StrawberryCanyon said:

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Lomiton said:

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This is not a situation in which the company is run by professional managers who don't have skin in the game. Founder Kevin Plank is still the chairman of the board and has super-voting stock, so he effectively still controls the company even though he is no longer CEO. Plank's annual salary is $26,000 and he receives no cash bonus. He has always taken virtually all of his compensation in stock. Plank, who's only about 47 years old, owns hundreds of millions of dollars of UA stock and would not risk a bankruptcy. UA still has a market cap of $4 billion and has been able to borrow at interest rates under 4% recently. I've seen companies in far worse shape than UA issue bonds in the last three months. Money is ridiculously cheap right now.

Plank, as most people probably know, played football at Maryland. He's a frat boy-type, and his style has caused problems. He stepped down as CEO in place of Patrik Frisk, who's an experience apparel company exec. I think Plank is giving Frisk the freedom to run the company differently than he did. That said, I think it's stupid for UA to pull away from college sports since high school/youth/college is its key market. Time and time again, UA has told Wall St. that it wants to be a performance sports brand, not a casual brand like Champion, for example. It's not clear to me how UA improves its position by backing away from taking on Nike and Adidas for sponsorships, especially in college football, which is UA's most visible sport.

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So Straw, what do you think that UA is thinking then? And what sort of out come do they realistically believe they are going to get based on these actions? I totally get that UA doesn't like either of the UC deals but is terminating the agreement and unilaterally firing the customer really going to get them where they want to go?

It doesn't sound to me (non-attorney) that UA has any real leverage, unless they were ready to go DEFCON 1 to reorg/BK. So why would they be doing this?

Thanks, and I'll hang up and listen to your answer.

BearGoggles said:

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GMP and ColoradoBear - thank you for hunting down the contract.

"Force Majeure Event" means any cause or event which is beyond the commercially reasonable control of Company (or the reasonable control of UCLA) and which renders the performance of this Agreement by the affected Party either impossible or impracticable, including, without limitation, flood, earthquake, fire, labor actions or work stoppages, natural calamities, national emergencies, declarations of war, riot, civil disturbance, sabotage, explosions, acts of God, acts of any regulatory, governmental body and/or agency, having jurisdiction over the affected Party, including without limitation any Laws, orders, ordinances, acts, or mandates which prohibit, restrict, or regulate the affected Party's performance of its obligations under
this Agreement.

So assuming pandemic and related government orders are beyond the [commercially] reasonable control of both parties, UA still needs to prove that the event(s) rendered performance "impossible or impracticable." Impossible seems like a real stretch. "Impracticable" is a term of art referring to economic loss that, as you might imagine, has been litigated extensively in California. For example, if the pandemic made it very expensive (e.g., a shortage of materials) for UA to make or deliver the apparel, then there might be a FM Event.

UA will need to show that it was the pandemic that made the contract impracticable (i.e., causation). It is not enough that it was a bad deal made worse. I think the long term nature of the contract and the fact that it has not really become more expensive for either party to perform (at least in the long run) makes this a harder claim for UA. I doubt UCLA has been pounding the table saying "were is our free stuff." UA better argument is that UCLA has been unable to perform (e.g., field teams) due to covid, but after a quick read, the contract provisions on those issues are pretty limited (i.e., UCLA does not have a lot of obligations).

As you might imagine, lawyers are thinking and writing about these things. Decent summaries of CA law here:

https://www.stimmel-law.com/en/articles/impossibility-performance-defense-breach-contract

https://donahue.com/resources/publications/does-covid-19-excuse-performance-under-your-contract/

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I don't disagree, but I find it curious that the reporter I got that contract language from reports that UA's letter did not invoke the force majeure clause.

The problem I keep having is why Cal? We don't pay enough to be a bad contract. The football team is improving, we will have some major olympians whenever the next Olympics occurs which provides some merchandising benefit. What do thy really save?

So the fall back is it must be COVID. The argument is COVID restrictions are a governmental action arguably triggering force majeure (believe me, commercial tenants are raising the argument), but UA purportedly did nor raise force majeure. Wondering if Is is some kind of Cali regulation (dealing with child labor or whatever). Something peculiar to Cali? Anybody want to hazard a guess? I get that UCLA is unprofitable, but you wonder why doesn't UA move to terminate other large dollar contracts then? Why only small dollar Cal?

Hate their symbol anyway. Reminds me of a deodorant..mor Armor-all for your car. Stupid name. Glad they are gone.maybe Top Dog could buy the Weiner mobile and sign Cal and drive it on the field like the Sooner Schooner.

Sebastabear said:

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wifeisafurd said:

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The problem I keep having is why Cal? We don't pay enough to be a bad contract. The football team is improving, we will have some major olympians whenever the next Olympics occurs which provides some merchandising benefit. What do thy really save?

So the fall back is it must be COVID. The argument is COVID restrictions are a governmental action arguably triggering force majeure (believe me, commercial tenants are raising the argument), but UA purportedly did nor raise force majeure. Wondering if Is is some kind of Cali regulation (dealing with child labor or whatever). Something peculiar to Cali? Anybody want to hazard a guess? I get that UCLA is unprofitable, but you wonder why doesn't UA move to terminate other large dollar contracts then? Why only small dollar Cal?

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I have to believe it's because they think it strengthens their case against UCLA. We must be doing (or not doing) the same thing they are. Otherwise agree this makes no sense.

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well unlike UCLA, Cal is gong to bowl games. But yes, you think there has to be something in common driving this.

wifeisafurd said:

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The problem I keep having is why Cal? We don't pay enough to be a bad contract. The football team is improving, we will have some major olympians whenever the next Olympics occurs which provides some merchandising benefit. What do thy really save?

So the fall back is it must be COVID. The argument is COVID restrictions are a governmental action arguably triggering force majeure (believe me, commercial tenants are raising the argument), but UA purportedly did nor raise force majeure. Wondering if Is is some kind of Cali regulation (dealing with child labor or whatever). Something peculiar to Cali? Anybody want to hazard a guess? I get that UCLA is unprofitable, but you wonder why doesn't UA move to terminate other large dollar contracts then? Why only small dollar Cal?

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Hey WIAF...

Drop the "Cali". Only immature teenagers use that expression and, you sir, are the antithesis of an immature teenager.

BearGoggles said:

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GMP and ColoradoBear - thank you for hunting down the contract.

"Force Majeure Event" means any cause or event which is beyond the commercially reasonable control of Company (or the reasonable control of UCLA) and which renders the performance of this Agreement by the affected Party either impossible or impracticable, including, without limitation, flood, earthquake, fire, labor actions or work stoppages, natural calamities, national emergencies, declarations of war, riot, civil disturbance, sabotage, explosions, acts of God, acts of any regulatory, governmental body and/or agency, having jurisdiction over the affected Party, including without limitation any Laws, orders, ordinances, acts, or mandates which prohibit, restrict, or regulate the affected Party's performance of its obligations under
this Agreement.

So assuming pandemic and related government orders are beyond the [commercially] reasonable control of both parties, UA still needs to prove that the event(s) rendered performance "impossible or impracticable." Impossible seems like a real stretch. "Impracticable" is a term of art referring to economic loss that, as you might imagine, has been litigated extensively in California. For example, if the pandemic made it very expensive (e.g., a shortage of materials) for UA to make or deliver the apparel, then there might be a FM Event.

UA will need to show that it was the pandemic that made the contract impracticable (i.e., causation). It is not enough that it was a bad deal made worse. I think the long term nature of the contract and the fact that it has not really become more expensive for either party to perform (at least in the long run) makes this a harder claim for UA. I doubt UCLA has been pounding the table saying "were is our free stuff." UA better argument is that UCLA has been unable to perform (e.g., field teams) due to covid, but after a quick read, the contract provisions on those issues are pretty limited (i.e., UCLA does not have a lot of obligations).

As you might imagine, lawyers are thinking and writing about these things. Decent summaries of CA law here:

https://www.stimmel-law.com/en/articles/impossibility-performance-defense-breach-contract

https://donahue.com/resources/publications/does-covid-19-excuse-performance-under-your-contract/

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You cited to my article. And you said it was a "decent" summary of the law. Thanks!

fwiw, a little support in the New York Daily News/The Action Network:

https://www.actionnetwork.com/general/rovell-under-armour-wont-get-away-with-terminating-ucla-cal-deals

I'll speculate that Under Armour, when they sent their termination letter in June, was gambling that the state of California would place more onerous restrictions on 2020-21 college sports than other states, thus giving them an argument for bailing out of only their California contracts.

JollyBear said:

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BearGoggles said:

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GMP and ColoradoBear - thank you for hunting down the contract.

"Force Majeure Event" means any cause or event which is beyond the commercially reasonable control of Company (or the reasonable control of UCLA) and which renders the performance of this Agreement by the affected Party either impossible or impracticable, including, without limitation, flood, earthquake, fire, labor actions or work stoppages, natural calamities, national emergencies, declarations of war, riot, civil disturbance, sabotage, explosions, acts of God, acts of any regulatory, governmental body and/or agency, having jurisdiction over the affected Party, including without limitation any Laws, orders, ordinances, acts, or mandates which prohibit, restrict, or regulate the affected Party's performance of its obligations under
this Agreement.

So assuming pandemic and related government orders are beyond the [commercially] reasonable control of both parties, UA still needs to prove that the event(s) rendered performance "impossible or impracticable." Impossible seems like a real stretch. "Impracticable" is a term of art referring to economic loss that, as you might imagine, has been litigated extensively in California. For example, if the pandemic made it very expensive (e.g., a shortage of materials) for UA to make or deliver the apparel, then there might be a FM Event.

UA will need to show that it was the pandemic that made the contract impracticable (i.e., causation). It is not enough that it was a bad deal made worse. I think the long term nature of the contract and the fact that it has not really become more expensive for either party to perform (at least in the long run) makes this a harder claim for UA. I doubt UCLA has been pounding the table saying "were is our free stuff." UA better argument is that UCLA has been unable to perform (e.g., field teams) due to covid, but after a quick read, the contract provisions on those issues are pretty limited (i.e., UCLA does not have a lot of obligations).

As you might imagine, lawyers are thinking and writing about these things. Decent summaries of CA law here:

https://www.stimmel-law.com/en/articles/impossibility-performance-defense-breach-contract

https://donahue.com/resources/publications/does-covid-19-excuse-performance-under-your-contract/

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You cited to my article. And you said it was a "decent" summary of the law. Thanks!

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That is funny. I very much meant that as a compliment by the way. Decent in the sense of readable, clear, and a good overview.

I'd be curious to hear your thoughts on the FM provision and the fact that the contract was apparently not fully executed. Any articles on the statute of frauds? :-D

Where are the posters from when the deal was signed that rambled on about how UA was seen as a cool brand by the youth, and not middle america dads who rant about nike's colin kaepernick ads?

UA has was a clear third tier brand behind nike and adidas. Nobody will ever camp out for their products and their products will never get recruits/players excited

91Cal said:

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fwiw, a little support in the New York Daily News/The Action Network:

https://www.actionnetwork.com/general/rovell-under-armour-wont-get-away-with-terminating-ucla-cal-deals

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Article also in the Baltimore Sun.

NYCGOBEARS said:

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91Cal said:

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fwiw, a little support in the New York Daily News/The Action Network:

https://www.actionnetwork.com/general/rovell-under-armour-wont-get-away-with-terminating-ucla-cal-deals

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Article also in the Baltimore Sun.

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Oh great, another sports journalist practicing law and giving investment advise.

Do we really know UA raised the COVID argument? And then chose not to assert force majeure as has been reported by Wilner? anyone see another COVIUD provision in the contract? My sense is we don't know what is going on from the vague disclosures by the schools. The idea that is all about UA west coast sales sucking seems absurd. All UA's North American sales suck at the moment if you believe their SEC filings. BTW, same with Nike and Adidas. Bad time to be an apparel merchandiser.

As an add:

The attorneys probably already know about California's dysfunctional court system. Right now there are Emergecy Orders due to COVID, stopping different types of commercial suits. The courts are going to have to rehear essentially all jury cases, since medical officers are not going to allow jurors over 60 or 65 (depending on the county), and guess the average age of the jury pool? So almost every ongoing cases are being declared mistrials. I was supposed to be an expert witness in ongoing case in March, and we just rep'd a new trial date in March 2021, and the judge said we were lucky to get that date. Criminal cases would get priority. Then commercial cases that were on going.

So let's say UA has stopped paying. Cal and UCLA file suit when the Emergecy Orders are lifted whenever that is. Then then get to wait in line, finally do discovery, and maybe a trial years down the road. In the meantime no money. That is called leverage to settle, and it happening all over with California contracts being terminated by large companies. I assume UCLA and Cal mitigate their damages by a contract with Nike, and sue for damages in the distant future, while UA figures out if it can stay afloat, or stay any suit with a BK filing. Not a great scenario, but one being faced by many California companies thanks to the court system's closure.

BearSD said:

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We managed to get a better deal than Auburn and Wisconsin? I am guessing that is based on our strength in Olympic sports?

I'm guessing it probably has a lot to do with market size. You're looking at the Bay Area/California vs. Madison, Wisconsin and Auburn, Alabama. The population and media market around the University of California and UC Los Angeles are way bigger than those other schools

That is not a good way to start off one's week...

Lomiton said:

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That is not a good way to start off one's week...

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Does this also mean that we shouldn't expect any updates or resolution to the sponsorship challenges?

'91 - I might be one of the least qualified to offer my opinion on this but since you replied to my message I will respond anyway.

Unless UA decides to cut the entire CAL/UCLA relationship appendage completely off, I would guess that both CAL/UCLA athletics will wear UA uniforms for the 2020 and 2021 seasons. I would think it's too late this year to change for the schools and not worth it for UA to risk further relationship negligence when there is a good chance they already had the fall gear in the production pipeline.

Don't expect anything new however. Same game gear as the last several years. It will be interesting to see if anything new comes on the fan side - UA (and the others) typically have several designs that they mimic for their all their schools. I wouldn't think that plastering on a CAL or UCLA on a pre-existing design for all their other schools has much downside for UA but who knows.

My guess if UA can't/won't fill the fan needs then it's any easy call for Nike, Adidas of Fanatics/Beast Mode to step into that breach.

I actually like UA for my exercise clothes and had read somewhere that UA, Lululemon, and Arc'teryx were at the frontier of actual research into fabrics and materials so it's sad to see them stumble. With that being said, I've found all of the UA Cal gear to be pretty horrendous. The "Sather Stripe" came across as really contrived to me, but then again it's not like they offered a tracksuit featuring it instead of plain solid piping or anything like that. I've only read whinging about the quality of fanatics merchandise so I'm not too optimistic about Beast Mode's future relationship. I'd love a new "BearShawn" shirt with Oski donning the sunglasses, too. It seems like fanatics has taken over the sports merchandising market by being the lowest bidder providing unsurprisingly poor quality merchandise? Fingers crossed our Bears come out on the other side of this fiasco okay. Adidas seems like the logical choice, but I'd welcome something unexpected like New Balance as well.

One of our former basketball players is Sr. Exec at Under Armor.

Lomiton said:

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'91 - I might be one of the least qualified to offer my opinion on this but since you replied to my message I will respond anyway.

Unless UA decides to cut the entire CAL/UCLA relationship appendage completely off, I would guess that both CAL/UCLA athletics will wear UA uniforms for the 2020 and 2021 seasons. I would think it's too late this year to change for the schools and not worth it for UA to risk further relationship negligence when there is a good chance they already had the fall gear in the production pipeline.

Don't expect anything new however. Same game gear as the last several years. It will be interesting to see if anything new comes on the fan side - UA (and the others) typically have several designs that they mimic for their all their schools. I wouldn't think that plastering on a CAL or UCLA on a pre-existing design for all their other schools has much downside for UA but who knows.

My guess if UA can't/won't fill the fan needs then it's any easy call for Nike, Adidas of Fanatics/Beast Mode to step into that breach.

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Thank you, Lomiton...no qualifications required to post/reply on this site!

Completely agree that there isn't enough time to outfit the team(s) this fall (or winter/spring likely) let alone get a new agreement in place. It would be amazing to see the AD play hardball with them and leverage UA's very public issues and the football program's ascendency to the advantage of the school/alumni to publicize a new agreement. Given these conditions, plus the loss of the Raiders from the area, the Stanford program's wobbling and the large alumni base, there is an opportunity to negotiate a separation and new agreement.

Another item that is not clear to me is who owns the design elements, including not only the Sather Stripes but also the word mark font and Block C/profile Golden Bear. I wouldn't put the stripes on any hall of fame for design lists, but it is the first distinguishable element in our uniforms that isn't cringeworthy like so many of the Nike design elements.

Who?

I believe that the school gets all the designs so if they chose to do so they would be easily transferable to another supplier. However...the goal of the school and their supply partner (new or old) is to have everyone buy more gear, which usually is why there are constant changes and one offs unless the fan base is one of those that just revolt when faced with change (USC, you know who you are). I'd wouldn't expect to see anything survive a new supplier regime but perhaps the bear-inside-the-C.

ajm9191 said:

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Tells me they are hanging their hat on the idea we aren't playing sports so therefore we aren't delivering the "asset" we promised them. Terrible argument given Cal and UCLA haven't done anything different than what has happened with the other schools they've kept (and even extended) during the pandemic. This is not a well run company and there's not a lot of good critical thinking taking place there.

"...committed to the majority of our contractual agreements"

Hmmm, I could see being to committed to all my contractual agreements or none of my contractual agreements but for UA to admit that they are only committed to some of their commitments (majority = some) sounds like a company that doesn't take their commitments seriously and prefers to pick and choose exactly which commitments they are going to remain "committed" to.

I have a hard time thinking that UA management doesn't know what they are doing here but this whole thing continues to sound like their present situation is so bad they'd prefer to to take the hit and just pay later. UA's risk is that the "pay later" program could be quite a bit more expensive both in cash and in future contracts with others.

Guess UA has to do what they have to do - I would just think they'd come up with a better set of excuses than what their CEO just provided; it's going to sound awful in court.

Pay later? Laughable.

Their exec's are presently picking the bones clean, followed by bankruptcy.

Bidness.

Bobodeluxe said:

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Pay later? Laughable.

Their exec's are presently picking the bones clean, followed by bankruptcy.

Bidness.

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Bobo: Usually I'd agree with that sentiment but it was pointed out earlier in this thread that Mr. Plank still has a lot of ownership in UA which means that bankruptcy will not be of great benefit to him.

What I will say is at this point, whether its a survive today plan or bankruptcy plan, kicking CAL/UCLA overboard was/is probably necessary for either plan.

Lomiton said:

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Bobodeluxe said:

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Pay later? Laughable.

Their exec's are presently picking the bones clean, followed by bankruptcy.

Bidness.

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Bobo: Usually I'd agree with that sentiment but it was pointed out earlier in this thread that Mr. Plank still has a lot of ownership in UA which means that bankruptcy will not be of great benefit to him.

What I will say is at this point, whether its a survive today plan or bankruptcy plan, kicking CAL/UCLA overboard was/is probably necessary for either plan.

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He doesn't have as much of a say anymore as the finance vultures are circling. The people who gave the money that kept the company afloat are extracting the value/releasing any ballast they can, which includes shedding any obligations they can. The fact that the UCLA and Cal contracts are the only two with FM and obligations clauses is the reason these are the only two they are trying to shed...if there was an equivalent out in the other agreements they would be exploiting those as well.

We don't yet know how deep the accounting irregularities go so the $ folks could simply be in recovery mode not rescue. The fallout could be catastrophic for the brand...what school would sign up with them ever again with the same clauses.