EXHIBIT 10(hh)
FIRST AMENDMENT TO LICENSE AGREEMENT
This is a First Amendment to the July 1, 1993 License Agreement
("Agreement") by and between PRECIOUS MOMENTS, INC. ("PMI"), an Illinois
corporation with principal offices in St. Xxxxxxx, Illinois; and ENESCO
CORPORATION ("Enesco"), an Ohio corporation with principal offices in
Itasca, Illinois.
RECITAL OF FACT
Having over the years worked ever more closely together to build a
partnership based on sharing, honesty and trust, PMI and Enesco believe
that by extending their partnership into the next Millennium, they can
achieve their mission to "touch the hearts of people in a personal way by
spreading goodness throughout the world" and to expand and perpetuate the
message and meaning behind PRECIOUS MOMENTS, even now one of the world's
best selling and most beloved properties.
To enhance and further their relationship, PMI and Enesco agree to
amend their Agreement as follows:
I. Paragraph 3 of the Agreement is hereby amended to read as follows:
3. TERM. The Term of this Agreement shall be for an original period
to commence on the effective date hereof, as specified in Paragraph 18
hereof, and to continue through the 31st day of December, 2007, and
shall thereafter be renewed automatically for additional five-year
renewal periods, unless, a party hereto shall give the other party
Notice of Termination at least three years prior to the end of the
original and any renewal period, or unless terminated sooner in
accordance with the provisions of Paragraphs 4(d) and 13 herein.
II. Paragraph 4(a) of the Agreement is hereby amended to read as follows:
4. ROYALTIES.
(a) Actual Percentage Royalties. Enesco shall pay PMI as actual
percentage royalties a sum equal to the percentages of the
"Net Wholesale Sales Price", "Net Retail Sales Price" and
"FOB Sales Price", as defined in paragraph 4(e), of all
Licensed Products sold under this Agreement during the
following time periods, by either Enesco or by any
sublicensee or distributor of Enesco, during the Term of
this Agreement:
Percentages for Wholesale Sales
Jan. 1, 1998 to Jan. 1, 1999 to Jan. 1, 2000 to
Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2007
--------------- --------------- ----------------
Porcelain Bisque Products 12.50% 12.75% 13.00%
Plush Products 10.00% 10.00% 10.00%
All Other Licensed Products 12.50% 12.50% 12.50%
Percentages for Direct Response Sales
Jan. 1, 1998 to Jan. 1, 1999 to Jan. 1, 2000 to
Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 2007
--------------- --------------- ---------------
Porcelain Bisque Products 6.25% 6.375% 6.50%
Plush Products 5.00% 5.000% 5.00%
All Other Licensed Products 6.25% 6.250% 6.25%
Percentages for F.O.B. Sales
----------------------------
Jan. 1, 1998 to
Dec. 31, 2007
---------------
All Licensed Products 14.00%
III. Subparagraph 4(b) of the Agreement is hereby amended to read as
follows:
(b) Notwithstanding any other provision of this Agreement, the
percentage royalty for Precious Moments Collectors' Club(R) "Members
Only" figurines shall be one-half the percentage royalties stated
in Paragraph 4(a); and the percentage royalties payable for the
existing Abbeville published book entitled: "Precious Moments Last
Forever" (Paragraph H. Books, No. 3), shall be 7.5%.
IV. Subparagraph 4(c) of the Agreement shall be amended to read as
follows:
4(c) Guaranteed Minimum Royalties. It is the intent of the
parties to provide herein for a three year minimum guarantee of
Forty-Five Million Dollars ($45,000,000) in royalties to PMI,
beginning January 1, 1998, which three year guarantee shall roll-
over automatically for the Term of the Agreement. Accordingly, in
the event that the total of the royalties due to PMI from Enesco,
pursuant to Paragraphs 4(a) and 4(b) hereof, during any calendar
year (starting with the calendar year 1998) during the Term of
this Agreement is less than Fifteen Million Dollars ($15,000,000)
(hereinafter the "Annual Minimum Royalty"), Enesco agrees to pay
PMI the difference between the Annual Minimum Royalty and the
total of the royalties (hereinafter the "Difference Payment") due
for the prior calendar year. Any such Difference Payment is due
and owing no later than ninety (90) days after the last day of
December of the prior calendar year.
V. Subparagraph 4(e) of the Agreement shall be amended to read as
follows:
4(e) Net Wholesale Sales Price, Net Retail Sales Price and F.O.B.
Sales Price.
(i) The term "Net Wholesale Sales Price", as used in this
Agreement, shall mean the actual billing price of Licensed
Products sold to wholesale customers of Enesco, or of its
sublicensees or distributors, less customer discounts and
allowances allowed and less any returns and transportation
charges allowed on returns.
(ii) The term "Net Retail Sales Price", as used in this
Agreement, shall mean the actual billing price of Licensed
Products sold via retail or direct response sales directly
to consumer customers of Enesco or of its sublicensee, The
Bradford Exchange, Ltd. and its affiliates (hereinafter
jointly "Bradford"), less sales taxes (including VAT), any
shipping and handling charges separately itemized on the
customer's invoice, credits for returns for which the
customer is given credit, and credits for non-payment by
customers (up to but not exceeding a maximum of 10.0%) to be
calculated separately for each program.
(iii) The term "F.O.B. Sales Price", as used in this Agreement,
shall mean the actual billing price for Licensed Products
sold on an F.O.B. price basis non-U.S.A. factory or non-U.S.A.
port.
(iv) All royalties due PMI shall accrue upon the sale of the
Licensed Products sold, regardless of the time of collection
by Enesco or its sublicensees or distributors. For purposes
of this Agreement, Licensed Products shall be considered
"sold" upon the date when such Licensed Products are billed
or invoiced, shipped or paid for, whichever event occurs
first. If any Licensed Products are consigned to a
distributor by either Enesco or its sublicensees, the
Licensed Products shall be considered "sold" by Enesco or by
its sublicensees upon the date on which the distributor
bills, invoices, ships or receives payment for the Licensed
Product, whichever event occurs first. Royalties on sales
by Enesco to Bradford shall be based on Bradford's Net
Retail Sales Price and shall be payable when the Licensed
Products are sold by Bradford. For the purpose of the
Bradford sublicense, a Licensed Product shall be considered
as "sold" upon the date when Bradford ships the Licensed
Product.
VI. The first sentence of Subparagraph 4(l) of the Agreement shall be
amended to read as follows:
(l) Accounting. No later than thirty (30) days after the last
day of March, June, September and December of each year
during the Term of this Agreement, Enesco shall furnish PMI
with complete and accurate statements showing, on a product
by product basis, the number, description and the actual
billing price, itemized deductions from the actual billing
price, and the Net Wholesale Sales Price, the Net Retail
Sales Price or the F.O.B. Sales Price, as the case may be,
of the Licensed Products sold by Enesco or its sublicensees
or distributors during the three (3) months calendar quarter
immediately preceding such thirty (30) day period.
VII. Paragraph 4 of the Agreement shall be amended by adding thereto new
Subparagraph (p) which reads as follows:
(p) Royalty Adjustments.
The parties agree that no royalties shall be due (i) on Licensed
Products which are donated by Enesco to a recognized charitable
organization; (ii) on figurines which are shipped free of charge
by Enesco to collectors' club members who have redeemed points
authenticated by Authorized Retailers under a program known as
Precious Rewards, which Program has been established for frequent
buyers of porcelain bisque Licensed Products; (iii) on Licensed
Products which Enesco sells exclusively to any Precious Moments
Chapel related company for resale in or near the Precious Moments
Chapel; and/or (iv) on Licensed Products sold directly to Butcher
and/or PMI for any reason.
VIII. Exhibit A of the Agreement is hereby amended to add the following
trademarks:
20. Precious Collectibles
21. Sammy's Circus
22. Little Moments
23. Little Moments Mean A Lot
24. Precious Rewards
25. Tender Tails
IX. Exhibit B-1 of the Agreement shall be amended as follows to add the
following to the list of Enesco Core Products:
43. Underglaze sculpted perfume bottles
44. Underglaze sculpted functional tea cups and saucers
45. Underglaze sculpted 4" flower pots
46. Two tier cookie plates
47. Sculpted kitchen molds
48. Sculpted napkin holders
49. Sculpted functional cream and sugar sets
50. Sculpted functional teapots
51. Underglaze figurative clocks
52. Sculpted porcelain alarm clocks
53. Sculpted canister sets
54. Sculpted spice jar sets
55. Sculpted tissue holders
56. Sculpted wastebaskets
57. Sculpted toothbrush holders
58. Sculpted cups
59. Sculpted soap dishes
60. Porcelain and glass canisters
61. Sculpted soda glasses
62. Sculpted ice cream dishes
63. Sculpted syrup pitchers
64. Stoneware sculpted cookie jars
65. Porcelain pomanders
66. Pitcher and bowl
67. Sculpted tree toppers
68. Sculpted ring box/holders
69. Sculpted porcelain 3-d lamps
70. Diecast porcelain trivets
71. Sculpted serving platters
72. Place card name plates
73. Underglaze sculpted salt and pepper shakers
74. Decal ring boxes
75. Sculpted wedding invitation holders
76. Porcelain coasters
77. Wood and porcelain salt and pepper displayer
78. Underglaze porcelain musical hanging ornaments
79. Stoneware toothpick holder
80. Ceramic casserole dish
81. Decal: tape dispenser, pencil cups, letter holder, desk
organizer, letter opener, paperweight, pen holder and pen
82. Porcelain Mugs with candy
83. Sculpted Pie plates
84. Candles: 3-d character, sculpted
85. Wood nutcrackers
86. Resin Products:
Resin and Lucite magnetic photo frames
Sculpted photo frames
Lamp finials
Sculpted large keepsake boxes
Sculpted atomizers
Sculpted bookmarks
Lapel pins
Xxxxxx miniature resin/bronze figurines
"Merry Dreams" glass ball containing resin figurine ornaments
Sculpted ring holders
Figurines
Sculpted earrings
Sculpted lamps
Sculpted clocks
Sculpted switch plate covers
Sculpted cross
Musicals
Banks
Plaques
Votive figurines
X. Exhibit B-2 of the Agreement is amended as follows to add the
following new non-exclusive product categories and products:
D. Glassware Products
2. Perfume bottles
3. Vases with attachments in coldcast or resin
4. Bottles with attachments in coldcast or resin
5. Covered boxes in coldcast or resin
6. Paperweights
7. Glass/brass plaques
E. Baby Accessories Line
3. Plastic baby wall decor
4. Frame/brush set
5. Baby cup with silver utensils
6. Bank with silver frame
7. Cross plaque with silver frame
8. Bank with rattle
F. Miscellaneous Products
22. Fabric gift pillows with porcelain attachments
23. Toy trains
24. Electric ceramic/porcelain potpourri burners
25. Outdoor hanging flags (non-exclusive/mass market)
26. Large and small garden stakes (mass market)
27. Jewelry gold electroplate (14k and 14k filled)
and sterling (excluding cloisonne or cloisonne -like);
rings, earrings, pendants, necklaces, charms and bracelets)
28. Vinyl growth chart
29. Paper-wrapped jewelry box
30. Artificial rose w/message attached
31. Fabric heart shaped sachet with porcelain attachment
32. Candles, votive
33. Antimony pins
34. Plastic inkflow; keychains, ornaments, frame magnets
35. Plastic boxes with candy
36. Flower pots with plant stakes and seeds
37. Glazed flower pots on wooden shelf hangers
38. Resin sculpted gardening line (terra cotta look);
birdhouses, birdfeeders, planters, watering cans,
birdbaths, plant stakes, flower pots, wall plaque
planter, water can statue, garden fountain, garden
magnet, hummingbird feeder, garden pot with seeds,
thermometer, sundial, wind chimes, pot huggers, utensil
rack, and signs.
H. Books
3. "Precious Moments Last Forever" (Abbeville Press)
X. Xxxx Products
13. Wood and plastic clocks
14. Recipe box
15. Chalkboard
16. Erasers
J. Brassware Products
8. Votive candle holders
9. Photo etched candle attachments
10. Photo etches hanging ornaments
M. Decoupage Products
3. Drawer scenters
Q. Potpourri Products
11. Basket with potpourri
U. Plush Products
V. Vinyl squeeze toys
XI. FAILURE TO EXPLOIT LICENSED PRODUCT RIGHTS.
With the exception of Core Products, rights to all other Licensed
Products shall be conditioned upon Enesco's exploitation of such
rights as follows:
New Non-Exclusive Licensed Products. If Enesco shall fail to
introduce any new non-exclusive Licensed Product within one (1) year
of the execution of this Amendment, or if following introduction,
Enesco shall fail to make more than token or nominal sales of any
Licensed Products for a period of two (2) calendar years, PMI shall
notify Enesco in writing that it has a six (6) month period from date
of notification to broadly distribute the product or forfeit its
rights to that Licensed Product.
New Exclusive Licensed Product Categories. Prior to being granted
additional exclusive product rights, Enesco shall provide PMI with a
marketing plan including but not limited to Enesco's projected annual
sales of each additional proposed exclusive Licensed Product category.
Assuming exclusive rights are then granted, Enesco shall forfeit its
exclusive rights to that Licensed Product category if the projected
annual sales are not realized within two (2) consecutive years of
marketing Licensed Products in such category.
XII. PREMIUMS.
Notwithstanding the other provisions of this Agreement, Enesco agrees
that the manufacture of any exclusive Licensed Product under the
Agreement, other than the Core Products, for distribution and sale by
another PMI PRECIOUS MOMENTS licensee as a "premium item", shall not
constitute an infringement of Enesco's rights under this Agreement so
long as Enesco is given a right of first refusal to meet the terms
offered to such other PMI PRECIOUS MOMENTS licensee for manufacturing
that "premium item" Licensed Product, which right of first refusal may
be exercised by Enesco within fifteen (15) days of Enesco's receipt
thereof.
XIII. TRANSSHIPMENT POLICY.
The parties agree that during the term of this Agreement, they shall
maintain the mutually agreed upon procedures, as set forth in Exhibit
A attached hereto or as subsequently amended, to endeavor to prevent
the authorized transshipment of Licensed Products into the United
States. Subject to compliance with the applicable foreign law, Enesco
further agrees that it shall enter into contractual agreements with
its foreign subsidiaries, its foreign affiliates and its foreign sub-
licensees that will expressly preclude them from exporting Licensed
Products to the United States.
XIV. EFFECTIVE DATE.
The effective date of this First Amendment shall be January 1, 1998.
XV. RATIFICATION.
All other terms and conditions of the Agreement are ratified and
confirmed and shall continue to remain in full force and effect.
IN WITNESS WHEREOF, the parties have, through their duly authorized
officers, set their hands and seals as of the 29 day of December, 1997.
WITNESS PRECIOUS MOMENTS, INC.
an Illinois Corporation
/s/ Xxxxxxxxx X. Xxxxxxxxx By: /s/ Xxx Xxxxxxx
--------------------------- --------------------------------
Xxx Xxxxxxx, President
WITNESS: ENESCO CORPORATION
an Ohio Corporation
/s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------- --------------------------------
Xxxxxxx X. Xxxxxxx, President
and Chief Operating Officer
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ILLINOIS )
)
COUNTY OF XXXX )
This Certificate of Acknowledgment is being made and executed pursuant
to the Uniform Recognition of Acknowledgment Act, as amended, by me, a
Notary Public commissioned in and for the County of Xxxx, State of
Illinois.
I Certify that the foregoing First Amendment to License Agreement was
acknowledged before me this 23 day of December, 1997, by Xxxxxxx X.
Xxxxxxx, President and Chief Operating Officer of ENESCO CORPORATION, an
Ohio corporation, on behalf of that corporation.
/s/ Xxxxx X. Xxxxxxxx
----------------------------------
Notary Public
My Commission expires: 11-19-2001
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ILLINOIS )
)
COUNTY OF XXXX )
This Certificate of Acknowledgment is being made and executed pursuant
to the Uniform Recognition of Acknowledgment Act, as amended, by me, a
Notary Public commissioned in and for the County of Xxxx, State of
Illinois.
I Certify that the foregoing First Amendment to License Agreement was
acknowledged before me this 29 day of December, 1997, by Xxx Xxxxxxx,
President of PRECIOUS MOMENTS, INC., an Illinois corporation, on behalf of
that corporation.
/s/ Xxxxxxxxx X. Xxxxxxxxx
----------------------------------
Notary Public
My Commission expires: 2-9-98
9
EXHIBIT A
POLICY
Subject: Transshipping of Precious Moments Porcelain Bisque products
Date Issued:
Issued by: ENESCO Corporation
I. Purpose
The purpose of this policy is to state that the Enesco Corporation
will not tolerate transshipping of Precious Moments Porcelain Bisque
products. Further, to emphasize to retailers and sales
representatives, the Precious Moments Authorized Dealer Agreement
that states, in part:
"2. Dealer's responsibilities are to:
B. Sell P recious Moments Porcelain Bisque products only under the
name and location listed above. Not sell any Precious Moments
Porcelain Bisque product at any location not approved by ENESCO
Corporation. Additionally, not transfer or transship, for resale or
further distribution, Precious Moments Porcelain Bisque products to
any unauthorized location or act as an agent for third parties in the
sale of Precious Moments Porcelain Bisque products without specific,
written approval from ENESCO Corporation."
II. Policy
The Enesco Corporation will take the following steps to minimize the
incidence of transshipping:
1. Annually, each facility that produces Precious Moments Porcelain
Bisque products will be asked to attest to their agreement to
maintain exclusive production/shipping only to the Enesco Corporation
and its authorized affiliates and distributors.
2. Conduct background investigations on potential international
customers who are interested in Precious Moments Porcelain Bisque
products. This due diligence process will assist in identifying a
potential international customer's suitability to market Precious
Moments Porcelain Bisque products.
3. Agreements will be maintained and updated for every Precious
Moments Authorized Dealer and Distributor.
4. Require retail sales reports from international affiliates and
distributors to evaluate their purchases versus reported retail
sales.
5. Covertly xxxx Precious Moments Porcelain Bisque products ordered
by, and shipped to international customers. Said marks will be
applied by either the production facilities overseas or by the Enesco
distribution center in Elk Grove Village, Illinois.
6. Covertly xxxx Precious Moments Porcelain Bisque products ordered
by, and shipped to selected domestic customers. Said marks will be
applied by either the production facilities overseas or by the Enesco
distribution center in Elk Grove Village, Illinois.
7. The Sales Team will be reminded of their obligation to report any
suspected or confirmed incidence of transshipping. Their annual
contract will be the document that defines this important
responsibility.
8. The Enesco Corporation will take whatever other actions required
to minimize transhipping.
III. Penalty
The Enesco Corporation will take the following steps in the event that
a customer's transshipping activities are discovered and verified:
1. With regard to domestic customers, the Precious Moments
Authorized Dealer Agreement states, in part:
"2. Dealer's responsibilities are to:
H. Understand that violation of any terms of this Agreement will
result in the loss if our Authorized Dealer status and current
Precious Moments Porcelain Bisque products subscription dollar
allocation."
2. With regard to international distributors, the International
Giftware Distribution Agreement states, in part:
"1(d) Distributor shall refrain from actively soliciting,
directly or indirectly, any customer outside the Territory for
the sale of Products and shall refrain from selling products to
any customer within the Territory if it knows or has reason to
know that such Products will be resold outside the Territory."
3. With regard to Enesco Associates, Sales Representatives and
Affiliates:
Per Xx. Xxxxxx Xxxxxxxx'x January 24, 1996 letter to the Personnel of
Enesco, it Sales Representatives, and its Affiliates:
"Enesco Corporation and it affiliated companies will not accept any
employee or sales representative activity associated with or in
support of distribution of sales of its product, which results in
diversion or transshipments to unauthorized dealers, retailers,
catalog companies or secondary marketers."
IV. Responsibility
It is the responsibility of Enesco's Vice President/General Manager,
Precious Moments or other designee of Enesco's Chairman or President
to ensure that the identified steps are continuously implemented and
monitored.
Signed this 29th day of December, 1997.
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxx Xxxxxxx
---------------------------- -----------------------------
Xxxxxxx X. Xxxxxxx Xxx Xxxxxxx
President & COO President
Enesco Corporation Precious Moments, Inc.
