1
EXHIBIT 10.22
THE PLAYCLOTHES CATALOG AGREEMENT
THIS AGREEMENT ("Agreement") is made as of July 1, 1994 by and between Regal
Greetings & Gifts Inc., a corporation organized and existing under the laws of
Canada, with its principal place of business at 000 Xxxxxxxx Xxxxxx Xxxx,
Xxxxxxx, Xxxxxxx X0X 0X0 ("Regal") and Childcraft, Inc., a corporation
organized and existing under the laws of the state of Delaware with its
principal place of Business at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, XX 00000
("Childcraft");
WHEREAS Childcraft has been authorized by its parent corporation, The Xxxx
Disney Company ("Disney"), to create, develop, distribute and fulfil orders
from direct mail catalogs published under the name "The Playclothes Catalog"
which feature a variety of merchandise ("Playclothes Merchandise"); and
WHEREAS Childcraft has developed a unique plan and system for the creation,
development and marketing of a direct mail, specialty catalog featuring
Playclothes Merchandise (the "Catalog"); and
WHEREAS Regal desires to obtain the rights from Childcraft to test the Catalog
and market the Catalog in Canada and obtain the necessary business services
(including, but not limited to, advice concerning product selection, budgets,
forecasting and marketing plans and to obtain a variety of camera-ready art,
photographic plates or proofs, keyplate, text and other materials for use by
Regal), and Childcraft is willing to grant such rights and provide such
services in order to adapt, develop and market the Catalog to meet the needs
and preferences of Canadian customers; and
WHEREAS Regal desires to obtain the rights from Childcraft to use the
"Playclothes" trademark in connection with the Catalog and the acquisition and
resale of merchandise bearing the Playclothes trademark and Childcraft is
willing to grant such rights on the terms and conditions set forth in this
Agreement;
THEREFORE, in consideration of the mutual promises contained herein, the
parties agree as follows:
1. TERM
Following the test period from July 1, 1994 to December 31,
1994, the term of this Agreement ("Term") shall be a six-year period commencing
January 1, 1995 and continuing up to and including December 31, 2000 and which
shall not be extended beyond this date except by a subsequent written agreement
signed by Regal and Childcraft. The period from January 1 to December 31 is
hereinafter referred to as a "Contract Year."
2
2. SCOPE OF AGREEMENT
A. Subject to and only in accordance with the provisions of this
Agreement, Childcraft grants Regal non-exclusive rights to:
(i) from July 1, 1994 to December 31, 1994:
(a) market a test Catalog in Canada; and
(b) use the Playclothes trademark in connection with the
Catalog, and sell merchandise bearing the Playclothes
trademark.
all such rights without payment of Service Fees or Royalties;
and
(ii) from January 1, 1995 through the end of the Term to:
(a) market the Catalog; and
(b) use the Playclothes trademark in connection with the
Catalog and sell merchandise bearing the Playclothes
trademark which is acquired from Childcraft or is
merchandise to which Childcraft has authorized the
Playclothes name to be applied and which has been
acquired from the vendor so authorized.
Childcraft agrees to advise Regal of such authorized vendors
and promptly advise Regal of changes thereto.
Regal will use reasonable efforts to exploit fully the rights herein granted in
Canada.
B. Notwithstanding the non-exclusive nature of the rights within
this Agreement, Childcraft agrees that during the Term, Childcraft shall not
authorize the Playclothes name to be used to identify any other direct mail
catalog in Canada nor authorize the sale of Playclothes merchandise through any
other direct mail catalog in Canada.
3. TERRITORY
The territory of this Agreement ("Territory") shall be the
country of Canada.
4. BUSINESS SERVICES PROVIDED BY CHILDCRAFT
A. Childcraft agrees that during the test period and the Term,
Childcraft shall provide its business services (the "Business Services") to
adapt and develop the Catalog. The Business Services provided by Childcraft
shall include the following:
(i) Childcraft shall utilize its expertise in direct mail sales of
merchandise to assist Regal in developing detailed budgets,
forecasts and schedules;
-2-
3
(ii) Childcraft's various creative resources shall assist Regal in
developing an attractive Catalog and advertising and
promotional materials and shall provide to Regal the use of
various camera-ready art, photographic plates or proofs,
keyplate, text and other similar materials already developed
by Childcraft for use in the United States; and
(iii) Childcraft shall utilize its marketing expertise to assist
Regal in creating, developing and implementing a marketing
program for the Catalog during the Term, including
advertising, promotions and expertise in clearance techniques.
5. MERCHANDISE AND OWNERSHIP
Merchandise shipped to and received by Regal from any source,
and legal title to such merchandise, will be governed by Regal's arrangements
with such source.
6. GUIDELINES FOR CATALOG OPERATIONS
In order to maintain the public reputation for quality and
customer service and the goodwill associated with "Playclothes", and as an
express condition of the rights to market the Catalog granted herein, Regal
agrees to comply with the following operational guidelines:
A. Facilities
Regal shall maintain suitable and adequate facilities
(including office space, telecommunications and warehousing facilities) to
conduct the direct mail business of the Catalog. Childcraft approves these
facilities now operated by Regal.
B. Personnel
(i) Regal shall hire an adequate number of personnel to take
customer orders, ship or deliver all such orders and respond to customer
inquiries or complaints. All such personnel shall be trained by Regal to
handle customer orders, inquiries and complaints and other related customer
services such as sending back order notices to process returns, rejected credit
card orders, and returned checks and to issue refunds or credits in a courteous
and expeditious manner and in accordance with all applicable Canadian federal,
provincial and local laws and standard practices in the direct marketing and
catalog sales industries.
(ii) In the event Childcraft shall become aware that any Regal
employee or agent responsible for fulfilling Regal's obligations under this
Agreement shall be discourteous to Catalog customers or otherwise endanger or
impugn the reputation for quality and customer service and the goodwill
associated with the name Playclothes, Childcraft shall provide notice of the
particulars of the same and may demand that Regal remove such employee or agent
from any activities or functions relating to this Agreement, and Regal shall
promptly comply with any such demand, provided that the improper conduct of the
employee or agent is substantiated. In the event that Regal fails or refuses
to comply with such demand after improper conduct has been substantiated,
Childcraft may terminate this Agreement pursuant to paragraph 18.C.
-3-
4
C. Inventory
(i) Regal shall exercise reasonable efforts to maintain an
adequate inventory of merchandise to ship all customer orders and avoid
creating customer complaints due to late or delayed delivery of orders from the
Catalog, all within prudent financial constraints. On a case-by-case basis,
Childcraft may, at its discretion, agree to purchase from Regal certain
over-inventoried merchandise items at Regal's original purchase price, subject
to Regal paying all costs to deliver such items to Childcraft at its warehouse
in the United States.
(ii) Childcraft will include Regal in planning activities of each
Catalog issuance and use reasonable efforts to support Regal to achieve
standards, delivery and quality of merchandise so as to support inventory
levels sufficient to meet customer demands and avoiding customer complaints due
to unsatisfactory back-order levels.
(iii) Regal shall use its reasonable commercial efforts to ensure
that the terms and conditions for purchase orders used by Regal to source goods
for the Catalog shall include a specific indemnity running from the vendor to
Regal and from the vendor to Childcraft for any third party claims which relate
to the Playclothes Merchandise as delivered to Regal.
D. Order Processing
(i) Regal shall accept customer orders from the Catalog through
the mail and over the phone and by facsimile or similar means.
(ii) Regal shall provide and maintain a telephone order-taking
service, such that customer telephone service shall be continuously available
on weekdays during business hours. In addition, Regal will staff and maintain
a separate customer service telephone line on weekdays during business hours to
answer customer questions or complaints.
(iii) Regal shall expend reasonable efforts to complete standard
shipments within 72 hours of Regal's receipt of an order for which merchandise
is in stock and to otherwise comply with any reasonable shipping instructions
provided by Regal's customers. In the event that Childcraft shall reasonably
determine that the number of back-ordered products is excessive and endangers
or threatens to endanger the reputation for quality and customer service and
the goodwill associated with the name "Playclothes", Childcraft shall provide
notice of same to Regal and Childcraft and Regal shall meet to discuss the
situation and agree upon a product order and inventory plan which will minimize
back- orders. In the event that Regal fails or refuses to remedy excessive
back-ordered products which endanger the reputation for quality and goodwill
associated with the trade-xxxx "Playclothes", Childcraft shall have the right
to terminate this Agreement pursuant to paragraph 18.C.
Regal shall handle all returns from customers in a timely
fashion, issuing credits or refunds as appropriate.
-4-
5
E. Customer List
Regal will record each customer's name and address to form a
customer list (the "List").
Regal shall make the List available for the use of Childcraft
and any subsidiary of Disney upon the following terms and conditions:
(i) during the Term, on normal trade terms and at the lowest price
at which Regal rents or would rent the List or any similar
list;
(ii) for a period of twenty-four months following the Term, or its
earlier termination by Regal, or its earlier termination by
Childcraft for cause, at no cost or expense to Childcraft and
during such twenty-four month period Childcraft may enter into
reciprocal rental and exchange agreements with third parties
as to names on the list. During and after such twenty-four
month period Childcraft shall be free to mail to names on the
list who have made purchases during the twenty-four month
period; and
(iii) all users of the List whether during the Term or thereafter
shall only be directly for or on behalf of Disney, its
divisions, subsidiaries or affiliated companies and may not be
used by or on behalf of any third party licensee of Disney,
Childcraft or any of their affiliates.
F. Taxes
Regal shall charge purchasers of merchandise through the
Catalog sales and other taxes in accordance with its internal policies and
procedures and the requirements of Canadian law. Regal acknowledges that it
has sole and exclusive liability and responsibility to remit such taxes to the
appropriate taxing authorities.
Regal shall indemnify and defend Childcraft and its officers
and directors from and against all claims, suits or liabilities and expenses
(including reasonable legal fees), if any, incurred as a result of Regal's
failure to remit to the appropriate authorities any such sales or other taxes
as may be claimed as due and owing by reason of its activities under this
Agreement.
G. Operating Reports
Within 20 days after the end of each calendar month during the
Term, Regal agrees to provide Childcraft with an operating report detailing the
following:
(i) a listing of each item of merchandise (including quantities
and s.k.u. or other product numbers) shipped to customers and
a list showing returns and exchanges during the previous
month; and
-5-
6
(ii) a cash management report detailing all amounts received on
orders or refunded on orders (whether or not such orders are
shipped or reshipped during the month).
H. Meetings
From time to time during the Term, but in no event less often
than once per calendar quarter, Regal shall meet with Childcraft in order to
share with Childcraft Regal's past sales results and planned future business
activity under this Agreement. Childcraft shall in turn share such information
relating to Childcraft's business in the United States as may be helpful to
Regal's activities hereunder.
I. Marketing Plans
At least thirty days prior to each Contract Year during the
term hereof, Regal shall furnish to Childcraft Regal's written marketing plans
with respect to the Catalog, which marketing plans shall include Regal's annual
sales estimate for the Catalog for the Contract Year. Thereafter, from time to
time during each such year Regal shall furnish to Childcraft periodic updates
of such marketing plans, which shall include, without limitation Regal's sales
estimate for each Catalog drop, each item of merchandise featured in the
Catalog, those items proposed to be added to or deleted from the Catalog, and
Regal's proposed advertising, promotion and publicity in connection with the
distribution of the Catalog.
J. Samples
Unless otherwise agreed by Childcraft, promptly after
printing, Regal shall deliver to Childcraft, at Regal's sole cost and expense,
25 copies of each drop of the Catalog and 1 additional copy to: Legal
Department, The Xxxx Disney Company, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000-0000.
7. APPROVALS
A. Childcraft and Regal shall jointly approve, in advance, any
press releases, advertising, publicity and promotional materials concerning the
contractual arrangements between Childcraft and Regal.
B. Regal acknowledges and agrees that the following rights are
retained by Childcraft in order to assure that the distribution of the Catalog
and the distribution and sale of merchandise by Regal are consistent with
Childcraft standards:
(i) the right to approve in advance (other than materials provided
by Childcraft) each photograph, illustration and mechanical,
and all copy (but not prices) as well as the quality of paper
used by Regal in the production of each drop of the Catalog;
(ii) the right to approve in advance all advertising and promotions
with respect to the Catalog;
-6-
7
(iii) the continuing right to approve the fulfilment facilities used
by Regal in connection with its performance under this
Agreement; provided, however, that Childcraft hereby approves
the fulfilment centres now operated by Regal unless and until
the performance of any such fulfilment centre should
deteriorate such that it shall adversely reflect upon the
Playclothes name or the Catalog, in which event Childcraft may
demand in writing that Regal resolve the problem. In the
event that Regal fails or refuses to comply with such demand,
Childcraft may terminate this Agreement pursuant to paragraph
18.C.
C. Regal shall provide Childcraft with its production schedule
for the Catalog (including, without limitation, its photography shooting
schedule), and for the advertising and promotional material therefore and shall
forward all items for which Childcraft's approval is needed at as early a time
as practicable. Childcraft shall use reasonable efforts to render its approval
or disapproval within 5 working days and to meet any special needs notified to
it by Regal, to permit Regal to meet such production schedule. Nonetheless, in
the event that Childcraft for any reason fails to respond within 5 working days
or meet other special needs notified to it, Regal understands and agrees that
any material submitted for approval shall be considered disapproved unless and
until expressly approved by Childcraft.
D. The decision to grant or withhold any approval, consent or
permission under this Agreement shall be within Childcraft's sole discretion,
exercised in good faith. In rendering any such decision, Childcraft may take
into consideration such commercial, corporate policy, aesthetic or other
considerations s it deems appropriate; provided, however, that Childcraft shall
endeavour to make Regal aware of any changes in its present commercial or
corporate policies in advance.
E. Regal shall not proceed with the production or distribution of
any Catalog beyond any step at which Childcraft's approval was required, if
such required approval has not been given. Regal shall not distribute any
advertising, publicity or promotion relating to the Catalog or any merchandise
contained therein without Childcraft's prior approval. Childcraft's failure or
refusal to grant any approvals required hereunder shall not result in any
liability for damages on its part to Regal or others claiming through Regal.
8. FEES
A. For the non-exclusive rights to market the Catalog and for the
necessary Business Services, Regal shall pay Childcraft a fee (the "Services
Fee") equal to seven percent (7%) of the Net Proceeds from all Catalog Sales
after December 31, 1994, it being agreed that Regal's sales and profits arising
from the Catalog are directly related to the level and quality of the Business
Services provided.
B. For the non-exclusive rights to use the Playclothes trademark
in connection with the Catalog and to sell merchandise bearing the Playclothes
trademark in the Territory, Regal shall pay to Childcraft a royalty (the
"Royalty") equal to three percent (3%) of the Net Proceeds from all Catalog
Sales after December 31, 1994.
-7-
8
For purposes of this Agreement:
(i) "Net Proceeds" shall mean and include all amounts received
from customers for Catalog Sales, less only actual credits and
cash refunds from customer returns, shipping and handling
credits, and sales and other taxes on such sales collected,
reported and paid to the federal, provincial or local taxing
authorities.
(ii) "Catalog Sales" shall mean all sales of Playclothes
Merchandise offered in the Catalog, excluding any inventory
clearance sales of Playclothes Merchandise by means other than
the Catalog and those made in outlet stores. Sales resulting
from product extensions described in Section 9, paragraph E.ii
are also excluded from "Catalog Sales".
C. Regal shall pay Childcraft all Services Fee and Royalties due,
less any applicable Canadian withholding taxes actually paid, with respect to
all Catalog Sales hereunder in any calendar quarter (whether during the Term or
thereafter) no later than 30 days following the end of such calendar quarter
and shall at the same time deliver to Childcraft at its offices a statement
(certified by an officer of Regal as being correct and complete) for the period
covered thereby and a copy of receipts or other documents evidencing payment to
the appropriate tax authority of all sums withheld as taxes. Each such
statement shall state the total amounts received from customers, shall itemize
by category the subtractions appropriate to reach "Net Proceeds", and shall
state the Services Fee and Royalties due Childcraft therefor, any adjustments
made in such figures for preceding periods, and such other items or information
as may be necessary to calculate the Services Fee and Royalties due to
Childcraft under this Agreement.
D. Notwithstanding the provisions of Subparagraphs 8.A, 8.B and
8.C hereinabove, Regal guarantees that for each Contract Year during the Term
Childcraft shall be paid by Regal the sums respectively specified below, as
guaranteed minimums for Services Fee and Royalties (the "Guaranteed Minimums").
If by the 30th day following the end of each such Contract Year, Regal has not
already paid Childcraft amounts which equal or exceed the Guaranteed Minimums
for such year, then by the 30th day after the end of such Contract Year Regal
shall pay Childcraft such additional sums as may be necessary to make Regal's
actual payments to Childcraft of all Services Fee and Royalties for said
Contract Year equal to the Guaranteed Minimums:
CONTRACT YEAR MINIMUM SERVICES FEE MINIMUM ROYALTIES
------------------------- -------------------- -----------------
Jan. 1 '95 - Dec. 31 '95 C$140,000 C$ 60,000
Jan. 1 '96 - Dec. 31 '96 C$196,000 C$ 84,000
Jan. 1 '97 - Dec. 31 '97 C$248,500 C$106,500
Jan. 1 '98 - Dec. 31 '98 C$297,500 C$127,500
Jan. 1 '99 - Dec. 31 '99 C$350,000 C$150,000
Jan. 1 2000 - Dec. 31 2000 C$350,000 C$150,000
-8-
9
E. Payments
All Services Fee and Royalties (including any Guaranteed
Minimums) and other amounts payable to Childcraft shall be remitted to
Childcraft in United States Dollars to Childcraft's address set forth on page 1
of this Agreement or to such bank or other office as Childcraft may from time
to time designate.
F. Governmental Regulations
If Regal shall be unable, because of governmental restrictions
or otherwise, to remit to Childcraft any sums of money due to it, Regal shall
immediately notify Childcraft in writing and await instructions as to the
disposition of such sums. Regal specifically acknowledges and agrees that all
sums of money accruing and owing to Childcraft hereunder and other things of
value provided by Childcraft to Regal for its use hereunder, so long as the
same or any portion thereof remains in Regal's possession or under its control,
shall (subject to any instructions given by Childcraft as to the disposition
thereof) be deemed funds held in trust by Regal as trustee for Childcraft and
shall be subject to and governed by all the obligations, duties and incidents
of the trust relationship, subject to the terms of this Agreement.
9. OWNERSHIP OF COPYRIGHTED MATERIALS, COPYRIGHT NOTICES AND
NON-ASSOCIATION WITH NON-DISNEY CHARACTER
A. Regal acknowledges that the copyrights, trademarks and all
other proprietary rights in and to the name "The Playclothes Catalog" and the
contents of the Catalog are exclusively owned by and reserved to Childcraft.
Regal shall neither acquire nor assert copyright or trademark ownership or any
other proprietary rights in the name "The Playclothes Catalog" or in the
contents of the Catalog itself, or in any derivation, adaptation, variation or
name thereof. Without limiting the foregoing, Regal hereby assigns to
Childcraft all its worldwide right, title and interest in the name "The
Playclothes Catalog" and in the contents of the Catalog.
B. All persons engaged by Regal in connection with the creation
and development of materials for the Catalog or any advertising or promotional
materials for the Catalog will be either employees, persons commissioned
pursuant to an agreement in writing to create works for hire or persons who
enter into a written agreement assigning to Childcraft all rights, title and
interest, including the copyright, in the works so created or developed so as
to ensure that all such rights in and to the materials shall be owned by
Childcraft and that no derivative or subsidiary rights therein shall exist in
any person other than Childcraft. Regal agrees that any agreement entered into
by Regal with others relating to the Catalog or this Agreement shall contain
such assignment clauses as are in Childcraft's reasonable opinion, necessary or
desirable to protect Childcraft's rights as set forth in this Agreement and
Regal shall, at Childcraft's request, furnish copies of all such agreements to
Childcraft. The obtaining of such assignment agreements is an express
condition and essential term of this Agreement.
-9-
10
C. As an express condition and an essential term of this
Agreement, each Catalog and any other material containing the name "The
Playclothes Catalog", shall bear a properly located copyright notice in
Childcraft's name. Regal will comply with such instructions as to form,
location and content of the notice as Childcraft may give from time to time.
If by inadvertence a proper copyright notice in Childcraft's name is omitted
from any Catalog, advertising or promotional material for any Catalog or any
other material containing the name "The Playclothes Catalog", Regal agrees at
Regal's sole cost and expense to use all reasonable efforts to correct the
omission in the Catalog or other material in process of production or
publication or in distribution. Regal agrees to advise Childcraft promptly and
in writing of the steps being taken to correct any such omission and to
cooperate fully with Childcraft in making the corrections on existing Catalogs
or advertising or promotional materials for the Catalog which can be located.
D. Regal agrees that it will not use the names "Childcraft",
"Disney", "The Playclothes Catalog" or any Catalog or other material
proprietary to Childcraft (or its parent company) in any way other than as
herein authorized (or authorized in any other written contract signed by Regal
and Childcraft or Disney). In addition to any other remedy Childcraft may
have, Regal agrees that the profits from any unauthorized use thereof, and all
profits from the use of any other copyrighted material of Childcraft or Disney
without authorization, shall be payable to Childcraft. Regal agrees to give
Childcraft prompt written notice of any unauthorized use by third parties in
Canada of the name "The Playclothes Catalog" which comes to Regal's attention.
Regal will not, without Childcraft's consent, bring or cause to be brought any
criminal prosecution, lawsuit or administrative action for infringement,
interference with or violation of any rights licensed to Regal hereunder.
Regal agrees to cooperate with Childcraft and, if necessary, to be named by
Childcraft as a sole complainant or co-complainant in any action against an
infringer of Childcraft's copyrights, trademarks or other proprietary rights,
provided, however, that Childcraft shall indemnify Regal for any costs, expense
or liabilities associated with such an action.
E. (i) Regal agrees not to associate other competitive
licensed properties with the name "The Playclothes
Catalog" either in the Catalog or in any advertising
promotional or display materials for the Catalog.
(ii) Childcraft agrees that Regal may incorporate a
non-competitive apparel brand that extends the
utility of the Catalog in meeting the needs of
Canadian customers. All instances must be approved
by Childcraft in writing and approvals will not be
unreasonably withheld but, Regal agrees that such
content will not exceed a number of items greater
than 10% of the number of Playclothes items displayed
in each instance and that such items will be included
in a separate section of the Catalog designed in a
manner consistent with the Catalog.
-10-
11
10. TRADEMARK RIGHTS AND OBLIGATIONS
A. All uses by Regal of the name "The Playclothes Catalog" shall
inure to Childcraft's benefit. Regal acknowledges that Childcraft is the
exclusive owner of any trademark incorporating all or any part of the name "The
Playclothes Catalog" and the trademark rights created by such uses. Without
limiting the foregoing, Regal hereby assigns to Childcraft its interest in any
trademark incorporating all or any part of the name "The Playclothes Catalog"
and any Catalogs and the trademark rights created by such uses together with
the goodwill attaching to that part of the business in connection with which
such trademark is used. Regal agrees to follow Childcraft's instructions for
proper use thereof in order that protection and/or registrations for such
trademark may be obtained or maintained.
B. Except with the written consent of Childcraft, neither Regal
or any parent, subsidiary, affiliate, partner or joint venture of Regal's will
register or attempt in any country to register copyrights in, or to register as
a trademark, service xxxx, design patent or industrial design the name "The
Playclothes Catalog", or derivations or adaptations thereof, or any work,
symbol or design which is so similar thereto as to suggest association with or
sponsorship by Childcraft, Disney or any subsidiary or affiliate company of
Disney. In the event of breach of the foregoing, Regal agrees, at Regal's
expense and at Childcraft's request, immediately to terminate the unauthorized
registration activity and promptly to execute and deliver, or cause to be
delivered, to Childcraft such assignments and other documents as Childcraft may
require to transfer to Childcraft or its designee all rights to the
registrations, patents or applications involved.
11. BOOKS AND RECORDS
During the Term and for a period of 3 years after the
expiration or earlier termination of this Agreement, Regal shall keep and
preserve accurate and complete records and books of account in accordance with
Canadian generally accepted accounting principles consistently applied,
reflecting all activities and transactions relating to Catalog sales hereunder.
For purposes of this Paragraph 11, "Records" shall not include hard-copy order
forms, so long as all order transactions are maintained on a computer system.
During the term and for a period of 3 years after the expiration or earlier
termination of the Agreement, Childcraft shall, at its cost and expense, except
as hereinafter provided, have the right to have its agents or employees,
including certified public accountant or attorneys and/or other persons of
Childcraft's choice, on one week's written notice to Regal and during regular
business hours, examine and make copies of Regal's computer system, books of
account (including general ledger), records, vouchers, invoices and all other
documents relating to Catalog sales hereunder in order to determine the
correctness and completeness of all payments made and statements delivered
hereunder to Childcraft. If any such examination reveals an error of 5% or
more in underpayment of total Services Fee and Royalties paid or payable to
Childcraft or if any such examination is made because Regal has not made timely
delivery hereunder to Childcraft of any statement of account required
hereunder, then Regal shall bear the costs and expenses of such examination, in
addition to payment of the amount of any unpaid Services Fee and Royalties that
such examination reveals to be owing to Childcraft.
-11-
12
12. COMPLIANCE WITH APPLICABLE LAWS, REGULATIONS AND INDUSTRY
STANDARDS
Regal represents and warrants to Childcraft that it is
authorized to perform and will undertake the activities contemplated to be
performed by it in this Agreement in a manner which complies with all
applicable laws, regulations and industry standards. Childcraft represents and
warrants to Regal that it is authorized to perform and will undertake the
activities contemplated to be performed by it in this Agreement in a manner
which complies with all applicable laws, regulations and industry standards.
13. RIGHTS UPON EXPIRATION OR TERMINATION OF THIS AGREEMENT
A. Upon the expiration or earlier termination of this Agreement,
Regal's right to print or distribute the Catalog shall terminate, all monies
payable hereunder to Childcraft shall become immediately due and payable in
full to Childcraft and all rights granted herein to Regal shall immediately and
automatically revert to Childcraft, except as specially provided in
Subparagraph 13.B hereinbelow.
B. Upon the expiration or earlier termination of this Agreement,
Regal shall have the right, on a non-exclusive basis, but otherwise in
accordance with all the terms and conditions of this Agreement, to continue to
fulfil Catalog orders received by Regal and undertake inventory clearance
during a period (the "Sell-off Period"), which is to be determined by both
parties acting reasonably.
C. Upon the later of 60 days after the expiration or earlier
termination of this Agreement, or the expiration of the Sell-Off Period:
(i) Regal shall furnish to Childcraft, at no cost to Childcraft,
subject to third party's rights, copies of all film used by
Regal in connection with producing or publishing the Catalog;
and
(ii) Regal shall furnish to Childcraft a certificate outlining
Regal's existing inventory of all materials (including all
artwork, graphics, photos, prints, mechanicals, designs,
plans, diagrams, plates, proofs, sketches, and all other
similar technical and/or special material whatsoever) that is
used by Regal exclusively in connection with the Catalog and
the advertising and promotion of the Catalog and of
merchandise contained within, their physical condition and
location and their actual individual direct, out-of-pocket
cost to Regal less all actual amortization and/or expenses
taken by Regal with respect thereto. Childcraft shall at all
times have the right, at its sole cost and expense, to conduct
a physical inventory of said materials and to inspect the sites
at which any of said materials are made, processed and/or
stored.
D. Childcraft shall have the right, but not the obligation,
within 90 days after expiration of the Term or the earlier termination of this
Agreement, to acquire, subject to third
-12-
13
party's rights, all or any of the materials described in subparagraph 13.C.(ii)
above at their direct, out-of-pocket cost to Regal less all actual amortization
and/or expenses taken by Regal with respect thereto. Childcraft shall exercise
such right by notifying Regal of its intention to acquire such materials within
such 90 day period. Upon payment, Childcraft shall thereupon become entitled
to possession of said materials, together with appropriate title documents
therefor, if requested by Childcraft. If Childcraft does not acquire them,
Regal shall destroy such materials and furnish Childcraft with a certificate of
such destruction. Childcraft shall have the right to have a representative
selected by it witness such destruction.
14. INDEMNIFICATION
A. Regal shall indemnify Childcraft and Disney and their
officers, directors and employees from and against any and all claims, damages,
losses and expenses (including reasonable legal fees) arising out of Regal's
performance of, or failure to perform, this Agreement that are caused, in whole
or in part (except for any damage caused by the acts or omissions of Childcraft
or Disney), by Regal's acts or omissions.
B. Childcraft shall indemnify Regal and its officers, directors
and employees from and against any and all claims, damages, losses and expenses
(including reasonable legal fees) arising out of:
(i) claims that Regal's use of the name "The Playclothes Catalog"
violates the rights of any third party or infringes any rights
granted by Disney or Childcraft to any third party;
(ii) Childcraft performance of, or failure to perform this
Agreement that are caused, in whole or in part (except for any
damage caused by the acts or omissions of Regal), by
Childcraft's acts or omissions; and
(iii) Childcraft and Regal agree to notify each other promptly of
any claim relating to Playclothes Merchandise and to cooperate
fully in the defense thereof and in minimizing the exposure of
the other party to damages.
Childcraft specifically excludes from any indemnity obligation
any claim related to any product sold in the Catalog, including, without
limitation, any claim that a product is defective or that the product itself or
any name used with the product, other than the Playclothes trademark, violates
the rights of any third party, whether or not Childcraft has approved the
inclusion of the product in the Catalog or supplied Catalog copy.
C. The indemnity obligations contained in this paragraph shall
survive the expiration or termination of this Agreement.
-13-
14
15. INSURANCE
Regal agrees to maintain in full force and effect during the
Term of this Agreement the following insurance coverage: Comprehensive
Liability Insurance and Warehouseman's Legal Liability Insurance with combine
single lines of no less than two million Canadian dollars (C$2,000,000). Regal
agrees to deliver to Childcraft a certificate or certificates of insurance
evidencing the above coverages and indicating that Childcraft shall receive
written notice of cancellation, non-renewal, or of any material change in
coverage, at least 30 days prior to the effective date thereof.
16. CONFIDENTIALITY
A. Regal acknowledges that material and information which
Childcraft has given or divulged to Regal or which will be given or divulged to
Regal during the Term and which related to Childcraft's direct mail operations,
plans and strategies, such as financial projections, marketing plans, pricing
strategies, customer lists and other such information or materials, constitutes
confidential and proprietary data. Regal shall keep such information or
material confidential and shall not reveal any such information or material to
any other person, or entity or use it for Regal's benefit or for the benefit of
any other person or entity, without Childcraft's prior written consent.
B. Childcraft acknowledges that material and information which
Regal has given or divulged to Childcraft or which will be give or divulge to
Childcraft during the term of this Agreement and which relates to Regal's
catalog operations, plans and strategies, such as financial projections,
marketing plans, pricing strategies, customer lists and other such information
or material, constitutes confidential and proprietary data. Childcraft shall
keep such material and information confidential and shall not reveal any such
information or material to any other person or entity or use it for
Childcraft's benefit or for the benefit of any other person or entity, without
Regal's prior written consent.
17. FORCE MAJEURE
Any failure by Regal or Childcraft to perform their respective
obligations or any of them hereunder, except for the payment of money, due to
any cause or event beyond the reasonable control of the party failing to
perform, including, without limitation, strikes, lockouts, or other labour
disputes, acts of God, fire, civil insurrections, actions or orders of any
governmental or other lawful authority or similar event, shall be excused, for
up to 90 days.
18. TERMINATION
A. Childcraft may terminate this Agreement without obligation or
liability to Regal other than to give Regal written notice thereof, under the
following circumstances:
(i) if Regal is in breach of its obligations under this Agreement
to pay Childcraft any money and such default is not cured
within 10 days after receipt of written notice thereof; or
-14-
15
(ii) if Regal or its parent corporation becomes insolvent or
subject to any bankruptcy, insolvency or receivership
proceeding of any nature, whether known by this or any other
name in the Territory; or
(iii) if Regal is not permitted or is unable to operate its business
in the usual manner, or is not permitted or is unable to
provide Childcraft with assurance satisfactory to Childcraft
that Regal will so operate its business, as debtor in
possession or its equivalent, or is not permitted, or is
unable to otherwise meet its obligations under this Agreement
or to provide Childcraft with assurance satisfactory to
Childcraft that it will meet such obligations; or
(iv) if Regal is for any reason unable or unwilling to publish a
Catalog of a quality acceptable to Childcraft (it being
understood and agreed that quality equal to that of the
current Disney Catalog is acceptable to Childcraft); or
(v) if Regal shall produce, publish, or distribute any edition of
the Catalog, or any promotional or advertising material for
any edition of the Catalog, which has not been approved in
writing by Childcraft.
B. Regal may terminate this Agreement without obligation or
liability to Childcraft other than to give Childcraft written notice thereof
and to pay to Childcraft all Services Fee and Royalties earned or accrued
hereunder to the date of termination:
(i) if Childcraft or its parent corporation becomes insolvent or
subject to any bankruptcy, insolvency or receivership
proceeding of any nature, whether known by this or any other
name in the territory; or
(ii) if Childcraft is not permitted or is unable to operate its
business in the usual manner, or is not permitted or is unable
to provide Regal with assurance satisfactory to Regal that
Childcraft will so operate its business, as debtor in
possession or its equivalent, or is not permitted, or is
unable to otherwise meet its obligation under this Agreement
or to provide Regal with assurance satisfactory to Regal that
it will meet such obligations.
C. Either party may terminate this Agreement for breach of the
other party's obligations hereunder. The party believing that a breach has
occurred shall give written notice to the other party specifying the nature of
the breach. Except in the case of a default caused by nonpayment of Services
Fee, Royalties, or any Guaranteed Minimums or the occurrence of any breach or
event listed in subparagraph A or B herein above, the defaulting party shall
have 30 days in which to cure such default or alternatively 30 days in which to
commence curing the default as expeditiously as possible, if it cannot be
completely cured within thirty days. If any such default is not cured within
such time period, this Agreement may be terminated upon written notice to the
defaulting party.
-15-
16
19. ASSIGNMENT
This Agreement may be assigned by either party to a reputable
third party in good financial standing.
20. NOTICES
Except as otherwise expressly provided for in this Agreement,
any notice, communication or payment required or permitted hereunder shall be
deemed to have been properly given or delivered when delivered personally or
when sent by first class mail or by telegraph or other electronic message, with
all postage and other charges prepaid to:
Childcraft, Inc.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Xxxxxx Xxxxxx
Attention: Vice President
Regal Greetings & Gifts Inc.
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Attention: President
21. GOVERNING LAW
This Agreement shall be governed by the laws of the State of
New York applicable to contracts made and to be fully performed in said state.
22. WAIVER
No waiver by either party, whether express or implied, of any
provision of this Agreement shall constitute a continuing waiver of such
provision or a waiver of any other provision of this Agreement. Further, no
waiver by either party, whether express or implied, of any breach or default by
the other party shall constitute a waiver of any other breach or default of the
same or any other provision of this Agreement.
23. AUTHORITY
A. Regal represents and warrants that it has the full authority
to enter into and fully perform this Agreement in all respects, and that this
Agreement does not require the approval or consent of any other person or
entity to be effective and binding upon Regal.
B. Childcraft Represents and warrants that it has the full
authority to enter into and fully perform this Agreement in all respects and
that this Agreement does not require the approval or consent of any other
person or entity to be effective and binding upon Childcraft.
-16-
17
24. RELATIONSHIP
This Agreement does not create and shall not be deemed to
create a joint venture, partnership, agency or employment relationship between
Regal and Childcraft or Disney.
25. HEADINGS
Headings of paragraphs herein are for convenience of reference
only and are without substantive significance.
26. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT
This Agreement can only be extended or modified by a
subsequent written agreement signed by both parties.
27. COMPLETE AGREEMENT
This Agreement shall constitute the whole and complete
agreement between Childcraft and Regal regarding the Playclothes Catalog and
supersedes all prior oral or written negotiations, representations and
agreements between the parties with respect to the subject matter hereof.
REGAL GREETINGS & GIFTS INC. CHILDCRAFT, INC.
By: /S/ By: /S/
--------------------------- --------------------
Title: President Title: V.P. General Manager
--------------------------- --------------------
Date: April 25th, 1995 Date: April 25, 1995
--------------------------- --------------------
-17-
18
EXHIBIT G
ASSIGNMENT AGREEMENT
Assignment Agreement, dated December 31, 1996, between Childcraft Inc.
("Childcraft"), Fulcrum Direct, Inc. ("Fulcrum") and Regal Greetings & Gifts
Inc. ("Regal") regarding the assignment of The Playclothes Catalog Agreement,
dated as of July 1, 1994, between Childcraft and Regal (the "Playclothes
License Agreement").
Childcraft hereby assigns all rights and obligations in the
Playclothes License Agreement to Fulcrum Direct, Inc. in connection with the
sale by Childcraft of certain assets of the Playclothes Catalog to Fulcrum.
The assignment of the Playclothes License Agreement is pursuant to Section 19
of such Agreement.
By its signature below, Regal consents to the assignment of all rights
and obligations in the Playclothes License Agreement by Childcraft to Fulcrum.
This Assignment Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement as of the date first written above.
CHILDCRAFT INC.
-----------------------------
Name:
Title:
FULCRUM DIRECT, INC.
/S/ XXXXX XXXXXX
-----------------------------
Name: Xxxxx Xxxxxx
Title: President & COO
Agreed to as of this date by:
REGAL GREETINGS & GIFTS INC.
/S/ XXXXX XXXXXXXXX
-----------------------------
Name: Xxxxx Xxxxxxxxx
Title: Vice President of Finance
-18-
