directors, officers, employees, agents and assigns as additional insureds for liabilities related to this Agreement. This policy shall not be cancelable or subject to reduction of coverage or limits or to any other modification without providing thirty (30) days written notice of cancellation or reduction of coverage to the Licensor. It is further agreed that the Licensee during the term of the Agreement will procure this Commercial General Liability insurance contract with an insurance company which has an A.M. Best Rating of A or better, unless otherwise approved in writing by Licensor. ARTICLE 6. INFRINGEMENT, INDEMNITY, AND DEFENSE ----------------------------------------------- A. Licensor represents and warrants that it is the owner of the Trademarks set forth in Paragraph 1.D. above. B. Licensor represents and warrants that it will not take any action with regard to the Trademarks so as to interfere with the manufacture, sale, distribution and advertising of Products as contemplated by this Agreement. C. Licensor represents and warrants that on its own initiative and at its own expense it will take all appropriate actions necessary to protect Licensee's exclusive right to use the Trademarks and will in good faith prosecute against all such infringements; provided, however, that Licensee will not be precluded from initiating at its own expense actions pursuant 7 to any rights and remedies Licensee may have under any law arising outside the scope of this Agreement. D. Licensor agrees to defend, indemnify and hold Licensee harmless from and against any liabilities and expense resulting from any suit, claim or other action or proceeding brought against Licensee for trademark infringement arising out of the use of the licensed Trademarks. E. Licensee will promptly notify Licensor in writing of all suits, claims or other actions or proceedings brought against Licensee and against which Licensor has agreed to defend, indemnify and hold harmless. Licensor at its sole expense agrees to defend the same; provided, however, that Licensee shall have given Licensor prompt notice in writing and shall have given Licensor all pertinent information in Licensee's possession to enable and permit Licensor to defend. ARTICLE 7. COMPETING BRANDS --------------------------- Licensee agrees that during the term of this Agreement it will not enter into new license arrangements with other producers of men's branded casual apparel that are marketed and sold in national and regional discount channels and that in Licensor's reasonable judgment compete in the marketplace with Licensor's line of BRITTANIA(R) products. This provision does not apply to store or private branded programs. ARTICLE 8. QUALITY AND PRODUCT CONTROL -------------------------------------- A. Licensee agrees to submit to Licensor for product and quality approval two (2) prototype samples ("Samples"), made under normal production conditions, of each Product proposed to be advertised, sold, manufactured, or distributed by Licensee. Promptly after receipt 8 of said Samples, Licensor shall give the Licensee its written approval or disapproval of the Samples. "Promptly" is intended to mean within ten (10) working days under ordinary circumstances. If Licensee does not receive notice of disapproval within ten (10) working days of delivery of Samples, Licensor shall be deemed to have approved such Samples. Licensor shall specifically set forth in writing its reasons for disapproval of any Sample and in no case will Licensor unreasonably withhold its approval. Licensee will not manufacture, advertise, sell, or distribute any such Products without prior approval. B. Licensor shall have the right to refuse to approve any Sample which in good faith is considered to impair the value or reputation of any of the Trademarks by reason of poor or substandard quality, inadequate or improper resemblance to the quality standard represented, or otherwise. Licensee agrees to maintain the quality of all Products made or sold by or through it under this Agreement up to the quality and finish of the Samples approved by Licensor and agrees not to change the Products in any substantial respect without the prior written consent of Licensor. However, Licensor understands and agrees that Licensee, from time to time and in its sole discretion, may change the materials and components used in and on an approved Product without the prior written approval of Licensor provided that the quality of the Product, its construction, or its appearance are not substantially affected thereby. From time to time after the Licensee has commenced selling the Products, Licensee shall, at the request of Licensor, furnish to Licensor without cost, a reasonable number of random samples not to exceed three (3) of each different style being manufactured and sold by or through Licensee hereunder, together with any labels, cartons, containers, and packing and wrapping materials used in connection therewith. C. Licensee agrees to promptly furnish Licensor with the addresses of Licensee's production and warehouse facilities for the Products and the names and addresses of 9 the persons, firms or corporations, if any, which are manufacturing each of the Products for Licensee. Licensor shall have the right upon reasonable notice (ten (10) working days or more) to Licensee, during regular business hours and at its own expense, to inspect any production and warehouse facilities where any of the Products are being manufactured or stored for the purpose of enabling Licensor to determine whether Licensee is adhering to the requirements of this Agreement relating to the nature and quality of the Products and the use of the Trademarks in connection therewith. It is understood that all manufacturing processes, including but not limited to equipment used, technical data, systems, methods and procedures, and all other information involved in the manufacturing and execution of Licensee's business shall be considered "Proprietary Information" as defined in Article 13 of this Agreement and shall not be disclosed by Licensor. D. Licensee agrees to develop and submit to Licensor an annual Marketing Plan for all products manufactured pursuant to this Agreement. "Marketing Plan" is defined as a plan which projects sales estimates and sets forth retail distribution, product, advertising, and promotional plans for the coming year. E. Licensor shall not require Licensee to pay royalties on off-quality Products, commonly referred to as "seconds" or "irregulars," provided that the Trademarks are removed from such Products. If Licensee is unable to remove the Trademarks from off-quality Products without unreasonable effort or expense, as determined by Licensee in its sole discretion, Licensee shall dispose of such branded off-quality Products through selected retailers approved by Licensor or to employees of Licensee or Licensor and only after clearly marking and packaging the Products as "irregular." The royalty percentage shall be reduced to one-half (1/2) of the royalty rate then in effect for branded, first-quality Products. The amount of such branded off-quality 10 products allowed shall not exceed two percent (2%) of annual Net Sales. Branded, off-quality Products in excess of two percent (2%) of the annual Net Sales shall be subject to the regularly applicable royalty rate. Licensee shall report amounts of such branded off-quality Products on a report such as the Monthly Sales of Irregulars report attached hereto as Schedule C.2. ARTICLE 9. ETHICS CODE AND GLOBAL SOURCING AND OPERATING GUIDELINES ------------------------------------------------------------------- A. Licensor has and is determined to maintain a world-wide reputation for ethical business conduct. To further this aim, Licensor has adopted a Code of Ethics and has also adopted Global Sourcing and Operating Guidelines setting forth standards of conduct it requires from, among others, its licensees, including Licensee. Licensee acknowledges that its conduct, and the conduct of any permitted sub-contractor, must reflect positively on Licensor's reputation and agrees to the provisions of this Article 9 accordingly. B. Licensee represents and warrants that Licensee and its key officers and managers have read and understand Licensor's Code of Ethics, a copy of which is attached to this Agreement as Exhibit 1, and agrees that Licensee will, and will cause its permitted sub-contractors to, abide by the principles set forth therein (as amended from time to time by Licensor) in conducting all aspects of its operations under this Agreement. C. Licensee further represents and warrants that its key officers and managers have read and understand the Global Sourcing and Operating Guidelines attached to this Agreement as Exhibit 2, and agrees that Licensee will, and will cause its permitted sub-contractors to, comply with the requirements of the Terms of Engagement at all times. D. Licensee remains fully responsible for compliance with all local laws and regulations applicable to Licensee's operations. If the requirements of the Code of Ethics or of the Global Sourcing and Operating Guidelines are stricter than the requirements of applicable law, 11 the requirements of the Code of Ethics and the Global Sourcing and Operating Guidelines shall control. E. This Article is of the essence of this Agreement. Any material failure by Licensee or any of its sub-contractors to comply with the Code of Ethics or any failure by Licensee or any of its sub-contractors to comply with the Global Sourcing and Operating Guidelines will be grounds for termination of this Agreement by Licensor. ARTICLE 10. TRADEMARK CONTROL ----------------------------- A. Licensor shall provide standards, specifications and instructions for the use of the Trademarks and Licensee agrees to strictly abide by them. The Trademarks shall be reproduced precisely as set forth on Schedule A hereto. B. Licensee agrees that no advertising or display materials shall be unethical, immoral or offensive to good taste, and no display or advertising material shall be used without the prior written approval of Licensor, which approval may be granted or withheld in Licensor's reasonable discretion; provided, however, that Licensor's approval shall be communicated not more than ten (10) working days after Licensee's submission of such material to Licensor, and such communication shall specifically describe the Licensor's basis for disapproval and suggest corrective action which may be taken to secure approval of such material. If Licensee does not receive notice of Licensor's disapproval within ten (10) working days, Licensor shall be deemed to have approved the material. The proposed uses and estimated duration of the displays and advertising material shall be stated by Licensee when submitting the same to Licensor for approval, and said approval shall extend only to the said proposed uses and duration thereof, except that once an advertisement has been approved by Licensor, it need not be resubmitted for subsequent repeats, changes in size of the advertisement or cropping. Samples of each 12 advertisement shall be retained by Licensee together with records of media and frequency of appearance of the advertisement. C. Licensee further agrees to cooperate with Licensor in maintaining advertising standards. This provision in no way shall operate to restrain resales, but only to avoid purchaser confusion and protect the valuable image represented by the Trademarks in all advertising and promotion. D. Licensee shall cooperate with Licensor, if necessary and upon request, in protecting and proving use of the Trademarks. E. Licensee agrees to place upon all hangtags, identification tags, price lists, catalogs, and similar trade advertising materials other than radio and television advertising, the phrase "Manufactured under license from Brittania Sportswear Ltd., Renton, WA 98055." F. Licensee agrees to keep records of sales volume and advertising expenditures on an annual basis. G. Licensee agrees to cooperate with Licensor in obtaining any further registrations and agrees not to use or register any trademarks confusingly similar to the Trademarks. ARTICLE 11. MARKETING OF THE PRODUCTS ------------------------------------- A. Licensee shall use its best efforts to exploit the rights granted herein consistent with Licensor's marketing policies and the maintenance of Licensor's goodwill. B. Licensee shall not sell Products to any account until it has obtained Licensor's prior written approval to sell to the specified account. Such approval or rejection shall be made by Licensor within ten (10) working days of receipt of Licensee's request for approval. If Licensee does not receive notice of Licensor's rejection within ten (10) working days, Licensor 13 shall be deemed to have approved the account. Licensee is not required to obtain approval for an account if Licensor, as of the effective date of the Agreement, already offers first quality Brittania(R) brand merchandise to the account. ARTICLE 12. ASSISTANCE BY LICENSOR ---------------------------------- A. Licensor shall, from time to time, furnish Licensee with such assistance and information in the following categories as Licensor and Licensee mutually deem necessary to aid Licensee in the production and marketing of Products under this Agreement. (1) Advertising and promotional materials for use by Licensee in the marketing, advertising or production of Products under this Agreement; and (2) Information concerning sales and trend data, promotions, credit information, marketing, and customers of Licensor for its garments, provided that Licensor shall have the right to withhold proprietary information in its sole discretion. B. Licensee shall reimburse Licensor for the out-of-pocket cost of furnishing Licensee with the material described in subparagraph A(1) of this article (which may include development and production cost for materials developed especially for use by Licensee at Licensee's request and otherwise will be limited to actual reproduction and shipping cost), and the salaries, traveling, and living expenses of Licensor's employees rendering assistance away from their normal employment location whose work activities do not normally involve licensing or sales, but only when such materials or assistance have been approved in advance in each instance by the Licensee in writing. 14 C. Licensor agrees to provide expertise in the development of markets for licensed Products, and the marketing of items of wearing apparel with the Products and Licensee agrees to coordinate all marketing activities with Licensor. ARTICLE 13. PROPRIETARY INFORMATION ----------------------------------- A. Except as otherwise provided in this Agreement, all proprietary information disclosed by one of the parties (the "Discloser") to the other party (the "Recipient") is Confidential Information and (1) shall remain the exclusive property of the Discloser, (2) shall be used by the Recipient only in connection with its performance under this Agreement and (3) shall be protected by the Recipient. Confidential Information includes, without limitation, any formula, pattern, program, method, technique, process, design, business plan, business opportunity, customer or personnel list, or financial statement that: (1) derives independent economic value, actual or potential, for not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Confidential Information includes, but is not limited to, information disclosed in connection with this Agreement, and shall not include information that: (1) is now or subsequently becomes generally available to the public through no wrongful act or omission of Recipient; (2) Recipient has legally obtained from sources other than the Discloser and is in its possession prior to disclosure to Recipient by Discloser; (3) is independently developed by Recipient without use, directly or indirectly, of any Confidential Information; or (4) Recipient obtains from a third party who has the right to transfer or disclose it. 15 B. Except as specifically authorized by Discloser in writing, Recipient shall not reproduce, use, distribute, disclose or otherwise disseminate the Confidential Information and shall not take any action causing, or fail to take any action necessary to prevent, any Confidential Information disclosed to Recipient pursuant to this Agreement to lose its character as Confidential Information. Upon termination of this Agreement or upon request by Discloser, Recipient shall promptly deliver to Discloser all Confidential Information and all embodiments thereof then in its custody, control or possession and shall deliver within five (5) days after such termination or request a written statement to Discloser certifying to such action. C. Recipient agrees that access to Confidential Information will be limited to those employees or other authorized representatives of Recipient who: (1) need to know such Confidential Information in connection with their work related to this Agreement and (2) have signed agreements with Recipient obligating them to maintain the confidentiality of Confidential Information disclosed to them. Recipient further agrees to inform such employees or authorized representatives of the confidential nature of Confidential Information and agrees to take all necessary steps to ensure that the terms of this Agreement are not violated by them. D. Recipient's duty to protect Discloser's Confidential Information pursuant to this Agreement extends both during the term of this Agreement (including any extension or renewal thereof) and after its termination. ARTICLE 14. RENEWAL ------------------- If during the second year of the Agreement (1998), Licensee's Net Sales meet or exceed a Net Sales volume of nine million dollars ($9,000,000), then Licensee shall have the option to renew the Agreement for an additional two-year period at the royalty rate and minimum royalties shown in Schedule E. Should Licensee exercise its option to renew, the parties agree, 16 during the first year of such renewal term, to meet and discuss terms on which a further renewal might be negotiated; provided, however, that Licensor shall be under no obligation to enter into an additional renewal if acceptable terms cannot be agreed to by the parties. During each annual renewal year Licensee shall remain current, on a quarterly basis, on the minimum royalty amounts for each annual renewal period as set forth above in Article 4.C. hereof. Should the Licensee not meet the terms required to automatically renew this Agreement, the Licensee and Licensor agree to meet at least six (6) months prior to the expiration of this Agreement to discuss the progress of the program and to negotiate possible terms for renewal. ARTICLE 15. BOOKS OF ACCOUNT ---------------------------- A. Licensee shall keep full and accurate books of account and all documents and other material relating to this Agreement and the subject matter thereof in accordance with generally-accepted accounting principles at Licensee's principal office at all times during the continuation of this Agreement and for two (2) years thereafter. Licensee agrees to keep complete and correct account of the number and Net Sales Price of Products sold according to this Agreement. B. Licensee shall submit to Licensor the monthly sales report and such other reports as will enable Licensor to evaluate the success of Licensee's marketing activities related to this Agreement. C. Licensor or its duly authorized agent or representative shall have the right upon ten (10) days' advance notice, during regular business hours, and at its own expense, to examine such books, documents, and other material relating to the Products and shall be at liberty 17 to make copies of all or any part of such books, documents and other related materials. Licensor agrees that all information, data, books, documents, and other materials acquired by it pursuant to this paragraph will be treated by it as proprietary information of Licensee in the same manner and upon the same terms as are set forth in Article 13 above. ARTICLE 16. USE OF TRADEMARKS ----------------------------- A. Licensee recognizes that (1) there is great value to Licensor in the Trademarks and the goodwill associated therewith, (2) that Licensor may license third parties to use such Trademarks and goodwill in connection with other goods and services in various countries, including the United States, (3) that nothing contained in this Agreement gives Licensee any interest or property rights in the Trademarks except the right to use the same as specifically granted herein, and (4) that all uses by Licensee of the Trademarks shall inure to the benefit of Licensor. B. Licensee agrees that it will not during the existence of this Agreement or thereafter, directly or indirectly, assert any interest or property rights in or to any of the Trademarks which are now or hereafter owned or controlled by Licensor and which have not been abandoned by Licensor. C. Upon termination of this Agreement, Licensee shall cease using the Trademarks, but shall have the right to dispose of stocks of Products in inventory and to complete and dispose of those Products in the process of manufacture; provided, however, that the same is completed within the period specified in Article 21 herein. ARTICLE 17. SPECIAL PURCHASE ---------------------------- 18 Licensor, from time to time, may purchase Products covered by this Agreement from Licensee for use in special retail promotions in connection with its apparel products and for resale to employees of Licensor as part of its established Employee Purchase Program (EPP). Such purchases as described in this Article shall be at a price to be agreed upon between the parties. ARTICLE 18. FORCE MAJEURE ------------------------- Neither party shall be deemed to be in breach of this Agreement, shall be subject to having this Agreement terminated, or shall in any way be liable to the other party for damages of any type or for any relief of any type on account of any act, omission, failure of performance, event, occurrence, or cause which is unavoidable or beyond its reasonable control, including, but not by way of limitation, accident, fire, flood, natural disaster, strike or labor disturbances, vandalism, riot or insurrection, war, embargo, any order, decree, law or regulation of any court, government or governmental agency. ARTICLE 19. NOTICE ------------------ All demands and requests required or permitted by this Agreement shall be by notice given hereunder. Notices for routine business matters, such as under Articles 8 and 10 above, shall be as agreed upon by the parties. If no form of notice is agreed upon, notice shall be given by a mailing in writing, postage prepaid, addressed to the parties as follows or to such other addresses as one party may specify in notice to the other party: 19 Brittania Sportswear Ltd. 500 Naches Ave. S.W. Renton, WA 98055 Attention: Director of Marketing (206) 227 - 7800 (206) 227 - 8616 (FAX) Nantucket Industries, Inc. 105 Madison Avenue New York, NY 10016 Attn: Chairman (212) 889 - 5656 (212) 532 - 3217 (FAX) Levi Strauss & Co. 1155 Battery Street San Francisco, CA 94111 Attention: Director of Licensing, LSNA (415) 544-7515 (415) 544-1495 (FAX) Such notice shall be effective upon receipt by the party to whom it is addressed. ARTICLE 20. ASSIGNMENT ---------------------- Licensee shall not assign, sublicense or otherwise transfer its right under this Agreement, to any subsidiary, parent company, affiliated entity, or any other third party without the prior written approval of Licensor which approval shall not be unreasonably withheld. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. ARTICLE 21. DISPOSAL OF STOCKS/TERMINATION ------------------------------------------ In the event this Agreement is terminated for any reason, Licensee shall discontinue the manufacture of Products under this Agreement on or before the effective date of such termination; provided, however, Licensee shall have the right to dispose of existing stocks of 20 Products on hand, in process, or in transit, produced in the ordinary course of business, in accordance with the terms of this Agreement (including, without limitation, the provisions of Article 11.B. regarding approved accounts). The right to dispose of stocks shall be non-exclusive with regard to use of the trademarks and shall not extend beyond one hundred and eighty (180) days from the date of termination of this Agreement, and may be shortened or eliminated at the discretion of Licensor if this Agreement is terminated by default by Licensee. Upon termination, Licensor shall continue to be paid on a quarterly basis during any permitted disposal period. ARTICLE 22. GOVERNING LAW; VENUE -------------------------------- A. The validity, construction, and performance and effect of this Agreement shall be governed by and construed under and in accordance with the laws of the State of California without regard to its choice of law principles. B. The parties hereto consent to the jurisdiction of the federal and state courts of the State of California. The parties agree that any action or proceeding arising out of this Agreement shall be brought in a federal or state court of competent jurisdiction in the State of California, and in no other jurisdiction. ARTICLE 23. AGREEMENT EMBODIES ALL UNDERSTANDINGS ------------------------------------------------- This Agreement embodies all understandings between the parties hereto. Any promises, agreements, representations, or obligations which may have been previously made or undertaken by either of the parties and not set out herein are canceled and shall be of no further force or effect. This Agreement shall not be changed, modified, abrogated, or superseded unless by a writing signed the party to be bound. 21 ARTICLE 24. WAIVER ------------------ The waiver by either party of any specific provision of the Agreement or either party's failure to exercise any right which accrues to it under this Agreement shall not affect the enforceability of any other provision or rights accruing hereunder. ARTICLE 25. SEVERABILITY ------------------------ Should any part or provision of this Agreement be held unenforceable or in conflict with the laws of any jurisdiction, the validity of the remaining parts or provisions shall not be affected by such holding. ARTICLE 26. ATTORNEYS' FEES --------------------------- In any litigation, arbitration or court proceeding between the parties, the prevailing party shall be entitled to recover, in addition to any other amounts rewarded, reasonable attorneys' fees and all costs of proceedings incurred in enforcing this Agreement. ARTICLE 27. HEADINGS -------------------- The section headings provided herein are provided for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. ARTICLE 28. COUNTERPARTS ------------------------ This Agreement may be executed in counterparts, each of which shall be deemed an original and which together shall constitute one and the same agreement. 22 IN WITNESS WHEREOF, the parties have executed this License Agreement as of the Effective Date. BRITTANIA SPORTSWEAR LTD. NANTUCKET INDUSTRIES, INC. LICENSOR LICENSEE By: By: ------------------------------- -------------------------------- Printed Name: Printed Name: -------------------- --------------------- Title: Title: ---------------------------- ----------------------------- 23 SCHEDULE A ---------- BRITTANIA(R) LOGOS AND DISTINCTIVE TRADEMARKS * Trademark usage is divided into 3 categories: o on Product o on Packaging o Advertising Attached hereto are the specific trademarks and exact approved uses thereof. SCHEDULE B ---------- PRODUCTS UNDERWEAR - --------- Men's knit colored/patterned underwear Men's knit boxer shorts LOUNGEWEAR - ---------- Top Silhouettes: - ---------------- Athletic Shirts Muscle Shirts Tee Back Athletic Shirts Tee Shirts Henley Neck Shirts Unconstructed CPO Shirt, V-Neck Fabrications: ------------- Knits: Jersey, Rib, Thermal and Mesh Woven: Flannel, Sheeting Fabric Weight: -------------- Between 130 and 180 grams per square meter Bottom Silhouettes: - ------------------- Boxer Shorts Jams Pull-On Pants Elastic Waist Pull-On Pants Draw String Waist Fabrications: ------------- Knits: Jersey, Rib, Thermal and Mesh Woven: Flannel, Sheeting Fabric Weight: -------------- Between 130 and 180 grams per square meter Unionsuits: - ----------- One Piece Fabrication: ------------ Knit: Jersey Fabric Weight: -------------- Between 130 and 180 grams per square meter SCHEDULE C.1. ------------- LEVI STRAUSS & CO. MONTHLY SALES REPORT FOR REGULAR PRODUCT Nantucket Industries Licensee Country: United States Month of , 19 Preparation Date: ---------------------------------- --- --------- - -------------------------------------------------------------------------------- PRODUCT GROUP NET UNITS NET SALES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTALS: - -------------------------------------------------------------------------------- (1) Total Sales for Month --------------- (2) Royalty at _____ percent --------------- (3) Royalties Accrued Quarter-to-Date --------------- SCHEDULE C.2. ------------- BRITTANIA SPORTSWEAR LTD. MONTHLY SALES REPORT FOR IRREGULAR PRODUCT Nantucket Industries Licensee Country: United States Month of , 19 Preparation Date: ---------------------------------- --- --------- - -------------------------------------------------------------------------------- PRODUCT GROUP NET UNITS NET SALES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTALS: - -------------------------------------------------------------------------------- (1) Total Sales for Month (2) Royalty at _____ percent (3) Royalties Accrued Quarter-to-Date SCHEDULE D ---------- BRITTANIA SPORTSWEAR LTD. QUARTERLY ROYALTY REMITTANCE REPORT REPORT FOR THE QUARTER ENDING ---------------------------- -------------------- Date Prepared Licensee ------------------------- -----------------
Month Net Sales - Firsts Net Sales - Seconds - --------- ------------------ ------------------- - -------------------- --------------------- - -------------------- --------------------- - -------------------- --------------------- 1. Total Sales Current Quarter _____________________ ____________________ 2. Sales- Prior Qtr(s) [Line 3 from prior report] _____________________ ____________________ 3. Total Sales - through current Qtr. [Line 1 + Line 2] _____________________ ____________________ 4. Royalty Earned [1sts + 2nds] Thru Cur Qtr [R.R.* X Line 3] _____________________ ____________________ 5. Total Royalty Earned [Total of 1sts + 2nds] _____________________ 6. Minimum Royalty Due End of Quarter** _____________________ 7. Enter Line 5 or Line 6 whichever is greater _____________________ 8. Royalties Paid in Prior Qtr.(s) of Current Agreement _____________________ 9. Royalty Due BSL - Current Qtr. [Line 7 less Line 8] _____________________ * Royalty Rate for 1sts is 4%. Royalty Rate for 2nds up to a maximum of 2% of Total Net Sales is 2% [see article 4.B. and 9.F.] ** Minimum Royalty Figure: See Schedule E.
SCHEDULE E ----------
ANNUAL/ ACCUMULATED PERIOD MINIMUM MINIMUM MINIMUM QUARTER NET SALES ROYALTY ROYALTY ROYALTY ($000) (% NET SALES) ($000) ($000) 1997 I 1,500.00 4.0% 60.00 60.00 II 1,500.00 4.0% 60.00 120.00 III 1,500.00 4.0% 60.00 180.00 IV 1,500.00 4.0% 60.00 240.00 TOTAL $ 6,000.00 $ 240.00 1998 I 1,531.25 4.0% 61.25 301.25 II 1,531.25 4.0% 61.25 362.50 III 1,531.25 4.0% 61.25 423.75 IV 1,531.25 4.0% 61.25 485.00 TOTAL $ 6,125.00 $ 245.00 1999 I 1,562.50 4.0% 62.50 547.50 II 1,562.50 4.0% 62.50 610.00 III 1,562.50 4.0% 62.50 672.50 IV 1,562.50 4.0% 62.50 735.00 TOTAL $ 6,250.00 $ 250.00
SCHEDULE E (continued)
RENEWAL/ ACCUMULATED PERIOD MINIMUM MINIMUM MINIMUM QUARTER NET SALES ROYALTY ROYALTY ROYALTY ($000) (% NET SALES) ($000) ($000) 2000 I 1,750.00 4.0% 70.00 70.00 II 1,750.00 4.0% 70.00 140.00 III 1,750.00 4.0% 70.00 210.00 IV 1,750.00 4.0% 70.00 280.00 TOTAL $ 7,000.00 $ 280.00 2001 I 1,950.00 4.0% 78.00 358.00 II 1,950.00 4.0% 78.00 436.00 III 1,950.00 4.0% 78.00 514.00 IV 1,950.00 4.0% 78.00 592.00 TOTAL $ 7,800.00 $ 312.00
EXHIBIT 1 LICENSOR'S CODE OF ETHICS Levi Strauss & Co. has a long and distinguished history of ethical conduct and community involvement. Essentially, these are a reflection of the mutually shared values of the founding families and of our employees. Our ethical values are based on the following elements: A commitment to commercial success in terms broader than merely financial measures. A respect of our employees, suppliers, customers, consumers and stockholders. A commitment to conduct which is not only legal but fair and morally correct in a fundamental sense. Avoidance of not only real, but the appearance of conflict of interest. From time to time the Company will publish specific guidelines, policies and procedures. However, the best test whether something is ethically correct is whether you would be prepared to present it to our senior management and board of directors as being consistent with our ethical traditions. If you have any uneasiness about an action you are about to take or which you see, you should discuss the action with your supervisor or management. EXHIBIT 2 LEVI STRAUSS & CO.'S GLOBAL SOURCING & OPERATING GUIDELINES Levi Strauss & Co. seeks to conduct its business in a responsible manner. We believe this is an important element of our corporate reputation which contributes to the strength of our commercial success. As we expand our marketing activities abroad, and work with contractors and suppliers throughout the world to help meet our customers' needs, it is important to protect our Company's reputation in selecting where and with whom to do business. Levi Strauss & Co.'s GLOBAL SOURCING & OPERATING GUIDELINES includes two parts: the BUSINESS PARTNER TERMS OF ENGAGEMENT, which address work place issues that are substantially controllable by individual business partners; and the COUNTRY ASSESSMENT GUIDELINES, which address larger, external issues beyond the control of the individual business partners. BUSINESS PARTNER TERMS OF ENGAGEMENT: The TERMS OF ENGAGEMENT are tool that help protect Levi Strauss & Co.'s CORPORATE REPUTATION and, therefore, its COMMERCIAL SUCCESS. They assist us in selecting business partners* that follow work place standards and business practices consistent with our Company's policies. As a set of guiding principles, they also help to identify potential problems so that we can work with our business partners to address issues of concern as they arise. Specially, we expect our business partners to operate work places where the following standards and practices are followed: 1. EMPLOYMENT STANDARDS: We will only do business with partners whose workers are in all cases present voluntarily, not put at risk of physical harm, fairly compensated, allowed the right of free association and not exploited in any way. In addition, the following specific guidelines will be followed. WAGES AND BENEFITS We will only do business with partners who provide wages and benefits that comply with any applicable law or match the prevailing local manufacturing or finishing industry practices. WORKING HOURS While permitting flexibility in scheduling, we will identify prevailing local work hours and seek business partners who do not exceed them accept for appropriately compensated overtime. While we favor partners who utilize less than sixty-hour work weeks, we will not use contractors who, on a regularly scheduled basis, require excess of a sixty-hour week. Employees should be allowed at least one day off in seven days. CHILD LABOR Use of child labor is not permissible. Workers can be no less than 14 years of age and not younger than the compulsory age to be in school. We will not utilize partners who use child labor in any of their facilities. We support the development of legitimate workplace apprenticeship programs for the educational benefit of younger people. PRISON LABOR/FORCED LABOR We will not knowingly utilize prison or forced labor in contracting relationships in the manufacture and finishing of our products. We will not utilize or purchase materials from a business partner utilizing prison or forced labor. DISCRIMINATION While we recognize and respect cultural differences, we believe that workers should be employed on the basis of their ability to do the job, rather than on the basis of personal characteristics or beliefs. We will favor business partners who share this value. DISCIPLINARY PRACTICES We will not utilize business partners who use corporal punishment or other forms of mental or physical coercion. HEALTH & SAFETY We will only utilize business partners who provide workers with a safe and healthy work environment. Business partners who provide residential facilities for their workers must provide safe and healthy facilities. 2. ENVIRONMENTAL STANDARDS: We will only do business with partners who share our commitment to the environment and who conduct their business in a way that is consistent with Levi Strauss & Co.'s Environmental Philosophy and Guiding Principles. 3. ETHICAL STANDARDS: We will only seek to identify and utilize business partners who aspire as individuals and in the conduct of their business to a set of ethical standards not incompatible with our own. 4. LEGAL STANDARDS: We expect our business partners to be law abiding as individuals and to comply with legal requirements relevant to the conduct of their business. 5. COMMUNITY INVOLVEMENT: We will favor business partners who share our commitment to contribute to improving community conditions. * Business partners are contractors and subcontractors who manufacture or finish our products and suppliers who provide raw materials used in the production of our products. We have begun applying the Terms of Engagement to business partners involved in manufacturing and finishing, and plan to extend their application to suppliers. Exhibit 2 continued COUNTRY ASSESSMENT GUIDELINES: The diverse cultural, social, political, and economic circumstances of the various countries where Levi Strauss & CO. has existing or future business interests raise issues that could subject our CORPORATE REPUTATION and therefore, our BUSINESS SUCCESS, to potential harm. The COUNTRY ASSESSMENT GUIDELINES are intended to help us assess these issues. The GUIDELINES are tools that assist us in making practical and principled decisions as we balance the potential risks and opportunities associated with conducting business in a particular country. In making these decisions, we consider the degree to which our global CORPORATE REPUTATION and COMMERCIAL SUCCESS may be exposed to UNREASONABLE RISK. Specially, we assess whether the: BRAND IMAGE would be adversely affected by a country's perception or image among our customers and/or consumers; HEALTH AND SAFETY of our employees and their families, or our Company representatives would be exposed to unreasonable risk; HUMAN RIGHTS ENVIRONMENT would prevent us from conducting business activities in a manner that is consistent with the Global Sourcing Guidelines and other Company policies; LEGAL SYSTEM would prevent us from adequately protecting our trademarks, investments or other commercial interests, or from implementing the Global Sourcing Guidelines and other Company policies; and POLITICAL, ECONOMIC AND SOCIAL ENVIRONMENT would threaten the Company's reputation and/or commercial interest. In making these assessments, we take into account the various types of business activities and objectives proposed (e.g., procurement of fabric and sundries, sourcing, licensing, direct investments in subsidiaries) and, thus, the accompanying level of risk involved. Levi Strauss & Co. is committed to continuous improvement in the implementation of its Global Sourcing & Operating Guidelines. As we apply these tools throughout the world, we will acquire greater experience and gain new insight from a variety of sources. The knowledge will enable us to continue our efforts to update our Guidelines, better address issues of concern, and meet new challenges. EX-10.BB.I 3 AMENDED LICENSE AGREEMENT Exhibit 10(bb)(i) SECOND AMENDMENT TO TECHNICAL ASSISTANCE AND TRADEMARK LICENSE AGREEMENT BETWEEN GUESS ?, INC. AND NANTUCKET INDUSTRIES, INC. THIS SECOND AMENDMENT TO TECHNICAL ASSISTANCE AND TRADEMARK LICENSE AGREEMENT, dated as of June 1, 1996 ("Second Amendment"), between GUESS ?, INC. ("LICENSOR") and NANTUCKET INDUSTRIES, INC. ("LICENSEE"), amends that certain Technical Assistance and Trademark License Agreement, as previously amended (the "Agreement"), dated as of December 9, 1992, between LICENSOR and LICENSEE. Capitalized terms used but not otherwise defined in this Second Amendment shall have the respective meanings ascribed to them in the Agreement. WHEREAS, LICENSOR and LICENSEE entered into the Agreement for the manufacture and sale of the Products; and WHEREAS, LICENSOR and LICENSEE desire to amend the Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the covenants and agreements contained in this Second Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by the execution hereof, the parties agree as follows: 1. The parties acknowledge and agree that, effective as of June 1, 1996 and except for the non-exclusive sell-off period of existing inventory until September 30, 1996 (as described below), LICENSEE is no longer authorized to manufacture or sell any men's knit or woven underwear products that bear the Guess Marks or any other GUESS trademarks (the "Discontinued Products"). All provisions of the Agreement granting LICENSEE any rights to use the Guess Marks in connection with the manufacture, promotion, distribution or sale of the Discontinued Products are hereby deleted. The Discontinued Products shall no longer be deemed to be "Products" under the Agreement. LICENSEE shall take the following actions in connection with the disposition of its Discontinued Products inventory: A. Within 10 days of execution of this Second Amendment, LICENSEE shall furnish LICENSOR with a certificate listing all inventories of Discontinued Products and related work in process, including all fabrics, trim, packaging and other materials used in the manufacture and marketing of such Discontinued Products, on hand or in process, and the location thereof. B. On or before September 30, 1996, to stop, and to cause all LICENSEE's accounts to stop, all sales and shipment of the Discontinued Products. C. On or before September 30, 1996, to return to LICENSOR's representative, all advertising, packaging, promotional, point of sale and showroom materials relating to the Discontinued Products. D. Except as expressly permitted otherwise in writing by LICENSOR, all sales of the Discontinued Products shall comply with the conditions set forth in the Agreement (including the payment of Trademark Royalties thereon), and in particular all sales shall be made so as to maintain the goodwill, prestige and reputation for quality associated with GUESS goods. Notwithstanding the foregoing, the sales of the Discontinued Products from June 1, 1996 through September 30, 1996, shall be excluded from the Closeout limitation described in Section 7.2.5, but not from any other limitation contained in the Agreement. E. Discontinued Products which remain unsold after September 30, 1996, shall be sold, liquidated or otherwise transferred only with LICENSOR's prior written consent. LICENSOR may immediately terminate the Agreement, without any right to cure, if LICENSEE breaches any provision of the sell-off plan described above. 2. Pursuant to Section 9.2 of the Agreement, LICENSEE has requested, and LICENSOR agrees, to renew this License (as amended herein) for a three (3) year Term through May 31, 1999, in accordance with the terms and conditions of this Second Amendment. 3. The following new Section 5.11 is hereby added to the Agreement: "5.11 Notwithstanding Section 7.2.2, LICENSEE shall grant to LICENSOR a ten percent (10%) Trade Discount on purchases of Products by LICENSOR from LICENSEE for sale in LICENSOR's retail and/or factory stores. LICENSEE shall accept from LICENSOR for full credit in the amount originally invoiced to LICENSOR, the return of up to fifteen percent (15%) of Products purchased by LICENSOR from LICENSEE for sale in LICENSOR's retail and/or factory stores, which remain unsold and which were shipped by LICENSEE during any part of any individual contract quarter." 4. Section 7.2.1 of the Agreement is amended to add the following after the word "Allowances" in the first line thereof: "(excluding credit given to LICENSOR for return of unsold Products pursuant to Section 5.11)". 5. Section 7.2.3 of the Agreement is amended as follows: (i) add the following after the word "Allowances" in the first line thereof: "(excluding credit given to LICENSOR for return of unsold Products pursuant to Section 5.11)". (ii) add the following after the word "Discounts" in the second line thereof: "(excluding the ten percent (10%) Trade Discount granted to LICENSOR pursuant to Section 5.11)". 6. Section 7.2.4 of the Agreement is amended to add the following after the word "Products" in the first line thereof: "(excluding returns of unsold Products by LICENSOR pursuant to Section 5.11)". 7. Section 7.2.5 of the Agreement is amended in its entirety as follows: "7.2.5 Closeouts (which are defined as Products sold at a reduction of ten percent (10%) or more from the list wholesale selling price shown on the Licensed Product Approval Form) shall not exceed three percent (3%) of total units shipped; provided however, that sales of closeouts to LICENSOR's own Guess stores, and sales of Products returned by LICENSOR to LICENSEE as unsold pursuant to Section 5.11, shall both be excluded from this limitation." 8. The Notice Addresses at Section 17.1 of the Agreement are replaced in their entirety with the following: "TO LICENSOR: GUESS ?, INC. 1444 South Alameda Street Los Angeles, California 90021 Telephone: (213) 765-3100 Facsimile: (213) 765-3666 Attn: Licensing Department with a copy to: GUESS ?, INC. 1444 South Alameda Street Los Angeles, California 90021 Telephone: (213) 765-3100 Facsimile: (213) 744-7821 Attn: General Counsel/Licensing TO LICENSEE: NANTUCKET INDUSTRIES, INC. 105 Madison Avenue New York, New York 10016 Telephone: (212) 889-5656 Facsimile: (212) 532-3217 Attn: Mr. Steve Samberg, Chairman" 9. The following new Section 17.11 is hereby added to the Agreement: "17.11 The Exhibits attached hereto and as revised from time to time are hereby incorporated by reference and form integral parts hereof. The reporting, approval and other similar forms of LICENSOR attached as Exhibits hereto may be revised by LICENSOR at any time and from time to time." 10. Exhibit A of the Agreement shall be replaced in its entirety with Exhibit A attached hereto. 11. Exhibit F of the Agreement shall be replaced in its entirety with Exhibit F attached hereto. 12. Exhibit G of the Agreement shall be replaced in its entirety with Exhibit G attached hereto. 13. Except as expressly modified by this Second Amendment, the Agreement is confirmed and shall continue to be and remain in full force and effect in accordance with its terms. Any existing or future reference to the Agreement and any document or instrument delivered in connection with the Agreement shall be deemed to be a reference to the Agreement as modified by this Second Amendment. To the extent anything in this Second Amendment is inconsistent with the Agreement, this Second Amendment shall control. 14. This Second Amendment may be executed in any number of counterparts, each of which, when taken together, shall constitute but one and the same instrument. 15. This Second Amendment shall be governed by and construed according to the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused their respective duly- authorized representatives to execute this Second Amendment as of the date first-above written. NANTUCKET INDUSTRIES, INC. GUESS ?, INC. By: By: -------------------------- --------------------------- Name: Name: ------------------------ ------------------------- Title: Title: ----------------------- ------------------------ EXHIBIT A PRODUCTS Ladies' undergarments including only panties, matching soft bras, matching tank tops and matching crop tops all to be sold in the underwear department of department stores and retail stores which sell underwear. EXHIBIT F MINIMUM NET SALES Initial Term Minimum Net Sales - ------------ ----------------- First Contract Year December 1, 1992 - May 31, 1994 $1,000,000 Second Contract Year June 1, 1994 - May 31, 1995 $2,000,000 Third Contract Year June 1, 1995 - May 31, 1996 $3,000,000 Renewal Term Fourth Contract Year June 1, 1996 - May 31, 1997 $8,000,000 Fifth Contract Year June 1, 1997 - May 31, 1998 $10,000,000 Sixth Contract Year June 1, 1998 - May 31, 1999 $12,000,000 EXHIBIT G ROYALTY MINIMUMS INITIAL TERM II. For the first Contract Year of the Initial Term, LICENSEE shall pay the sum of US$70,000 one half upon execution and the balance in three equal installments of US$11,666.67 each, the first due on July 1, 1993, the second due on October 1, 1993 and the third due on January 1, 1994. III. For the second Contract Year, LICENSEE shall pay the sum of US$105,000 in four equal installments of US$26,250 each, the first due on April 1, 1994, the second due on July 1, 1994, the third due on October 1, 1994 and the fourth due on January 1, 1995. IV. For the third Contract Year, LICENSEE shall pay the sum of US$140,000 in four equal installments of US$35,000 each, the first due on April 1, 1995, the second due on July 1, 1995, the third due on October 1, 1995 and the fourth due on January 1, 1996. RENEWAL TERM: V. For the fourth Contract Year, LICENSEE shall pay the sum of US$560,000 as follows: US$87,500 has been paid as of the date of signing this Second Amendment; the remaining US$472,500 shall be paid in two equal installments of US$236,250 each, the first due on October 1, 1996 and the second due on January 1, 1997. VI. For the fifth Contract Year, LICENSEE shall pay the sum of US$700,000 in four equal installments of US$175,000 each, the first due on April 1, 1997, the second due on July 1, 1997, the third due on October 1, 1997 and the fourth due on January 1, 1998. VII. For the sixth Contract Year, LICENSEE shall pay the sum of US$840,000 in four equal installments of US$210,000 each, the first due on April 1, 1998, the second due on July 1, 1998, the third due on October 1, 1998 and the fourth due on January 1, 1999. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE STATEMENTS DATED AUGUST 31, 1996 AS FILED IN FORM 10-Q FOR THE QUARTERLY PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS JUN-01-1996 AUG-31-1996 15,085 5,335 4,949,194 91,000 9,186,869 14,735,807 7,373,901 4,095,963 18,306,728 2,921,737 0 0 500 324,185 4,097,788 18,306,728 7,974,742 7,974,742 6,168,991 6,168,991 1,958,051 30,000 282,701 (435,001) 0 (435,001) 0 0 0 (435,001) (0.15) (0.15)
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