EXHIBIT 4
TERMINATION AND REPLACEMENT OF MANUFACTURING AGREEMENT
Agreement dated March 11, 2002 entered into between and among JAUNTIWAY
INVESTMENTS LIMITED, a Hong Kong private limited company with its offices at
Units D-F, 26th Floor, CDW Building, 388 Castle Peak Road, Tsuen Wan, N.T, Hong
Kong ("JI"), TAI NAM INDUSTRIAL COMPANY LIMITED, a Hong Kong private limited
company with its offices at Units D-F, 26th Floor, CDW Building, 388 Castle Peak
Road, Tsuen Wan, N.T., Hong Kong ("TN") and XXXXX KI XXXX XXX and XXXXXXX XXXX
XXXX XXXXX, individuals with their address at Units D-F, 26th Floor, CDW
Building, 388 Castle Peak Road, Tsuen Wan, N.T, Hong Kong, (collectively
referred to as the "Principals");
and
TOYMAX INTERNATIONAL, INC., a Delaware corporation with its offices at 000 X.
Xxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000, U.S.A., ("Toymax International"),
TOYMAX (H.K.) LIMITED, a Hong Kong private limited company, with its offices at
Units D-F, 26th Floor, CDW Building, 388 Castle Peak Road, Tsuen Wan, N.T., Hong
Kong ("Toymax HK"); hereafter Toymax International and Toy Max HK are referred
to collectively as the "Toymax Companies");
and
JAKKS PACIFIC, INC., a Delaware corporation with its offices at 00000 Xxxxxxx
Xxxxx Xxxxxxx, Xxxxxx, Xxxxxxxxxx , X.X.X. ("JAKKS"). The parties to this
Agreement may also sometimes be referred to collectively as the "Parties" or
single as a "Party."
W I T N E S S E T H :
WHEREAS, JI and TN, which are owned by the Principals, and the Toymax Companies
are parties to a Manufacturing Agreement dated as of September 22, 1997, as
amended by an Amendment dated as of April 1, 1999 that recites that it is an
agreement between JI, TN and Toymax International and its subsidiaries (such
Agreement as amended is referred to as the "Existing Manufacturing Agreement")
pursuant to which JI agreed to manufacture products for the Toymax Companies
ordered by TN as Agent for the Toymax Companies under certain Agency Agreements
between TN and the Toymax Companies and their affiliates (the "Agency
Agreements");
WHEREAS, concurrently herewith JAKKS has acquired a majority of the outstanding
shares of capital stock of Toymax International, which is the parent company of
the other Toymax Companies, from certain shareholders of Toymax International,
including Best Phase Limited, a British Virgin Islands corporation owned by the
Principals, pursuant to a Stock Purchase Agreement dated February __, 2002 (the
"Stock Purchase Agreement");
WHEREAS, as a condition to such acquisition, JI, TN and the Toymax Companies
agreed to terminate the Existing Manufacturing Agreement and enter into this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged receipt of which is hereby acknowledged, the
Parties hereto hereby agree as follows:
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1. Termination of Existing Manufacturing Agreement. The Existing
Manufacturing Agreement is hereby terminated as of the date hereof
and replaced in its entirety by this Agreement. JI, the Principals
and each of the Toymax Companies represents and warrants to JAKKS
that there are no other agreements, understandings or undertakings
between or among JI and any of the Toymax Companies or any of their
respective Affiliates (as defined below) that provide for JI to
manufacture products for the Toymax Companies or their respective
Affiliates or for TN under the Agency Agreements, or otherwise as
agent for the Toymax Companies, or with any other Person acting as
agent for the Toymax Companies, and, to the extent that any such
agreements, understandings or undertakings exist, they are hereby
terminated. JI and the Toymax Companies agree that with the
exception of open purchase orders issued to TN by the Toymax
Companies under the Agency Agreements, which are deemed assigned by
TN to Toymax International upon termination of the Agency Agreements
under the agreement being executed concurrently herewith by JAKKS,
TN and certain Toymax Companies, they have no claims against one
another under the Existing Manufacturing Agreement.
2. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
a. "Affiliate" of a Person means another Person directly or
indirectly controlling, controlled by, or under common control with,
such Person; for this purpose, "control" of a Person means the power
(whether or not exercised) to direct the policies, operations or
activities of such Person by virtue of the ownership of, or right to
vote or direct the manner of voting of, securities of such Person,
or pursuant to agreement or law or otherwise.
b. "Current Toymax Product Line" means the Existing Toymax
Products and any Modified Toymax Product.
c. "Books and Records" means all customer lists, account records,
pricing information, sales literature, promotional literature and
all other books and records, files, invoices, supplier lists, and
contracts relating to the Products that JI produced for the Toymax
Companies under the Manufacturing Agreement, including all
documents, computer software or other tangible expression of the
Tools, Molds and Specifications (subject to Section 10 of this
Agreement) or the Trade Rights.
d. "Competitive Product" means any product that is substantially
identical to (i) a product sold by the Toymax Companies within the
three (3) year period prior to the date hereof (with the exception
of products known as "Snapshots" and products sold by Toymax
International's Candy Planet and Monogram divisions), or (ii) a
product sold by the Toymax Companies after the date hereof through
the end of the term of this Agreement, or (iii) a product sold or
marketed by JAKKS or its other Affiliates after the date hereof
through the end of the term of this Agreement.
e. "Existing JAKKS Products" means the products being sold or
marketed by JAKKS and its Affiliates as of the date hereof and any
extension, adaptation, redesign, or reconfiguration of an Existing
JAKKS Product.
f. "Existing Toymax Products" means the products identified on
the
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Product and Price List manufactured by JI for the Toymax Companies
as of the date hereof.
g. "JI & TN Manufacturing Trade Right" means a patent, or
know-how, inventions, trade secrets, technical process or
proprietary right relating to manufacturing processes employed by JI
and TN in its business and that (A) were conceived or invented by JI
or TN independently of the Toymax Companies prior to the date hereof
and which have not become generally known in the industry or are not
otherwise in the public domain, or (B) are conceived or invented by
JI or TN after the date hereof independently of JAKKS and its
Affiliates (including the Toymax Companies) and are not and do not
become generally known in the industry or otherwise become part of
the public domain.
h. "Modified Toymax Product" means an Existing Toymax Product the
Specifications for which are modified by the Toymax Companies, JAKKS
or its other Affiliates (provided such modification is agreed to by
JI) after the date hereof, and any extension, adaptation, redesign,
or reconfiguration of an Existing Toymax Product.
i. "New Product Manufacturing Terms" has the meaning provided for
in Section 3(c) of this Agreement.
j. "New Products" means products other than the Existing Toymax
Products and the Existing JAKKS Products, first proposed to be
manufactured by the Toymax Companies, JAKKS or its other Affiliates
after the date hereof.
k. "Person" includes without limitation a natural person,
corporation, joint stock company, limited liability company,
partnership, joint venture, association, trust, Governmental
Authority, or any group of the foregoing acting in concert.
l. "Product and Price List" means the list attached as Exhibit A
identifying all Existing Toymax Products that are currently being
manufactured by JI for the Toymax Companies or for TN under the
Existing Manufacturing Agreement and the prices being charged for
such Products by JI.
m. "Product Vendee" means the Toymax Company or JAKKS or its
other Affiliate ordering a Product from JI under this Agreement.
n. "Products" means New Products, Existing Toymax Products,
Modified Toymax Products and the Existing JAKKS Products.
o. "Significant Amount" with respect to a New Product means at
least twenty (20%) percent of the aggregate production of such New
Product.
p. "Specifications" means descriptive, quantitative and
qualitative criteria agreed to in writing prior to production by JI
and JAKKS or a Product Vendee for the manufacture of Products.
q. "Tools, Molds and Specifications" means any tools, molds,
designs, prototypes, blueprints, drawings, Specifications, and the
like developed or
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otherwise produced in connection with the design, manufacture and
marketing of the Products.
r. "Trade Right" means a patent, claim of copyright, trademark,
trade name, brand name, service xxxx, logo, symbol, trade dress or
design, or representation or expression of any thereof, or
registration or application for registration thereof, or any other
invention, trade secret, technical information, know-how,
proprietary right or intellectual property developed, conceived of,
invented or otherwise produced in connection with the design,
manufacture and marketing of the Products.
3. Manufacture of Products.
a. JI shall use its commercially reasonable efforts to conduct
such preparations, validations, testing and analyses, as shall
enable it to manufacture Products pursuant to this Agreement
according to the Specifications agreed to in writing by the Parties.
b. JAKKS and the Toymax Companies shall continue to use JI to
manufacture the Existing Toymax Products in accordance with the
Specifications in effect for the Existing Toymax Products and the
prices identified in the Product and Price List, subject to the
provisions of Section 4. The quantity of Existing Toymax Products
ordered by the Toymax Companies or JAKKS shall be determined by
JAKKS in its discretion, provided, however, that JAKKS agrees that
JI shall have the exclusive right to manufacture all Products in the
Current Toymax Product Line provided that JI meets JAKKS delivery
requirements (and JI agrees to use reasonable commercial efforts to
comply with JAKKS' delivery requirements, provided that JI shall not
be required to agree to deliver Products in less than 28 days, and
(i) for Products incorporating computer chips or Integrated
circuits, such longer period as is reasonably required to obtain
such chips or integrated circuits, but no longer than prevailing
industry availability for such component, and (ii) for Products
incorporating other components from dedicated third party suppliers,
such longer lead time as reasonably required to obtain such
components, but no longer than prevailing industry availability for
such component), and that JI is otherwise in accordance with the
provisions of this Agreement. In the event that JAKKS or the Product
Vendee desires to manufacture a Modified Toymax Product, then such
commitment is subject to agreement between JI and JAKKS or the
Product Vendee, as the case may be, upon the price, Specifications,
quantities and delivery dates for such Modified Toymax Product.
c. After the date hereof, JAKKS agrees to use commercially
reasonable efforts to order from JI or arrange for the Toymax
Companies or other of JAKKS' Affiliates to order from JI a
Significant Amount of New Products, provided that (i) agreement can
be reached with JI on the prices, Specifications, quantities, and
delivery dates (collectively referred to as the "New Product
Manufacturing Terms") for such New Products, and (ii) that the
quality of Products delivered by JI after the date hereof is at
least equal to the quality of Existing Toymax Products manufactured
by JI under the Existing Manufacturing
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Agreement prior to the date hereof. If JI and JAKKS or its Affiliate
do not reach agreement on the price for such New Product, and JAKKS
or one of its Affiliates obtains a more favorable price for such New
Product from another third party manufacturer, then, provided that
JI has previously manufactured that generic type of product for
JAKKS or its Affiliates (including the Toymax Companies), then JAKKS
or an Affiliate shall give notice to JI of such competitive price
and the other New Product Manufacturing Terms on which such third
party manufacturer was willing to manufacture the New Product, and
if JI advises JAKKS or its Affiliate within one (1) business day
that JI agrees to manufacture such New Product on such New Product
Manufacturing Terms, then JAKKS will place such order for such New
Product with JI (and the amount so ordered shall be included in the
calculation of Significant Amount); the rights conferred upon JI in
this sentence shall not in any way be deemed to expand, modify, or
otherwise affect the obligations of JAKKS undertaken in the first
sentence of this paragraph.
4. Purchase Prices.
a. PAYMENT. Payment for Products shall be made within thirty (30)
days after shipment by JI of such Product to the Product Vendee, at
the purchase price identified on the Product and Price List, if an
Existing Toymax Product, or the purchase price agreed to in
accordance with this Agreement for any Modified Toymax Product or
New Product, subject to the provisions of paragraph (b) of this
Section 4.
b. COMPETITIVE AND MOST FAVORED CUSTOMER PRICING.
i. JI agrees that if any of the prices for the Existing
Toymax Products are not competitive with the prices for the
same products, quality and quantity that could be arranged by
JAKKS with other third party manufacturers on an arms-length
basis, such prices shall be adjusted to reflect such
competitive price, provided JAKKS gives notice to JI and
evidence of such other competitive price.
ii. JI agrees that the prices for any Products (including
Modified Toymax Product and New Products) ordered by JAKKS or
its Affiliates or the Toymax Companies after the date hereof
shall be no greater than the prices charged by JI to the
Toymax Companies or TN under the Agency Agreements for the
same or substantially the same products prior to the date
hereof.
iii. JI agrees that in connection with setting and adjusting
all pricing and other terms (including quantity) for any
Products (including Modified Toymax Products and New Products)
ordered by the Toymax Companies or JAKKS and its other
Affiliates after the date hereof, such pricing and terms shall
be no less favorable than the prices charged and terms given
by JI to its most credit-worthy, largest and favored customers
for similar products and terms, including quantity.
iv. After a purchase order placed by a Product Vendee has
been
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accepted by JI, such purchase order and the Specifications for
the Product covered by such purchase order may not be changed
without the approval of JI and the Product Vendee.
c. ADJUSTMENT OF CURRENT PRICES. JI's prices for the Existing
Products shall remain in effect for the balance of 2002, and
thereafter JI may give ninety (90) days prior written notice to
JAKKS of an increase in any such price resulting from increases in
JI's cost of materials, provided, however that if JAKKS thereafter
gives notice to JI that such increased price is not competitive with
the price for such Product that could be arranged by JAKKS with
other third party manufacturers on an arms-length basis, and JI does
not agree to meet such competitive price within one (1) business day
after notice from JAKKS of such competitive price, JAKKS shall have
the right to terminate this Agreement with respect to such Existing
Product.
5. Delivery of Products.
a. Products shall be delivered to the Product Vendee F.O.B. the
ports of Xxxx Xxxx (PRC) or Hong Kong or as otherwise agreed by JI
and the Product Vendee. JI shall arrange with a common carrier to
ship the quantity of Product covered by such order to the location
selected by the Product Vendee.
b. Upon delivery of a Product in accordance with an order, JI
shall present the Product Vendee with an invoice for the quantity of
the Product covered thereby, in each case at a purchase price
determined pursuant to the terms of Section 4.
c. Payments to JI shall be made in U.S. Dollars. The Product
Vendee shall not be required to provide a letter of credit or any
other security to JI in connection with this Agreement or any
purchase order.
d. Any foreign, federal, state, county or municipal sales or use
tax, excise or similar charge, or any other tax assessment (other
than that assessed against income), or other charge lawfully
assessed or charged by any governmental agency or authority on the
sale, use or transportation of any Product delivered to a Product
Vendee pursuant to this Agreement shall be immediately paid by the
Product Vendee at the time of payment of the related invoice for
such Product or when required by applicable law.
6. Confidentiality.
a. During the term of this Agreement, any disclosure to JI or the
Principals and their respective Affiliates (a "recipient") of
proprietary know how and other data and information concerning each
and all of the Products ("Confidential Information") by the Toymax
Companies, JAKKS or its other Affiliates (a "disclosing party") is
made on the following terms:
i. The recipient will receive, maintain and hold
Confidential Information in strict confidence and will use the
same level of care in safeguarding it that it uses with its
own confidential material of a similar
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nature;
ii. The recipient will take all such steps as may be
reasonably necessary to prevent the disclosure of Confidential
Information; and
iii. The recipient will not utilize Confidential Information,
other than strictly for meeting its obligations hereunder, and
other than JI & TN Manufacturing Trade Rights, without first
having obtained the disclosing party's written consent to such
utilization.
b. The commitments set forth in paragraph 6(a) shall not extend
to any portion of Confidential Information:
i. which was or becomes (through no fault of the recipient
in breach of its obligations under this Agreement) generally
available to the public;
ii. which is known to the recipient prior to disclosure or
was independently developed by the recipient (excluding
information regarding the Toymax Companies which would
otherwise be Confidential Information that was disclosed to JI
or the Principals under the Existing Manufacturing Agreement,
or that was disclosed to either of the Principals in
connection with their acting as a director, shareholder, or
employee of any of the Toymax Companies or their predecessors
or respective Affiliates and excluding any other non-public
information concerning Existing Toymax Products or New
Products under development by or for the Toymax Companies,
JAKKS or its other Affiliates);
iii. which was not acquired, directly or indirectly and/or in
any manner, from the disclosing party or any of its Affiliates
and which the recipient lawfully had in its possession prior
to the date of this Agreement;
iv. which, hereafter, through no act or omission on the part
of the recipient, becomes information generally available to
the public.
c. At any time upon written request by the disclosing party, (i)
the Confidential Information, including any copies, shall be
returned to the disclosing party, and (ii) all Books and Records and
Tools, Molds and Specifications (subject to the provisions of
Section 10 of this Agreement) and any other material whatsoever
developed by the recipient which relates to such Confidential
Information, including all copies and/or any other form of
reproduction and/or description thereof made by the recipient,
shall, at the disclosing party's option, be returned to the
disclosing party or destroyed.
d. In the event that a recipient or any of its employees,
directors, or representatives become legally compelled (by
deposition, interrogatory, request of documents, subpoena, civil
investigative demand or similar process) to disclose any of the
Confidential Information, the recipient or other such person
referred to above from whom such Confidential Information is being
sought shall provide JAKKS and the disclosing party with prompt
prior written notice of such requirement so that it may seek a
protective order or other appropriate remedy
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and/or waive compliance with the terms of this Agreement. In the
event that such protective order or other remedy is not obtained, or
JAKKS waives compliance with the provisions hereof, the person
required to provide such information agrees to furnish only such
portion of the Confidential Information which is legally required to
be furnished.
7. Manufacturing Standards and Quality Assurance.
a. Prior to commencement of manufacture of a New Product or a
Modified Toymax Product, JI shall provide a sample or prototype of
each Product for approval by JAKKS, the Toymax Company, or JAKKS'
other Affiliate ordering such Product, and the entity ordering the
Product shall notify JI of its approval, or the reasons for its
disapproval, within a reasonable period of time after delivery of
the sample or prototype. Prior to any initial shipment of a Product
by JI, or as otherwise requested by JAKKS or the Product Vendee, JI
shall provide the Product Vendee with samples of such Product for
inspection and approval. In addition, JI shall have each of the
Products tested in accordance with the testing procedures described
in the applicable Specifications and shall provide JAKKS or the
Product Vendee, at JAKKS or the Product Vendee's expense, with a
certificate of compliance from an independent certified testing
laboratory approved by JAKKS or the Product Vendee.
b. JAKKS or the Product Vendee shall provide to JI written notice
of rejection of any shipment of Products if the subject Products do
not meet the Specifications. In order to permit a timely and
accurate investigation by JI, JAKKS or the Product Vendee shall
provide supporting evidence in its possession on which JAKKS or the
Product Vendee has based such belief.
c. If the Parties disagree with respect to whether a shipment of
Product does not conform to the Specifications (a "Non-Conforming
Product"), the Parties agree that the Product in question shall be
submitted for testing to an independent testing laboratory
acceptable to JI and JAKKS or the Product Vendee. The determination
of such independent laboratory as to whether such Product meets and
will continue to meet all Specifications will be binding on both
parties with respect to the Product Vendee's right to return the
shipment hereunder and refusal to pay the applicable Purchase Price.
The cost related to such testing will be paid by the party who was
in error with respect to whether the Product was a Non-Conforming
Product.
d. Within a reasonable period of time after a determination that
a Product is a Non-Conforming Product by (i) the mutual consent of
the Parties, or (ii) an independent testing laboratory as provided
above, JI shall issue a credit to the Product Vendee in an amount
equal to the sum of (x) the amount invoiced to and paid by the
Product Vendee for the manufacturing and processing of such
Non-Conforming Product, unless such Product is replaced, (y) any
applicable freight charges invoiced to and paid by the Product
Vendee for the shipment of such Non-Conforming Product, and (z) any
applicable transit, insurance premium, taxes, duties or other
similar costs related to the Non-Conforming Product. If there is any
outstanding credit to the Product Vendee upon the termination or
expiration of this Agreement, JI shall reimburse the Product Vendee
in the
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amount of such credit within thirty (30) calendar days after such
termination or expiration. EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT, THE ONLY WARRANTY PROVIDED BY JI TO THE PRODUCT VENDEE
WITH RESPECT TO THE PRODUCTS SHIPPED UNDER THIS AGREEMENT IS THAT
THE PRODUCT CONFORMS IN ALL RESPECTS TO THE SPECIFICATIONS ON THE
DATE OF SHIPMENT, AND THE PRODUCT VENDEE EXPRESSLY WAIVES ANY
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. In the event that a Product does not conform to
the Specifications, then other than the rights to terminate this
Agreement as provided in this Agreement, the sole remedy of the
Product Vendee is the credit or replacement provided for in this
paragraph. In the event of repeated instances of non-conformance of
Products to the Specifications, the Product Vendee shall have the
right to require a credit rather than replacement. If JI determines
that repair or replacement of a Non-Conforming Product is not
commercially feasible, then, at its option, JI shall provide the
Product Vendee the credit provided for in this paragraph rather than
repair or replacement.
e. The Product Vendee shall have the right, at reasonable times,
and on reasonable prior notice, to inspect and arrange for its
licensees or representatives to inspect, JI's manufacturing
facilities, provided the frequency of such inspection by Persons
other than JAKKS or the Product Vendee does not unreasonably
interfere with JI's business or operations.
8. Term and Termination.
a. This Agreement shall have a term commencing on the date hereof
and ending on the close of business in New York, NY on the third
anniversary hereof. JAKKS shall have the right to terminate this
Agreement with respect to a particular Product, upon twenty (20)
days' prior written notice to JI, in the case of non-electronic
Products, and thirty (30) days prior written notice to JI, in the
case of electronic Products, in the event JI shall fail to supply
the Product Vendee that particular Product within twenty (20) days
of the requested supply date set forth in the purchase order for
non-electronic Products and thirty (30) days of the requested supply
date set forth in the purchase order for electronic Products,
provided, however, that in the exercise of its discretion JAKKS or
the Product Vendee may determine to accept such late shipment.
b. JI or JAKKS may terminate this Agreement by giving written
notice thereof to the other Party in the event that the other Party
shall have breached or defaulted in any material respect in the
performance of an obligation imposed on such other Party hereunder
(including non-payment by the Product Vendee in accordance with
paragraph 4(a) above and failure to comply with the pricing
requirements of paragraph 4(b)); provided that the non-breaching
Party shall have notified the breaching Party in writing of such
breach or default, advising of the nature of the breach or default,
and within ten (10) calendar days after the date of such notice in
the case of monetary defaults and thirty (30) calendar days after
the date of such notice in the case of non-monetary defaults, the
breaching Party shall not have cured such breach or default. For
purposes of this paragraph,
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notices may be given or received by JAKKS on behalf of the Toymax
Companies.
c. If this Agreement is terminated pursuant to the provisions of
this Article 8, the Parties shall be bound by the following
provisions:
i. Except with respect to Non-Conforming Products, all
pending orders placed by the Product Vendee on or before
receipt of a notice of termination for the Products shall be
fulfilled by JI and delivered on the supply dates requested by
the Product Vendee, be paid for in accordance with the terms
and provisions hereof and with respect to quality remain
subject to the provisions hereof, except where this Agreement
has been terminated by JI as a result of a material breach by
JAKKS or the Product Vendee such as non-payment, in which
event fulfillment of such purchase orders shall be at the
option of JI, and if such purchase orders are not fulfilled in
accordance with their terms, the Product Vendee shall have no
further obligation to make payment for such pending orders.
ii. After this Agreement is terminated, all Confidential
Information shall be returned by the recipients to the
disclosing parties as set forth in Section 6 of this
Agreement.
9. Restrictive Covenant. From and after the date hereof and the later
of December 31, 2004 or one (1) year following the termination or
expiration of this Agreement, neither JI nor the Principals shall,
directly or indirectly through any Affiliate or other intermediary
(a) manufacture, produce, sell, market or otherwise promote any
Competitive Product or serve as a partner, member, manager,
director, officer or employee of, or consultant or advisor to, or in
any manner own, control, manage, operate or otherwise participate or
invest in, or be connected with any Person that engages in the
marketing or sale of Competitive Products, or authorize the use of
its or their name in connection therewith, or (b) for itself, or
himself or herself, or on behalf of any other Person, employ, engage
or retain any Person who at any time during the preceding 12-month
period shall have been an employee of any of the Toymax Companies or
JAKKS or its other Affiliates, or contact any supplier within the
United States, Hong Kong or People's Republic of China, or any
customer or employee of the Toymax Companies, JAKKS or its other
Affiliates for the purpose of soliciting customers for the sale of
Competitive Products or persuading any such supplier or customer to
cease doing or reduce the amount of business being done with, or
persuading such employee to cease being employed by a Toymax
Company, JAKKS or its other Affiliates. The foregoing provisions
notwithstanding, JI or the Principals may invest its or his funds in
securities of an issuer if the securities of such issuer are listed
for trading on a registered securities exchange or actively traded
in the over-the-counter market and JI's and the Principals' and
their Affiliates aggregate holdings therein represent less than 1%
of the total number of shares or principal amount of the securities
of such issuer then outstanding.
JI and each of the Principals acknowledges that the provisions of this
Section, and the period of time, lack of any specific geographic area
given the international nature of the business of JAKKS and its
Affiliates, and the scope and type of restrictions on their activities set
forth herein, are reasonable and necessary for the protection of JAKKS and
its Affiliates are an essential inducement to JAKKS entering into this
Agreement and the Stock Purchase Agreement and
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acquiring shares of common stock of Toymax International from Best Phase
Limited and the other shareholders selling their shares to JAKKS pursuant
to the Stock Purchase Agreement. The Principals, JI & TN each acknowledges
that the type of services that they and it have performed for Toymax
International and its Affiliates were of an intellectual and technical
character that required the disclosure of confidential and proprietary
information of Toymax International and its Affiliates to them and
resulted in the creation by them of information which is confidential and
proprietary to Toymax International and its Affiliates, and accordingly
that the restrictive covenants contained herein are necessary in order to
protect and maintain the business and assets and goodwill of Toymax
International, whose shares are being purchased by JAKKS. The Principals,
JI & TN each acknowledges that the business of Toymax International and
its Affiliates extends beyond the geographic area of the State of New
York, U.S.A. and of Hong Kong and accordingly, it is reasonable that the
restrictive covenants set forth above are not limited by specific
geographic area but by the location of the suppliers and customers of
Toymax International and its Affiliates. The Principals, JI, and TN each
acknowledges that the remedy at law for any breach of this agreement by
them will be inadequate and that, accordingly, Toymax International shall,
in addition to all other available remedies (including without limitation
seeking such damages as it can show it has sustained by reason of such
breach), be entitled to injunctive relief without being required to post
bond or other security and without having to prove the inadequacy of the
available remedies at law.
10. Ownership of Trade Rights, and Tools, Molds, Designs, etc.
a. ACKNOWLEDGMENT BY JI, TN AND THE PRINCIPALS. JI, TN and the
Principals acknowledges and agrees that (i) all of the Trade Rights
(subject to the provisions of paragraph 10(b) regarding the JI & TN
Manufacturing Trade Rights) are the sole property of the Toymax
Companies or the Product Vendee, as the case may be, and (ii) they
have no interest in or claim to any of the Tools, Molds and
Specifications (other than tools and molds relating to the Existing
Toymax Products in an immaterial amount not exceeding $100,000.00 in
the aggregate now owned by JI and TN), developed, conceived and
produced in connection with the design, manufacture and marketing of
the Products by them prior to and after the date hereof subject to
payment by the Toymax Companies or the Product Vendee of any
outstanding invoice for tools and molds as reflected on the books
and records of the Toymax Companies prior to or after the date
hereof. JI, TN and the Principals represent and warrant to JAKKS and
the Toymax Companies that they have received payment in full of all
amounts due to them for all of the Tools, Molds and Specifications
used by JI or TN in connection with the manufacture of the Existing
Toymax Products and all other products manufactured by JI or TN for
the Toymax Companies and their Affiliates within the past five (5)
years (other than tools and molds relating to the Existing Toymax
Products in an immaterial amount not exceeding $100,000.00 in the
aggregate now owned by JI and TN.)
b. "WORKS FOR HIRE". JI and the Principals each acknowledges and
agrees that for all purposes of U.S. and foreign Copyright Laws the
Trade Rights and any inventions, discoveries, enhancements or
improvements to any tangible or intangible property, with respect to
the Products manufactured by JI for the Toymax Companies or TN under
the Existing Manufacturing Agreement and this Manufacturing
Agreement (for the purposes of this paragraph all of the foregoing
11
is collectively referred to as the "Work", but excluding therefrom
any JI & TN Manufacturing Trade Right), and any and all elements
thereof, shall be deemed to constitute "works for hire", belonging
to the Toymax Companies, JAKKS or its other Affiliates acting as the
Product Vendee, within the meaning of Xxxxx 00, Xxxxxx Xxxxxx Code,
Section 101, and any comparable provisions of the law of any other
jurisdiction, such that all right, title and interest therein,
including, without limitation, copyrights and exclusive rights under
copyright, vest in the Toymax Companies, JAKKS or its other
Affiliates acting as the Product Vendee. JI and the Principals each
hereby transfers and conveys to the Toymax Companies the exclusive,
world-wide, royalty-free, paid-up right to exploit, use, develop,
license the Work, and any improvements thereto or derivatives
thereof; and the exclusive right, title and interest in and to all
inventions, improvements, patent applications and letters patent,
"know-how", and all intellectual property and other rights, tangible
or intangible, which relate to or are based upon or derived from the
Work; and to all information, documents, and specifications that
relate to the Work. If the Work or any of the elements thereof is
deemed not to be "works for hire" within the meaning of Xxxxx 00,
Xxxxxx Xxxxxx Code, Section 101, then by its signature below JI and
each of the Principals hereby assigns and transfers to the Toymax
Companies, JAKKS or its other Affiliates acting as the Product
Vendee with respect to any Product or prospective Product to which
the Work relates all right, title and interest in and to the Work,
including rights throughout the world for good and valuable
consideration, receipt of which JI and each of the Principals hereby
acknowledges. Notwithstanding the foregoing, (i) if any
manufacturing process used by JI in the manufacture of any Product
under this Agreement or the Existing Manufacturing Agreement that
would otherwise constitute part of the Work, becomes part of the
public domain, JI shall have a perpetual, non-exclusive,
royalty-free right to use such process in its manufacturing
operations commencing one (1) year after it first becomes part of
the public domain, and (ii) subject to the restrictive covenants in
Section 9 of this Agreement, as between or among the Parties, no
Party shall have any claim to any other manufacturing process not
described in clause (i) or other intellectual property right
generally known in the toy industry or otherwise in the public
domain.
x. XXXXX OF LICENSE TO JI & TN MANUFACTURING TRADE RIGHT. JI and
TN hereby grant to JAKKS and its Affiliates, including the Toymax
Companies, a perpetual, non-exclusive, royalty-free right to
exploit, use, and sub-license in their respective businesses any JI
& TN Manufacturing Trade Right invented or conceived prior to the
date hereof.
11. Miscellaneous.
a. LIMITATION OF AUTHORITY. No provision hereof shall be deemed
to create any partnership, joint venture or joint enterprise or
association among the parties hereto, or to authorize or to empower
any party hereto to act on behalf of, obligate or bind any other
party hereto.
b. FEES AND EXPENSES. Each party hereto shall bear such fees and
expenses as may be incurred by it in connection with this Agreement.
12
c. FORCE MAJEURE. Any delay in or failure of the performance of
any of the duties or obligations of a Party hereto (except the
payment of money owed) shall not be considered a breach of this
Agreement and the time required for performance shall be extended
for a period equal to the period of such delay, provided that such
delay has been caused by or is the result of any acts of God; act of
the public enemy; insurrections; war; riots; embargoes; labor
disputes, including strikes, lockouts, job actions or boycotts;
fires; explosions; floods; shortages of material or energy; delay in
transportation; any discontinuance of the manufacture, distribution,
sale; or other unforeseeable causes beyond the control and without
the fault or negligence of the Party so affected. The Party so
affected shall give prompt notice to the other Party of such cause,
and shall take whatever steps are necessary to relieve the effect of
such cause as rapidly as possible. Notwithstanding the foregoing, if
such period of delay exceeds thirty (30) days, then such delay may
be considered a breach of this Agreement and the extension of time
for performance shall cease at the end of such thirty (30) day
period.
d. NOTICES. Any Notice or demand required or permitted to be
given or made hereunder to or upon any party hereto shall be deemed
to have been duly given or made for all purposes if (a) in writing
and sent by (i) messenger or an overnight courier service against
receipt, or (ii) certified or registered mail, postage paid, return
receipt requested, or (b) sent by telegram, telecopy (confirmed
orally), telex or similar electronic means, provided that a written
copy thereof is sent on the same day by postage-paid first-class
mail, to such party at the following address:
to JAKKS or the Toymax Companies:
00000 Xxxxxxx Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
with a copy to:
Feder, Kaszovitz, Isaacson,
Weber, Xxxxx, Bass & Rhine LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
to JI, or TN, or the Principals, at:
Units D-F, 26th Floor, CDW Building
000 Xxxxxx Xxxx Xxxx
Xxxxx Xxx, X.X, Xxxx Xxxx
Attn: Xxxxx Xxx
Fax: 000-0000-0000
13
with a copy to:
Ettelman & Xxxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxxxxx Xxxxxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
or such other address as any party hereto may at any time, or from
time to time, direct by Notice given to the other parties in
accordance with this Section. Except as otherwise expressly provided
herein, the date of giving or making of any such Notice or demand
shall be, in the case of clause (a) (i), the date of the receipt; in
the case of clause (a) (ii), three business days after such Notice
or demand is sent domestically within the United States of America
and seven business days after such Notice or demand is sent
internationally; and, in the case of clause (b), the business day
next following the date such Notice or demand is sent.
e. AMENDMENT. Except as otherwise expressly provided herein, no
amendment of this Agreement shall be valid or effective, unless in
writing and signed by or on behalf of the parties hereto.
f. WAIVER. No course of dealing or omission or delay on the part
of any party hereto in asserting or exercising any right hereunder
shall constitute or operate as a waiver of any such right. No waiver
of any provision hereof shall be effective, unless in writing and
signed by or on behalf of the party to be charged therewith. No
waiver shall be deemed a continuing waiver or waiver in respect of
any other or subsequent breach or default, unless expressly so
stated in writing. Any additional or different terms stated by a
Party in any proposal, quotation, purchase order, confirmation,
sales order, invoice, acceptance document, acknowledgment or other
document, and any terms that are inconsistent with or in variance
with the terms and conditions in this Agreement, shall be of no
force and effect. No course of dealing, usage of trade or course of
performance shall be relevant to explain, supplement or modify any
express provisions of this Agreement. A Party's failure to object to
any such provision contained in any communication from the other
Party shall not be deemed to be an acceptance thereof or a waiver of
that party's rights and remedies hereunder.
g. GOVERNING LAW. The parties acknowledge and agree that this
Agreement shall be a contract made in the United States, State of
New York. All questions pertaining to the validity, construction,
execution and performance of this Agreement shall be construed and
governed in accordance with the domestic laws of the State of New
York (including, without limitation, the UCC), without giving effect
to principles of (i) comity of nations or (ii) conflicts of law, and
this Agreement shall not be governed by the provisions of the U.N.
Convention on Contracts for the International Sale of Goods. Each
party to this Agreement submits to the jurisdiction of the courts of
the State of New York, located in New York County, New York, United
States of America, and to the jurisdiction of the United States
District Court for the Southern District of Xxx Xxxx, Xxx Xxxx, Xxx
Xxxx, Xxxxxx Xxxxxx of America with respect to any matter arising
out of this Agreement, waives any objection to venue in the Counties
of New York,
14
State of New York, or such District, and agrees that service of any
summons, complaint, Notice or other process relating to such
proceeding may be effected in the manner provided by Paragraph 10(d)
hereof. If service of process is required to be made within the
United States of America, JI, TN, and each of the Principals appoint
as their agent for service of any process the firm of Ettelman &
Xxxxxxxxxx, P.C., 000 Xxxxxxx Xxxxxxxxx Xxxxxxxxx, Xxxxxx Xxxx, Xxx
Xxxx 00000.
h. DAMAGE LIMITATION. No Party shall be liable to the other for
punitive, exemplary or special damages, with the exception of
damages for breach of the provisions of Section 6, Section 9 and
Section 10, as to which no such limitation shall apply.
h. REPRESENTATION REGARDING TOYMAX (BERMUDA) LIMITED. JI
represent and warrant that Toymax (Bermuda) Limited, an exempted
company organized under the laws of Bermuda and a party to the
Existing Manufacturing Agreement, has been dissolved.
i. SEVERABILITY. The provisions hereof are severable and in the
event that any provision of this Agreement shall be determined to be
invalid or unenforceable in any respect by a court of competent
jurisdiction, the remaining provisions hereof shall not be affected,
but shall, subject to the discretion of such court, remain in full
force and effect, and any invalid or unenforceable provision shall
be deemed, without further action on the part of the parties hereto,
amended and limited to the extent necessary to render the same valid
and enforceable.
j. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original and which together shall
constitute one and the same agreement.
k. FURTHER ASSURANCES. Each party hereto shall promptly execute,
deliver, file or record such agreements, instruments, certificates
and other documents and perform such other and further acts as any
other party hereto may reasonably request or as may otherwise be
reasonably necessary or proper, to carry out the provisions of this
Agreement.
l. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement is not intended, and shall not
be deemed, to create or confer any right or interest for the benefit
of any Person not a party hereto.
m. ASSIGNMENT. JI's obligations under this Agreement may not be
assigned without the prior written consent of JAKKS, and any
purported assignment without such consent shall be void and without
effect.
n. TITLES AND CAPTIONS. The titles and captions of the Articles
and Sections of this Agreement are for convenience of reference only
and do not in any way define or interpret the intent of the parties
or modify or otherwise affect any of the provisions hereof.
15
o. GRAMMATICAL CONVENTIONS. Whenever the context so requires,
each pronoun or verb used herein shall be construed in the singular
or the plural sense and each capitalized term defined herein and
each pronoun used herein shall be construed in the masculine,
feminine or neuter sense.
p. REFERENCES. The terms "herein," "hereto," "hereof," "hereby"
and "hereunder," and other terms of similar import, refer to this
Agreement as a whole, and not to any Article, Section or other part
hereof.
q. NO PRESUMPTIONS. Each party hereto acknowledges that it has
participated, with the advice of counsel, in the preparation of this
Agreement. No party hereto is entitled to any presumption with
respect to the interpretation of any provision hereof or the
resolution of any alleged ambiguity herein based on any claim that
any other party hereto drafted or controlled the drafting of this
Agreement.
r. EXHIBITS AND SCHEDULES. Any Exhibits and Schedules hereto are
an integral part of this Agreement and are incorporated in their
entirety herein by this reference.
s. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, commitments or arrangements
relating thereto.
16
IN WITNESS WHEREOF, the parties by their respective duly authorized officers,
have duly executed this Agreement as of the date set forth in the Preamble
hereto.
JAUNTIWAY INVESTMENTS LIMITED TAI NAM INDUSTRIAL COMPANY LIMITED
By: /s/ XXXXX KI XXXX XXX By: /s/ XXXXX KI XXXX XXX
---------------------- ---------------------
Name: Xxxxx Ki Xxxx Xxx Name: Xxxxx Ki Xxxx Xxx
Title: Title:
TOYMAX INTERNATIONAL INC. JAKKS PACIFIC, INC.
By: /s/ XXXXXXX XXXXXXXX By: /s/ XXXX X. XXXXXXX
---------------------- ---------------------
Name: Xxxxxxx Xxxxxxxx Name: Xxxx X. Xxxxxxx
Title: CFO Title: Exec. V.P./C.F.O.
TOYMAX (H.K.) LIMITED
By: /s/ XXXXX KI XXXX XXX
---------------------
Name: Xxxxx Ki Xxxx Xxx
Title:
Xxxxx Ki Xxxx Xxx and Xxxxxxx Xxxx Xxxx Xxxxx sign the foregoing Agreement for
the purpose of agreeing to the provisions of Sections 1, 6, 9,10 and 11 thereof.
/s/ XXXXX KI XXXX XXX
---------------------
Xxxxx Ki Xxxx Xxx
/s/ XXXXXXX XXXX XXXX XXXXX
---------------------------
Xxxxxxx Xxxx Xxxx Xxxxx
17
EXHIBIT A
PRODUCT AND PRICE LIST
of Existing Toymax Products
18
