-----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, UOF2YA/NQ3/jKYfR9wj5dKNyAGO/EX36WJq7OHJBVbYnemmpsOzOwsLf6NRg8sq0 UTTFvOtjM9w8KrOe7ZDWmQ== 0000950146-97-001401.txt : 19970912 0000950146-97-001401.hdr.sgml : 19970912 ACCESSION NUMBER: 0000950146-97-001401 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970904 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANSKIN INC CENTRAL INDEX KEY: 0000889299 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 621284179 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20382 FILM NUMBER: 97675294 BUSINESS ADDRESS: STREET 1: 111 W 40TH ST CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2127644630 MAIL ADDRESS: STREET 1: 111 W 40TH ST CITY: NEW YORK STATE: NY ZIP: 10018 10-Q 1 FORM 10-Q QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28,1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to __________________ Commission file number 0-20382 ----------- Danskin, Inc. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 62-1284179 - ------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 111 West 40th Street, New York, NY 10018 ---------------------------------------- (Address of principal executive offices) (212) 764-4630 ------------------------------ (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- The number of shares outstanding of the issuer's Common Stock, $.01 par value, as of July 31,1997, excluding 1,000 shares held by a subsidiary: 6,229,116. DANSKIN, INC. AND SUBSIDIARIES FORM 10-Q FOR THE FISCAL SIX MONTH PERIODS ENDED JUNE 29, 1996 AND JUNE 28, 1997 INDEX ------ Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Condensed Balance Sheets (Unaudited) as of December 28, 1996 and June 28, 1997 3 Consolidated Condensed Statements of Operations (Unaudited) for the Fiscal Three and Six Month Periods Ended June 29, 1996 and June 28, 1997 4 Consolidated Condensed Statements of Cash Flows (Unaudited) for the Fiscal Six Month Periods Ended June 29, 1996 and June 28, 1997 5 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosure About Market Risk 19 PART II - OTHER INFORMATION Item 1. Legal Proceedings 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 20 PART I - FINANCIAL INFORMATION Item 1. Financial Statements DANSKIN, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS Danskin, Inc. And Subsidiaries Consolidated Condensed Balance Sheet
December 28, 1996 June 28, 1997 ASSETS Current assets: Cash and cash equivalents $1,177,000 $1,940,000 Accounts receivable, less allowance for doubtful accounts of $938,000 in December 1996 and $1,070,000 in June 1997 16,093,000 18,181,000 Inventories 34,075,000 32,092,000 Prepaid expenses and other current assets 3,397,000 4,004,000 Total current assets 54,742,000 56,217,000 Property, plant and equipment - net of accumulated depreciation and amortization of $7,721,000 at December 28, 1996 and $8,665,000 at June 28, 1997 9,292,000 8,402,000 Other assets 2,906,000 2,972,000 Total Assets $66,940,000 $67,591,000 LIABILITIES AND STOCKHOLDERS' EQUITY/DEFICIT Current liabilities: Revolving loan payable $9,969,000 $15,529,000 Current portion of long-term debt $0 $750,000 Accounts payable 9,682,000 9,559,000 Accrued expenses 10,532,000 10,122,000 Total current liabilities 30,183,000 35,960,000 Long-term debt, net of current maturities 31,589,000 30,506,000 Accrued retirement costs 4,367,000 2,715,000 35,956,000 33,221,000 Total Liabilities 66,139,000 69,181,000 Commitments and contingencies Stockholders' Equity/Deficit: Preferred Stock, $.01 par value, 10,000 shares authorized; 1000 shares issued at December 28, 1996 10 10 and 1,000 shares issued at June 28, 1997 Common Stock, $.01 par value, 20,000,000 shares authorized, 6,047,255 shares issued at December 28, 1996 and 6,230,116 shares issued at June 28, 1997, less 1,000 shares held by subsidiary 60,463 62,291 Additional paid-in capital 18,901,527 19,189,699 Warrants outstanding 764,000 764,000 Accumulated deficit (16,345,000) (19,026,000) Accumulated translation adjustment (15,000) (15,000) Minimum pension liability adjustment (2,565,000) (2,565,000) Total Stockholders' Equity/Deficit 801,000 (1,590,000) Total Liabilities and Stockholders' Equity/Deficit $66,940,000 $67,591,000
These statements should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 3 Item 1. Financial Statements (continued) DANSKIN, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Fiscal Three Months Ended Fiscal Six Months Ended June 29, 1996 June 28, 1997 June 29, 1996 June 28, 1997 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net revenues $29,664,000 $29,469,000 $61,106,000 $60,254,000 Cost of goods sold 19,043,000 20,161,000 40,091,000 40,116,000 Gross profit 10,621,000 9,308,000 21,015,000 20,138,000 Selling, general and administrative expenses 9,647,000 9,510,000 20,707,000 19,861,000 Provision for doubtful accounts receivable 137,000 86,000 275,000 175,000 Interest expense 1,211,000 1,250,000 2,375,000 2,435,000 10,995,000 10,846,000 23,357,000 22,471,000 Loss before income tax provision (374,000) (1,538,000) (2,342,000) (2,333,000) Provision for income taxes 63,000 49,000 126,000 98,000 Net loss (437,000) (1,587,000) (2,468,000) (2,431,000) Preferred dividends -- 125,000 -- 250,000 Net loss applicable to Common Stock ($437,000) ($1,712,000) ($2,468,000) ($2,681,000) Net loss per share ($0.07) ($0.27) ($0.41) ($0.43) Weighted average number of common shares 6,022,000 6,288,000 5,978,000 6,176,000
These statements should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 4 Item 1. Financial Statements (continued) DANSKIN, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Fiscal Six Months Ended June 29, 1996 June 28, 1997 (Unaudited) (Unaudited) Cash Flows From Operating Activities: Net loss ($2,468,000) ($2,431,000) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 1,312,000 1,309,000 Provision for doubtful accounts receivable 275,000 175,000 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (2,258,000) (2,263,000) (Increase) decrease in inventories (1,322,000) 1,983,000 (Increase) decrease in prepaid expenses and other current assets (149,000) (608,000) Increase (decrease) in accounts payable 29,000 (123,000) Increase (decrease) in accrued expenses (621,000) (2,061,000) Financing costs incurred (129,000) (380,000) Net cash used in operating activities (5,331,000) (4,399,000) Cash Flows From Investing Activities: Capital expenditures (421,000) (104,000) Net cash used in investing activities (421,000) (104,000) Cash Flows From Financing Activities: Net (payments) receipts under revolving notes payable 5,582,000 5,560,000 Payments of long-term debt -- (333,000) Proceeds from exercises of options to purchase common shares 309,000 Purchase and retirement of common stock (115,000) (20,000) Net proceeds form sale of common stock to Savings Plan 170,000 59,000 Net cash provided by (used in) financing activities 5,946,000 5,266,000 Net increase (decrease) in Cash and Cash Equivalents 194,000 763,000 Cash and Cash Equivalents, Beginning of Period 1,143,000 1,177,000 Cash and Cash Equivalents, End of Period $1,337,000 $1,940,000
These statements should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 5 Item 1. Financial Statements (continued) Danskin, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements ---------------------------------------------------- 1. In the opinion of the management of Danskin, Inc. and Subsidiaries (the "Company"), the accompanying Consolidated Condensed Financial Statements have been presented on a basis consistent with the Company's fiscal year financial statements and contain all adjustments (all of which were of a normal and recurring nature) necessary to present fairly the financial position of the Company as of June 28, 1997, as well as its results of operations for the fiscal three and six month peiods ended June 28, 1997 and June 26, 1996 and its cash flows for the six months ended June 28, 1997 and June 26, 1996. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Operating results for interim periods may not be indicative of results for the full fiscal year. 2. On March 27, 1997, the Company entered into a Sixth Amendment to the Amended and Restated Loan and Security Agreement (the "Loan and Security Agreement") with First Union National Bank of North Carolina ("First Union") which , among other matters, required the Company to pay First Union an "additional equity fee" of $3,000,000 in 2002, unless the Company obtained at least $6,000,000 of net equity proceeds prior to August 31, 1997. By Letter Agreement, dated as of June 17, 1997, First Union extended this August 31, 1997 deadline to December 1, 1997. In addition, by letter dated July 2, 1997, First Union (i) waived compliance with the covenant requirements relating to sales of inventory, and (ii) amended the financial covenants of the Loan and Security Agreement. Availability under the revolving credit facility in excess of utilization was $1,969,000 as of June 28, 1997. On May 19, 1997, the Company and Danskin Investors, LLC (the "Investor"), a company newly formed by an investment group led by Onyx Partners, Inc., entered into an agreement pursuant to which, under certain circumstances, the Investor would make an equity investment in the Company. On August 28, 1997, First Union, the Company and the Investor entered into a letter agreement (the "Letter Agreement"), which among other things, provides for (i) the purchase by the Investor of certain notes executed by the Company and payable to First Union under the Loan and Security Agreement in the approximate principal amount of $21.265 million (the "Term Loan"), (ii) the restructuring of First Union's revolving credit commitments to the Company (the "Revolving Credit Facility") pending a contemplated refinancing thereof, and (iii) the disposition of the warrants ( the "Warrants") issued to First Union in June 1995 in connection with a prior restructuring of the Company's obligations to First Union. The Investor has paid $500,000 to First Union as a deposit to be applied to the purchase of the Term Loan, or, if the closing on the purchase of the Term Loan (the "Term Loan Closing") does not occur, under certain circumstances, to be retained by First Union. The Term Loan Closing is scheduled to occur on or before September 19, 1997. The conditions to the Term Loan Closing include, among others, requirements that (i) the Investor shall have (x) entered into an intercreditor agreement with First Union providing for the subordination of the Company's obligations to the Investor under the Term Loan, the collateral securing such obligations, and any new debt securities issued by the Company to the Investor, to the Company's obligations under the Revolving Credit Facility, and (y) made a $4 million cash equity or interim debt investment in the Company and (ii) the Company shall have (a) provided a release to First Union, and (b) entered into an amendment to the Loan and Security Agreement as described below. All deferred or accrued and unpaid interest, fees (other than the Additional Equity Fee) and expenses owed by the Company to First Union in connection with the Term Loan are to be paid at the Term Loan Closing. In addition, the Company would be obligated to pay First Union a fee of $250,000 in connection with the transaction. Pursuant to certain letter agreements, First Union, subject to the terms and provisions of the Loan and Security Agreement, agreed to make overadvances (collectively, the "Overadvance") available to the Company in varying amounts up to a maximum aggregate principal amount equal to $1,500,000 at any one time outstanding for borrowings on or before August 28, 1997. Under the terms of the Letter Agreement, First Union will continue to make the Overadvance available to the Company in varying amounts up to a maximum aggregate principal amount not to exceed $2.0 million though October 31, 1997, so long as the Term Loan Closing has occurred on or before September 19, 1997. 6 Item 1. Financial Statements (continued) At the Term Loan Closing, the Revolving Credit Facility will be amended to, among other things, (i) adjust the applicable interest rates, (ii) reset the maturity date for such Facility to March 31, 1998, and (iii) eliminate the Additional Equity Fee. On August 28, 1997, the Company agreed to the terms of a Memorandum of Understanding with the Investor pursuant to which the Investor will, simultaneously with the occurrence of the Term Loan Closing, make a capital investment in the Company. In accordance with the terms and conditions of the Memorandum of Understanding, the Investor will (i) contribute the $21.265 million face amount of the Term Loan to the Company and (ii) invest an additional $4 million cash in the Company (collectively, the "Capital Infusion"). In exchange for the Capital Infusion, the Investor shall receive (a) $15 million face amount of debt (the "Subordinated Debt"), subordinated only to the Company's obligations to First Union under the Revolving Credit Facility, and (b) convertible preferred stock of the Company having a liquidation preference of $500,000 (the "Investor Preferred Stock"). The Subordinated Debt shall bear interest, commencing on the date that is three months from the Term Loan Closing, at the rate of 8% per annum. Upon the Term Loan Closing, the holder of the Investor Preferred Stock shall have the right to designate four of nine directors to the Board of Directors of the Company. The Memorandum of Understanding further provides that the Company shall repay all principal and accrued but unpaid interest under the Revolving Credit Facility with the proceeds from a new revolving credit facility (the "New Revolving Credit Facility") and term loan (the "New Term Loan") to be provided by a new lender. The Company and the Investor are currently in discussions with several potential lenders and have received proposals from certain of such lenders. No assurances can be given, however, that alternate financing will be available. Concurrent with the Company's initial borrowing under the New Revolving Credit Facility and New Term Loan, the Investor will exchange its interest in the Subordinated Debt and the Investor Preferred Stock (collectively, the "Old Investor Securities") for certain new securities of the Company. Specifically, the Investor shall receive (i) $12 million of new convertible preferred stock of the Company (the "New Convertible Preferred Stock"); (ii) seven year warrants to purchase 10 million shares of common stock of the Company at a per share price of $0.30 (the "Investor Warrants", and, together with the New Convertible Preferred Stock, the "New Investor Securities"); and (iii) its pro rata share of 10 million shares of common stock of the Company which shall be offered to the Company's shareholders pursuant to the Rights Offering (as defined below). The New Convertible Preferred Stock shall have an 8% annual dividend rate, payment of which shall be deferred through December 31, 1999, a seven year maturity, and the holder thereof shall be entitled to designate five of nine directors to the Board of Directors of the Company. Beginning with the fiscal year ended December 31, 1999, if the Company meets certain agreed upon financial targets (the "Financial Targets"), all accrued dividends will be forgiven and the New Convertible Preferred Stock shall 7 Item 1. Financial Statements (continued) automatically convert into 40 million shares of common stock of the Company at a conversion price of $0.30 per share. Concurrent with the exchange of the Old Investor Securities, (i) the Company shall offer to its shareholders (the "Rights Offering") the right to purchase their pro rata share of 10 million shares of common stock of the Company (the "Offered Common Stock") at a per share price of $0.30. The Investor shall purchase its pro rata share of the Offered Common Stock in exchange for an equivalent amount of Subordinated Debt concurrent with the exchange of the Old Investor Securities. The proceeds from any shares of Offered Common Stock purchased by the Company's shareholders other than the Investor shall be paid to the Investor in exchange for the further reduction of the Subordinated Debt. The Investor shall standby to purchase any shares of Offered Common Stock not taken up by other shareholders of the Company in the Rights Offering, and shall purchase such shares in exchange for the further reduction of any remaining Subordinated Debt. The conditions to the Capital Infusion include, among others, requirements that (a) the Investor shall have acquired the Term Loan; (b) the Investor and the Company shall have entered into a definitive agreement or agreements memorializing the transactions contemplated in the Memorandum of Understanding; (c) the Company's lease for its New York showroom shall have been revised on terms satisfactory to the Investor; (d) certain agreements shall have been reached with senior management of the Company; (e) the Company's license agreements with Anne Klein & Company and Givenchy Corporation shall have been revised on terms satisfactory to the Investor; (f) SunAmerica Life Insurance Company shall have waived its right to designate members of the Board of Directors of the Company; (g) the Investor shall have negotiated a satisfactory agreement with the current holder of the preferred stock of the Company; (h) the Rights Agreement dated as of June 5, 1996 between the Company and First Union shall have been amended to provide that the Investor shall not constitute an "Acquiring Person" as defined therein, or the rights issued thereunder shall have been redeemed; (i) an agreement shall have been reached with Donald Schupak, the Chairman of the Board of Directors of the Company; and (j) all actions required to establish the post-closing Board of Directors of the Company shall have been taken and all required resignations of directors shall have been received. Although there can be no assurances, the Company presently anticipates being able to satisfy each of the conditions to the Capital Infusion prior to September 19, 1997. The Loan and Security Agreement contains covenants requiring the Company to meet certain interest coverage and profitability levels, and it contains certain other restrictions, including limits on the Company's ability to incur debt, make capital expenditures, merge, pay dividends or repurchase its own stock. It also provides that an event of default will occur if any person, with specific exceptions, becomes the owner of or controls more than 20% of the Company's Common Stock. The Company's obligations under the Loan and Security Agreement are secured by liens on substantially all the Company's assets. Interest rates on all obligations under the Loan and Security Agreement were set at prime plus 1.5% (9.75% at December 28, 1996 and 10% at June 28, 1997). On each annual adjustment date (as defined), the interest rate may be reduced based on certain ratios of interest coverage and debt to earnings before interest, taxes, depreciation and amortization levels. In July 1995, the Company purchased an interest rate cap from First Union with a notional amount of $20,000,000, which provides for a prime rate limit of 9.25% for the period through October 1998. 3. On August 6, 1996, the Company issued its 10% Convertible Preferred Stock (the "Preferred Stock") having a liquidation preference of $5,000,000, in exchange for the convertible subordinated debenture previously outstanding. The Preferred Stock is entitled to vote on an as converted basis, and is convertible into 4,403,339 shares of Common Stock at a conversion price of $1.14 per share following the "reset" of such conversion price that took place on August 6, 1997. 8 Item 1. Financial Statements (continued) Danskin, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (continued) --------------------------------------------------------------- Such conversion price may also be reset on the second anniversary of issuance under certain circumstances and will be adjusted in the event of dilution. Holders of the Preferred Stock have the right to vote separately as a class for the election of one Director. The director previously elected to the Board of Directors of the Company in this capacity resigned in May 1997. The Company has the right to make quarterly dividend payments by issuing additional shares of common stock in lieu of cash and did so in March 1997 by issuing 56,689 shares at $2.205 per share and in June 1997 by issuing 102,881 shares at $1.21 per share. The Company has not yet taken action with respect to the dividend payment which was due on September 1, 1997. 4. On May 9, 1997, the Company received notification from the Nasdaq Stock Market, Inc. ("NASDQ"), that it would delist the Company's common stock from the Nasdaq SmallCap Market effective at the close of business on May 16, 1997 because of the Company's non-compliance with NASDQ's minimum capital and surplus requirement. The Company appealed Nasdaq's decision, and after an oral hearing held on June 19, 1997, the Company was notified that its appeal had been denied. The Company's common stock was delisted effective June 27, 1997. The Company's common stock is presently traded in the over-the-counter market. 5. Inventories are stated at the lower of cost or market on a first-in, first-out basis. Inventories consisted of the following: December 28, June 28, 1996 1997 ------------ -------------- (unaudited) Finished goods $19,742,000 $20,447,000 Raw materials 5,767,000 6,424,000 Work-in-process 7,663,000 4,548,000 Packaging materials 903,000 673,000 ----------- ----------- $34,075,000 $32,092,000 6. On March 11, 1997, a complaint was filed against the Company in Christian Dior Couture S.A. and Christian Dior, Inc. vs. Danskin, Inc., U.S. District Court, Southern District of New York, 97Civ. 1709 (SAS), in an action brought by the Company's former licensor of the Christian Dior(R) trademark for women's hosiery, alleging that the Company had marketed certain unapproved merchandise under Dior's trademark and requesting an injunction as well as monetary damages. On July 2, 1997, the parties entered into a Settlement Agreement and Mutual Release. Management does not believe that the liability of the Company under the Settlement Agreement and Mutual Release is material to its consolidated financial position, results of operations, liquidity or business of the Company. The Company is party to other legal proceedings arising in the ordinary course of its business. Management believes that the ultimate resolution of these proceedings will not, in the aggregate, have a material adverse impact on the financial condition, results of operations, liquidity or business of the Company. 9 Item 1. Financial Statements (continued) Danskin, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (continued) ---------------------------------------------------- 7. The Company's income tax provision rates differed from federal statutory rates due to the change in valuation allowance and the effect of state taxes for the three and six months ended June 1997 and 1996. The breakdown of income tax expense between current tax expense and deferred tax expense is not available for the three months ended June 1996 and 1997. No allocation between current and deferred income taxes was made during the three and six months ended June 1997 and 1996, as such amounts would not be considered material to the Company's consolidated financial position. The Company has been selected for audit by certain Federal and state tax authorities, the resolution of which cannot be determined at this time. Management believes that any possible ultimate liability from these audits will not materially affect the consolidated financial position or results of operations of the Company. 8. On October 4, 1996 the Company entered into an agreement with SunAmerica which entitled SunAmerica to (a) designate two nominees for election to the Company's Board of Directors and to appoint at least one of these nominees to serve on each committee of the Board and (b) designate an additional person to serve as an observer of the Board. Mr. Michele Benasra, one of two directors nominated to the Board of Directors by SunAmerica, resigned his Board seat in July 1997. Sun America has not designated a replacement director. 9. Effective April 15, 1997, the Company curtailed participation in and froze the accrual of benefits under the Pennaco Hosiery Division of Danskin, Inc. Hourly Employees' Pension Plan (the "Pension Plan"). Because of the curtailment, no person who is not presently a "Participant" (as defined) in the Pension Plan, may become a participant after April 15, 1997 and no "Credited Service" (as defined) shall be granted to any participant after such date. Therefore, the Company will not accrue any additional liability under the Pension Plan. 10 Item 2. Management's Discussion and Analysis of Financial Condition and ---------------------------------------------------------------- Results of Operations --------------------- Cautionary Statements --------------------- Certain statements contained in the discussion below, including, without limitation, statements containing the words "believes," "anticipates," "expects," and words of similar import, constitute "forward-looking" statements within the meaning of the Private Securities Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the effects of future events on the Company's financial performance; the risk that the Company may not be able to finance its planned growth; risks related to the retail industry in which the Company competes, including potential adverse impact of external factors such as inflation, consumer confidence, unemployment rates and consumer tastes and preferences; and the risk of potential increase in market interest rates from current rates. Given these uncertainties, current and prospective investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. The following discussion and analysis should be read in conjunction with the Consolidated Condensed Financial Statements, related notes and other information included in this quarterly report on Form 10-Q (operating data for Danskin include operating data for the Company's retail activities). Results of Operations --------------------- Comparison of the three and six months of year ending December 1997 with the three and six months of year ended December 1996. Net Revenues: Net revenues amounted to $29.5 million for the three months ended June 1997, a decrease of $0.2 million, or 0.7%, from the prior year three months ended June 1996. Net revenues for the six months ended June 1997 amounted to $60.3 million, a decrease of $0.8 million, or 1.3%, from $61.1 million the same prior year period. Wholesale revenues for the Company increased $0.2 million for the three month period, and declined $0.4 million for the six-month period. Retail volume decreased $0.4 million for the three and six month periods. Danskin activewear net revenues, which include the Company's retail operations, amounted to $20.0 million for the three months ended June 1997, an increase of $1.3 million, or 7.0%, from $18.7 million in the prior year three months ended June 1996, and increased $3.1 million, to $41.3 million, or 8.1%, for the six month period ended June 1997 over the same prior year period. Sales at the Company's 48 retail stores declined $0.4 million, or 8.0%, to $4.6 million in net revenues for the three months ended June 1997, and generated sales of $8.9 million for the six month period ending 1997 compared to $9.3 million for the same prior period. Comparable retail store sales declined 9.5% for the three months ended June 1997 and declined 7.2% for the six month period ending June 1997. The Company continues its efforts to improve store product offerings, renegotiate existing leases and streamline store operations. Marketing of activewear wholesale 11 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- (Results of Operations continued) --------------------------------- products continues to address the industry's lifestyle casual wear trends, and to emphasize fashion and dance product offerings. In addition, the Company has increased its focus on outdoor fitness and sport bra products as well as offerings for children's gymnastics, as promoted by Nadia Comaneci and Kerri Strug. Pennaco legwear net revenues amounted to $9.5 million for the three months ended June 1997, a decline of $1.5 million, or 13.6%, from the three months ended June 1996, and declined $3.9 million, or 17%, to $19.0 million for the six month period ended June 1997 from the same prior year period. This decline is indicative of a continued weak sheer hosiery market in the department store class of trade. The re-launch of the Anne Klein brand has partially offset other brand declines. Gross Profit: Gross profit decreased by $1.3 million, or 12.3%, to $9.3 million in the three months ended June 1997 from $10.6 million in the prior year period, and declined $0.9 million, or 4.3%, to $20.1 million for the six month period ended June 1997 from the prior year period. Gross profit as a percentage of net revenues decreased to 33.5% in the six months ended June 1997 from 34.4% in the same prior year period. Gross margins for activewear were 35.9% for the three months ended June 1997 versus 40.5% for the three months ended June 1996, and 37.2% for the six month period ended June 1997 versus 38.9% for the same prior year period. This three and six month decrease was primarily attributable to additional obsolescence provisions and customer mark-down allowances from prior seasons and incremental private label programs. Legwear gross profit decreased to 22.7% in the three months ended June 1997 from 27.8% in the prior period, and declined to 25.1% for the six month period ending June 1997 compared to 26.9% for the same prior year period. This three and six month decrease is primarily due to increased obsolescence provisions due to a difficult sheer hosiery retail market and higher sales mix of closeout sales. Selling, General and Administrative Expenses Selling, general and administrative expenses, including retail store operating costs, decreased by $0.2 million, or 2.0%, to $9.6 million, or 32.5% of net revenues, in the three months ended June 1997, from $9.8 million, or 33% of net revenues for the three month period ended June 1996. For the six month period ended June 1997, selling, general and administrative expenses decreased $1.0 million, or 4.8%, to $20.0 million, or 33.2% of net revenues compared to $21.0 million or 34.4% of net revenue for the six month period ended June 1997. Selling, general and administrative expenses, excluding retail store operating costs, decreased $1.1 million, or 7.0%, to $14.6 million, or 24.2% of net revenues, in the six months ended June 1997, from $15.7 million, or 25.7% of net revenues in the same prior year period. The wholesale decrease in the June 1997 six month period 12 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- Results of Operations (continued) --------------------------------- was principally a result of a reduction in the provision for doubtful accounts and lower compensation and distribution costs. Operating Income/Loss: As a result of the foregoing, loss from operations (i.e., income /loss before interest expense, non-recurring charges and income taxes) amounted to $0.3 million for the three months ended June 1997, a decline of $1.1 million from the income of $0.8 million for the three month period ended June 1996. For the six month period ended June 1997, the Company generated operating income of $0.1 million compared to breakeven for the same prior year period. The Danskin wholesale business accounted for all of the operating income for the three and six month periods. Interest Expense: Interest expense amounted to $1.2 million for each three month period ended June 1997 and 1996, and $2.4 million for the six month periods ending June 1997 and 1996. The Company's effective interest rate was 11.1% and 10.6% for the three months ended June 1997 and June 1996, respectively, and 11.0% and 10.6% for the six months ended June 1997 and 1996. Effective rates increased principally due to the issuance of the Preferred Stock in exchange for the subordinated convertible debenture, which had an 8% coupon. Income Tax Provision: The Company's income tax provision rates differed from the Federal statutory rates due to the change in the deferred tax valuation allowance and the effect of state taxes for the three and six months ended June 1997 and June 1996. The Company's deferred tax balance was $0 at both June 1997 and December 1996. Net Loss: As a result of the foregoing, the Company experienced a net loss after preferred dividends of $1.7 million for the three months ended June 1997, which represents an increase of $1.3 million from a $0.4 million net loss in the three months ended June 1996, and a net loss of $2.7 million for the six month period ending June 1997, an increase of $0.2 million from the net loss of $2.5 million for the six month period ended June 1996. 13 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations (continued) --------------------------------- (Liquidity and Capital Resources) --------------------------------- The Company's primary liquidity and capital requirements relate to the funding of working capital needs, primarily inventory and accounts receivable, capital investments in operating facilities, machinery and equipment, principal and interest payments on indebtedness, and to the funding of operating losses in the legwear division. The Company's primary sources of liquidity have historically been bank financing, the issuance of convertible securities, vendor credit terms and internally generated funds. Net cash flow from operations improved by $0.9 million to a use of $4.4 million for the six months ended June 1997, from a use of $5.3 million in the six month period ended June 1996, principally as a result of decreases in both legwear and activewear inventory levels. After $0.1 million used in capital expenditures during the current six month period and $5.2 million provided from financing activities, the Company's cash position increased $0.8 million to $1.9 million. Working capital declined $4.3 million to $20.3 million at June 1997 from $23.6 million at June 1996. Although accounts receivable increased by $2.1 million, inventory levels decreased by $2.0 million and there was a $5.6 million increase in the revolving loan balance, primarily to support the Company's net loss of $5.4 million during this 12 month period, as well as from increases in the activewear business. On March 27, 1997, the Company entered into a Sixth Amendment to the Amended and Restated Loan and Security Agreement (the "Loan and Security Agreement") with First Union National Bank of North Carolina which, among other things, required the Company to pay First Union an "additional equity fee" of $3,000,000 in 2002, unless the Company obtained at least $6,000,000 of net equity proceeds prior to August 31, 1997. By letter agreement dated as of June 17, 1997, First Union extended this August 31, 1997 deadline to December 1, 1997. In addition, by letter agreement dated July 2, 1997, First Union (i) waived compliance with the covenant requirements relating to certain sales of inventory, and (ii) amended the financial covenants of the Loan and Security Agreement. Availability under the revolving credit facility in excess of utilization was $1,969,000 as of June 28, 1997. On May 19, 1997, the Company and Danskin Investors, LLC (the "Investor"), a company newly formed by an investment group led by Onyx Partners, Inc., entered 14 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations (continued) --------------------------------- (Liquidity and Capital Resources continued) ------------------------------------------- into an agreement pursuant to which, under certain circumstances, the Investor would make an equity investment in the Company. On August 28, 1997, First Union , the Company and the Investor entered into a letter agreement (the "Letter Agreement"), which among other things, provides for (i) the purchase by the Investor of certain notes executed by the Company and payable to First Union pursuant to the Loan and Security Agreement in the approximate principal amount of $21.265 million (the "Term Loan"), (ii) the restructuring of First Union's revolving credit commitments to the Company (the "Revolving Credit Facility") pending a contemplated refinancing thereof, and (iii) the disposition of the warrants issued to First Union in June 1995 in connection with a prior restructuring of the Company's obligations to First Union. The Investor has paid $500,000 to First Union as a deposit to be applied to the purchase of the Term Loan, or, if the closing on the purchase of the Term Loan (the "Term Loan Closing") does not occur, under certain circumstances, to be retained by First Union. The Term Loan Closing is scheduled to occur on or before September 19, 1997. The conditions to the Term Loan Closing include, among others, requirements that (i) the Investor shall have (x) entered into an intercreditor agreement with First Union providing for the subordination of the Company's obligations to the Investor under the Term Loan, the collateral securing such obligations, and any new debt securities issued by the Company to the Investor, to the Company's obligations under the Revolving Credit Facility, and (y) made a $4 million cash equity or interim debt investment in the Company and (ii) the Company shall have (a) provided a release to First Union, and (b) entered into an amendment to the Loan and Security Agreement as described below. All deferred or accrued and unpaid interest, fees (other than the Additional Equity Fee) and expenses owed by the Company to First Union in connection with the Term Loan are to be paid at the Term Loan Closing. In addition, the Company would be obligated to pay First Union a fee of $250,000 in connection with the transaction. Pursuant to certain letter agreements, First Union, subject to the terms and provisions of the Loan and Security Agreement, agreed to make overadvances (collectively, the "Overadvance") available to the Company in varying amounts up to a maximum aggregate principal amount equal to $1,500,000 at any one time outstanding for borrowings on or before August 28, 1997. Under the terms of the Letter Agreement, First Union will continue to make the Overadvance available to the Company in varying amounts up to a maximum aggregate principal amount not to exceed $2.0 million though October 31, 1997, so long as the Term Loan Closing has occurred on or before September 19, 1997. At the Term Loan Closing, the Revolving Credit Facility will be amended to, among other things, (i) adjust the applicable interest rates, (ii) reset the maturity date for such Facility to March 31, 1998 and (iii) eliminate the Additional Equity Fee. 15 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations (continued) --------------------------------- (Liquidity and Capital Resources continued) ------------------------------------------- On August 28, 1997, the Company agreed to the terms of a Memorandum of Understanding with the Investor pursuant to which the Investor will, simultaneously with the occurrence of the Term Loan Closing, make a capital investment in the Company. In accordance with the terms and conditions of the Memorandum of Understanding, the Investor will (i) contribute the $21.265 million face amount of the Term Loan to the Company and (ii) invest an additional $4 million cash in the Company (collectively, the "Capital Infusion"). In exchange for the Capital Infusion, the Investor shall receive (a) $15 million face amount of debt (the "Subordinated Debt"), subordinated only to the Company's obligations to First Union under the Revolving Credit Facility, and (b) convertible preferred stock of the Company having a liquidation preference of $500,000 (the "Investor Preferred Stock"). The Subordinated Debt shall bear interest, commencing on the date that is three months from the Term Loan Closing, at the rate of 8% per annum. Upon the Term Loan Closing, the holder of the Investor Preferred Stock shall have the right to designate four of nine directors to the Board of Directors of the Company. The Memorandum of Understanding further provides that the Company shall repay all principal and accrued but unpaid interest under the Revolving Credit Facility with the proceeds from a new revolving credit facility (the "New Revolving Credit Facility") and term loan (the "New Term Loan") to be provided by a new lender. The Company and the Investor are currently in discussions with several potential lenders and have received proposals from certain of such lenders. No assurances can be given, however, that replacement financing will be available. Concurrent with the Company's initial borrowing under the New Revolving Credit Facility and New Term Loan, the Investor will exchange its interest in the Subordinated Debt and the Investor Preferred Stock (collectively, the "Old Investor Securities") for certain new securities of the Company. Specifically, the Investor shall receive (i) $12 million of new convertible preferred stock of the Company (the "New Convertible Preferred Stock"); (ii) seven year warrants to purchase 10 million shares of common stock of the Company at a per share price of $0.30 (the "Investor Warrants", and, together with the New Convertible Preferred Stock, the "New Investor Securities"); and (iii) its pro rata share of 10 million shares of common stock of the Company which shall be offered to the Company's shareholders pursuant to the Rights Offering (as defined below). The New Convertible Preferred Stock shall have an 8% annual dividend rate, payment of which shall be deferred through December 31, 1999, a seven year maturity, and the holder thereof shall be entitled to designate five of nine directors to the Board of Directors of the Company. Beginning with the fiscal year ended December 31, 1999, if the Company meets certain agreed upon financial targets (the "Financial Targets"), all accrued dividends will be forgiven and the New Convertible Preferred Stock shall automatically convert into 40 million shares of common stock of the Company at a conversion price of $0.30 per share. 16 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations (continued) --------------------------------- (Liquidity and Capital Resources continued) ------------------------------------------- Concurrent with the exchange of the Old Investor Securities, (i) the Company shall offer to its shareholders (the "Rights Offering") the right to purchase their pro rata share of 10 million shares of common stock of the Company (the "Offered Common Stock") at a per share price of $0.30. The Investor shall purchase its pro rata share of the Offered Common Stock in exchange for an equivalent amount of Subordinated Debt concurrent with the exchange of the Old Investor Securities. The proceeds from any shares of Offered Common Stock purchased by the public shareholders other than the Investor shall be paid to the Investor in exchange for the further reduction of the Subordinated Debt. The Investor shall standby to purchase any shares of Offered Common Stock not taken up by other shareholders of the Company in the Rights Offering, and shall purchase such shares in exchange for the further reduction of any remaining Subordinated Debt. The conditions to the Capital Infusion include, among others, requirements that (a) the Investor shall have acquired the Term Loan; (b) the Investor and the Company shall have entered into a definitive agreement or agreements memorializing the transactions contemplated in the Memorandum of Understanding; (c) the Company's lease for its New York showroom shall have been revised on terms satisfactory to the Investor; (d) certain agreements shall have been reached with senior management of the Company; (e) the Company's license agreements with Anne Klein & Company and Givenchy Corporation shall have been revised on terms satisfactory to the Investor; (f) SunAmerica Life Insurance Company shall have waived its right to designate members of the Board of Directors of the Company; (g) the Investor shall have negotiated a satisfactory agreement with the current holder of the preferred stock of the Company; (h) the Rights Agreement dated as of June 5, 1996 between the Company and First Union shall have been amended to provide that the Investor shall not constitute an "Acquiring Person" as defined therein, or the rights issued thereunder shall have been redeemed; (i) an agreement shall have been reached with Donald Schupak, the Chairman of the Board of Directors of the Company; and (j) all actions required to establish the post-closing Board of Directors of the Company shall have been taken and all required resignations of directors shall have been received. Although there can be no assurances, the Company presently anticipates being able to satisfy each of the conditions to the Capital Infusion prior to September 19, 1997. 17 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- (Liquidity and Capital Resources continued) ------------------------------------------- Although there can be no assurances, the Company anticipates that its short-term funding requirements pending closing of the transactions described above, will continue to be provided principally under the Company's existing bank facilities and vendor financing arrangements. The Loan and Security Agreement established covenants requiring the Company to meet certain interest coverage and profitability levels, and it contains certain other restrictions, including limits on the Company's ability to incur debt, make capital expenditures, merge, pay dividends or repurchase its own stock. It also provides that an event of default would occur if any person, with specific exceptions, becomes the owner of or controls more than 20% of the Company's Common Stock. The Company's obligations under the Loan and Security Agreement are secured by liens on substantially all the Company's assets. Interest rates on all obligations under the Loan and Security Agreement were set at prime plus 1.5% (9.75% at December 28, 1996 and 10% at June 28, 1997). On each annual adjustment date (as defined), the interest rate may be reduced based on certain ratios of interest coverage and debt to earnings before interest, taxes, depreciation and amortization levels. In July 1995, the Company purchased an interest rate cap from First Union with a nominal amount of $20,000,000, which provides for a prime rate limit of 9.25% for the period through October 1998. On August 6, 1996, the Company issued the Preferred Stock having a liquidation preference of $5,000,000, in exchange for the convertible subordinated debenture previously outstanding. The Preferred Stock is entitled to vote on an as converted basis, and is convertible into 4,403,339 shares of Common Stock at a conversion price of $1.14 per share following the "reset" of such conversion price that took place on August 6, 1997. Such conversion price may be reset on the second anniversary of issuance under certain circumstances and will be adjusted in the event of dilution. Holders of the Preferred Stock have the right to vote separately as a class for the election of one Director. The director previously elected to the Board of Directors of the Company in this capacity resigned in May 1997. The Company has the right to make quarterly dividend payments by issuing additional shares of common stock in lieu of cash and did so in March 1997 by issuing 56,689 shares at a price of $2.205 per share and in June 1997 by issuing 102,881 shares at $1.21 per share. The Company has not yet taken any action with respect to the dividend payment which was due on September 1, 1997. Strategic Outlook The Company's business strategy over the next two to three years will be to better capitalize on the consumer recognition of the Danskin(R) brand and to develop new channels for distribution. Further, the Company is taking steps to evaluate its long term business prospects in the contracting sheer hosiery market, amid increased retailer demands for responsiveness. The Company intends, to the 18 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- (Strategic Outlook continued) ----------------------------- extent adequate cash flow from operations can be generated and financing can be obtained on appropriate terms, expand Danskin(R) and other product lines, pursue growth in international sales, selectively license the Danskin(R) name for additional product categories, and open additional full price Danskin(R) stores. There can be no assurance that the Company will be able to generate adequate cash flow from operations, or obtain financing on appropriate terms to implement this strategy, particularly given the difficulty of predicting hosiery operations or, if implemented, that this strategy will be successful. As described above, the Company has entered into a Letter Agreement with the Investor and First Union and has agreed to the terms of a Memorandum of Understanding with the Investor concerning a financing and an equity investment transaction. If the transactions presently contemplated by the Memorandum of Understanding are concluded, they would be highly dilutive of existing common stockholders. The Company is currently unable to determine whether these transactions will be concluded successfully or whether adequate financing will ultimately be available to meet the above objectives. No assurances can be given regarding the Company's ability to de-leverage its capital structure, to raise new equity as required in the Loan and Security Agreement or to expand its business. Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- Pursuant to the General Instructions to Rule 305 of Regulation S-K, the quantitative and qualitative disclosures called for by this Item 3 and by Rule 305 of Regulation S-K are inapplicable to the Company at this time. PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- See Note 6 in the Notes to Consolidated Condensed Financial Statements in Part I - Financial Information of this Form 10-Q. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None 19 Item 6. Exhibits and Reports on Form 8-K (a) Exhibit ------- 10.10.6 License Agreement, dated November 1, 1996, between Wundie Industries, Inc. and the Registrant. (b) Form 8-K -------- Form 8-K dated May 19, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DANSKIN, INC. September 4, 1997 By: /s/ Edwin W. Dean ----------------------------- Edwin W. Dean Vice Chairman of the Board, General Counsel and Secretary September 4, 1997 By: /s/ Beverly Eichel ----------------------------- Beverly Eichel Executive Vice President and Chief Financial Officer (Principal Financial Officer) 20 EX-10.6 2 LICENSE AGREEMENT LICENSE AGREEMENT between DANSKIN, INC. and WUNDIES INDUSTRIES, INC. Dated as of November 1, 1996 INDEX 1. Definitions............................................................. 1 2. License Grant........................................................... 2 3. Term.................................................................... 3 4. Licensed Merchandise.................................................... 4 5. Use of Licensed Mark.................................................... 7 6. Royalty................................................................. 8 7. Records................................................................. 10 8. Trademark and Related Rights............................................ 11 9. Indemnification and Insurance........................................... 12 10. Infringement............................................................ 14 11. Termination............................................................. 15 12. Effect of Expiration or Termination..................................... 17 13. Bankruptcy and Financial Covenants...................................... 19 14. Representations and Warranties.......................................... 19 15. Advertising and Sales Promotion......................................... 20 16. Confidentiality......................................................... 21 17. Governing Law; Arbitration.............................................. 21 18. Interest................................................................ 22 19. Importation of Merchandise.............................................. 22 20. Notices................................................................. 22 21. Miscellaneous........................................................... 23 EXHIBITS 1(A) List of "Merchandise"................................................... 24 2(B) Provisions of Agreement between Licensor and Dan River, Inc............. 25 4(F) Form of Contractor's Agreement.......................................... 26 4(K) List ofAuthorized Customers............................................. 28 LICENSE AGREEMENT ----------------- THIS AGREEMENT, made and entered into as of this 1st day of November, 1996 between DANSKIN, INC., a Delaware corporation with its principal offices at 111 West 40th Street, New York, New York 10018, (hereinafter referred to as "Licensor") and WUNDIES INDUSTRIES, INC., a corporation, with its principal offices at 1 Penn Plaza, New York, New York 10119, (hereinafter referred to as "Licensee"). WITNESSETH: WHEREAS, Licensor is the owner of the trademark and service mark DANSKIN(R), and any simulations and variations thereof; and WHEREAS, Licensee desires to obtain a license to use said trademark in connection with the manufacture, merchandising, promotion, advertising, sale and distribution of Merchandise, as hereinafter defined, and Licensor is willing to grant such license subject to the terms of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, Licensor and Licensee agree as follows: 1. Definitions The following definitions shall be applicable throughout this Agreement: 1 A. The term "Annual Period" shall mean the 14-month period commencing November 1, 1996 and ending on December 31, 1997, and each 12-month period thereafter during the Term commencing on January 1 and ending on December 31. 1 B. The term "Guaranteed Minimum Royalties" shall mean with respect to any Annual Period the minimum royalty payments that Licensee is obligated to pay to Licensor, as set forth in Section 6(B) below. 1 C. The term "Licensed Mark" shall mean the trademark DANSKIN(R), and any simulations or variations thereof, all in the form approved in writing by Licensor for use by Licensee hereunder. 1 D. The term "Licensed Merchandise" shall mean Merchandise that is manufactured, sold or promoted by or on behalf of Licensee and which bears the Licensed Mark. 1 E. The term "Merchandise" shall mean Girls' and Ladies underwear and coordinates sold in lingerie departments, excluding foundation, activewear and sports bras, all as shown on Exhibit 1(E) hereto. 1 F. The term "Minimum Annual Net Sales", to be achieved by Licensee in respect of each Annual Period by virtue of bona fide Sales made at arm's length, shall mean the Minimum Annual Net Sales, as set forth in Section 6(B) below with respect to each Annual Period. 1 G. The term "Net Sales" shall mean the total invoiced price of the Licensed Merchandise shipped by Licensee to any third party in connection with any sale, rental or other use or disposition, less only (i) normal and actual trade discounts, sales allowances usually granted and actually taken by customers and returns actually received, (ii) local, state and federal sales, use and excise taxes required to be charged by Licensee with respect to a Sale and not reimbursed by customers, and (iii) freight charges and insurance if separately stated on the invoice. If a Sale is made other than at arm's length, Net Sales for such Sale shall be based on the price for a corresponding Sale at arm's length. No deduction shall be made for uncollected or uncollectible accounts. 1 H. The term "Prototype" shall mean any and all models or samples of Licensed Merchandise, except that the "Final Prototype" shall mean the actual final sample of each model of Licensed Merchandise which has been approved by Licensor and from which the first commercial production thereof will be made. 1 I. The term "Quarterly Period" shall mean the period beginning November 1, 1996 and ending March 31, 1997 and thereafter shall mean one of the quarterly periods within an Annual Period, the first such quarterly period commencing on the first day of the Annual Period and the next three quarterly periods following consecutively thereafter. 1 J. The term "Sales" shall mean sales, rentals or other dispositions of Licensed Merchandise. 1 K. Unless sooner terminated in accordance with the provisions hereof, the term "Term" shall mean the Initial Term of this Agreement and any Renewal Term, as such terms are defined in Article 3 hereof. 1 L. The term "Territory" shall mean the United States of America, its territories and post exchanges throughout the world, except that post exchanges are on a non-exclusive basis. 2. License Grant 2 A. Licensor hereby grants to Licensee an exclusive license throughout the Territory (but not elsewhere) during the Term to use the Licensed Mark as a trademark in connection with the manufacture, advertising, merchandising, promotion, publicity, sale and distribution of Merchandise, subject to all the terms and conditions of this Agreement. 2 B. Licensee acknowledges that the grant to it of the Licensed Mark hereunder is qualified by the terms of an agreement between Licensor and Dan River Inc., as amended, the applicable provisions of which are attached hereto as Exhibit 2 (B), and it agrees to comply in all respects with such provisions. 2 C. Licensee shall use its best efforts to exploit the rights granted herein at all times in a manner consistent with good business practices and the standards set forth below. Licensee will assign appropriate executive staff to supervise its marketing efforts who will devote their best efforts to maximizing the Sales of the Licensed Merchandise. 2 2 D. Any Merchandise which does not continue to maintain, for any six consecutive months, widespread commercial distribution as Licensed Merchandise within the Territory, may be withdrawn by Licensor at any time thereafter as Merchandise permitted to bear the Licensed Mark under this Agreement. Any such withdrawal shall not affect any Guaranteed Minimum Royalty requirements hereunder, nor any Minimum Annual Net Sales requirements hereunder, nor any other provision of this Agreement. 2 E. Licensee may use the Licensed Mark only in connection with the manufacture, advertising, merchandising, promotion, publicity and distribution of Merchandise which has been approved by Licensor in accordance with Article 4 hereof. No license is granted hereunder for the use of the Licensed Mark for any purpose other than upon or in connection with the Licensed Merchandise. No license is granted hereunder for the manufacture, sale or distribution of Licensed Merchandise for promotional or publicity purposes (other than the promotion or publicity of Licensed Merchandise) or for use of Licensed Merchandise in combination sales with other merchandise or as premiums or giveaways, or for disposal under or in connection with any similar methods of merchandising. 2 F. Licensor reserves all rights to use and to grant to third parties the right to use the Licensed Mark on any product, including Merchandise, in any geographical area outside the Territory and within the Territory on products other than Merchandise. Licensor will make good faith efforts to enforce its agreements with such third parties in order to protect Licensee's exclusive right to use the Licensed Mark on the Licensed Merchandise in the Territory. Additionally, Licensor reserves all rights to use the Licensed Mark on any product, including the Merchandise, within or outside of the Territory for products used for promotional purposes for or in connection with any of Licensor's businesses. 2 G. The license granted herein is strictly personal to Licensee. Neither this Agreement nor any of the rights granted to Licensee hereunder may be assigned, sublicensed or otherwise transferred, in whole or in part, by Licensee to any person, partnership firm, corporation or other entity whatsoever without the prior written approval of Licensor. Any attempted assignment, or sublicense or other transfer in violation of this Agreement, whether voluntary or by operation of law, directly or indirectly, shall be void and of no force or effect. Without limiting the preceding sentence, in the event of any attempted or completed assignment, sublicense or other transfer, or in the event of a change of control of Licensee as described in Section 11(G) hereof, without Licensor's prior written approval, Licensor may, at its option, immediately and without prior notice, terminate the rights and license hereby granted to Licensee by written notice to Licensee. 3. Term 3 A. This initial term of this Agreement (the "Initial Term") shall become effective as of November 1, 1996, and shall consist of three (3) Annual Periods. Licensee shall have the option to renew this Agreement for two (2) successive renewal terms of three (3) Annual Periods each (each such renewal term hereof to be referred to herein as a "Renewal Term"); provided that (i) Licensee gives Licensor irrevocable written notice of its intent to renew at least one hundred and twenty (120) days prior to the commencement of the Renewal Term for 3 which the renewal option is being exercised, time being of the essence, (ii) Licensee has paid all of the Percentage Royalties (as hereinafter defined) and Guaranteed Minimum Royalties theretofore required to be paid and (even if all Percentage Royalties and Guaranteed Minimum Royalties have been paid) has achieved all of the Minimum Annual Net Sales for prior Annual Periods, and (iii) on the date of renewal, Licensee is in compliance with all the terms and conditions of this Agreement. 4. Licensed Merchandise 4 A. Licensed Merchandise shall at all times be of high quality, commensurate with the reputation and heritage of products which bear the Licensed Mark. Consistent with this standard, Licensee agrees that Licensed Merchandise will be designed, manufactured, advertised, promoted, publicized, distributed and sold in a manner which is consistent with high quality standards, and commensurate with the levels customarily maintained for products which bear the Licensed Mark. 4 B. Licensee shall submit to Licensor for approval all sketches, styles, designs, specifications, colors, materials, and fabrics for all Merchandise intended to be sold as Licensed Merchandise, including any wrapping, labels, packaging or containers (said packaging, containers and wrapping hereinafter collectively, "Packaging") intended to be utilized in connection with the Licensed Merchandise, in order to ensure that such Merchandise and Packaging are commensurate with high quality materials, workmanship and design standards. Prior to first commercial sale or production of any Licensed Merchandise, Licensee shall submit for Licensor's prior approval two copies of the Prototype of each different item of Licensed Merchandise that Licensee intends to market, including related proposed Packaging. The two copies of the Prototype must be sent to Danskin, Inc., attention: Director of Marketing, at the address to which notices must then be sent to Licensor pursuant to Article 20 hereof. Each such submitted Prototype shall be deemed accepted and approved by Licensor unless Licensor notifies Licensee of its objections thereto within ten (10) business days after receipt of such submission. In the event Licensor objects to any Prototype, Licensor shall state the particulars of such objections. Licensor and Licensee shall, if requested, consult and cooperate with each other for purposes of modifying the Prototype as expeditiously as possible. Licensee shall then resubmit a modified Prototype and it shall be deemed accepted and approved by Licensor unless Licensor notifies Licensee of its objection thereto within five (5) business days of its receipt thereof. The above approval process shall be repeated until such time as the Prototype has been finally approved by Licensor or the parties agree that the Prototype shall not be marketed as Licensed Merchandise. Licensee shall not manufacture, use or sell any Merchandise under the Licensed Mark without having received the prior approval of Licensor pursuant to this Section 4(B). 4 C. The Licensed Merchandise manufactured on behalf of and sold by Licensee shall be similar in all material respects in materials, color, workmanship, designs, dimensions, styling and quality to the Final Prototype approved by Licensor. If, in the sole judgment of Licensor, any Licensed Merchandise is not being manufactured in accordance with the Final Prototype thereof, Licensor shall so notify Licensee in writing and Licensee shall promptly repair or change the Licensed Merchandise in question to conform to the Final Prototype. If, in the sole 4 judgment of Licensor, the Licensed Merchandise as repaired or changed does not conform to the Final Prototype, then the Licensed Mark shall be promptly removed from the Licensed Merchandise. 4 D. In the event that the standard, style, appearance or quality of any Licensed Merchandise ceases to be acceptable to Licensor, Licensor shall have the right, exercisable in its reasonable discretion, to withdraw its approval of such Merchandise. Upon receipt of written notice from Licensor of its determination to withdraw such approval, Licensee shall, within sixty (60) days thereafter, either correct the deficiencies in the Merchandise to the satisfaction of Licensor or immediately cease the use of the Licensed Mark in connection with the promotion, advertisement, sale, manufacture, distribution or use of such Licensed Merchandise. (Nothing in the preceding sentence shall limit or restrict Licensor's right of termination pursuant to subparagraph 11(B)(iii) hereof.) Notice of such election by Licensor to withdraw approval shall not relieve Licensee from its obligation to pay royalties on such Licensed Merchandise for Sales made by Licensee to the date of disapproval or thereafter, as permitted herein. 4 E. Except as specifically provided below, all right, title and interest in and to the sketches, designs, and specifications of the Merchandise, including any modifications and improvements thereto, which are not part of the public domain, shall be the sole property of the Licensee; provided, however, that all Merchandise manufactured during the Term from designs approved by Licensor shall bear the Licensed Mark. All Packaging which is not in the public domain or not theretofore used by Licensee shall be the sole property of Licensor. Except with regard to Packaging, in the event Licensor, as part of the approval process set forth in Section 4(B) above, delivers to Licensee any sketches, designs or specifications which Licensor believes to be novel and proprietary to Licensor, Licensor shall so notify Licensee in writing within ten (10) days of said delivery, but in any event before the commencement of production. If Licensee fails to object in writing to Licensor's claim that any such sketches, designs or specifications are novel and proprietary to Licensor within ten (10) business days of Licensee's receipt of Licensor's claim, then such claimed items as are not in the public domain shall be deemed to be the sole property of Licensor. Any such sketches, designs or specifications provided by Licensor and not claimed as novel and proprietary to Licensor pursuant to written notification as provided above shall be deemed to have originated with, and to be the property of, Licensee insofar as they are not part of the public domain. In order to effectuate the vesting of rights for novel sketches, designs, or specifications provided herein, Licensor and Licensee agree to execute appropriate documents, assigning to the other party whatever rights that party may have in the sketches, designs or specifications. In no event shall Licensee claim or acquire, whether by operation of law or otherwise, any right, title or interest in or to the Licensed Mark. 4 F. Licensee may, subject to obtaining Licensor's prior written consent, utilize a third party for the sole purpose of manufacturing all or a portion of the Licensed Merchandise; provided that Licensee shall furnish Licensor with (a) an undertaking in the form annexed hereto as Exhibit 4(F), signed on behalf of both Licensee and such manufacturer, and (b) such further information, including, but not limited to, financial statements and credit reports of such manufacturer and a description of the Licensed Merchandise to be manufactured by it, as Licensor may require. 4 G. Licensor shall on reasonable notice to Licensee have the right to visit and inspect any and all 5 manufacturing facilities (whether owned by Licensee or subcontracted with the consent of Licensor) in which Licensed Merchandise is being manufactured. 4 H. Licensor shall have the right, upon written notice to Licensee, immediately to terminate the right of Licensee to manufacture Licensed Merchandise through any manufacturing facility at Licensor's sole discretion at any time it determines to its satisfaction that such manufacturer has infringed, or is infringing, any of the trademarks, patents, copyrights or designs of Licensor, or has pirated, or is pirating, the trademarks, patents, copyrights or designs of Licensor, or otherwise improperly has used, or is using, the trademarks, patents, copyrights or designs of Licensor. 4 I. Licensee agrees to exercise commercially reasonable efforts to safeguard the prestige of the Licensed Mark for the benefit of Licensor. Licensee shall not market any of the Licensed Merchandise as seconds or irregulars, unless Sales of such Licensed Merchandise does not exceed, during any four (4) consecutive Quarterly Periods, four percent (4%) of the total Sales of the Licensed Merchandise during such Periods. 4 J. The Licensed Merchandise shall be sold by Licensee only at wholesale and only to specialty stores, sporting goods stores, better department stores (excluding discount stores such as KMart and Walmart), warehouse or price clubs and retail catalogs, subject in each case to the prior approval of Licensor. Sales to Sears are permitted only of children's Merchandise. Licensee shall not (1) sell or distribute any Licensed Merchandise to discounters, wholesalers, jobbers, diverters, or any other entity which does not sell at retail exclusively, or (2) sell the Licensed Merchandise directly to the public in retail stores, catalogs or otherwise unless Licensee submits a proposal to Licensor outlining its plans for the development of such a business and Licensor approves such proposal, in the exercise of its sole discretion. 4 K. Attached hereto as Exhibit 4(K) is a true and complete schedule setting forth the name and address of all stores or other customers to which Licensee proposes to sell or distribute Licensed Merchandise, which customers are hereby approved by Licensor. Licensee shall update such list on a quarterly basis. Licensor shall have the right to disapprove, or withdraw its prior approval, of all or any portion of the list. Licensee shall not sell Licensed Merchandise to any customer that has not first obtained the approval of Licensor or as to which Licensor has withdrawn its prior approval. 4 L. For purposes of monitoring quality, and for promotional and/or advertising purposes, Licensee agrees to provide to Licensor, upon request and free of charge, a reasonable number of current production samples of Licensed Merchandise. 4 M. Any approval of Licensor required under this Agreement shall not (unless otherwise expressly provided herein) be withheld unreasonably and (except as otherwise expressly herein provided) any sample or artwork submitted to Licensor which has not been disapproved in writing within ten (10) business days after receipt by Licensor shall be deemed to have been approved. However, Licensor's approval of any Prototype or artwork shall not be construed to mean that Licensor has determined that the sample or artwork conforms to the laws or regulations of any jurisdiction, or that it is not in conflict with any other licensed articles and Licensor shall not bear any liability for such approval. 6 4 N. In any review conducted hereunder, Licensor is acting in an advisory capacity only, and shall have no responsibility for the operation of Licensee's business or its manufacturing, distribution, sales or facilities used in connection therewith, whether upon the recommendation of Licensor or otherwise. 5. Use of Licensed Mark 5 A. All Licensed Merchandise will bear at least one label with the Licensed Mark in a form approved by Licensor in accordance with this Article 5. Licensee agrees that it will use and display the Licensed Mark only in the form in which it is registered and shall not use any variations thereof or an abbreviated form thereof unless such is specifically approved by Licensor in writing. Licensee shall submit to Licensor for its prior approval copies of all advertising, including coop advertising, promotional materials (including incentives designed to promote sales such as gift items), Packaging or trade materials utilizing the Licensed Mark, (including business cards, invoices, stationery and other printed matter) prepared by or for Licensee for use in connection with the Licensed Merchandise and the Licensed Mark. Any advertising, labeling, office stationery, invoices, etc. containing the Licensed Mark shall include an (R) in a circle adjacent to the Licensed Mark and shall be used solely in conjunction with the sale of Licensed Merchandise. 5 B. Licensee will not use the Licensed Mark as a Corporate name or as a trademark, in whole or in part, or in such a way as to give the impression that the Licensed Mark is the property of Licensee. Licensee shall not use any mark other than the Licensed Mark (a "Secondary Mark") in connection with any of the Licensed Merchandise or on labels, tags, packaging or wrapping materials therefor without obtaining the prior written consent of Licensor. Licensee hereby sells, transfers and assigns to Licensor all right, title and interest in and to all Secondary Marks used in connection with the Licensed Mark along with the goodwill associated therewith. Licensee's right to use any approved Secondary Mark shall be only for a period concurrent with the Term or such shorter period as specified in Licensor's approval, unless sooner terminated as herein provided. Licensor shall have the right to proceed with applications to register the same in its name or in the name of any related company and Licensee shall provide its reasonable assistance with respect thereto. 5 C. Licensor may, to the extent Licensor reasonably deems it necessary to the protection of its rights in and to the Licensed Mark, from time to time issue written uniform rules and instructions to Licensee regarding use of the Licensed Mark, and required marking legends or notices which Licensee shall use in connection with the Licensed Mark. 5 D. Upon request of Licensor, but not more than once in each Annual Period during the Term, Licensee will make a written or oral presentation to Licensor detailing Licensee's plans to commercialize the Licensed Merchandise and will submit to Licensor for its review a complete written business plan, including marketing, advertising and sales plans. Licensee agrees to provide Licensor with such additional information as Licensor may reasonably request. 7 5 E. Licensee will comply with all laws, rules, regulations and requirements of any governmental body which may be applicable to the manufacture, advertising, distribution, sale, packaging, publicity or promotion of the Licensed Merchandise. 5 F. Licensor and its duly authorized representatives shall have the right, at any time within the Term during normal business hours and upon reasonable notice, to inspect all facilities utilized by Licensee (and its contractors and suppliers, to the extent Licensee may employ same) in connection with the manufacture, sale, storage or distribution of the Licensed Merchandise (provided, that the respective identities of Licensee's suppliers and contractors, if any, shall be deemed confidential and proprietary information to which the confidentiality obligations under Article 16 hereof shall apply). Licensee shall take all steps reasonably requested by Licensor to protect against the misuse of the Licensed Mark by its suppliers, contractors and customers. In addition, Licensee shall, upon demand by Licensor, terminate any supplier or contractor whose use of child labor, prison labor or unfair labor practices violates the policies of Licensor or any United States governmental authority in this regard or any law or regulation in effect in the Territory. 6. Royalty 6 A. Licensee shall pay Licensor, in United States currency, royalties with respect to Net Sales during each Annual Period (the "Percentage Royalties"), as follows: (i) with respect to Sales to department stores (industry standard definition, but excluding J.C. Penney, Sears and Montgomery Ward), three percent (3%) of Licensee's annual Net Sales of Licensed Merchandise (except for Sales of girls' products) up to and including $5,000,000; and five percent (5%) of the excess of such Net Sales over $5,000,000; (ii) with respect to Sales to customers other than department stores, as defined above, six percent (6%) of Licensee's annual Net Sales of Licensed Merchandise (except for Sales of girls' products) up to and including $4,000,000; four percent (4%) of the excess of such Net Sales over $4,000,000 and up to and including $8,000,000; and five percent (5%) of the excess of such Net Sales over $8,000,000; and (iii) with respect to Sales of girls' products, four percent (4%) of Licensee's annual Net Sales of such Licensed Merchandise. The Percentage Royalties shall be paid by Licensee within thirty (30) days after the last day of each Quarterly Period on the Net Sales of all Licensed Merchandise sold during such Quarterly Period. 6 B. Notwithstanding the provisions of Section 6(A) above, Licensee shall in any event be obligated to pay Licensor a Guaranteed Minimum Royalty, in United States currency, for each Annual Period as set forth below. If the Percentage Royalties payable by Licensee under Section 6(A) above with respect to any Quarterly Period do not equal or exceed the amount of Guaranteed Minimum Royalties for such Quarterly Period, as set forth in the table immediately below, then Licensee shall pay to Licensor the amount of such shortfall in accordance with Section 6(C). Licensee understands and agrees, however, that its failure to meet the applicable Minimum Annual Net Sales shall be grounds for termination and/or non-renewal of this Agreement and may not be cured merely by Licensee's payment of the applicable Guaranteed Minimum Royalties. Minimum Annual Guaranteed Guaranteed Annual Period Annual Net Sales Minimum Royalty Quarterly Payment - ------------- ---------------- --------------- ----------------- 8 Initial Term - ------------ First Annual Period $6,000,000 $120,000 $30,000 Second Annual Period $6,000,000 $120,000 $30,000 Third Annual Period $6,000,000 $120,000 $30,000 First Renewal Term - ------------------ First Annual Period $7,000,000 $120,000 $30,000 Second Annual Period $7,000,000 $120,000 $30,000 Third Annual Period $7,000,000 $120,000 $30,000 Second Renewal Term - ------------------- First Annual Period $8,000,000 $120,000 $30,000 Second Annual Period $8,000,000 $120,000 $30,000 Third Annual Period $8,000,000 $120,000 $30,000 6 C. The Guaranteed Minimum Royalty referred to in the immediately preceding Section 6(B) shall be payable for each Annual Period in four (4) equal quarterly installments within thirty (30) days following the close of each Quarterly Period, on or before each April 30, July 31, October 31 and January 31. Licensee shall be entitled to credit, against each Guaranteed Minimum Royalty payment made by Licensee in respect of a Quarterly Period, any amount by which (x) the total of all Guaranteed Minimum Royalty payments and Percentage Royalty payments paid for all prior Quarterly Periods in the current Annual Period, exceed (y) the total of all Guaranteed Minimum Royalty payments which were payable for all prior Quarterly Periods in the current Annual Period. 6 D. Notwithstanding the foregoing, in the event of the termination hereof prior to the expiration of the Initial Term or any Renewal Term, the Percentage Royalties on Net Sales shall be payable within thirty (30) days after such termination for the portion of the Quarterly Period up to the date of such early termination. In the event Licensee exercises its option pursuant to Section 12(B) hereof to temporarily extend the license herein granted for purposes of liquidating its inventory of Licensed Merchandise, Licensee shall account for and make all payments of Percentage Royalties based on Net Sales within (30) days after each Quarterly Period or portion thereof until final termination. Licensor agrees to refund within 30 days to Licensee any portion of Licensee's payment of Percentage Royalties as may be appropriate to reflect returns of Licensed Merchandise received by Licensee subsequent to any payment of Percentage Royalties pursuant to this Section 6(D). 6 E. Within thirty (30) days following the conclusion of each Quarterly Period, Licensee shall deliver to Licensor an itemized statement setting forth the total Net Sales of Licensed Merchandise during said period and, at the same time, shall deliver to Licensor a royalty payment as provided in Section 6(A) above, but in no event an amount less than the quarterly Guaranteed Minimum Royalty payment payable for the Quarterly Period last ended. The itemized statement referred to above shall contain the computation of Percentage Royalties earned during such Quarterly Period, in sufficient detail to be audited from Licensee's books. 6 F. Within sixty (60) days after the end of each Annual Period Licensee shall submit to Licensor 9 a report setting forth, for the immediately previous Annual Period, the totals of all information contained in the quarterly statements provided to Licensor pursuant to Section 6(E) above, along with two tabulations showing (i) a listing by SKU number of the total units and Net Sales thereof including all returns and deductions for the Annual Period for which the statement is submitted and (ii) a listing by customer showing the customer's name, location and Net Sales to such customer for the Annual Period for which the statement is submitted. Such report shall be prepared in accordance with generally accepted accounting principles, as applicable, which shall be consistently applied, and shall be accompanied by a certification of Licensee's chief financial officer to the effect that such officer has reviewed the report and the quarterly statements furnished by Licensee hereunder as well as Licensee's books of accounts and records, that such report has been prepared in accordance with generally accepted accounting principles as applicable, which were applied on a consistent basis, and that, in such officer's opinion, such report and quarterly statements are complete and correct. 6 G. Within sixty (60) days after the end of each Annual Period, if requested by Licensor, and in event within sixty (60) days after the date of expiration or termination of this agreement, Licensee shall submit to Licensor an accurate schedule (the "Inventory Schedule") setting forth, as of such date, the Licensee's inventories of Licensed Merchandise, detailed by SKU number, of any Packaging, raw materials, work in process or finished inventory of Licensed Merchandise which is on hand or in transit as of the close of business on such date (hereinafter the "Inventory"). 6 H. All royalty payments, reports and accounting statements are to be sent to Danskin, Inc., Attention: Chief Financial Officer, at the address to which notices to Licensor are then to be sent pursuant to Article 20 hereof. 7. Records 7 A. Licensee shall maintain, at its main offices, true and accurate books and records, in accordance with generally accepted accounting principles, containing all particulars which may be necessary for the purpose of conducting its business according to the terms and conditions herein contained and for determining the amounts payable to Licensor pursuant to Article 6 and Section 12(B). Licensee shall make such books and records available to Licensor and its designated representatives during regular business hours and upon reasonable notice during the Initial Term and any Renewal Term and for a period of twenty-four (24) months after each such period for the purpose of verifying Licensee's reports, records and payments hereunder. Licensor and its representatives shall be entitled to make copies, at Licensor's expense, of any such records subject to Licensor's obligation to treat information contained in such records as confidential pursuant to Article 16. Licensee shall render such assistance to Licensor and its designated representatives as they may reasonably request. If, upon inspection of the books and records being maintained by Licensee as required hereunder, Licensor uncovers an error in royalty computation such that royalties paid for any period being reviewed are to be adjusted by greater than five percent (5%) of the royalties actually paid by Licensee for such period, Licensee shall promptly make whatever payments may be necessary to reimburse Licensor for the reasonable costs of conducting the audit. Additionally, if the audit uncovers an underpayment or overpayment of royalties, Licensee (or 10 Licensor) agrees to promptly make (or return) such discrepancy in payment and, in the event of an underpayment of royalties, Licensee shall pay interest to Licensor in accordance with Article 18 hereof. 8. Trademark and Related Rights 8 A. Licensee acknowledges that the Licensed Mark has acquired valuable goodwill with the public and that products bearing the Licensed Mark have acquired a reputation of high quality, prestige and style. Licensee acknowledges that Licensor is the owner of all right, title and interest in and to the Licensed Mark in any and all forms or embodiments thereof, and is also the owner of the goodwill attached to the Licensed Mark including that which arises from the sale of Licensed Merchandise hereunder. Sales by Licensee of the Licensed Merchandise shall be deemed to have been made by and for the benefit of Licensor for the purposes of securing trademark rights and/or registration and all uses of the Licensed Mark by Licensee,and any goodwill arising therefrom, shall inure to the benefit of Licensor. Licensee hereby assigns to Licensor any rights to the Licensed Mark which may, by operation of law or otherwise, vest in Licensee, and any goodwill arising therefrom, which shall in any event inure to the benefit of Licensor. Licensee shall not attempt to register the mark "DANSKIN(R)", or any variation or simulation thereof, for its own benefit in any country in the world. Licensee agrees that it will not knowingly directly or indirectly infringe the "DANSKIN(R)" trademark in countries outside the Territory and will not contribute to or induce such infringement by selling Licensed Merchandise to persons whom Licensee knows, or reasonably has reason to know, intend to infringe the "DANSKIN(R)" trademark outside the Territory. 8 B. Licensee acknowledges that only Licensor may file or prosecute trademark applications to register the Licensed Mark for the Merchandise. Licensee will cooperate with Licensor in connection with the filing and prosecution by Licensor of any applications to register the Licensed Mark as a trademark within the Territory, including the Territory as such may be amended from time to time hereafter, and the maintenance or renewal of any trademark registration, and will, free of charge, supply Licensor with such Licensed Merchandise, including samples, containers, labels and other uses of the Licensed Mark, as may reasonably be requested by Licensor in connection therewith. Licensee shall promptly execute all documents (including, but not limited to, the making and terminating of registered user agreements) which Licensor may reasonably request in order to obtain or maintain a registration in any jurisdiction or to establish or to maintain Licensor's ownership of the Licensed Mark in any jurisdiction. Except as otherwise expressly provided in this Section 8(B), Licensor will pay all costs and fees incurred by it or Licensee, if Licensee incurs such expenses at the request of Licensor, in connection with filing for, obtaining, maintaining or renewing any trademark registration of the Licensed Mark in any jurisdiction. The rights and obligations under this Section 8(B) shall survive termination of this Agreement. 8 C. Licensee agrees and undertakes to use the Licensed Mark strictly in compliance with and observance of any and all applicable trademark laws and to use such legends, markings or notices in connection therewith as are required by law or otherwise reasonably required by Licensor to protect its rights. Upon expiration or termination of this Agreement for any 11 reason whatsoever, Licensee will execute and file any and all documents required by Licensor regarding the Licensed Mark. Licensor shall be solely responsible for bearing all expenses incurred in preparing and recording any such documents. 8 D. Licensee agrees (i) not to challenge or in any manner impugn the validity of this Agreement or the validity or ownership by Licensor of the Licensed Mark or any application for registration thereof, or any trademark registrations thereof, in any jurisdiction, and (ii) not to contest the fact that Licensee's rights under this Agreement, subject to the provisions of Section l2(B) hereof, terminate upon termination of this Agreement. Licensee shall not become a party adverse to Licensor in any litigation in which others may contest the validity of the Licensed Mark or Licensor's rights thereto. The provisions of this Section shall survive any termination or expiration of this Agreement. 8 E. Licensee shall not commit any act, suffer to be done any act, fail to act or at any time use, promote, advertise, display, commercialize or otherwise use the Licensed Mark or Licensed Merchandise or any material utilizing or reproducing the Licensed Mark or Licensed Merchandise, in a manner that will adversely affect any rights of Licensor thereto or therein or which in any way derogates the value or reputation of the Licensed Mark. 9. Indemnification and Insurance 9 A. Licensor does hereby agree to indemnify and hold harmless Licensee, its parents, subsidiaries, and affiliates and their officers, directors and employees against any and all liabilities, claims, causes of action, suits, damages and expenses for which they or any of them may become liable or may incur or be compelled to pay in any action or claim against them or any of them for or by reason of (a) the infringement of another's trademark as a result of Licensee's approved use of the Licensed Mark within the Territory, or (b) the infringement of design or trade secret rights as a result of Licensee's use of any designs, sketches or specifications provided by Licensor and claimed by Licensor as novel and proprietary to it pursuant to Section 4(E), provided that Licensee gives Licensor written notice of each such claim within ten (10) business days of receipt of such claim (although any failure or delay in giving such notice shall not affect Licensor's indemnification obligations unless Licensor's ability to defend is materially prejudiced thereby) and the opportunity to control the defense of any such claim through counsel of its own choosing, and fully cooperates with Licensor in the defense against such claim. If Licensor elects not to undertake the defense of any such claim, it shall pay or reimburse Licensee, immediately upon request, for all reasonable costs and expenses, including but not limited to reasonable attorneys' fees and expenses, that Licensee may incur in the defense of such claim. 9 B. Licensee does hereby agree to indemnify and hold harmless Licensor, its subsidiaries and affiliates and their officers, directors and employees against any and all liabilities, claims, causes of action, suits, damages and expenses for which they or any of them may become liable or may incur or be compelled to pay in any action or claim against them or any of them for or by reason of (a) the infringement of any patent, design or trade secret rights of third parties as a result of Licensee's use of any designs, sketches or specifications provided by 12 Licensee or its contractors, (b) any acts that may be committed, omitted or suffered by Licensee or any of its servants, agents or employees in connection with the performance of this Agreement, or (c) any acts giving rise to liability in connection with Licensed Merchandise including, but not limited to, the manufacture, marketing, promotion, publicity, sales, advertising, use, or distribution of Licensed Merchandise. Licensor shall give Licensee written notice of any such claim within ten (10) business days of receipt of such claim (although any failure or delay in giving such notice shall not affect Licensee's indemnification obligation unless Licensee's ability to defend is materially prejudiced thereby) and the opportunity to control the defense thereof through attorneys of its own choosing and reasonably approved by Licensor. Licensor shall fully cooperate with Licensee in the defense against any such claim. If Licensee elects not to undertake the defense of any such claim, it shall pay or reimburse Licensor, immediately upon request, for all reasonable costs and expenses, including but not limited to reasonable attorneys' fees and expenses, that Licensor may incur in the defense of such claim. 9 C. A party obligated to make indemnification by the terms of this Article 9 (the "(Indemnifying Party") may, without the consent of the party to be indemnified (the "Indemnified Party"), settle or compromise or consent to the entry of any judgment in any action involving only the payment of money which includes as an unconditional term thereof the delivery by the claimant or plaintiff to the Indemnified Party of a duly executed written release of the Indemnified Party from all liability in respect of such action which written release shall be reasonably satisfactory in form and substance to counsel for the Indemnified Party; provided, however, that if the money to be paid in connection with such settlement, compromise, or entry of judgment (the "Cash Settlement") is payable in installments, the Indemnifying Party shall be required to provide a letter of credit or such other security for the payment of the entire Cash Settlement as shall be satisfactory to counsel to the Indemnified Party. The Indemnifying Party shall not, without the written consent of the Indemnified Party, settle or compromise any action involving relief other than the payment of money in any manner that, in the reasonable judgment of the Indemnified Party, would adversely affect the Indemnified Party. So long as the Indemnifying Party is contesting any claim in good faith, the Indemnified Party shall not pay or settle any such claim, unless such settlement includes as an unconditional term thereof the delivery by the claimant or plaintiff and by the Indemnified Party to the Indemnifying Party of duly executed written releases of the Indemnifying Party from all liability in respect of such claim which written releases shall be reasonably satisfactory in form and substance to counsel for the Indemnifying Party. The Indemnified Party shall cooperate fully (at the Indemnifying Party's expense) in all aspects of any investigation, defense, pre-trial activities, trial, compromise, settlement or discharge of any claim in respect of which indemnity is sought pursuant to this Article 9. 9 D. In any legal action between the parties involving a claim for indemnification hereunder, the prevailing party shall be entitled to recover its costs and expenses incurred in such action, including reasonable attorneys' fees. 9 E. At all times during the Term, Licensee agrees to carry, with an insurance carrier having been authorized to do business in the State of Pennsylvania and having a rating of A+ according to Best's Insurance Reports, a broad form Comprehensive General Liability Insurance Policy written on an occurrence basis covering its activities with respect to the Licensed Merchandise 13 which includes but is not limited to coverage for contractual liability, premises, operations, products and completed operations, personal and advertising injury liability and broad form property damage liability, with limits of liability of at least $2 Million per occurrence and $3 Million in the annual aggregate. Licensee shall have Licensor named as an additional insured on such policy. Licensee shall, upon request by Licensor, deliver to Licensor (i) a certificate of such insurance from the Licensee's insurance carrier which sets forth the scope of coverage and the limits of liability stated above and further provides that the policy may not be materially changed or canceled without thirty (30) days prior written notice to Licensor and/or (ii) a copy of the policy. 10. Infringement 10 A. Licensee shall promptly notify Licensor of any infringement or imitation of the Licensed Mark by third parties, or any act of unfair competition by third parties relating to the Licensed Mark, promptly after such infringement or act shall come to Licensee's attention. After receipt of such notice from Licensee, Licensor shall, in the exercise of its sole discretion, decide whether to take action to stop such infringement or other act. If Licensor decides to take such action, Licensee shall fully cooperate with Licensor and, if so requested by Licensor, shall join with Licensor as a party to any action brought by Licensor. Licensor shall bear all expenses in connection with such action. Any recovery as a result of such action belong solely to Licensor. If Licensor, in the exercise of its discretion, declines to commence, prosecute or settle any such infringement, then Licensee, at its own expense, may take steps to stop such infringement subject to the following conditions: (i) Licensor shall have the right to approve the selection of counsel by Licensee; (ii) Licensee shall keep Licensor continuously apprised of the progress of such proceeding, and (iii) no settlement or compromise of such proceeding may be made by Licensee without the prior written approval of Licensor, which approval shall not be unreasonably withheld or delayed. All intangible benefits resulting from such proceeding shall inure to the benefit of Licensor. In the event that any monetary recovery is made against such infringer, Licensee shall recoup its litigation expenses, including reasonable counsel fees, from such recovery and then remit the balance of the recovery to Licensor. 10 B. In the event that any person other than Licensee or a customer shall use the Licensed Mark in a manner which infringes upon the exclusive License hereby granted, Licensor shall, following written notice thereof from Licensee, initiate any action which Licensor, in the exercise of its reasonable discretion, deems appropriate to restrain such infringement with respect to the Licensed Merchandise. In such event Licensee shall, at Licensor's expense, join with Licensor in such action to the extent and in such manner as Licensor, in its reasonable discretion, may deem advisable for the protection of the respective rights of Licensor and/or Licensee to the Licensed Marks. Licensee agrees to cooperate fully with Licensor in connection with any such claims or suits and undertakes to furnish full assistance to Licensor in the conduct of all proceedings in regard thereto. Licensor shall have the sole right, exercisable in its sole discretion, to settle any claim or suit of the kind referred to in this Section 10(B). 14 11. Termination Notwithstanding the terms and conditions of Article 3 hereof, this Agreement may be terminated in accordance with the following provisions: 11 A. Either party may terminate this Agreement by giving notice in writing to the other party in the event the other party (the "Defaulting Party") fails to perform its obligations or acts in breach of its covenants as set forth in this Agreement and such Defaulting Party fails to take all reasonable steps necessary to cure such default within (30) days after delivery of written notice of such default from the other party. Notwithstanding the preceding sentence, in the event of a breach by Licensee of its obligations under Articles 2, 4, 5, 6 or 8 hereof, Licensor may terminate this Agreement within ten (10) days after delivery of written notice of such breach to Licensee if Licensee fails to remedy such breach within such ten (10) day period. Notwithstanding the foregoing, if, at any time during the Term, Licensor gives notice to Licensee of default or breach two (2) times, then upon the third notice Licensee shall no longer have the right to remedy the breach and termination shall be effective at the time of notice. The failure of Licensor to exercise this right to terminate for any breach shall not affect its right to exercise such right upon a subsequent breach. 11 B. Without prejudice to any other rights Licensor may have, Licensor may terminate this Agreement, without liability, at any time: (i) If Licensee fails to continue the bona fide distribution and sale of the Licensed Merchandise for a consecutive period in excess of six months; or (ii) If Licensee understates royalties due for any royalty report by ten (10 %) percent or more, and fails to pay such deficiency within ten (10) days after delivery of written notice of such deficiency to Licensee, or misrepresents or misstates material information in any other report required or requested under this Agreement; or (iii) If the quality of Licensed Merchandise (other than seconds) is materially lower (as determined by Licensor in its sole subjective discretion) than Final Prototypes, and Licensee fails to correct the deficiencies to the satisfaction of Licensor within ten (10) days of written notice; or (iv) If Licensee fails to achieve the Minimum Annual Net Sales specified in Section 6(B) hereof for any Annual Period; provided, however, that Licensor shall not have such right of termination if, together with the report required to be delivered under Section 6 (F), Licensee shall have paid to Licensor an amount equal to the difference between the amount of Guaranteed Minimum Royalty previously paid with respect to such Annual Period and the Percentage Royalties that would be calculated with respect to the Minimum Annual Net Sales for such period. 11 C. If either party shall make an assignment for the benefit of creditors, or shall generally not pay its debts as they become due, or shall file a petition commencing a voluntary case under the Bankruptcy Reform Act of 1978, 11 U.S.C. Section 101 et seq., as amended or any successor thereto (the "Bankruptcy Code"), or shall be adjudicated an insolvent, or shall file any 15 petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future statute, law or regulations, or shall file any answer admitting or shall fail to deny the material allegations of such petition filed against it for such relief, or consent to the filing of any such petition or shall seek or consent to or acquiesce in the appointment of any, agent, trustee, receiver, custodian, liquidator or similar officer for it or of all or any substantial part of its assets or properties, or its directors or majority stockholders shall take any action authorizing any of the foregoing or looking to its dissolution or liquidation, or it shall cease doing business as a going concern, or an order for relief shall be entered against it under any chapter of the Bankruptcy Code, this Agreement shall automatically, without notice or any further act or deed of any party, terminate and be of no further force or effect, except that any and all liabilities and obligations of the parties at the time outstanding under or in connection with this Agreement shall automatically, without notice or any further act or deed of any party, become due and payable. 11 D. If, within sixty (60) days after the filing of any petition or the commencement of any proceeding against either party seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy Code or any other present or future statute, law or regulation, such proceeding shall not have been dismissed, or a decree or order of a court having competent jurisdiction shall have been entered approving as properly filed any such petition, or if, within sixty (60) days after the appointment, without the consent or acquiescence of such party, of any agent, trustee, receiver, custodian, liquidator or similar officer for it or of all or any substantial part of its properties, such appointment shall not have been vacated, this Agreement shall automatically, without notice or any further act or deed of any party, terminate and be of no further force or effect, except that any and all liabilities and obligations of the parties at the time outstanding under or in connection with this Agreement shall automatically, without notice or any further act or deed of any party, become due and payable. 11 E. In the event Licensee attempts to assign or sublicense any of its rights hereunder without the prior written approval of Licensor as required by the terms of Section 2(G), this Agreement shall terminate immediately, without notice to Licensee or any other action on Licensor's part. 11 F. In the event that during the Term hereof the Licensed Mark is finally held invalid or unenforceable in the Territory by a court of competent jurisdiction, from which decision Licensor fails or elects not to appeal, or any court of competent jurisdiction permanently enjoins the use of the Licensed Mark as contemplated hereby, Licensee's sole remedy, except for the indemnification provided in Section 9(A), shall be termination of this Agreement without any further liability hereunder and Licensee shall not otherwise be entitled to damages from Licensor of any nature or sort whatsoever. 11 G. If, in a single transaction or a series of transactions, Licensee sells or otherwise disposes of substantially all of its business or assets to a third party, or such of the outstanding voting equity interest in Licensee is transferred (by disposition, or otherwise), in a single transaction or a series of transactions, as shall result in control over the management of Licensee to be thereby substantially changed, this Agreement shall terminate immediately, without notice to Licensee or any other action, on Licensor's part. 16 12. Effect of Expiration or Termination 12 A. Except to the extent provided in Section 12(B) hereof, upon the expiration or termination of this Agreement for any reason, neither Licensee nor its receivers, representatives, agents, successors or permitted assigns shall have any right to exploit or in any way use the Licensed Mark. Except to the extent provided in Section 12(B) hereof, upon such expiration or termination of this Agreement, Licensee shall forthwith discontinue all use of the Licensed Mark and shall not thereafter use the Licensed Mark or any variation or simulation thereof, or any mark confusingly similar thereto, and Licensee hereby irrevocably releases and disclaims any right or interest in or to the Licensed Mark. Within (30) days of the expiration or termination of this Agreement, Licensee shall provide Licensor with an Inventory Schedule pursuant to Section 6 (G). 12 B. If, upon the expiration of this Agreement or its termination prior to expiration, other than by Licensor pursuant to Section 11 (A), 11 (B), 11 (C), 11 (D) or 11 (E), Licensee shall have on hand any Inventory and if Licensee is not otherwise in default under this Agreement, Licensee may continue to use the Licensed Mark solely in connection with the advertising, merchandising, promotion and sale of the Inventory for a period of six (6) months following the expiration or termination of this Agreement (the "Sell-Off Period") under a nonexclusive license. During such Sell-Off Period, Licensee shall be obligated to continue to pay Licensor the Percentage Royalties provided for in Section 6(A) and, anything herein to the contrary notwithstanding, all advertising, merchandising, promotion and sale of the Inventory during the Sell-Off Period shall continue to be subject to, and performed in accordance with, the terms of this Agreement (including, without limitation, Article 4 hereof). If Licensee elects to continue to use the Licensed Mark as provided under this Section, it shall notify Licensor of its election thirty (30) days prior to the expiration or termination of this Agreement. IN NO EVENT SHALL LICENSEE ACCEPT, AFTER THE TERMINATION OR EXPIRATION OF THIS AGREEMENT, ANY ORDER FOR NEW PRODUCTION OF LICENSED MERCHANDISE TO BE MANUFACTURED AFTER THE CLOSE OF THE SELL-OFF PERIOD NOR ANY OTHER ORDER WHATSOEVER THAT SHALL REQUIRE DELIVERY AFTER THE CLOSE OF THE SELL-OFF PERIOD. Licensee's Sales of Licensed Merchandise during the Sell-Off Period must not exceed the reported Inventory. 12 C. Notwithstanding the foregoing, or Licensee's desire to use the Licensed Mark as provided in Section 12(B) above, Licensor shall have the option, exercisable by written notice to Licensee within thirty (30) days after its receipt from Licensee of the complete Inventory Schedule as provided in Section 12(A), to purchase any or all of the Inventory not subject to outstanding bona fide purchase orders, for an amount (the "Inventory Price") equal to the standard cost of manufacturing to Licensee of the Inventory being purchased or its fair market value, whichever is lower. (In the event that the parties cannot agree upon the fair market value of any Inventory, Licensor shall be entitled to purchase same at the fair market value claimed by Licensor, subject to the agreement of Licensor that such dispute as to fair market value shall subsequently be submitted to arbitration pursuant to Section 17(B) and the agreement of the 17 parties that the costs of the prevailing party in such arbitration shall be borne by the other party). In the event that Licensor notifies Licensee of its desire to purchase the Inventory on hand, such notice shall apply only to that portion of the Inventory remaining on the date said notice is received by Licensee. Upon such day within thirty (30) days of its receipt of such notice as Licensor shall designate to Licensee in writing, Licensee shall deliver to Licensor or its designee all of the Inventory referred to therein against payment by Licensor of the full Inventory Price in cash. Licensor shall pay Licensee only for such Inventory as is deemed by Licensor, in its reasonable discretion, to be in marketable condition. 12 D. Upon the expiration or termination of this Agreement or upon the expiration of the Sell-Off Period provided for in Section 12(B) hereof, Licensee shall, at its own expense, destroy all labels, packaging, advertising and promotional materials bearing the Licensed Mark and confirm such destruction to Licensor in writing. 12 E. Notwithstanding any termination or expiration of this Agreement, Licensor shall have, and hereby reserves, all the rights and remedies which it has, or which are granted to it by operation of law, with respect to the collection of royalties or other funds payable by Licensee pursuant to this Agreement and the enforcement of all rights relating to the establishment, maintenance or protection of the Licensed Mark. In addition, upon termination or expiration of this Agreement, both Licensee and Licensor shall continue to have rights and remedies hereunder, or granted to each of them by operation of law, with respect to damages for breach of this Agreement on the part of the other. 12 F. Licensor may, during the Sell-Off Period, manufacture, advertise, promote, sell and distribute Merchandise directly or through others, and grant licenses to third parties with respect to the Merchandise and the Licensed Mark. 12 G. One hundred and twenty (120) days prior to the expiration of the Initial Term or of any Renewal Term, if Licensee chooses not to renew this Agreement or does not qualify under Section 3(A) to do so, Licensor shall have the right to manufacture, advertise, promote, sell and distribute Licensed Merchandise in the Territory directly or through others and to grant licenses in connection therewith to third parties, provided such Licensed Merchandise shall not be shipped prior to the expiration of the Term of this Agreement. 12 H. Upon the expiration or termination of this Agreement in accordance herewith, Licensee shall not be entitled to termination payments, compensation, reimbursements, or damages on account of any loss of prospective profits on anticipated sales or on account of expenditures, including for advertising, promotion or for manufacturing facilities, investments, leases, or other commitments relating to the business or goodwill of Licensee. 13. Bankruptcy and Financial Covenants 13 A. Notwithstanding the provisions of Section 11 (C) and Section 11 (D), in the event that it is determined by any court or bankruptcy trustee that this Agreement may be assumed or 18 assigned in connection with a case commenced by or against either party under the Bankruptcy Code, Licensor and Licensee hereby acknowledge that adequate assurance of future performance under this Agreement (within the meaning of the Bankruptcy Code) shall include, inter alia, adequate assurance: (i) that any and all royalty payments and other consideration due from Licensee to Licensor under or pursuant to this Agreement shall be duly and timely paid and shall not decline from the levels specified in this Agreement; (ii) that the assumption or assignment of this Agreement will not result in the breach by Licensor or any other party of any provision in any other license, contract, or agreement relating to the Licensed Mark or otherwise; (iii) that any person or entity that assumes this Agreement or to which this Agreement is assigned shall fully and faithfully assume, observe and comply with the covenants, requirements and restrictions provided for under this Agreement and that termination rights for breach of this Agreement apply; (iv) that the value of the Licensed Mark for use in connection with the sale of Licensed Merchandise shall not be materially diminished by reason of the assumption or assignment of this Agreement; and (v) that the transferee of the license of the Licensed Mark will not be a direct competitor of Licensor. Any person or entity to which this Agreement is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Agreement on and after the date of such assignment. Any such assignees shall upon demand execute and deliver to Licensor or Licensee, as the case may be, an instrument confirming such assumption. 14. Representations and Warranties 14 A. Licensor represents and warrants that it has the full legal right, power and authority, and all corporate action has been taken that is necessary to authorize Licensor, to enter into this Agreement and to grant the rights and licenses granted herein by Licensor to Licensee. 14 B. Licensor represents and warrants that to the best of its knowledge, the Licensed Mark does not infringe or otherwise violate the rights of any third party in the Territory. 14 C. Licensee represents and warrants that it has the full legal right, power and authority, and all corporate action has been taken that is necessary to authorize Licensee, to enter into this 19 Agreement and to consummate all transactions and to fulfill the obligations contemplated herein. 14 D. Each of Licensor and Licensee represents and warrants that neither the execution and delivery hereof nor the consummation of the transactions contemplated hereby to be performed by it constitutes (with or without notice and/or passage of time) a default under, or breach of any term or provision of, any agreement or instrument to or by which it or any of its assets is subject or bound. 15. Advertising and Sales Promotion 15 A. Licensee shall exercise its best efforts to promote and advertise Licensed Merchandise in the various appropriate media throughout the Territory as may be approved by Licensor. Accordingly, Licensee agrees that during the Term it will expend an amount not less than one percent (1%) of Net Sales in each Annual Period for the purpose of advertising, promoting and publicizing the Licensed Merchandise. In the event Licensee fails to make the minimum advertising expenditures set forth above during any Annual Period, the amount of the deficiency shall, at Licensor's discretion, be paid to Licensor promptly following the rendering of the final accounting for said Annual Period, to be used as Licensor may elect to advertise and promote the Licensed Mark, or be added to the minimum advertising expenditures required to be spent by Licensee on advertising the Licensed Merchandise during the following Annual Period. 15 B. "Advertising" as used in this Section shall include cooperative advertising whereby a third party contributes to advertising expenses incurred, and promotion and display advertising, as well as advertising appearing in print or other media. The following items shall not constitute expenditures towards this requirement: (i) the portion of any cooperative advertising paid by a third party and (ii) expenses incurred by Licensee in connection with its participation in any trade shows, for the preparation of catalogs, and for tags, labels and Packaging. 15 C. Licensee agrees not to offer for sale, advertise or publicize any of the Licensed Merchandise without the prior written approval of Licensor. All advertising and promotional material including, but not limited to, artwork, displays and copy, shall be submitted to Licensor for its written approval prior to the use of any such advertising or promotional materials. 15 D. No consumer advertising or promotional material shall contain reference to Licensor's name except that Licensee's tags and labels which have been approved by Licensor may utilize the following statement: "DANSKIN(R)(TM of DANSKIN, INC. used under license by Wundies Industries, Inc.)" only on approved Licensed Merchandise. 15 E. Licensee shall maintain a separate area for exhibition of Licensed Merchandise within Licensee's showroom with reasonably prominent signage designating such area as a showroom for licensed DANSKIN(R)merchandise. Said showroom shall be staffed and maintained in a manner commensurate with the reputation and prestige of the Licensed Mark as a designation for high quality products. In addition, any Merchandise which bears the Licensed Mark shall be designed exclusively for the Licensed Merchandise. 20 16. Confidentiality 16 A. In connection with the performance of this Agreement, each of Licensor and Licensee will have access to certain confidential and proprietary information of the other party, including, but not limited to, business plans, proposed advertising, designs, sales records, financial data, identities of suppliers and manufacturers and manufacturer's know-how. Recognizing that such information represents valuable assets and property of the disclosing party, and the harm that may befall the disclosing party if any of such information is disclosed, the recipient agrees to hold such in strict confidence and not to use or otherwise disclose any such information to third parties without having received the prior written consent of the disclosing party. The obligation of confidentiality created herein shall survive the expiration or termination of this Agreement. 16 B. The obligations of confidentiality created herein shall cease to apply (i) to information which falls into the public domain, provided it did not fall into the public domain through the unauthorized acts of the receiving party; (ii) to information which was in the receiving party's possession prior to its disclosure, or was later disclosed to the receiving party by a third party who is lawfully in possession of such and not bound by any restriction with respect to the disclosure of same; (iii) to information which is required to be disclosed by law, but only to the extent so required and only upon notice to the other party hereto; and (iv) to information that Licensor may be required to disclose in order to enforce its rights under this Agreement. 17. Governing Law; Arbitration 17 A. This Agreement shall be deemed to be a contract made under the laws of the State of New York and shall be governed by and construed in accordance with the laws of such State. 17 B. Any controversy arising out of or relating to this Agreement shall be resolved by arbitration in the City of New York pursuant to the Commercial Rules then obtaining of the American Arbitration Association. The panel of Arbitrators appointed to settle any controversy or claim shall consist of three (3) arbitrators. The Arbitrators sitting in any such controversy shall have no power or jurisdiction to alter or modify any express provision of this Agreement or to make any award which by its terms affects any such alteration or modification. 17 C. The parties consent to the jurisdiction of any Federal or State Court located in New York County and further consent that any demand for arbitration, or any process or notice of motion or other application to any such Court or a Judge thereof in connection with the same, may be served in or out of the State of New York by registered mail or by personal service provided a reasonable time for appearance is allowed. 17 D. The provision for arbitration herein shall not be deemed any waiver of the rights of either party to any provisional remedy provided under New York law. It is agreed that in the event of any violation or threatened violation hereof, the other party hereto shall have the right to 21 obtain a preliminary injunction enjoining any further violation of this Agreement pending the arbitration hearing. 18. Interest 18 A. Licensee shall pay interest to Licensor upon all overdue amounts payable under this Agreement at the prime rate, plus three percent (3%) per annum, in effect at The Chase Manhattan Bank, N.A. (or its successor), through the period from the due date to the date of payment. However, such payment shall in no way affect the rights of Licensor under this Agreement, including but not limited to those specified in Article 12 hereof. 19. Importation of Merchandise 19 A. All Merchandise caused to be manufactured by Licensee outside the United States shall be imported into the United States under the name of the LICENSEE ONLY. Any and all Merchandise imported under a name other than that of Licensee shall be deemed counterfeit by U.S. Customs and will be treated accordingly. 19 B. In order to prevent the importation of counterfeit merchandise, Licensee shall use a customs broker approved by Licensor for all Merchandise imported under this Agreement. Licensor shall not be liable for any acts of or transaction with said broker. 20. Notices All notices or other written communications required or permitted by this Agreement to be given to a party shall be in writing and shall be deemed to be duly given when received if hand delivered (provided a receipt is obtained) or sent by overnight courier or mailed by certified or registered mail, return receipt requested (provided that if no return receipt is received, the notice shall be deemed delivered on the third business day following its deposit, properly addressed and postage prepaid, in the United States mails); if to Licensor, to the address of Licensor first above written, Attention: Director of Marketing, and if to Licensee, to the address of Licensee first above written. Notices shall also be deemed to have been received upon electronically confirmed transmission to the following facsimile transmission numbers: 22 (i) Licensor: (212) 768-1638 (ii) Licensee: (212) 967-2318 Either party may change the address (or facsimile transmission number) to which such notice and other communications shall be sent by written notice to the other party, provided that any notice of change of address (or facsimile transmission number) shall be effective only upon receipt. 21. Miscellaneous 21 A. This Agreement sets forth the entire agreement and understanding between the parties hereto relating in any way to the use of the Licensed Mark, or to any other subject matter contained herein and merges all prior discussions between them. Neither party shall be bound by any definition, condition, warranty or representation other than as expressly stated in this Agreement, and this Agreement may not be amended or modified except by a written instrument duly executed by Licensor and Licensee. 21 B. Nothing herein contained shall be construed to constitute the parties hereto as partners or as joint venturers, or either as an employee or agent of the other. Licensee shall not represent itself as agent or representative of Licensor for any purpose and shall have no right to create or assume any obligation of any kind, expressed or implied, for or on behalf of Licensor. 21 C. The headings in this Agreement are for the convenience of the parties only and shall not effect the meaning or interpretation of this Agreement or any provisions thereof. 21 D. No waiver by either party, whether expressed or implied, of any provision of this Agreement, or of any breach or default, shall constitute a continuing waiver of such provision or a waiver of any other provision of this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver of any violation of, or default under, any of the provisions of this Agreement by Licensee. 21 E. Except as otherwise provided herein, this Agreement shall. be binding upon and inure to the benefit of the parties, their successors and permitted assigns. 21 F. This Agreement may be executed in one or more counterparts each of which shall be deemed one and the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date and year first above written. DANSKIN, INC. WUNDIES INDUSTRIES, INC. LICENSOR LICENSEE By: By: ----------------------------------- ---------------------------------- 23 Name: Name: --------------------------------- -------------------------------- (Printed) (Printed) Title: Title: -------------------------------- ------------------------------- 24 EXHIBIT 1(E) LIST OF "MERCHANDISE' STYLES ================================================ STYLE DESCRIP ----- ------- 4250 DANSKIN CAMISOLE/PANTY SET 4251 DANSKIN CAMISOLE/PANTY SET 4265W DANSKIN SPORTS BRA W/PANTY 4266P DANSKIN LACE BRA W/BIKINI 4266W DANSKIN LACE BRA W/PANTY 4276 DANSKIN KNIT HEART CAMI SET 4276L DANSKIN CAMISOLE/PANTY SET 4276M DANSKIN CAMISOLE/PANTY SET 4276P DANSKIN CAMISOLE/PANTY SET 4276W DANSKIN CAMISOLE/PANTY SET 4505-01 DANSKIN BRA SET 4505-02 DANSKIN BRA SET 4505-03 DANSKIN BRA SET 4600-01 DANSKIN COT/SPAN UNDERWIRE BRA 4600-02 DANSKIN COT/SPAN UNDERWIRE BRA 4600-03 DANSKIN COT/SPAN UNDERWIRE BRA 4600-04 DANSKIN COT/SPAN UNDERWIRE BRA 4600-05 DANSKIN COT/SPAN UNDERWIRE BRA 4601-01 DANSKIN COT/SPAN UNDERWIRE BRA 4601-02 DANSKIN COT/SPAN UNDERWIRE BRA 4601-03 DANSKIN COT/SPAN UNDERWIRE BRA 4601-04 DANSKIN COT/SPAN UNDERWIRE BRA 4601-05 DANSKIN COT/SPAN UNDERWIRE BRA 4602-01 DANSKIN COT/SPAN UNDERWIRE BRA 4602-02 DANSKIN COT/SPAN UNDERWIRE BRA 4602-03 DANSKIN COT/SPAN UNDERWIRE BRA 4603-01 DANSKIN COT/SPAN UNDERWIRE BRA 4603-02 DANSKIN COT/SPAN UNDERWIRE BRA 4603-03 DANSKIN COT/SPAN UNDERWIRE BRA 4710 DANSKIN COTTON MODIFIED BRIEF 4711 DANSKIN COTTON MODIFIED BRIEF 4792 DANSKIN HANGING UNDERWEAR 4793 DANSKIN HANGING UNDERWEAR 4796 DANSKIN HANGING UNDERWEAR 4808 DANSKIN COTTON PRINT BRIEF 4810 DANSKIN COTTON BRIEF 4810C DANSKIN COTTON BRIEF 4810S DANSKIN COTTON BRIEF 4811 DANSKIN COTTON BRIEF 4811 DANSKIN COTTON VEST 4814 DANSKIN COTTON BRIEF 4815 DANSKIN BRA 4816B DANSKIN PANTY 4816W DANSKIN PANTY 4817 DANSKIN COTTON PRINT BIKINI 4818G DANSKIN RIB CROP TOP 4818P DANSKIN RIB CROP TOP 4818W DANSKIN RIB CROP TOP 4819G DANSKIN RIB TANK TOP 4819W DANSKIN RIB TANK TOP 4821G DANSKIN RIBBED BRIEF 4821P DANSKIN RIBBED BRIEF 4821W DANSKIN RIBBED BRIEF ================================================ Page 1 STYLES ================================================ 4822G DANSKIN BOY LEG BOXER 4822W DANSKIN BOY LEG BOXER 4829 DANSKIN PRINTED COTTON BRIEF 4829F DANSKIN PRINTED COTTON BRIEF 4830 DANSKIN COTTON BRIEF 4830F DANSKIN COTTON BRIEF 4830M DANSKIN BRIEF 4831 DANSKIN COTTON BIKINI 4831 DANSKIN COTTON PRINT BIKINI 4831M DANSKIN BIKINI 4832 DANSKIN COTTON PRINT BRIEF 4832F DANSKIN COTTON PRINT BRIEF 4833 DANSKIN UNDERSHIRT 4834 DANSKIN COTTON SLEEVELESS VEST 4835 DANSKIN NYLON BRIEF 4836 DANSKIN SOLID BRIEF 4837 DANSKIN COTTON BRIEF 4837F DANSKIN COTTON BRIEF 4840 DANSKIN COTTON BRIEF 4840F DANSKIN COTTON BRIEF 5119-01 DANSKIN COT/SPAND HI-CUT BRIEF 5119-02 DANSKIN COT/SPAND HI-CUT BRIEF 5119-03 DANSKIN COT/SPAND HI-CUT BRIEF 5119-04 DANSKIN COT/SPAND HI-CUT BRIEF 5119-05 DANSKIN COT/SPAND HI-CUT BRIEF 5120-01 DANSKIN COT/SPAND HI-CUT BRIEF 5120-02 DANSKIN COT/SPAND HI-CUT BRIEF 5120-03 DANSKIN COT/SPAN HI-CUT BRIEF 5120-04 DANSKIN COT/SPAN HI-CUT BRIEF 6044-01 DANSKIN COTTON/LYCRA BRIEF 6044-02 DANSKIN COTTON/LYCRA BRIEF 6044-03 DANSKIN COTTON/LYCRA BRIEF 6044-04 DANSKIN COTTON/LYCRA BRIEF 6044-05 DANSKIN COTTON/LYCRA BRIEF 6044-06 DANSKIN COTTON/LYCRA BRIEF 6044-07 DANSKIN COTTON/LYCRA BRIEF 6045-01 DANSKIN HI-CUT BRIEF 6045-02 DANSKIN HI-CUT BRIEF 6045-03 DANSKIN HI-CUT BRIEF 6045-04 DANSKIN HI-CUT BRIEF 6045-05 DANSKIN HI-CUT BRIEF 6045-06 DANSKIN HI-CUT BRIEF 6045-07 DANSKIN HI-CUT BRIEF 9400 DANSKIN 6 PK STRETCH BRIEFS 9400IR DANSKIN HI-CUTS AND BRIEFS 9402 DANSKIN SPORTS BRA 9402F DANSKIN SPORTS BRA 9406 DANSKIN COMBED COTTON BRIEF 9406C DANSKIN COMBED COTTON BRIEF 9406F DANSKIN COMBED COTTON BRIEF 9406IRR DANSKIN IRREG LADIES STYLES 9409 DANSKIN STRETCH BRIEF 9410 DANSKIN BRIEF 9411 DANSKIN HI-CUT BRIEF ================================================ Page 2 STYLES ================================================ 9414 DANSKIN BIKINI - BUBBLE PACK 9414 DANSKIN BIKINI BUBBLE PACK 9415 DANSKIN BIKINI - BUBBLE PACK 9416 DANSKIN BIKINI - BUBBLE PACK 9416 DANSKIN BIKINI BUBBLE PACK 9417 DANSKIN BIKINI - BUBBLE PACK 9417 DANSKIN BIKINI BUBBLE PACK 9418 DANSKIN BIKINI BUBBLE PACK 9419 DANSKIN HI-CUTBRIEF BUBBLEPACK 9420 DANSKIN HI-CUTBRIEF BUBBLEPACK 9421 DANSKIN HI-CUTBRIEF BUBBLEPACK 9423 DANSKIN BRA 9423 DANSKIN BRA 9423 DANSKIN SCALLOP LACE BRA 9424 DANSKIN BRA 9424R DANSKIN CIRCULAR KNIT BRA 9424R DANSKIN ROSE PATTERN BRA 9426B DANSKIN COTTON TACTEL BRIEF 9426B DANSKIN COTTON/TACTEL BRIEF 9426P DANSKIN COTTON/TACTEL BRIEF 9426W DANSKIN COTTON/TACTEL BRIEF 9427AX DANSKIN X-SZ BRIEF 9427B DANSKIN BRIEF 9427B DANSKIN SOLID BRIEF 9427P DANSKIN COTTON BRIEF 9427PX DANSKIN SOLID BRIEF 9427W DANSKIN COTTON BRIEF 9427WMX DANSKIN SOLID BRIEF 9427WX DANSKIN COTTON BRIEF 9428 DANSKIN COTTON BRA 9429 DANSKIN COTTON HI-CUT BRIEF 9436C DANSKIN 6 PK LADIES BRIEF 9436F DANSKIN BRIEF 9436IRR DANSKIN VARIOUS STYLES 9443 DANSKIN BIKINI - BUBBLE PACK 9443 DANSKIN BIKINI BUBBLE PACK 9448 DANSKIN BUBBLE PACK PRT BIKINI 9454 DANSKIN STRET HICUT LACE BRIEF 9454 DANSKIN STRETCH HI-CUT BRIEF 9455 DANSKIN LACE BRIEF 9456 DANSKIN HI-CUT BRIEF 9456R DANSKIN HI-CUT BRIEF 9457 DANSKIN BRIEF 9457R DANSKIN BRIEF 9457RX DANSKIN KNIT BRIEF 9458 DANSKIN LACE ILLUSIONS THONG 9458R DANSKIN KNIT THONG 9459 DANSKIN LACE ILLUSIONS THONG 9460B DANSKIN DIP FRONT SOLID BIKINI 9460BS DANSKIN DIP FRONT BIKINI 9460C DANSKIN DIP FRONT SOLID BIKINI 9460E DANSKIN SOLID DIP FRONT BIKINI 9460J DANSKIN SOLID DIP FRONT BIKINI 9460MB DANSKIN SOLID DIP FRONT BIKINI ================================================ Page 3 STYLES ================================================ 9460MC DANSKIN SOLID DIP FRONT BIKINI 9460MW DANSKIN SOLID DIP FRONT BIKINI 9460R DANSKIN SOLID DIP FRONT BIKINI 9460W DANSKIN DIP FRONT SOLID BIKINI 9461 DANSKIN DIP FRONT BIKINI 9461F DANSKIN PRT DIP FRONT BIKINI 9461I DANSKIN PRT DIP FRONT BIKINI 9461MA DANSKIN PRT DIP FRONT BIKINI 9461N DANSKIN PRT DIP FRONT BIKINI 9461P DANSKIN PRT DIP FRONT BIKINI 9461S DANSKIN PRT DIP FRONT BIKINI 9464A DANSKIN SOLID HI-CUT BRIEF 9464C DANSKIN SOLID HI-CUT BRIEF 9464F DANSKIN PRINTED HI-CUT BRIEF 9464H DANSKIN PRINTED HI-CUT BRIEF 9464N DANSKIN PRINTED HI-CUT BRIEF 9464P DANSKIN HI-CUT BRIEF 9464S DANSKIN SOLID HI-CUT BRIEF 9464Y DANSKIN PRINTED HI-CUT BRIEF 9464Z DANSKIN PRINTED HI-CUT BRIEF 9468 DANSKIN "LACE ILLUSION" BRIEF 9468F DANSKIN "LACE ILLUSION" BRIEF 9470 DANSKIN SPORTS BRA 9470B DANSKIN BONUS PACK SPORTS BRA 9470B DANSKIN SPORTS BRA 9470F DANSKIN SPORTS BRA 9471 DANSKIN COT/LYCRA HI-CUT PANTY 9473 DANSKIN BUBBLE PACK PRT BIKINI 9474B DANSKIN COTTON BRIEF 9474BX DANSKIN COTTON BRIEF 9474C DANSKIN FRENCH CUT BRIEF 9474D DANSKIN COTTON BRIEF 9474DX DANSKIN COTTON BRIEF 9474P DANSKIN COTTON BRIEF 9474PX DANSKIN COTTON BRIEF 9474T DANSKIN COTTON BRIEF 9474TX DANSKIN COTTON BRIEF 9474W DANSKIN COTTON BRIEF 9474W DANSKIN COTTON BRIEF 9474WX DANSKIN COTTON BRIEF 9474Z DANSKIN COTTON BRIEF 9474ZX DANSKIN COTTON BRIEF 9475B DANSKIN COTTON BRIEF 9475BX DANSKIN COTTON BRIEF 9475D DANSKIN COTTON BRIEF 9475DX DANSKIN COTTON BRIEF 9475P DANSKIN COTTON BRIEF 9475PX DANSKIN COTTON BRIEF 9475T DANSKIN COTTON BRIEF 9475TX DANSKIN COTTON BRIEF 9475W DANSKIN COTTON BRIEF 9475WX DANSKIN COTTON BRIEF 9476 DANSKIN BUBBLE PACK PRT BIKINI 9477 DANSKIN HI-CUT BRIEF ================================================ Page 4 STYLES ================================================ 9478 DANSKIN HI-CUT BRIEF 9479 DANSKIN HI-CUT BRIEF 9483 DANSKIN HI-CUT BRIEF 9483MB DANSKIN BRA 9483MW DANSKIN BRA 9484MA DANSKIN UNDERWIRE BRA 9484MA2 DANSKIN UNDERWIRE BRA 9484MW DANSKIN UNDERWIRE BRA 9485 DANSKIN HI-CUT BRIEF 9489 DANSKIN SPORTS BRA 9489F DANSKIN SPORTS BRA FLAT PACKED 9494 DANSKIN SOLID BASIC BRIEF 9495 DANSKIN SOLID HI-CUT BRIEF ================================================ Page 5 EXHIBIT 2(B) Provisions of Agreement between Licensor and Dan River, Inc., as amended - ------------------------------------------------------------------------ As a result of the Agreement between Licensor and Dan River Inc., as amended, use of the Licensed Mark must be associated with the distinctive "dancing figure" logo on all labelling, hang tags, packaging and other point-of sale materials, as well as in all advertising, as follows: (a) the "dancing figure shall be prominently displayed in close association with the word "DANSKIN", but no further distant from any part of the word "DANSKIN" than the width of one letter of said word. (b) the "dancing figure design shall have a height and width no smaller than the height and width of the largest letter of the word "DANSKIN" with which it is combined; and (c) in advertisements not accompanying products or television commercials controlled by Licensee, the "dancing figure" shall appear at least once as prominently as described in paragraphs (a) and (b) above with the most prominent display of the word "DANSKIN", but need not be repeated every time the word "DANSKIN" appears in the same advertisement or television commercial, nor need it be displayed constantly during the entire television commercial; and (d) provided that the "dancing figure" is displayed in association with the most prominent displays of the word DANSKIN in the manner aforesaid at the point of retail sale of articles of DANSKIN-branded wearing apparel and accessories, any very small labels thereon, accompanying these products at the point of retail sale, wherein the display of the design figure may be illegible or difficult to see, are exempted from the requirements described in paragraphs (a) and (b) above; and (e) individual packages and advertising may delete the "dancing figure" providing (i) the overall layout of such packaging or advertising is similar to the format of other DANSKIN material which utilizes the "dancing figure" in association with DANSKIN; (ii) such packaging is intended to be presented to the public in combination with DANSKIN displays or other point-of-sale materials which utilize the "dancing figure" in combination with DANSKIN; (iii) the word DANSKIN is not to be separated into two syllables; and (iv) the first syllable of DANSKIN is not emphasized. 26 EXHIBIT 4(F) LETTERHEAD OF MANUFACTURER -------------------------- Wundies Industries, Inc. 1 Penn Plaza New York, New York 10119 Att: [Date] Gentlemen: It is our understanding that as Licensee under a License Agreement ("License Agreement") dated as of January 1, 1997 with Danskin, Inc. ("Licensor") you propose to place an order with our company for the manufacture of goods contemplated by the License Agreement. Terms used herein, unless the context otherwise required, are used as defined in the License Agreement. In consideration of this order, we acknowledge that the Licensed Mark to be affixed to goods is the sole property of Licensor, and that our company's manufacture of such products and affixation of the Licensed Mark to such products gives us no right of ownership and no right to use said marks on any other products. We agree not to use any trademark, service mark, tradename, model, designations or other word, device or design of Licensor, other than the Licensed Mark, and agree not to sell any products bearing the Licensed Mark or any designation which is similar thereto or likely to be confused therewith as a trademark or service mark. We agree that Licensor may at any time without prior notice, terminate our authorization to manufacture goods for you. We agree upon such termination to immediately cease use of all marks, manufacturing and merchandising know-how and confidential data communicated to us with respect to the Licensed Merchandise. We agree to preserve the secrecy of all confidential manufacturing and merchandising know-how in the manufacture of any other products. We agree not to use such know-how in the manufacture of any products sold to any party who is not a Licensee of Licensor. We agree to cooperate in quality control and will promptly provide a reasonable number of samples of goods from said order to you and Licensor upon request. We will permit representatives of both Licensor and Licensee to inspect the goods and manufacture of the goods on our premises at any time during normal business hours. No goods, products or labels bearing the Licensed Mark will be conveyed to any other party. At the termination of the License Agreement or said order, however occurring, or termination of Licensor's approval as provided for in the License Agreement, we shall immediately discontinue manufacturing any products whatsoever which are manufactured with said know-how or bear the 27 Licensed Mark, and will offer to sell any labels, packaging or other items bearing the Licensed Mark, to Licensor and Licensee at our cost, and undertake to make no claim against Licensor for any reason whatsoever. Sincerely, (Manufacturer) By --------------------------------------------- Agreed to as above WUNDIES INDUSTRIES, INC. By Date ------------------------------------ ----------------- APPROVED: For Licensor Date: -------------------------- ----------------- 28 EXHIBIT 4(K) LIST OF AUTHORIZED CUSTOMERS ---------------------------- ======================================================= Customer Number Customer Name --------------- ------------- 1420 ARMY & A/F EXCH SERVICE MANY ELK * 4855 BJ WHOLESALE 1940 BOSCOVS 2300 CARSON PIRE SCOTT & CO 2420 US COAST GUARD 2640 DANSKIN INC 3190 FEDCO, INC MANY FEDERATED 3865 GOODY'S * 4350 HOME SHOPPING CLUB 4375 PRICELESS KIDS 4954 KIDS R US 5090 KOHLS 5095 KOLBO TRADING INC 5530 M.D.S. EXPORT INC 5700 USMC 5730 MARSHALLS MANY MAY CO. MANY MERCANTILE 6060 MERVYN'S * 6300 MONTGOMERY WARD 6429 NATHAN INDUSTRIES 6451 NAVY EXCHANGE 6551 NEWTON BUYING CORP 6795 PENNEY, J.C., CO * 6955 PRICECOSTCO MANY PROFITTS 7150 RICHMAN GORDON 7250 ROSS STORES, INC * 7440 SAMS CLUB ** 7560 SEARS 7520 VALUE CITY D.S. INC 7695 SILBERBERG, J., INC 7950 SPECIALTY RETAILERS, INC 8056 SPORTS AUTHORITY 8200 SYMS 8462 TRI NORTH DEPT STORES 8540 UHLMANS 8561 UPTONS ======================================================= * The Licensed Merchandise shall be sold by licensee subject to the prior approval of Licensor of such merchandise. ** Only sales of children's Merchandise are permitted. 29 EX-27 3 FDS -- ARTICLE 5
5 0000889299 Danskin, Inc. $US YEAR DEC-27-1997 DEC-29-1996 JUN-28-1997 1.0 1,940,000 0 18,181,000 1,070,000 32,092,000 56,217,000 8,402,000 8,665,000 67,591,000 35,960,000 0 0 10 62,291 (1,652,301) 67,591,000 60,254,000 60,254,000 40,116,000 40,116,000 19,861,000 175,000 2,435,000 (2,583,000) 98,000 (2,681,000) 0 0 0 (2,681,000) (0.43) 0
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