AGREEMENT
THIS AGREEMENT (this "Agreement"), effective as of June 17, 1996,
between CHEVRON U.S.A. INC. ("Chevron") and FOTOBALL USA, INC.
("Fotoball");
WHEREAS, Chevron holds all copyright and other rights in certain car
characters created by Aardman Studios (the "Characters") and associated names
for the Characters created by Chevron; and
WHEREAS, Fotoball has produced for Chevron a toy car Prototype (defined below)
based on the Xxxxxx 4-Xxxxxxx Character; and
WHEREAS, Chevron intends to use the Xxxxxx 4-Xxxxxxx Character as the basis
of an in-station promotion whereby participating Chevron branded retail
outlets will sell toy cars identical in all material respects to the Prototype
(the "Cars") from approximately December 1, 1996 to approximately
January 15, 1997 (the "Promotion");
NOW, THEREFORE, the parties hereto agree as follows:
1. FUNDAMENTAL OBLIGATIONS
During the term of this Agreement and in accordance with the terms and
conditions set forth herein:
(i) Fotoball (either directly or through its subcontractors) shall design,
manufacture and package the Cars, sell and deliver the Cars to Chevron and
its dealers and jobbers and provide information to Chevron dealers and
jobbers in connection with the Promotion; and (ii) Chevron shall purchase
a minimum of 500,000 Cars.
2. DESIGN AND MANUFACTURE OF THE CARS
(a) Fotoball is responsible for all aspects of the design and production of
the Cars. All versions of the Cars shall conform to the specifications
attached hereto as Exhibit A (the "Specifications"). Fotoball has already
designed and produced one prototype Car based on the Xxxxxx 4-Xxxxxxx Sport
Utility Vehicle Character (the "Prototype"). Chevron approved the Prototype
on June 17, 1996. Fotoball has begun the production of the production molds
to be used in connection with the Cars, other than the Prototype and Sample
Car, based on such approval.
(b) Fotoball delivered to Chevron by July 22, 1996 two hundred (200)
hand made Cars to be used as sales samples of the Xxxxxx 4-Xxxxxxx Sport
Utility Vehicle ("F4W") (the "Sample Car"). Fotoball warrants that it used
commercially reasonable efforts to make the Sample Car identical to the
approved Prototype in all material respects and to meet the applicable
Specifications, except that the doors do not open and the eye mechanisms
do not operate. Chevron acknowledges that Fotoball manufactured the Sample
Car by hand and that such Samples will have a limited life and unpredictable
quality. Chevron has inspected the Sample Cars and has confirmed in writing
any deviations from the Prototype or other material problems that Fotoball
will be expected to avoid in producing the production Cars.
(c) Fotoball shall deliver to Chevron production samples (manufactured
using the production molds) of the F4W, without final packaging, on or before
October 7, 1996. Fotoball shall ensure that the production samples are
identical to the approved Prototype in all material respects, meet the
applicable Specifications and avoid any problems with the Sample Cars
identified by Chevron. Chevron shall inspect the production samples and
notify Fotoball in writing within five (5) business days of their delivery
that the production samples are either approved or contain deviations or
problems that need to be fixed. Fotoball shall propose in writing various
options to resolve any such deviations or problems identified by Chevron
within three (3) days. Such options shall include a description of any
impact or changes in the Schedule. Chevron shall consider such options and
instruct Fotoball in writing within three (3) business days as to how it
should proceed. Fotoball shall bear the actual cost of fixing any material
deviations from the Prototypes and Specifications and maintaining the
schedule set forth as Exhibit B (the "Schedule").
(d) Subject to Section 5, Fotoball shall manufacture the Cars and ship
them to the United States in accordance with the Schedule. Fotoball shall
manufacture at least 101.5% of the Initial Order (defined below) to provide
sufficient inventory for replacing defective and damaged inventory. Such
inventory will not be available for reorders or purchases unless agreed to
by Fotoball at the end of the Promotion.
3. DESIGN AND MANUFACTURE AND DELIVERY OF THE PACKAGING
(a) Fotoball shall be responsible for all aspects of the manufacture of the
Cars packaging and inserts (owner's manual and business reply card). Fotoball
has submitted design options to Chevron for the packaging and inserts and
Chevron has approved one of these options. Chevron has made available to
Fotoball the "illustrator of record" ("Illustrator") who shall be art-directed
by Fotoball regarding illustration services for the packaging and inserts.
Responsibility for the legal aspects of the design of the Cars' packaging
shall be shared as follows: Fotoball shall be responsible for compliance with
all applicable laws and regulations specifically relating to the packaging of
toys, and all applicable laws and regulations relating to imported products;
Chevron shall be responsible for compliance with all applicable laws and
regulations relating to the depiction and use of all trademarks, trade names
or trade dress.
(b) Chevron shall provide Fotoball with camera ready artwork and the paper
specifications needed to comply with U.S. Postal Service requirements for the
business reply cards by August 23, 1996.
(c) Chevron shall pay the Illustrator directly as well as reimburse
Fotoball for the actual, reasonable cost (on a time and materials basis) for
creative design, match prints and final film (the cost of which, as had been
agreed, will not exceed $30,000.00). Fotoball shall be responsible for all
printing costs of the packaging and inserts, including packaging and an owner's
manual for each Car ordered and one million 3-1/2" x 6" four color/one color
business reply cards.
(d) Fotoball shall submit match prints of the packaging and inserts on or
before September 2, 1996. Chevron shall inspect such match prints and notify
Fotoball in writing within five (5) business days of its receipt that the
match prints are either approved or contain deviations or problems that need
to be fixed. Fotoball shall propose in writing various options to resolve any
such deviations or problems identified by Chevron within three (3) business
days. Such options shall include a description of any impact or changes to
the Schedule. Chevron shall consider such options and instruct Fotoball in
writing within three (3) business days as to how it should proceed. Fotoball
shall bear the actual cost of fixing any material deviations or problems and
maintaining the Schedule.
(e) Fotoball shall deliver to Chevron press proofs of the packaging, and
inserts on or before September 30, 1996. The press proofs shall comply with
all applicable laws and regulations, conform to any applicable specifications
provided by Chevron and contain all mutually agreeable changes recommended by
Fotoball. Chevron shall provide written approval or disapproval of the
packaging press proofs within five (5) business days of its receipt of such
press proofs. Fotoball shall propose in writing various options to resolve
any such deviations or problems identified by Chevron within three (3)
business days. Such options shall include a description of any impact or
changes to the Schedule. Chevron shall consider such options and instruct
Fotoball in writing within three (3) business days as to how it should
proceed. Fotoball shall bear the actual cost of fixing any material
deviations or problems and maintaining the Schedule. The press proofs may
be retained by Chevron.
(f) Fotoball shall manufacture the packaging and inserts so that it is
identical in all material respects to the approved press proofs. Fotoball
shall not manufacture or produce any material that departs from Chevron
-approved press proofs in any respect without Chevron's prior written consent.
4. ORDER AND DELIVERY OF CARS
(a) The "Initial Order" shall mean the compilation of all orders for Cars
from Chevron and its dealers and jobbers (including Chevron's order for
inventory to fill reorders) which are received by Fotoball on or before
September 16, 1996.
(b) Chevron will solicit the Initial Order for Cars from each participating
retail outlet and send Fotoball written notification of the Initial Order by
September 16, 1996. Each order shall set forth the number of Cars ordered and
the address to which such Cars are to be shipped.
(c) Fotoball shall ship the Initial Order as set forth in Exhibit B and
shall provide inventory management services for the Cars in the Initial Order
to be delivered to Alaska.
(d) Fotoball shall take all reorders directly from participating retail
outlets. Such reorders shall be filled using the inventory purchased by
Chevron in the Initial Order for such purpose. In addition, Fotoball shall
act as the initial point of contact to answer calls from Chevron dealers and
jobbers regarding the Promotion. During the Promotion, Fotoball shall maintain
a toll-free hotline operated from 6:30 a.m. to 3:30 p.m. Pacific time, Monday
through Friday (with the exception of legal holidays), for such purposes, and
Chevron shall provide Fotoball with a guidebook to assist Fotoball in
answering any such calls. Fotoball shall ship all reorders via the method
requested by the retail outlet within 24 hours of receipt. Fotoball shall
forward to the appropriate person at Chevron any call it cannot answer itself.
The operational period of the hotline may be modified as mutually agreed by
Chevron and Fotoball.
(e) Chevron may order additional Cars in excess of the Initial Order
during the Promotion or at anytime prior to December 31, 1997. Such additional
cars shall be delivered and paid for on the dates determined by mutual
agreement between the parties.
(f) All shipments of the Cars will be delivered by Fotoball directly to the
location specified in each order. Each Car shipped by Fotoball shall be
properly packaged for retail sale in 40 Car containers.
5. DELAYS
Subject to the next succeeding sentence, Fotoball shall adhere to (and
bear all costs required to maintain) the Schedule and the other dates set
forth herein; provided that where Chevron's approval or instruction or
delivery of materials is required herein, Fotoball may not proceed without
Chevron's written approval or instruction or such materials. Fotoball shall
be entitled to (i) a day-for-day extension for any delay caused by Chevron
in failing to provide timely approval or instruction or materials, plus
(ii) the actual increase in costs, if any, which it suffers; provided that
Fotoball seeks such approval or instruction or materials via facsimile from
Chevron prior to and after the allotted time for such approval or instruction
expires. Fotoball shall promptly notify Chevron in the event it has reason
to suspect that any portion of the Schedule may be delayed.
6. EXCLUSIVITY AND RESTRICTIONS
(a) Chevron shall not purchase for the Promotion toy cars similar to the
Prototypes from anyone other than Fotoball. Chevron retains the right to
purchase from others: (i) promotional items (other than plastic toy cars for
the Promotion), such as key chains, pins, inflatable cars, stuffed cars, etc.
during and after the Promotion and (ii) plastic toy cars (whether based on
F4W or other Characters) for use after the Promotion.
(b) No right or license is granted to Fotoball except as expressly stated
herein. Without limiting the generality of the foregoing, Fotoball shall not
use or distribute materials containing the Characters or Chevron's logo unless
agreed to in writing by Chevron.
7. PAYMENTS
(a) The price Chevron will pay for the Cars ordered and delivered shall be
determined by the following formula:
Price =$3.23 per Car, plus
$0.99 per Car (for air shipping from Hong Kong to the U.S.),
plus
$900,000 (to cover fixed costs), plus
additional charges for Alaska and Hawaii pursuant to Section 7(b), plus
additional charges for creative services pursuant to Section 3(c).
With respect to orders made after the Promotion, the foregoing amount is
subject to adjustment for any change in the actual cost of materials and/or
shipping, unless a lower price is agreed to between the parties. All costs,
including the cost of the molds, Sample Cars, Prototypes, packaging and
services is incorporated into the foregoing price formula, except for Chevron
caused delay costs as provided in Section 5 and certain post-Promotion storage
costs as provided in Section 13(c).
(b) Chevron shall pay to Fotoball i) $0. 10 per Car for all Cars in the
Initial Order delivered to Alaska for the additional cost of inventory
management of such Cars and ii) the difference between published UPS air
shipping rates (at the time of actual shipping) and the predetermined ground
shipping allowance for reorders of Cars delivered to Alaska and Hawaii.
(c) Chevron shall pay to Fotoball three hundred thousand dollars ($300,000)
upon execution of this Agreement. Fotoball shall invoice Chevron for creative
services identified in Section 3(c) upon completion of such creative services.
Subject to Fotoball's performance as indicated on Exhibit B, Fotoball shall
invoice Chevron for the remaining balance on December 6, 1996. Fotoball
shall invoice Chevron for the incremental increase in cost due to expedited
shipping of reorders, if expedited shipping is requested and for additional
charges incurred pursuant to Section 7(b) (associated with delivery to Alaska
and Hawaii) on or about February 1, 1997 and March 1, 1997. Fotoball shall
invoice Chevron for the amount of Chevron's delay costs incurred in accordance
with Section 5 hereof and the increased costs caused by Chevron's changes
determined in accordance with Section 2(c) upon submission of receipts and
other acceptable proof of such costs. Chevron shall pay all undisputed amounts
set forth in such invoices within thirty (30) days of the date of receipt.
Chevron shall be responsible for and pay directly to Aardman Studios any fees
or royalties due in connection with the license granted by Aardman Studios to
Chevron regarding the Characters used in the Promotion.
(d) The price of the Cars noted above includes full and complete
compensation for everything provided in connection with Fotoball's performance
hereunder. Such price is not subject to increase due to any: use tax, sales
tax, value added tax or any other applicable taxes; import/export duties or
levies; ground, air or sea freight or domestic or international shipping
charges; handling fees; warehousing or storage charges; insurance fees; costs
for the design, development, manufacture, transport, packaging and delivery
of the Cars (other than as provided in Section 7(b) above); costs for support
of the Promotion; costs associated with the development and production of the
models, tooling, samples or molds (other than as provided in Section 2(c));
charges for the cost of materials; costs for product safety testing, packaging
(other than as provided in Section 3(a)), shipping (including customs,
brokers and clearance fees) or other transportation to Chevron dealers (other
than as provided in Section 7(b) above); fees for insurance outlined herein,
reorder processing and program support (including access to an 800 operator)
or warehousing or shipping of additional Cars through the conclusion of the
Promotion and all warehousing of all Cars purchased until thirty (30) days
following the conclusion of the Promotion.
8. WARRANTY
Fotoball warrants that the Cars and packaging will be new and first class,
free from defects in materials and workmanship, fit for their intended purpose
and will conform to the Specifications (and applicable specifications,
respectively) and that the Cars will be identical in all material respects
with the Prototypes. Fotoball further warrants that the Cars and the Cars'
packaging will comply with all applicable industry and government safety
regulations and standards, including but not limited to the Consumer Product
Safety Act, the Hazardous Substance Act, the Child Protection and Safety Act
and the Toy Manufacturers of America Safety Standards (as contained in
ASTM F963-86). Prior to approval of production samples pursuant to Section
2(c), Fotoball shall furnish Chevron with certificates of approved independent
testing laboratories certifying that the Cars and Car packaging and inserts
comply with such regulations and standards. Fotoball warrants that defects
and deviations from the Prototypes or Specifications found in the production
sample Cars can be corrected within the time allotted in the Schedule, so
that such defects and deviations do not appear in the Cars ordered for the
Promotion. Fotoball warrants that all services shall be performed by
qualified, competent personnel in a courteous, timely and professional
manner.
9. TERM
The term of this Agreement will commence effective as of June 17, 1996
and expire December 31, 1997, unless sooner terminated hereunder or extended
by mutual agreement. Indemnity, warranty and other obligations intended to
survive termination shall survive expiration or termination.
10. TITLE AND RISK OF LOSS
Title to the Cars shall pass from Fotoball to Chevron upon receipt by
Chevron or its jobbers or dealers. Fotoball shall, at its sole expense,
warehouse the Cars, retaining risk of loss and shall take all reasonable
precautions in caring for the Cars during the term of this Agreement. Risk
of loss shall pass to Chevron upon delivery to participating retail outlets.
Fotoball shall own any excess inventory of materials and/or Cars and/or
packaging, subject to Section 6(b). Unless otherwise agreed in writing,
Chevron shall own all other workproduct arising from Fotoball's performance
of this Agreement, including, without limitation, the production molds, all
drawings, sketches, designs, and any and all patents, copyrights, tradesecrets,
trademarks (including trade dress) or other intellectual property rights
arising out of the foregoing. Fotoball shall execute any documents and take
any other action reasonably requested by Chevron to perfect its rights in the
foregoing.
11. INSURANCE
(a) Fotoball agrees to maintain at its expense at all times during the
term of this Agreement: (i) comprehensive general liability insurance (bodily
injury and property damage), including endorsements for contractual and
product liability, of not less than $500,000 combined single limit per
occurrence; (ii) hired and non-owned automobile liability insurance (bodily
injury and property damage) of not less than $500,000 combined single limit
per occurrence; (iii) property insurance, product insurance and cargo insurance
of not less than $1,000,000 combined single limit per occurrence covering the
replacement costs of the production molds and the Cars while in transit and
while in the care, custody and control of Fotoball (such insurance shall name
Chevron as the loss payee with respect to the production molds); (iv) workers
compensation, employer's liability and any other insurance or bonding
prescribed by applicable law; and (v) excess liability insurance of not less
than $1,000,000 per occurrence in excess of clauses (i), (ii) and (iv) (except
workers compensation insurance) above, each of which names Chevron as an
additional insured. The workers' compensation insurance required herein shall
contain a waiver of subrogation against Chevron.
(b) As proof of such insurance, a certificate of insurance naming Chevron
as an insured party and indicating thereon that the insurance may not be
changed, canceled, or allowed to lapse through non-renewal or failure to pay
the premium therefor except upon not less than thirty (30) days written notice
to Chevron, will be submitted to Chevron by Fotoball within thirty (30) days
after the date of this Agreement.
(c) If Fotoball fails to furnish proof of such insurance as required above,
or if at any time during the term of this Agreement Chevron is notified of the
change, cancellation or lapse of such insurance, which change, cancellation or
lapse Fotoball does not rectify within ten (10) days of the insurance status
change, Chevron, in addition to all other remedies available to it hereunder,
may at its option obtain such insurance coverage and xxxx Fotoball for the
premium cost thereof. Fotoball agrees to remit such premium to Chevron within
ten (10) days of receipt of notice from Chevron of the amount of such premium
cost. Such premium cost is in addition to any other payments due under this
Agreement. Fotoball's indemnity and other obligations shall not be limited by
the foregoing insurance requirements.
12. INDEMNIFICATION
(a) Fotoball shall defend, indemnify and save harmless Chevron and any
company in which Chevron owns at least fifty per cent of the shares entitled
to vote at a general election of directors, and the officers, directors,
employees, agents and vendors of any of them (collectively, "Chevron
indemnitee"), from and against any and all loss, damage, injury and liability
(including costs and reasonable attorney's fees), relating to or arising out
of Fotoball's making, performance or breach of this Agreement. The Chevron
indemnitee's rights to indemnification under the foregoing shall be independent
of any rights to insurance as provided in Section 8 hereof.
(b) Chevron shall defend, indemnify and save harmless Fotoball and any
company in which Fotoball owns at least fifty per cent of the shares entitled
to vote at a general election of directors, and the officers, directors,
employees, agents and vendors of any of them (collectively, "Fotoball
indemnitee"), from and against any and all loss, damage, injury and liability
(including costs and reasonable attorney's fees), relating to or arising out
of a claim or demand alleging that the design, manufacture, or sale of the
Cars or packaging in accordance with this Agreement infringes intellectual
property rights in the Characters or Chevron products.
13. TERMINATION
(a) Either party may terminate this Agreement upon a material breach that
is not cured within twenty (20) calendar days of notice thereof.
(b) Fotoball agrees that upon termination of this Agreement, Fotoball shall
forthwith cease and desist in the manufacture of the Cars.
(c) Fotoball agrees that upon completion of the Promotion, at Chevron's
written election, Fotoball shall either (i) destroy, at its own expense,
(ii) deliver to Chevron at Chevron's expense or (iii) store at Chevron's
expense all plates, molds, preprints, matrices and other devices using the
Cars. In the event Fotoball stores such items at Chevron's expense, Fotoball
shall credit such storage costs towards any future orders of Cars Chevron may
make.
14. RIGHT TO AUDIT
Fotoball shall maintain true and correct records in connection with this
Agreement and all transactions related thereto for at least 24 months after the
delivery of the products or the provision of services hereunder. Chevron may
from time to time, during regular business hours and with 48 hours notice,
make an audit of all records of Fotoball. Upon completion of this audit, any
amount by which the total payment by Chevron to Fotoball exceeds the amount
due Fotoball, as shown by the audit shall be returned to Chevron. Fotoball
will provide reasonable assistance and not interfere with Chevron in making
such audits.
15. GENERAL PROVISIONS
(a) Entire Agreement. This writing represents and expresses the entire
agreement of the parties hereto. It replaces and supersedes all prior
contracts, representations and understandings (written or oral) between the
parties concerning the within subject matter. No amendment of this Agreement
shall be binding on the parties unless in writing and signed by authorized
representatives of both parties.
(b) Waiver. No waiver by either party, whether express or implied, of
any provision of this Agreement or of any breach or default by the other
party shall constitute a continuing waiver of any provision of this Agreement,
and no such waiver by either party shall prevent such party from enforcing any
and all provisions of this Agreement or from acting upon the same with regard
to any subsequent breach or default by the other party.
(c) Headings. Captions and headings to sections are included solely for
convenience and are not intended to affect interpretation of any provision of
this Agreement.
(d) Force Majeure. In the event an act of the government, war conditions,
fire, flood, or other act of God prevents either party from performing in
accordance with the provisions of this Agreement, such nonperformance shall
be excused and shall not be considered a breach or default for so long as the
said conditions prevail. However, at any time after a two (2) month period
of such nonperformance, either party may terminate this Agreement as to duties
to be performed thereafter on thirty (30) days written notice thereof to the
other party.
(e) Notices. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be considered
as properly given or made if (i) hand delivered, (ii) mailed registered mail,
return receipt requested, postage prepaid, (iii) sent by prepaid express
overnight courier service, or (iv) sent by electronic facsimile transmission:
If to Chevron: Chevron U.S.A. Inc.
000 Xxxxxx Xxxxxx; Room 2326
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: P. A. Xxxxx
Fax No. : (000) 000-0000
If to Fotoball: Fotoball USA, Inc.
0000 Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: X. Xxxxxx
Fax No.: (000) 000-0000
or to such other address as any such party may have designated by like notice
forwarded to the other party hereto. All notices shall be deemed given when
mailed; however, notwithstanding the foregoing, all notices of change of
address shall be deemed given when received.
(f) Further Assurances. The parties agree to execute, acknowledge and
deliver all such further instruments, and do all such other acts, as may be
necessary or appropriate in order to carry out the intent and purposes of
this Agreement.
(g) Governing Law. This Agreement and the relationship of the parties will
be governed by, and interpreted in accordance with, the laws of the State of
California, excluding its conflict of laws rules.
(h) Jurisdiction; Venue. All disputes under or relating to this Agreement
shall be brought and decided only by the courts of California. The parties
hereby submit to the personal jurisdiction of the federal and state courts
located in the state of California. Each party agrees that if so served it
will raise no objection to the personal jurisdiction of the court on any matter
connected with this Agreement that is within the court's subject matter
jurisdiction. Each party hereby waives all rights it has or which may
hereafter arise to contest such exclusive jurisdiction or venue.
(i) Invalidity. If any term or provision of this Agreement or the
application to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons whose circumstances are other than those as to
which it is held invalid or unenforceable, shall not be affected.
(j) Conflict of Interest. No director, employee or agent of Fotoball shall
give or receive any commission, fee, rebate, gift or entertainment of
significant cost or value in connection with this Agreement, or enter into
any business arrangement with any director, employee or agent of Chevron or
any affiliate other than as a representative of Chevron or its affiliate,
without prior written notice to Chevron. Fotoball will promptly notify
Chevron of any violation of this paragraph, and any consideration received
as a result of such violation of this paragraph shall be paid over or credited
to Chevron. Additionally, if any violation of this paragraph occurring prior
to the date of this Agreement resulted directly or indirectly in Chevron's
consent to enter into this Agreement with Fotoball, Chevron may, at Chevron's
sole option, terminate this Agreement at any time and, notwithstanding any of
the provision of this Agreement, pay no compensation or reimbursement to
Fotoball whatsoever for any work done after the date of termination. Chevron
or its representatives may audit any and all records of Fotoball pertaining to
this Agreement for the sole purpose of determining whether Fotoball has
complied with the terms of this paragraph, all in accordance with Section 11
of this Agreement.
IN WITNESS WHEREOF, the parties hereto intending to be bound hereby
executed this Agreement as of the date first above written.
CHEVRON U.S.A. INC. FOTOBALL USA, INC.
By /s/X. X. Xxxx By /s/ Xxxxxxx Xxxxxx
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General Manager, Retail Brand Services President
