1
EXHIBIT 10.26
The Xxxx Disney Company
000 Xxxxx Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
October 1, 1994
Sun Sportswear, Inc.
0000 Xxxxx 000xx Xxxxxx
Xxxx, XX 00000
Re: WINNIE THE POOH
Dear Sirs/Mesdames:
We hereby agree with you as follows:
1. MEANING OF TERMS As used in this Agreement:
A. "LICENSED MATERIAL" means the graphic depictions of the following:
WINNIE THE POOH, XXXXXXXXXXX XXXXX,
EEYORE, KANGA, ROO, RABBIT, PIGLET,
OWL, GOPHER, AND TIGGER, ALL IN THE STYLE AS
DESIGNED BY US.
B. "TRADEMARKS" means "XXXX DISNEY" and "DISNEY", the names for and
representations of Licensed Material included in Subparagraph 1.A.
above.
C. "ARTICLES" means the following items on or in connections with which the
Licensed Material and/or the Trademarks are reproduced or used:
1. Women's basic screen printed knit tops and bottoms
in sizes S, M, L, XL, XXL, XXXL and Maternity
2. Women's basic screen printed coordinates in sizes
S, M, L, XL, XXL, XXXL and Maternity
3. Girls' basic screen printed T-shirts in sizes 4 - 16
4. Girls' knit basic screen printed coordinates in sizes
7 - 16
5. Boys' basic screen printed knit tops and bottoms in
sizes 4 - 20
6. Boys' basic screen printed related knit separates in
sizes 4 - 20
7. Mens' basic screen printed knit tops and bottoms in
sizes S, M, L, XL AND XXL
D. "MINIMUM PER ARTICLE ROYALTY" means for each Article identified herein
which is sold the sum indicated herein:
None.
E. PRINCIPAL TERM" means the period commencing October 1, 1994, and ending
December 31, 1996.
69
2
F. "TERRITORY" means the United States, United States PX's wherever
located, and United States territories and possessions, excluding Puerto
Rico. However, if sales are made to chain stores in the United States
which have stores in Puerto Rico, such chain stores may supply Articles
to such stores in Puerto Rico.
G. "ROYALTIES" means a copyright royalty in the amounts set forth below in
Subparagraphs 1.G.(1)(a), (b), and (c) and Royalties shall be further
governed by the provisions contained in Subparagraphs 1.G.(2)-(5):
(1)(a) ten percent (10%) of your Net Invoiced Xxxxxxxx to authorized
retailers for Articles shipped by you from a location in the
Territory for delivery to a customer located in the Territory
("F.O.B. In Sales"); or
(b) fourteen percent (14%) of your Net Invoiced Xxxxxxxx to
authorized retailers when your customer located in the
Territory bears the costs (e.g., shipping, duties, and the
like) of obtaining delivery in the Territory of Articles
manufactured outside the Territory ("F.O.B. Out Sales"); or
(c) if a Minimum Per Article Royalty has been specified in
Subparagraph 1.D. above, and it would result in a higher
royalty to be paid for the Articles, you agree to pay the
higher royalty amount.
(2) The sums which we are paid as Royalties on any sales to
Affiliates shall be no less than the sums paid on sales to
customers not affiliated with you, and if such Affiliate is a
reseller of the Articles, the sale to such customer shall not be
counted as a sale for Royalty calculation purposes; in such case,
the relevant sale for Royalty calculation purposes shall be that
of such Affiliate.
(3) All sales of Articles shipped to a customer outside the
Territory pursuant to a distribution permission shall bear a
Royalty at the rate for F.O.B. Out Sales.
(4) Royalties payable shall be not less for each Article sold than
the Minimum Per Article Royalty, if such a Royalty has been
specified in Subparagraph 1.D. No Royalties are payable on the
mere manufacture of Articles.
(5) The full Royalty percentage shall be payable on close-out or
other deep discount sales of Articles, including sales to
employees, except that no Royalty shall be payable on Articles
sold with our written permission at or below your acquisition cost
or your cost of manufacture, excluding overheads.
70
3
H. "NET INVOICED XXXXXXXX" means the following:
(1) actual invoiced xxxxxxxx (i.e., sales quantity multiplied by
your selling price) for Articles sold, and all other receivable
of any kind whatsoever, received in payment for the Articles,
whether received by you or any parent, subsidiary or affiliate
of yours, except as provided in Subparagraphs 1.G.(2), and
1.H.(2), less "Allowable Deductions" as hereinafter defined.
(2) The following are not part of Net Invoiced Xxxxxxxx: invoiced
charges for transportation of Articles within the Territory
which are separately identified on the sales invoice, and taxes
on the sale.
I. "ALLOWABLE DEDUCTIONS" means the following:
(1) volume discounts and other discounts separately identified on
your sales invoices as being applicable to sales of Articles
licensed hereunder or to combined sales of such Articles and
other products not licensed by us, and post-invoice credits
granted and properly documented as applicable to sales of
Articles licensed hereunder or to combined sales of such
Articles and other products not licensed by us; in the event
that a post- invoice credit is issued for combined sales of
Articles and other products not licensed by us, and you cannot
document the portion of the credit applicable to the Articles,
you may apply only a pro rata portion of the credit to the
Articles.
(2) The following are not Allowable Deductions, whether granted on
sales invoices or as post-invoice credits: cash discounts
granted as terms of payment; early payment discounts;
allowances or discounts related to advertising; xxxx down
allowances; costs incurred in manufacturing, importing, selling
or advertising Articles; freight costs incorporated in the
selling price; and uncollectible accounts.
J. "ROYALTY PAYMENT PERIOD" means each calendar quarterly period during the
Principal Term and during any other term.
K. "ADVANCE" means the following sum(s) payable by the following date(s) as
an advance on Royalties to accrue in the following period(s):
$40,000.00 payable upon your signing of this Agreement for the
period commencing October 1, 1994, and ending December 31,
1996.
L. "GUARANTEE" means the following sum(s) which you guarantee to pay as
minimum Royalties on your cumulative sales in the following period(s):
$200,000.00 for the period commencing October 1, 1994, and
ending December 31, 1996.
71
4
M. "SAMPLES" means six (6) samples of each stock keeping unit ("SKU") of
each Article, from the first production run of each supplier of each SKU
of each Article.
N. "PROMOTION COMMITMENT" means the following sum(s) which you agree
to spend in the following way(s):
None.
O. "MARKETING DATE" means the following date(s) by which the following
Article(s) shall be available for purchase by the public at retail outlets:
By January 1, 1995, for all Articles.
P. "AFFILIATE" means any corporation or other entity which directly or
indirectly controls, is controlled by or is under common control with
you. "Control" of an entity shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or
policies of such entity, whether through ownership of voting securities,
by contract or otherwise.
2. RIGHTS GRANTED
A. In consideration for your promise to pay and your payment of all
Royalties, Advances and Guarantees required hereunder, we grant
you the non-exclusive right, during the Principal Term and any
extension thereof, and only within the Territory, to reproduce the
Licensed Material only on or in connection with the Articles, to
use the Trademarks, but only such Trademarks and uses thereof as
may be approved when the Articles are approved and only on or in
connection with the Articles, and to manufacture, distribute for
sale and sell (other than by direct marketing methods, including
buy not limited to direct mail and door-to-door solicitation) the
Articles only to mass market retailers (e.g., KMart, X.X. Xxxxxx,
Co., Inc., Sears, Xxxxxxx and Co., and Target) in the Territory.
You will not sell the Articles to other retailers for resale to
the public in the Territory or to wholesalers. If there is a
questions as to whether a particular customer falls within the
category of a mass market retailer, our determination shall be
binding. If you wish to sell the Articles to wholesalers or
distributors for resale to retailers, you must notify us and
negotiate the applicable royalty rate for such sales, which you
acknowledge shall be a higher royalty rate than the rate set forth
in Subparagraphs 1.G.(1)(a) and (b) for sales to retailers.
B. Unless we consent in writing, you shall not sell or otherwise
provide Articles for use as premiums (including those in
purchase-with-purchase promotions), promotions, give-aways,
fund-raisers, or entries in sweepstakes, or to customers for
resale by direct mail or other direct marketing methods,
including, without limitation, home shopping television programs,
or to customers for inclusion in another product, unless such
product has been licensed by us. However, nothing
72
5
contained herein shall preclude you from soliciting orders by mail
from mass market retailers, nor from selling to mass market
retailers which sell predominantly at retail, but which include
the Articles in their mail order catalogs or otherwise sell
Articles by direct marketing methods as well as at retail. If you
wish to sell the Articles to other customers for resale through
mail order catalogs, you must obtain our prior written consent in
each instance.
C. Unless we consent in writing, you shall not give away or donate
Articles, except minor quantities of samples, not for onward
distribution, to your accounts or other persons for the purpose of
promoting Article sales.
D. Nothing contained herein shall preclude you from selling Articles
to us or to any subsidiary of ours, or to your or our employees,
subject to the payment to us of Royalties on such sales.
E. We further grant you the right to reproduce the Licensed Material
and to use the Trademarks, only within the Territory, on
containers, packaging and display material for the Articles, and
in advertising for the Articles.
F. Nothing contained in this Agreement shall be deemed to imply any
restriction on your freedom and that of your customers to sell the
Articles at such prices as you or they shall determine.
G. You recognize and acknowledge the vital importance to us of the
characters and other proprietary material we own and create, and
the association of the Disney name with them. In order to prevent
the denigration of our products and the value of their association
with the Disney name, and in order to ensure the dedication of
your best efforts to preserve and maintain that value, you agree
that, during the Principal Term and any extension hereof, you will
not manufacture or distribute any merchandise embodying or bearing
any artwork or other representation which we determine, in our
reasonable discretion, is confusingly similar to our Disney
characters or other proprietary material.
3. ADVANCE
A. You agree to pay the Advance, which shall be on account of
Royalties to accrue during the Principal Term only, and only with
respect to sales in the Territory; provided, however, that if any
part of the Advance is specified hereinabove as applying to any
period less than the Principal Term, such part shall be on account
of Royalties to accrue during such lesser period only. If said
Royalties should be less than the Advance, no part of the Advance
shall be repayable.
B. Royalties accruing during any sell-off period or extension of the
Principal Term shall not be offset against the Advance unless
otherwise agreed in writing. Royalties accruing during any
extension of the
73
6
Principal Term or any other term shall be offset only against an
advance paid with respect to such extended term.
C. In no event shall Royalties accruing by reason of any sales to us
or a subsidiary of ours or by reason of sales outside the
Territory pursuant to a distribution permission be offset against
the Advance or any subsequent advance.
4. GUARANTEE
A. You shall, with your statement for each Royalty Payment Period
ending on a date indicated in Subparagraph 1.L. hereof defining
"Guarantee," or upon termination if the Agreement is terminated
prior to the end of the Principal Term, pay us the amount, if any,
by which cumulative Royalties paid with respect to sales in the
Territory during any period or periods covered by the Guarantee
provision, or any Guarantee provision contained in any agreement
extending the term hereof, fall short of the amount of the
Guarantee for such period.
B. Advances applicable to Royalties due on sales in the period to
which the Guarantee relates apply towards meeting the Guarantee.
C. In no event shall Royalties paid with respect of sales to us or to
any subsidiary or affiliate of ours, or with respect to sales
outside the Territory pursuant to a distribution permission, apply
towards the meeting of the Guarantee or any subsequent guarantee.
5. PRE-PRODUCTION APPROVALS
A. As early as possible, and in any case before commercial production
of any Article, you shall submit to us for our review and written
approval (to utilize such materials in preparing a pre-production
sample) all concepts, all preliminary and proposed final artwork,
and all three-dimensional models which are to appear on or in the
Article. Thereafter, you shall submit to us for our written
approval a pre-production sample of each Article. We shall
endeavor to respond to such requests within a reasonable time, but
such approvals should be sought as early as possible in case of
delays. In addition to the foregoing, as early as possible, and
in any case no later than sixty (60) days following written
conceptual approval, you shall supply to us for our use for
internal purposes, a mock-up, prototype or pre-production sample
of each style of each Article on or in connection with which the
Licensed Material is used. You acknowledge that we may not
approve concepts or artwork submitted near the end of the
Principal Term.
B. Approval or disapproval shall lie solely in our discretion, and
any Article not so approved in writing shall be deemed unlicensed
and shall not be manufactured or sold. If any unapproved Article
is being sold, we may, together with other remedies available to
us, including but not limited to, immediate termination of this
Agreement, by written notice require such Article to be
immediately withdrawn from the market. Any
74
7
modification of an Article, including, but not limited to, change
of materials, color, design or size of the representation of
Licensed Material must be submitted in advance for our written
approval as if it were a new Article. Approval of an Article
which uses particular artwork does not imply approval of such
artwork for use with a different Article. The fact that artwork
has been taken from a Disney publication or a previously approved
Article does not mean that its use will necessarily be approved in
connection with an Article licensed hereunder.
C. If you submit for approval artwork from an article or book
manufactured or published by another licensee of ours or of any
subsidiary of ours, you must advise us in writing of the source of
such artwork. If you fail to do so, any approval which we may
give for use by you of such artwork may be withdrawn by giving you
written notice thereof, and you may be required by us not to sell
Articles using such artwork.
D. Notwithstanding the above, as we rely primarily on you for the
consistent quality and safety of the Articles and their compliance
with applicable laws and standards, we will not unreasonably
object to any change in the design of an Article or in the
materials used in the manufacture of the Article or in the process
of manufacturing the Articles which you advise us in writing is
intended to make the Article safer or more durable.
E. If we have supplied you with forms for use in applying for
approval of artwork, models, pre-production and production samples
of Articles, you shall use such forms when submitting anything for
our approval.
6. APPROVAL OF PRODUCTION SAMPLES
A. Before shipping an Article to any customer, you agree to furnish
to us, from the first production run of each supplier of each of
the Articles, for our approval of all aspects of the Article in
question, the number of Samples with packaging which is
hereinabove set forth, which shall conform to the approved
artwork, three-dimensional models and pre-production sample.
Approval or disapproval of the artwork as it appears on the
Article, as well as of the quality of the Article, shall lie in
our sole discretion and may, among other things, be based on
unacceptable quality of the artwork or of the Article as
manufactured. Any Article not so approved shall be deemed
unlicensed, shall not be sold and, unless otherwise agreed by us
in writing, shall be destroyed. Such destruction shall be
attested to in a certificate signed by one of your officers.
Production samples of Articles for which we have approved a
pre-production sample shall be deemed approved, unless within
twenty (20) days of our receipt of such production sample we
notify you to the contrary.
B. You agree to make available at no charge a reasonable number of
additional samples of each Article as we may from time to time
reasonably request for the purpose of comparison with earlier
samples,
75
8
or to test for compliance with applicable laws, regulations and
standards, and to permit us upon reasonable request to inspect
your manufacturing operations and testing records (and those of
your suppliers) for the Articles.
C. It is specifically understood that we may disapprove an Article or
a production run of an Article because the quality is unacceptable
to us, and accordingly, we recommend that you submit production
samples to us for approval before committing to a large original
production run or to purchase a large shipment from a new
supplier.
D. No modification of an approved production sample shall be made
without our further prior written approval. Articles being sold
must conform in all respects to the approved production sample.
It is understood that if in our reasonable judgment the quality of
an Article originally approved has deteriorated in later
production runs, or if the Article has otherwise been altered, we
may, in addition to other remedies available to us, by written
notice require such Article to be immediately withdrawn from the
market.
E. The rights granted hereunder do not permit the sale of "seconds"
or "irregulars". All Articles not meeting the standard of
approved samples shall be destroyed or all Licensed Material and
Trademarks shall be removed or obliterated therefrom.
F. Notwithstanding the above, as we rely primarily on you for the
consistent quality and safety of the Articles and their compliance
with applicable laws and standards, we will not unreasonably
object to any change in the design of an Article or in the
materials used in the manufacture of the Article or in the process
of manufacturing the Articles which you advise us in writing is
intended to make the Article safer or more durable.
G. We shall have the right, by written notice to you, to require
modification of any Article approved by us under any previous
agreement between us pertaining to Licensed Material. Likewise,
if the Principal Term of this Agreement is extended by mutual
agreement, we shall have the right, by written notice to you, to
require modification of any Article approved by us under this
Agreement. It is understood that there is no obligation upon
either party to extend the Agreement.
H. If we notify you of a required modification under Subparagraph
6.G. with respect to a particular Article, such notification
shall advise you of the nature of the changes required, and you
shall not accept any order for any such Article until the Article
has been resubmitted to us with such changes and you have received
our written approval of the Article as modified. However, you may
continue to distribute your inventory of the previously approved
Articles until such inventory is exhausted (unless such Articles
are dangerously defective, as determined by us.)
I. You agree to give us written notice of the first ship date for
each Article.
76
9
7. APPROVAL OF PACKAGING, PROMOTIONAL MATERIAL AND
ADVERTISING
A. All containers, packaging, display material, promotional material,
catalogs, and all advertising, including, but not limited to,
television advertising and press releases, for Articles must be
submitted to us and receive our written approval before use. To
avoid unnecessary expense if changes are required, our approval
thereof should be procured when such is still in rough or
storyboard format. We shall endeavor to respond to requests for
approval within a reasonable time. Approval or disapproval shall
lie in our sole discretion, and the use of unapproved containers,
packaging, display material, promotional material, catalogs or
advertising is prohibited. Whenever you shall prepare catalog
sheets or other printed matter containing illustrations of
Articles, you will furnish to us five (5) copies thereof when they
are published.
B. If we have supplied you with forms for use in applying for
approval of artwork, models, pre-production and production samples
of Articles, you shall use such forms when submitting anything for
our approval.
C. We have designed character artwork to be used by all licensees in
connection with the hang tags and garment labels of all
merchandise using the Licensed Material. We will supply you with
reproduction artwork thereof, and you agree to use such artwork on
the hang tags and garment labels of the Articles, which you will
have printed and attached to each Article at your cost. We
recommend that you source the hang tags and garment labels from
our authorized manufacturer of pre-approved hang tags and garment
labels, the name of which will be provided to you upon request.
However, you may use another manufacturer for the required hang
tags and garment labels if the hang tags and garment labels
manufactured are of equivalent quality and are approved by us in
accordance with our usual approval process.
8. ARTWORK
You shall pay us, within thirty (30) days of receiving an invoice therefor,
for artwork done at your request by us or third parties under contract to
us in the development and creation of Articles, display, packaging or
promotional material (including any artwork which in our opinion is
necessary to modify artwork initially prepared by you and submitted to us
for approval, subject to your prior written approval) at our then
prevailing commercial art rates. Estimates of artwork charges are
available upon request. While you are not obligated to utilize the
services of our Art Department, you are encouraged to do so in order to
minimize delays which may occur if outside artists do renditions of
Licensed Material which we cannot approve and to maximize the
attractiveness of the Articles.
77
10
9. PRINT, RADIO OR TV ADVERTISING
You will obtain all approvals necessary in connection with print,
radio or television advertising, if any, which we may authorize. You
represent and warrant that all advertising and promotional materials
shall comply with all applicable laws and regulations. Our approval
of copy or storyboards for such advertising will not imply a
representation or belief by us that such copy or storyboards are
sufficient to meet any applicable code, standard, or other obligation.
This Agreement does not grant you any rights to use the Licensed
Material in animation. You may not use any animation or live action
footage from the motion picture from which the Licensed Material comes
without our prior written approval in each instance. In the event we
approve the use of film clips of the motion picture from which the
Licensed Material comes, for use in a television commercial, you shall
be responsible for any re-use fees which may be applicable, including
SAG payments for talent. No reproduction of the film clip footage
shall be made except for inclusion, as approved by us, in such
commercial and there shall be no modifications of the film clip
footage. All film clip footage shall be returned to us immediately
after its inclusion in such commercial. We shall have the right to
prohibit you from advertising the Articles by means of television
and/or billboards. Such right shall be exercised within our sole
discretion, including without limitation for reasons of overexposure
of the Licensed Material.
10. LICENSEE NAME AND ADDRESS ON ARTICLES
A. Your name, trade name (or a trademark of yours which you have
advised us in writing that you are using) and your address (at
least city and state) will appear on permanently affixed labeling
on each Article or, if the Article is sold to the public in
packaging or a container, printed on such packaging or a container
so that the public can identify the supplier of the Article. On
soft goods "permanently affixed" shall mean sewn on. RN numbers
do not constitute a sufficient label under this paragraph.
B. You shall advise us in writing of all trade names or trademarks
you wish to use on Articles being sold under this license. You
may sell the Articles only under mutually agreed upon trade names
or trademarks.
11. COMPLIANCE WITH APPROVED SAMPLES AND APPLICABLE
LAWS AND STANDARDS
Each Article and component thereof distributed hereunder shall be of good
quality and free of defects in design, materials and workmanship, and shall
comply with all applicable laws, regulations and voluntary industry
standards and such specifications, if any, as may have been specified in
this Agreement, and shall conform to the Sample thereof approved by us.
Both before and after you put Articles on the market, you shall follow
reasonable and proper procedures for testing that Articles comply with such
laws, regulations, and standards, and shall, upon reasonable notice, permit
our designees to inspect testing, manufacturing and quality control records
and procedures and to test the Articles for compliance. You shall also
give due consideration to any
78
11
recommendations of ours that Articles exceed the requirements of applicable
laws, regulations and standards. Articles not complying with applicable
laws, regulations and voluntary standards shall be deemed unapproved, even
if previously approved by us, and shall not be shipped unless and until
they have been brought into full compliance therewith.
12. DISNEY OWNERSHIP OF ALL RIGHTS IN LICENSED MATERIAL
You acknowledge that the copyrights and all other proprietary rights in and
to Licensed Material are exclusively owned by and reserved to us. You
shall neither acquire nor assert copyright ownership or any other
proprietary rights in Licensed Material or in any derivation, adaptation,
variation or name thereof. Without limiting the foregoing, you hereby
assign to us all your worldwide right, title and interest in the Licensed
Material and in any material objects consisting of or incorporating
drawings, paintings, animation cels, or sculptures of Licensed Material, or
other derivations, adaptations, compilations, collective works, variations
or names of Licensed Material, heretofore or hereafter created by or for
you or any parent, subsidiary or Affiliate of yours. All such new
materials shall be included in the definition of "Licensed Material" under
this Agreement. If any third party makes or has made any contribution to
the creation of any new materials which are included in the definition of
Licensed Material under this Paragraph 12, you agree to obtain from such
party a full assignment of rights so that the foregoing assignment by you
shall vest full rights to such new materials in us. The foregoing
assignment to us of material objects shall not include that portion of your
displays, catalogs or promotional material not containing Licensed
Material, or the physical items constituting the Articles, unless such
items are in the shape of the Licensed Material.
13. COPYRIGHT NOTICE
As a condition to the grant of rights hereunder, each Article and any other
matter containing Licensed Material shall bear a properly located
permanently affixed copyright notice in our name (e.g., "(C)Disney"), or
such other notice as we may notify to you in writing. You will comply with
such instructions as to form, location and content of the notice as we may
give from time to time. You will not, without our prior written consent,
affix to any Article or any other matter containing Licensed Material a
copyright notice in any other name. If through inadvertence or otherwise a
copyright notice on any Article or other such matter should appear in your
name or the name of a third party, you hereby agree to assign to us the
copyright represented by any such copyright notice in your name and, upon
request, cause the execution and delivery to us of whatever documents are
necessary to convey to us that copyright represented by any such copyright
notice. If by inadvertence a proper copyright notice is omitted from any
Article or other matter containing Licensed Material, you agree at your
expense to use all reasonable efforts to correct the omission on all such
Articles or other matter in process of manufacture or in distribution. You
agree to advise us promptly and in writing of the steps being taken to
correct any such omission and to make the corrections on existing Articles
which can be located.
79
12
14. NON-ASSOCIATION OF OTHER FANCIFUL CHARACTERS WITH
LICENSED MATERIAL
To preserve our identification with our characters and to avoid
confusion of the public, you agree not to associate other characters
(other than such as constitute a trademark of yours) or licensed
properties with the Licensed Material or the Trademarks either on the
Articles or in their packaging, or, without our written permission, on
advertising, promotional or display materials.
15. ACTIVE MARKETING OF ARTICLES
You agree to manufacture (or have manufactured for you) and offer for
sale all the Articles and to exercise the rights granted herein. You
agree that by the Marketing Date applicable to a particular Article
or, in the absence of such a date being specified in Subparagraph
1.O., by six (6) months from the commencement of the Principal Term,
shipments to customers of such Article will have taken place in
sufficient time that such Article shall be available for purchase by
the public at the retail outlets authorized pursuant to Subparagraph
2.A. In any case in which such sales have not taken place or when the
Article is not then and thereafter available for purchase by the
public, we may either invoke our remedies under Paragraph 28, or
withdraw such Article from the list of Articles licensed in this
Agreement without obligation to you other than to give you written
notice thereof.
16. PROMOTION COMMITMENT
You agree to carry out the Promotion Commitment, if any, as defined in
Subparagraph 1.N.
17. TRADEMARK RIGHTS AND OBLIGATIONS
A. All uses of the Trademarks by you hereunder shall inure to our
benefit. You acknowledge that we are the exclusive owner of all
the Trademarks, and of any trademark incorporating all or any part
of a Trademark or any Licensed Material, and the trademark rights
created by such uses. Without limiting the foregoing, you hereby
assign to us all the Trademarks, and any trademark incorporating
all or any part of a Trademark or any Licensed Material, and the
trademark rights created by such uses, together with the goodwill
attaching to that part of the business in connection with which
such Trademarks or trademarks are used. You agree to execute and
deliver to us such documents as we require to register you as a
Registered User or Permitted User of the Trademarks or such
trademarks and to follow our instructions for proper use thereof
in order that protection and/or registrations for the Trademarks
and such trademarks may be obtained or maintained.
B. You agree not to use any Licensed Material or Trademarks, or any
trademark incorporating all or any part of a Trademark or of any
Licensed Material, on any business sign, business cards,
stationery or forms (except as licensed herein), or to use any
Licensed Material or
80
13
Trademark as the name of your business or any division thereof,
unless otherwise agreed by us in writing.
C. Nothing contained herein shall prohibit you from using your own
trademarks on the Articles or your copyright notice on the
Articles when the Articles contain independent material which is
your property. Nothing contained herein is intended to give us
any rights to, and we shall not use, any trademark, copyright or
patent used by you in connection with the Articles which is not
derived or adapted from Licensed Material, Trademarks, or other
materials owned by us.
18. REGISTRATIONS
Except with our written consent, neither you, your parent, nor any
subsidiary or affiliate of yours will register or attempt in any country to
register copyrights in, or to register as a trademark, service xxxx, design
patent or industrial design, or business designation, any of the Licensed
Material, Trademarks or derivations or adaptations thereof, or any word,
symbol or design which is so similar thereto as to suggest association with
or sponsorship by us or any subsidiary of ours. In the event of breach of
the foregoing, you agree, at your expense and at our request, immediately
to terminate the unauthorized registration activity and promptly to execute
and deliver, or cause to be delivered, to us such assignments and other
documents as we may require to transfer to us all rights to the
registrations, patents or applications involved.
19. UNLICENSED USE OF LICENSED MATERIALS
A. You agree that you will not use the Licensed Material, or the
Trademarks, or any other material the copyright to which is owned
by us in any way other than as herein authorized (or as is
authorized in any other written contract in effect between us).
In addition to any other remedy we may have, you agree that the
profits from any use thereof on products other than the Articles
(unless authorized by us in writing), and all profits from the use
of any other copyrighted material of ours without written
authorization, shall be payable to us.
B. You agree to give us prompt written notice of any unlicensed use
by third parties of Licensed Material or Trademarks, and that you
will not, without our written consent, bring or cause to be
brought any criminal prosecution, lawsuit or administrative action
for infringement, interference with or violation of any rights to
Licensed Material or Trademarks. Because of the need for and the
high costs of an effective anti-piracy enforcement program, you
agree to cooperate with us, and, if necessary, to be named by us
as a sole complainant or co-complainant in any action against an
infringer of the Licensed Material or Trademarks and,
notwithstanding any right of yours to recover same, legal or
otherwise, you agree to pay to us, and hereby waive all claims to,
all damages or other monetary relief recovered in such action by
reason of a judgment or settlement whether or not such damages or
other monetary relief, or any part thereof, represent or are
intended to represent injury sustained by you as a licensee
hereunder; in any such action against an
81
14
infringer, we agree to reimburse you for reasonable expenses
incurred at our request, including reasonable attorney's fees if
we have requested you to retain separate counsel.
20. STATEMENTS AND PAYMENTS OF ROYALTIES
A. You agree to furnish to us by the 30th day after each Royalty
Payment Period a full and accurate statement showing by Article,
with stock number and item description, the quantities, Net
Invoiced Xxxxxxxx and applicable Royalty rate(s) of Articles
invoiced during the preceding Royalty Payment Period, and the
quantities and invoice value of Articles returned for credit or
refund in such period. At the same time you will pay us all
Royalties due on xxxxxxxx shown by such statement. To the extent
that any Royalties are not paid, you authorize us to offset
Royalties due against any sums which we or any subsidiary of ours
may owe to you or any parent, subsidiary or Affiliate of yours.
No deduction or withholding from Royalties payable to us shall be
made by reason of any tax. Any applicable tax on the manufacture,
distribution and sale of the Articles shall be borne by you.
B. If we at any time so request, your statements shall be made on
statement forms which we shall provide, and you will fully comply
with the instructions supplied by us for completing such forms.
Except as otherwise agreed in writing, such statements shall
separately reflect the sales and applicable Royalties for each
individual Article. Apparel Articles shall be reported separately
by size range (e.g., "boys'", "girls'", "men's", etc.). Your
statements shall identify for each Article the character or other
Licensed Material used on each such Article or the motion picture
or television series from which such character derived. However,
Articles which differ only in that different characters or scenes
appear on them may be reported as a single Article if the
characters or scenes used on such Articles are from the same
motion picture or television series.
C. Your statement shall with respect to all Articles report separately:
(1) F.O.B. In Sales;
(2) F.O.B. Out Sales;
(3) sales of Articles outside the Territory pursuant to a
distribution permission (indicating the country involved);
(4) your sales of Articles as a supplier to any of our or our
Affiliates' licensees for the Articles (which sales shall
not generate Royalties payable to us so long as such
licensees are reselling the Articles and paying us
royalties on such resales);
(5) sales of Articles to us or any subsidiary of ours;
(6) sales of Articles to your or our employees;
82
15
(7) sales of Articles under any brand or program identified in
Subparagraph 1.B. hereinabove.
D. Sales of items licensed under contracts with us other than this
Agreement shall not be reported on the same statement as sales of
Articles under this Agreement.
E. Your statements and payments shall be delivered to The Xxxx Disney
Company, X.X. Xxx 000000, Xxxxxxx, Xxxxxxx 00000. However,
Advances should be mailed directly to the Contract Administrator
at 000 Xxxxx Xxxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000-0000.
A copy of each statement must be sent to us at 000 Xxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000-0000, to the attention of
the Contract Administrator, Consumer Products Division.
21. ARTICLES RETURNED FOR CREDIT OR REFUND
Royalties reported on sales of Articles which have been returned to you for
credit or refund and on which a refund has been made or credit memo issued
may be credited against Royalties due. The credit shall be taken in the
Royalty Payment Period in which the refund is given or credit memo issued.
Unused credits may be carried forward, but in no event shall you be
entitled to a refund of Royalties.
22. INTEREST
Royalties or any other payments due to us hereunder which are received
after the due date shall bear interest at the rate of 10% per annum from
the due date (or the maximum permissible by law if less than 10%).
23. AUDITS AND MAINTAINING RECORDS
You agree to keep accurate records of all transactions relating to this
Agreement and any prior agreement with us, including, without limitation,
shipments to you of Articles and components thereof, inventory records,
records of sales and shipments by you, and records of returns, and to
preserve such records for the lesser of seven (7) years or two (2) years
after the expiration or termination of this Agreement. We or our
representatives, shall have the right from time to time, during your
normal business hours, but only for the purpose of confirming your
performance hereunder, to examine and make extracts from all such records,
including the general ledger, invoices and any other records which we
reasonably deem appropriate to verify the accuracy of your statements or
your performance hereunder, including records of your parent, subsidiary
and affiliated companies, if they are involved in activities which are the
subject of this Agreement. In particular, your invoices shall identify the
Articles separately from goods which are not licensed hereunder. If in an
audit of your records it is determined that there is a short fall of five
percent (5%) or more in Royalties reported for any Royalty Payment Period,
you shall upon request from us reimburse us for the full out-of-pocket
costs of the audit, including the
83
16
costs of employee auditors calculated at $60 per hour per person for travel
time during normal working hours and actual working time.
24. MANUFACTURE OF ARTICLES BY THIRD PARTY MANUFACTURERS
A. If you at any time desire to have Articles or components thereof
containing Licensed Material manufactured by a third party, you
must, as a condition to the continuation of this Agreement, notify
us of the name and address of such manufacturer and the Articles
or components involved and obtain our prior written permission to
do so. If we are prepared to grant permission, we will do so if:
(1) In the case of manufacture outside the Territory:
(a) you and each of your manufacturers and any
submanufacturers sign a Consent/Manufacturer's
Agreement in a form which we will furnish to you;
and
(b) we receive all such agreements properly signed;
and
(2) In the case of manufacture in the Territory:
(a) upon our request, you cause each such
manufacturer to sign an agreement in a form which
we will furnish to you; and
(b) we receive all such agreements properly signed.
(A SAMPLE OF SAID AGREEMENT FORM IS AVAILABLE ON REQUEST.)
B. We will not normally require agreements from suppliers of yours
who are manufacturing in the Territory, but your purchase of
Articles from a third party manufacturer without such agreements
as are required hereunder being signed and delivered to us shall
be a violation of this Agreement. It is not our policy to reveal
the names of your suppliers to third parties or to any division of
ours involved with buying products, except as may be necessary to
enforce our contract rights or protect our trademarks and
copyrights.
C. If any such manufacturer utilizes Licensed Material or Trademarks
for any unauthorized purpose, you shall cooperate fully in
bringing such utilization to an immediate halt. If, by reason of
your not having supplied the above mentioned agreements to us or
not having given us the name of any supplier, we make any
representation or take any action and are thereby subjected to any
penalty or expense, you will fully compensate us for any cost or
loss we sustain.
84
17
25. INDEMNITY
A. You shall indemnify us during and after the term hereof against
all claims, liabilities (including settlements entered into in
good faith with your consent, not to be unreasonably withheld) and
expenses (including reasonable attorneys' fees) arising out of
your activities hereunder, or out of any defect (whether obvious
or hidden and whether or not present in any sample approved by us)
in an Article, or arising from personal injury or any infringement
of any rights of any other person by the manufacture, sale,
possession or use of Articles, or their failure to comply with
applicable laws, regulations and standards. The parties
indemnified hereunder shall include The Xxxx Disney Company and
its subsidiaries, and their officers, directors, employees and
agents. The indemnity shall not apply to any claim or liability
relating to any infringement of the copyright of a third party
caused by your utilization of the Licensed Material and the
Trademarks in accordance with the provisions hereof.
B. We shall indemnify you during and after the term hereof against
all claims, liabilities (including settlements entered into in
good faith with our consent, not to be unreasonably withheld) and
expenses (including reasonable attorneys' fees) arising out of any
claim that your use of any representation of the Licensed Material
or the Trademarks approved in accordance with the provisions of
this Agreement infringes the copyright of any third party or
infringes any right granted by us to such third party. You shall
not, however, be entitled to recover for lost profits.
C. Additionally, if by reason of any claims referred to in
Subparagraph 25.B., you are precluded from selling any stock of
Articles or utilizing any materials in your possession or which
come into your possession by reason of any required recall, we
shall be obligated to purchase such Articles and materials from
you at their out-of-pocket cost to you, excluding overheads, but
we shall have no other responsibility or liability with respect to
such Articles or materials.
D. No warranty or indemnity is given with respect to any liability or
expense arising from any claim that use of the Licensed Material
or the Trademarks on or in connection with the Articles hereunder
or any packaging, advertising or promotional material infringes on
any trademark right of any third party or otherwise constitutes
unfair competition by reason of any prior rights acquired by such
third party other than rights acquired from us. It is expressly
agreed that it is your responsibility to carry out such
investigations as you may deem appropriate to establish that
Articles, packaging, promotional and advertising material which
are manufactured or created hereunder, including any use made of
the Licensed Material and the Trademarks therewith, do not
infringe such right of any third party, and we shall not be liable
to you if such infringement occurs.
E. You and we agree to give each other prompt written notice of any
claim or suit which may arise under the indemnity provisions set
forth above.
85
18
Without limiting the foregoing, you agree to give us written
notice of any product liability claim made with respect to any
Article within seven (7) days of your receipt of the claim.
26. INSURANCE
You shall maintain in full force and effect at all times while this
Agreement is in effect and for three years thereafter commercial general
liability insurance, including broad form coverage for contractual
liability, products liability and personal injury liability (including
bodily injury and death), waiving subrogation, with minimum limits of no
less than two million dollars (US $2,000,000.00) per occurrence, and naming
as additional insureds those indemnified in Paragraph 25 hereof. You shall
deliver to us a certificate or certificates of insurance evidencing
satisfactory coverage and indicating that we shall receive written notice
of cancellation, non-renewal or of any material change in coverage at least
thirty (30) days prior to the effective date thereof. Your insurance shall
be carried by an insurer with a BEST rating of B + VII or better.
Compliance herewith in no way limits your indemnity obligations, except to
the extent that your insurance company actually pays us amounts which you
would otherwise pay us.
27. WITHDRAWAL OF LICENSED MATERIAL
You agree that we may, without obligation to you other than to give you
written notice thereof, withdraw from the scope of this Agreement any
Licensed Material which by the Marketing Date or, in the absence of such a
date being specified in Subparagraph 1.O., by six (6) months from the
commencement of the Principal Term, is not being used on or in connection
with the Articles. We may also withdraw any Licensed Material or Articles
the use or sale of which under this Agreement would infringe or reasonably
be claimed to infringe the rights of a third party, other than rights
granted by us, in which case our obligations to you shall be limited to the
purchase at cost of Articles and other materials utilizing such withdrawn
Licensed Material which cannot be sold or used. In the case of any
withdrawal under the preceding sentence, the Advances and Guarantees shall
be adjusted to correspond to the time remaining in the Principal Term, or
the number of Articles remaining under the Agreement, at the date of
withdrawal.
28. TERMINATION
Without prejudice to any other right or remedy available to us:
A. If you fail to manufacture, sell and distribute the Articles, or
to furnish statements and pay Royalties as herein provided, or if
you otherwise breach the terms of this Agreement, and if any such
failure is not corrected within thirty (30) days after we send you
written notice thereof (or, in the case of non-payment of
Royalties within fifteen (15) days), we shall have the right at
any time to terminate this Agreement by giving you written notice
thereof.
86
19
B. We shall have the right at any time to terminate this Agreement by
giving you written notice thereof:
(1) if you deliver to any customer without our written
authorization merchandise containing representations of
Licensed Material or other material the copyright or other
proprietary rights to which are owned by us other than
articles listed herein and approved in accordance with the
provisions hereof;
(2) if you deliver Articles outside the Territory or knowingly
sell Articles to a third party for delivery outside the
Territory, unless pursuant to a written distribution
permission or separate written license agreement with us
or any subsidiary of ours;
(3) if a breach occurs which is of the same nature, and which
violates the same provision of this Agreement, as a breach
of which we have previously given you written notice;
(4) if you breach any material term of any other license
agreement between us, and we terminate such agreement for
cause;
(5) if you shall make any assignment for the benefit of
creditors, or file a petition in bankruptcy, or are
adjudged bankrupt, or become insolvent, or are placed in
the hands of a receiver, or if the equivalent of any such
proceedings or acts occurs, though known by some other
name or term; and/or
(6) if you are not permitted or are unable to operate your
business in the usual manner, or are not permitted or are
unable to provide us with assurance satisfactory to us
that you will so operate your business, as debtor in
possession or its equivalent, or are not permitted, or are
unable to otherwise meet your obligations under this
Agreement or to provide us with assurance satisfactory to
us that you will meet such obligations.
29. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
A. Upon the expiration or termination of this Agreement, all rights
herein granted to you shall revert to us, and we shall be entitled
to retain all Royalties and other things of value paid or
delivered to us. You agree that the Articles shall be
manufactured during the Principal Term in quantities consistent
with anticipated demand therefor so as not to result in an
excessive inventory build-up immediately prior to the end of the
Principal Term. You agree that from the expiration or termination
of this Agreement you shall neither manufacture nor have
manufactured for you any Articles, that you will deliver to us any
and all artwork (including animation cels and drawings) which may
have been used or created by you in connection with this
Agreement, that you will at our option either sell to us at cost
or destroy or efface any molds, plates and
87
20
other items used to reproduce Licensed Martial or Trademarks, and
that except as hereinafter provided, you will cease selling
Articles. Any unauthorized distribution of Articles after the
expiration or termination of this Agreement shall constitute
copyright infringement.
B. If you have any unsold Articles in inventory on the expiration or
termination date, you shall provide us with a full statement of
the kinds and numbers of such unsold Articles and shall thereupon,
but only if such statement has been provided to us and if you have
fully complied with the terms of this Agreement including the
payment of all Royalties due and the Guarantee, have the right for
a limited period of ninety (90) days from such expiration or
earlier termination date to sell off and deliver such Articles.
You shall furnish us statements covering such sales and pay us
Royalties in respect of such sales. Such Royalties shall not be
applied against the Advance or towards meeting the Guarantee.
C. In recognition of our interest in maintaining a stable and viable
market for the Articles during and after the Principal Term and
any sell-off period, you agree to refrain from "dumping" the
Articles in the market during any sell-off period granted to you.
"Dumping" shall mean the distribution of product at volume levels
significantly above your prior sales practices with respect to the
Articles, and at price levels so far below your prior sales
practices with respect to the Articles as to disparage the
Articles; provided, however, that nothing contained herein shall
be deemed to restrict your ability to set product prices at your
discretion.
D. Except as otherwise agreed by us in writing, any inventory of
Articles in your possession or control after the expiration or
termination hereof and of any sell-off period granted hereunder
shall be destroyed, or all Licensed Material and Trademarks
removed or obliterated therefrom.
E. If we supply you with forms regarding compliance with this
Paragraph 29, you agree to complete, execute and return such forms
to us expeditiously.
30. WAIVERS
A waiver by either of us at any time of a breach of any provision of this
Agreement shall not apply to any breach of any other provision of this
Agreement, or imply that a breach of the same provision at any other time
has been or will be waived, or that this Agreement has been in any way
amended, nor shall any failure by either party to object to conduct of the
other be deemed to waive such party's right to claim that a repetition of
such conduct is a breach hereof.
31. PURCHASE OF ARTICLES BY US
If we wish to purchase Articles, you agree to sell such Articles to us or
any subsidiary of ours at as low a price as you charge for similar
quantities sold to your regular customers and to pay us Royalties on any
such sales.
88
21
32. NON-ASSIGNABILITY
A. You shall not voluntarily or by operation of law assign,
sub-license, transfer, encumber or otherwise dispose of all or
any part of your interest in this Agreement without our prior
written consent. Any attempted assignment, sub-license,
transfer, encumbrance or other disposal without such consent
shall be void and shall constitute a material default and
breach of this Agreement. "Transfer" within the meaning of
this Paragraph 32 shall include any merger or consolidation
involving your company or your parent (if any); any sale or
transfer of all or substantially all of your (or your parent)
company's assets; any transfer of your rights hereunder to a
division, business segment or other entity of yours other than
the one specifically referenced on page 1 hereof (or any sale
or attempted sale of Articles under a trademark or trade name
of such division, business segment or other entity); and any
transaction or series of related transactions resulting in the
transfer of thirty-three and one-third percent (33-1/3%) or
more of the voting stock of your (or your parent) company (or,
if your company is a partnership, thirty-three and one-third
percent (33-1/3%) or more of the profit and loss participation
in your company, or the occurrence of any of the foregoing
with respect to any general partner of your company).
B. However, you may, upon written notice to us, unless we have
objected within thirty (30) days of receipt of such notice,
sublicense your rights hereunder to your parent, subsidiary and
Affiliated companies. You hereby irrevocably and unconditionally
guarantee that they will observe and perform all of your
obligations hereunder, including, without limitation, the
provisions governing approvals, and compliance with approved
samples, applicable laws and standards, and all other provisions
hereof, and that they will otherwise adhere strictly to all of the
terms hereof and act in accordance with your obligations
hereunder. Any involvement of a parent, subsidiary or Affiliate
in the activities which are the subject of this Agreement shall be
deemed carried on pursuant to such a sublicense and thus covered
by such guarantee, but, unless notified to us and not timely
objected to, such involvement may be treated by us as a breach of
this Agreement.
33. RELATIONSHIP
This Agreement does not provide for a joint venture, partnership, agency or
employment relationship between us.
34. CONSTRUCTION
The language of all parts of this Agreement shall in all cases be construed
as a whole, according to its fair meaning and not strictly for or against
any of the parties. Headings of paragraphs herein are for convenience of
reference only and are without substantive significance.
89
22
35. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT
Except as otherwise provided herein, this Agreement can only be extended or
modified by a writing signed by both parties.
36. NOTICES
All notices which either party is required or may desire to serve upon the
other party shall be in writing, addressed to the party to be served at the
address set forth on page 1 of this Agreement, and may be served personally
or by depositing the same addressed as herein provided (unless and until
otherwise notified), postage prepaid, in the United States mail. Such
notice shall be deemed served upon personal delivery or upon the date of
mailing; provided, however, that we shall be deemed to have been served
with a notice of a request for approval of materials under this Agreement
only upon our actual receipt of the request and of any required
accompanying materials. Any notice sent to us hereunder shall be sent to
the attention of "Vice President, Licensing", unless we advise you in
writing otherwise.
37. MUSIC
Music is not licensed hereunder. Any charges, fees or royalties payable
for music rights or any other rights not covered by this Agreement shall be
additional to the Royalties and covered by separate agreement.
38. PREVIOUS AGREEMENTS
This Agreement, and any confidentiality agreement you may have signed
pertaining to any of the Licensed Material, contains the entire agreement
between us concerning the subject matter hereof and supersedes any
pre-existing agreement and any oral or written communications between us.
However, if pursuant to any such pre-existing agreement there was any
agreement(s) in effect permitting you to sell or distribute Articles
outside the Territory or to cause to be manufactured any Articles outside
the Territory, such agreement(s) shall be deemed to remain in effect to the
extent that they relate to Licensed Material and Articles licensed
hereunder.
39. CHOICE OF LAW AND FORUM
This Agreement shall be deemed to be entered into in California and shall
be governed and interpreted according to the laws of the State of
California. Any legal actions pertaining to this Agreement shall be
commenced within the State of California and within either Los Angeles or
Orange Counties. The prevailing party shall be entitled to recover
reasonable attorney's fees and costs incurred therein.
40. EQUITABLE RELIEF
You acknowledge that we will have no adequate remedy at law for your
failure to comply with the terms herewith, including your obligation to
cease the manufacture, sale, advertisement, promotion or distribution of
the Articles upon
90
23
termination. Accordingly, in the event you fail to comply with the terms
of this Agreement, you acknowledge and agree that, in addition to any and
all other remedies available to us, we shall have the right to have any
breach by you of this Agreement remedied by equitable relief, including,
but not limited to, a temporary restraining order, a preliminary
injunction, a permanent injunction, or such other alternative relief as may
be appropriate without the necessity of our posting any bond or proving any
damages.
Please sign below under the word "Agreed". When signed by both parties this
shall constitute an agreement between us.
THE XXXX DISNEY COMPANY
By: /s/ Xxxx Xxxxxxx
-------------------
Title: VP/DMM
-----------------
Date: 10/27/94
-----------------
AGREED:
SUN SPORTSWEAR, INC.
By: /s/ L. Xxxx Xxxxxx
-------------------
Title: Executive Vice. Pres., COO
--------------------------
91
