1
NOTE: The omitted portions of this document marked with an asterisk are subject
to a confidential treatment request and have been filed separately with the
Securities and Exchange Commission.
LICENSE AGREEMENT
-----------------
Date: December 3, 1996
Re: WINNIE THE POOH
This license agreement ("Agreement") is entered into by and between Disney
Enterprises, Inc. ("Disney"), with a principal place of business at 000 Xxxxx
Xxxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000, and THE FIRST YEARS, INC.
("Licensee"), with its principal place of business at One Kiddie Drive, Avon, MA
02322-1171. Disney and Licensee agree as follows:
1. MEANING OF TERMS
----------------
A. "LICENSED MATERIAL" means the graphic representations of the following:
WINNIE THE POOH, XXXXXXXXXXX XXXXX, EEYORE, KANGA, ROO, RABBIT,
PIGLET, OWL, GOPHER, and TIGGER, all in the style as designed by
Disney.
B. "TRADEMARKS" means "XXXX DISNEY", "DISNEY", and the representations of
Licensed Material included in Subparagraph 1.A. above.
C. "ARTICLES" means the items set forth on Schedule A, which is attached
hereto and incorporated herein by this reference, on or in connection with
which the Licensed Material and/or the Trademarks are reproduced or used,
and includes each and every stock keeping unit ("SKU") of each Article.
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 January 1, 1997, and
ending * .
F. "TERRITORY" means the United States, United States PX's wherever located,
and United States territories and possessions, excluding Puerto Rico, Guam,
Commonwealth of Northern Mariana Islands and Palau. 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 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)-(6):
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(1)(a)* percent ( * %) of Licensee's Net Invoiced Xxxxxxxx to authorized
Retailers and Wholesalers for Articles shipped by Licensee from a
location in the Territory for delivery to a customer located in the
Territory ("F.O.B. In Sales"); or
(b)* percent ( * %) of Licensee's Net Invoiced Xxxxxxxx to authorized
Retailers and Wholesalers when Licensee's customer located in the
Territory takes title to the Articles outside the Territory and/or
bears the risk of loss of Articles manufactured and shipped to the
customer from 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, Licensee agrees to pay the higher royalty amount.
(2) The sums paid to Disney as Royalties on any sales to Licensee's
Affiliates shall be no less than the sums paid on sales to customers
not affiliated with Licensee.
(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. However, sales of Articles to Disney's
Affiliates outside the Territory shall bear a Royalty at the rate for
F.O.B. In Sales.
(4) 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.
(6) Royalties reported on sales of Articles which have been returned to
Licensee 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 Licensee be entitled to a refund of Royalties.
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H. "NET INVOICED XXXXXXXX" means the following:
(1) actual invoiced xxxxxxxx (i.e., sales quantity multiplied by
Licensee's selling price) for Articles sold, and all other receivables
of any kind whatsoever, received in payment for the Articles, whether
received by Licensee or any of Licensee's Affiliates, except as
provided in Subparagraph 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 sales taxes.
I. "ALLOWABLE DEDUCTIONS" means the following:
(1) volume discounts, and other discounts from the invoice price (or
post-invoice credits) unilaterally imposed in the regular course of
business by Licensee's customers, so long as Licensee documents such
discounts (or credits) to Disney's satisfaction. In the event a
documented unilateral discount (or credit) is taken with respect to
combined sales of Articles and other products not licensed by Disney,
and Licensee cannot document the portion of the discount (or credit)
applicable to the Articles, Licensee may apply only a pro rata portion
of the discount (or credit) to the Articles. Unilateral discounts or
credits are never deductible if they represent items listed below in
Subparagraph 1.1.(2).
(2) The following are not Allowable Deductions, whether granted on sales
invoices or unilaterally imposed as discounts or as post-invoice
credits: cash discounts granted as terms of payment; early payment
discounts; allowances or discounts relating to advertising; xxxx down
allowances; new store allowances; defective goods allowances or
allowances taken by customers in lieu of returning goods; 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 the sell-offperiod, if granted.
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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):
None.
L. "GUARANTEE" means the following sum(s) which Licensee guarantees
to pay as minimum Royalties on Licensee's cumulative sales in the
following period(s):
*
M. "SAMPLES" means twelve (12) samples of each 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 Licensee
agrees to spend in the following way(s):
Licensee hereby acknowledges Licensee's understanding that Disney is
implementing a common marketing and promotional fund (the "Common
Marketing Fund"), during the Principal Term, for purposes of
marketing and promoting the Licensed Material, the Trademarks,
and/or the brand(s), as Disney may deem appropriate in Disney's
absolute discretion. In order to implement the Common Marketing
Fund, Licensee shall be required, from time to time at Disney's
request, to provide a contribution(s) to the Common Marketing Fund,
the cumulative total of which shall not exceed * percent ( * %) of
Licensee's Net Invoiced Xxxxxxxx for Articles (such Net Invoiced
Xxxxxxxx to be estimated by Disney in a reasonable manner) during the
Principal Term, but in no event less than a cumulative total of *
percent ( * %) of the quotient of (the Guarantee divided by the
Royalty rate for F.O.B. In Sales). Within fifteen (15) days after each
request by Disney, Licensee shall pay to Disney the amount of the
contribution designated by Disney. Such contribution may be expended
by Disney and/or Disney's designees in the amount and in the manner
Disney deems most appropriate in order to market, promote, and
advertise the Licensed Material, the Trademarks, and/or the brand(s).
Licensee's contribution shall only be spent for the promotion of the
Licensed Material, the Trademarks, and/or the brand(s) licensed
hereunder. However, Disney does not ensure that Licensee will benefit
directly or pro-rata from the operation of the Common Marketing
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Fund. Licensee shall not be entitled to any audit rights with regard to the
Common Marketing Fund.
O. "MARKETING DATE" means the following date(s) by which the following
Article(s) shall be available for purchase by the public at the retail
outlets authorized pursuant to Subparagraph 2.A.:
By January 1, 1997, for all Articles.
P. "AFFILIATE" means, with regard to Licensee, any corporation or other entity
which directly or indirectly controls, is controlled by, or is under common
control with Licensee; with regard to Disney, "Affiliate" means any
corporation or other entity which directly or indirectly controls, is
controlled by, or is under common control with Disney. "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.
Q. "LAWS" means any and all applicable laws, rules, regulations, voluntary
industry standards, association laws, codes or other obligations pertaining
to any of Licensee's activities under this Agreement, including but not
limited to those applicable to the manufacture, pricing, sale and/or
distribution of the Articles.
R. "RETAILER" means independent and chain retail outlets which have
storefronts and business licenses, and which customers walk into, not up
to; "WHOLESALER" means a seller of items to retailers, not consumers, and
includes the term "distributor". The following do not qualify as authorized
sales outlets for Articles under this Agreement under any circumstances:
swap meets, flea markets, street peddlers, unauthorized kiosks, and the
like.
2. RIGHTS GRANTED
--------------
A. In consideration for Licensee's promise to pay and Licensee's payment of
all Royalties, Advances and Guarantees required hereunder, Disney grants
Licensee the non-exclusive right, during the Principal Term, and only
within the Territory, to reproduce the Licensed Material only on or in
connection with the Articles, to use such Trademarks and uses thereof as
may be approved when each SKU of the Articles is approved and only on or
in connection with the Articles, and to manufacture, distribute for sale
and sell the Articles (other than by direct marketing methods, which
includes but is not limited to, computer on-line selling, direct mail and
door-to-door solicitation). Licensee will sell the Articles only to the
following Retailers in
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the Territory for resale to the public in the Territory, or to Wholesalers
in the Territory for resale only to the following Retailers: (1) mass
market Retailers (including such Retailers as Target, Toys R Us, WalMart
and KMart), and (2) drug chains; provided, however, that the Articles
identified in Schedule A as A.12, and B.1 through B.7 must be carded and
sold only to the infant accessory departments or the juvenile products
departments of such authorized Retailers. Licensee will not sell the
Articles to other Retailers, or to other Wholesalers. In addition, License
may not sell the Articles to Retailers selling merchandise on a duty-free
basis, or to Wholesalers for resale to such Retailers, unless such Retailer
or Wholesaler has a then-current license agreement with Disney or any of
Disney's Affiliates permitting it to make such duty-free sales. Licensee
may sell the Articles to authorized customers for resale through the
pre-approved mail order catalogs listed on the Catalog Schedule to this
Agreement. If there is a question as to whether a particular customer falls
within any of the categories specified above, Disney's determination shall
be binding.
B. Unless Disney consents in writing, Licensee 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 through unapproved direct marketing methods,
including but not limited to, home shopping television programs, or to
customers for inclusion in another product. If Licensee wishes to sell the
Articles to customers for resale through mail order catalogs other than
those listed on the Catalog Schedule hereto, Licensee must obtain Disney's
prior written consent in each instance. However, Licensee may solicit
orders by mail from those Wholesalers or Retailers authorized pursuant to
Subparagraph 2.A. above, and Licensee may sell to such authorized 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.
C. The prohibition of computer on-line selling referenced in Subparagraph 2.A.
includes, but is not limited to, the display, promotion or offering of
Articles in or on any on-line venues, including but not limited to, any
catalog company's or Retailer's "Websites," "home pages," or any similar
venues, except as specifically permitted in the next two sentences. With
Disney's prior written permission, Articles approved by Disney may be
displayed and promoted on Disney-controlled Internet services, only within
the Territory. In addition, with Disney's prior written permission,
Articles approved by Disney may be displayed and promoted on Licensee's own
Website; however, Licensee must obtain Disney's prior written approval of
all creative and editorial elements of
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such promotional uses, in accordance with the provisions of Paragraph 7 of
this Agreement.
D. Unless Disney consents in writing, Licensee shall not give away or donate
Articles to Licensee's accounts or other persons for the purpose of
promoting sales of Articles, except for minor quantities or samples which
are not for onward distribution.
E. Nothing contained herein shall preclude Licensee from selling Articles to
Disney or to any of Disney's Affiliates, or to Licensee's or Disney's
employees, subject to the payment to Disney of Royalties on such sales.
X. Xxxxxx further grants Licensee the right to reproduce the Licensed Material
and to use the approved Trademarks, only within the Territory, during the
Principal Term, on containers, packaging and display material for the
Articles, and in advertising for the Articles.
G. Nothing contained in this Agreement shall be deemed to imply any
restriction on Licensee's freedom and that of Licensee's customers to sell
the Articles at such prices as Licensee or they shall determine.
H. Licensee recognizes and acknowledges the vital importance to Disney of the
characters and other proprietary material Disney owns and creates, and the
association of the Disney name with them. In order to prevent the
denigration of Disney's products and the value of their association with
the Disney name, and in order to ensure the dedication of Licensee's best
efforts to preserve and maintain that value, Licensee agrees that, during
the Principal Term and any extension hereof, Licensee will not manufacture
or distribute any merchandise embodying or bearing any artwork or other
representation which Disney determines, in Disney's reasonable discretion,
is confusingly similar to Disney's characters or other proprietary
material.
3. ADVANCE
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A. Licensee agrees 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. .
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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 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 Disney or
any of Disney's Affiliates 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. Licensee shall, with Licensee's 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 Disney 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 to sales to Disney or to any
of Disney's Affiliates, 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, Licensee shall submit to Disney for Disney's 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 any and all SKUs of the
Article. Thereafter, Licensee shall submit to Disney for Disney's written
approval a pre-production sample of each SKU of each Article. Disney 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, Licensee shall
supply to Disney
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for Disney's use for internal purposes, a mock-up, prototype or
pre-production sample of each SKU of each Article on or in connection with
which the Licensed Material is used. Licensee acknowledges that Disney may
not approve concepts or artwork submitted near the end of the Principal
Term. Any pre-production approval Disney may give will not constitute or
imply a representation or belief by Disney that such materials comply with
any applicable Laws.
B. Approval or disapproval shall lie solely in Disney's discretion, and any
SKU of any Article not so approved in writing shall be deemed unlicensed
and shall not be manufactured or sold. If any unapproved SKU of any Article
is being sold, Disney may, together with other remedies available to
Disney, including but not limited to, immediate termination of this
Agreement, by written notice require such SKU of such Article to be
immediately withdrawn from the market. Any modification of any SKU 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 Disney's written approval as if it were a new SKU of an
Article. Approval of any SKU 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 Licensee submits for approval artwork from an article or book
manufactured or published by another licensee of Disney's or of any of
Disney's Affiliates, Licensee must advise Disney in writing of the source
of such artwork. If Licensee fails to do so, any approval which Disney may
give for use by Licensee of such artwork may be withdrawn by giving
Licensee written notice thereof, and Licensee may be required by Disney not
to sell Articles using such artwork.
D. Licensee is responsible for the consistent quality and safety of the
Articles and their compliance with applicable Laws. Disney 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 Licensee advises Disney in writing is
intended to make the Article safer or more durable.
E. If Disney has supplied Licensee with forms for use in applying for approval
of artwork, models, pre-production and production samples of Articles,
Licensee shall use such forms when submitting anything for Disney's
approval.
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6. APPROVAL OF PRODUCTION SAMPLES
------------------------------
A. Before shipping an Article to any customer, Licensee agrees to furnish to
Disney, from the first production run of each supplier of each of the
Articles, for Disney's 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 any SKU of the Article, as well as of the quality of the Article, shall
lie in Disney's sole discretion and may, among other things, be based on
unacceptable quality of the artwork or of the Article as manufactured. Any
SKU of any Article not so approved shall be deemed unlicensed, shall not be
sold and, unless otherwise agreed by Disney in writing, shall be destroyed.
Such destruction shall be attested to in a certificate signed by one of
Licensee's officers. Production samples of Articles for which Disney has
approved a pre-production sample shall be deemed approved, unless within
twenty (20) days of Disney's receipt of such production sample Disney
notifies Licensee to the contrary. Any approval of a production sample
attributable to Disney will not constitute or imply a representation or
belief by Disney that such production sample complies with any applicable
Laws.
B. Licensee agrees to make available at no charge such additional samples of
any or all SKUs of each Article as Disney may from time to time reasonably
request for the purpose of comparison with earlier samples, or for Disney's
anti-piracy efforts, or to test for compliance with applicable Laws, and to
permit Disney to inspect Licensee's manufacturing operations and testing
records (and those of Licensee's third-party manufacturers) for the
Articles.
C. Licensee acknowledges that Disney may disapprove any SKU of an Article or a
production run of any SKU of an Article because the quality is unacceptable
to Disney, and accordingly, Disney recommends that Licensee submit
production samples to Disney 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
Disney's further prior written approval. All SKUs of Articles being sold
must conform in all respects to the approved production sample. It is
understood that if in Disney's reasonable judgment the quality of any SKU
of an Article originally approved has deteriorated in later production
runs, or if the SKU has otherwise been altered, Disney may, in addition to
other remedies available to Disney, by written notice require such SKU of
the Article to be immediately withdrawn from the market.
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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. Licensee is responsible for the consistent quality and safety of the
Articles and their compliance with applicable Laws. Disney 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 Licensee advises Disney in writing is
intended to make the Article safer or more durable.
X. Xxxxxx shall have the right, by written notice to Licensee, to require
modification of any SKU of any Article approved by Disney under this or any
previous agreement between the parties pertaining to Licensed Material.
Likewise, if the Principal Term of this Agreement is extended by mutual
agreement, Disney shall have the right, by written notice to Licensee, to
require modification of any SKU of any Article approved by Disney under
this Agreement. It is understood that there is no obligation upon either
party to extend the Agreement.
H. If Disney notifies Licensee of a required modification under Subparagraph
6.G. with respect to any SKU of a particular Article, such notification
shall advise Licensee of the nature of the changes required, and Licensee
shall not accept any order for any such Article until the subject SKU has
been resubmitted to Disney with such changes and Licensee has received
Disney's written approval of the Article as modified. However, Licensee
may continue to distribute Licensee's inventory of the previously approved
Articles until such inventory is exhausted (unless such Articles are
dangerously defective, as determined by Disney).
I. Upon Disney's request, Licensee agrees to give Disney written notice of the
first ship date for each Article.
J. If Disney has inadvertently approved a concept, pre-production sample, or
production sample of a product which is not included in the Articles under
this Agreement, or if Disney has inadvertently approved an Article using
artwork and/or trademarks not included in the Agreement, such approval may
be revoked at any time without any obligation whatsoever on Disney's part
to Licensee. Any such product as to which Disney's approval is revoked
shall be deemed unauthorized and shall not be distributed or sold by or for
Licensee.
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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 Disney
and receive Disney's written approval before use. To avoid unnecessary
expense if changes are required, Disney's approval thereof should be
procured when such is still in rough or storyboard format. Disney shall
endeavor to respond to requests for approval within a reasonable time.
Approval or disapproval shall lie in Disney's sole discretion, and the use
of unapproved containers, packaging, display material, promotional
material, catalogs or advertising is prohibited. Disney's approval of any
containers, packaging, display material, promotional material, catalogs or
advertising under this Agreement will not constitute or imply a
representation or belief by Disney that such materials comply with any
applicable Laws. Whenever Licensee prepares catalog sheets or other printed
matter containing illustrations of Articles, Licensee will furnish to
Disney five (5) copies thereof when they are published.
B. If Disney has supplied Licensee with forms for use in applying for approval
of materials referenced in this Paragraph 7, Licensee shall use such forms
when submitting anything for Disney's approval.
X. Xxxxxx has designed character artwork and/or a brand name logo(s) to be
used by all licensees in connection with the packaging of all merchandise
using the Licensed Material, and, if applicable, on hang tags and garment
labels for such merchandise. Disney will supply Licensee with reproduction
artwork thereof; and Licensee agrees to use such artwork and/or logo(s) on
the packaging of the Articles, and, if applicable, on hang tags and garment
labels, which Licensee will have printed and attached to each Article at
Licensee's cost. Disney recommends that Licensee source the hang tags and
garment labels from Disney's authorized manufacturer (if any) of pre-
approved hang tags and garment labels, the name of which will be provided
to Licensee upon request. However, Licensee 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 Disney in
accordance with Disney's usual approval process.
8. ARTWORK
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Licensee shall pay Disney, within thirty (30) days of receiving an invoice
therefor, for Style Guides and for artwork done at Licensee's request by
Disney or third parties
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under contract to Disney in the development and creation of Articles,
display, packaging or promotional material (including any artwork which in
Disney's opinion is necessary to modify artwork initially prepared by
Licensee and submitted to Disney for approval, subject to Licensee's prior
written approval) at Disney's then prevailing commercial art rates.
Estimates of artwork charges are available upon request. While Licensee is
not obligated to utilize the services of Disney's Art Department, Licensee
is encouraged to do so in order to minimize delays which may occur if
outside artists do renditions of Licensed Material which Disney cannot
approve and to maximize the attractiveness of the Articles. Artwork will be
returned to Licensee by overnight courier, at Licensee's cost (unless other
arrangements are made).
9. PRINT, RADIO OR TV ADVERTISING
------------------------------
Licensee will obtain all approvals necessary in connection with print,
radio or television advertising, if any, which Disney may authorize.
Licensee represents and warrants that all advertising and promotional
materials shall comply with all applicable Laws. Disney's approval of copy
or storyboards for such advertising will not constitute or imply a
representation or belief by Disney that such copy or storyboards comply
with any applicable Laws. This Agreement does not grant Licensee any rights
to use the Licensed Material in animation. Licensee may not use any
animation or live action footage from the motion picture from which the
Licensed Material comes without Disney's prior written approval in each
instance. In the event Disney approves the use of film clips of the motion
picture from which the Licensed Material comes, for use in a television
commercial, Licensee 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
Disney, in such commercial and there shall be no modifications of the film
clip footage. All film clip footage shall be returned to Disney immediately
after its inclusion in such commercial. Disney shall have the right to
prohibit Licensee from advertising the Articles by means of television
and/or billboards. Such right shall be exercised within Disney's absolute
discretion, including without limitation for reasons of overexposure of the
Licensed Material.
10. LICENSEE NAME AND ADDRESS ON ARTICLES
-------------------------------------
A. Licensee's name, trade name (or Licensee's trademark which Licensee
has advised Disney in writing that Licensee is using) and Licensee's
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.
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B. Licensee shall advise Disney in writing of all trade names or
trademarks Licensee wishes to use on Articles being sold under this
license. Licensee may sell the Articles only under mutually agreed
upon trade names or trademarks.
11. COMPLIANCE WITH APPROVED SAMPLES AND APPLICABLE LAWS AND STANDARDS
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A. Licensee covenants that 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,
and such specifications, if any, as may have been specified in
connection with this Agreement (e.g., Disney's Apparel Performance
Specification Manual, if the Articles are items of apparel), and shall
conform to the Sample thereof approved by Disney.
B. Without limiting the foregoing, Licensee covenants on behalf of
Licensee's own company, and on behalf of all of Licensee's third-party
manufacturers and suppliers (collectively, "Manufacturers"), as
follows:
(1) Licensee and the Manufacturers agree not to use child labor in
the manufacturing, packaging or distribution of Disney
merchandise. The term "child" refers to a person younger than the
age for completing compulsory education, but in no case shall any
child younger than fourteen (14) years of age be employed in the
manufacturing, packaging or distribution of Disney merchandise.
(2) Licensee and the Manufacturers agree to provide employees with a
safe and healthy workplace in compliance with all applicable
Laws. Licensee and the Manufacturers agree to provide Disney with
all information Disney may request about manufacturing, packaging
and distribution facilities for the Articles.
(3) Licensee and the Manufacturers agree only to employ persons whose
presence is voluntary. Licensee and the Manufacturers agree not
to use prison labor, or to use corporal punishment or other forms
of mental or physical coercion as a form of discipline of
employees.
(4) Licensee and the Manufacturers agree to comply with all
applicable wage and hour Laws, including minimum wage, overtime,
and maximum hours Licensee and the Manufacturers agree to
utilize fair employment practices as defined by applicable Laws.
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(5) Licensee and the Manufacturers agree not to discriminate in
hiring and employment practices on grounds of race, religion,
national origin, political affiliation, sexual preference, or
gender.
(6) Licensee and the Manufacturers agree to comply with all
applicable environmental Laws.
(7) Licensee and the Manufacturers agree to comply with all
applicable Laws pertaining to the manufacture, pricing, sale and
distribution of the Articles.
(8) Licensee and the Manufacturers agree that Disney may engage in
activities such as unannounced on-site inspections of
manufacturing, packaging and distribution facilities in order to
monitor compliance with applicable Laws.
C. Both before and after Licensee puts Articles on the market, Licensee
shall follow reasonable and proper procedures for testing that
Articles comply with all applicable Laws, and shall permit Disney's
designees to inspect testing, manufacturing and quality control
records and procedures and to test the Articles for compliance.
Licensee agrees to promptly reimburse Disney for the reasonable costs
of such testing. Licensee shall also give due consideration to any
recommendations by Disney that Articles exceed the requirements of
applicable Laws. Articles not manufactured, packaged or distributed in
accordance with applicable Laws shall be deemed unapproved, even if
previously approved by Disney, 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
---------------------------------------------------
Licensee acknowledges that the copyrights and all other proprietary rights
in and to Licensed Material are exclusively owned by and reserved to Disney
or its licensor. Licensee 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, Licensee hereby assigns to Disney all Licensee's 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 Licensee or any of Licensee's
Affiliates. 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
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Paragraph 12, Licensee agrees to obtain from such party a full assignment
of rights so that the foregoing assignment by Licensee shall vest full
rights to such new materials in Disney. Licensee further covenants that any
such new materials created by Licensee or by any third party Licensee has
engaged are original to Licensee or such third party and do not violate the
rights of any other person or entity; this covenant regarding originality
shall not extend to any materials Disney supplies to Licensee, but does
apply to all materials Licensee or Licensee's third party contractors may
add thereto. The foregoing assignment to Disney of material objects shall
not include that portion of Licensee's 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 Disney's name (e.g., "(C) Disney"),
or such other notice as Disney specifies to Licensee in writing. Licensee
will comply with such instructions as to form, location and content of the
notice as Disney may give from time to time. Without limiting the
foregoing, Licensee agrees to include on the Article, or the packaging for
the Article, or the hang tag for the Article (if applicable), the following
language: Based on the "Winnie The Pooh" works, copyright X.X. Xxxxx and
X.X. Xxxxxxx. Licensee will not, without Disney's 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
Licensee's name or the name of a third party, Licensee hereby agrees to
assign to Disney the copyright represented by any such copyright notice in
Licensee's name and, upon request, cause the execution and delivery to
Disney of whatever documents are necessary to convey to Disney 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, Licensee agrees at Licensee's expense to use
all reasonable efforts to correct the omission on all such Articles or
other matter in process of manufacture or in distribution. Licensee agrees
to advise Disney 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.
14. NON-ASSOCIATION OF OTHER FANCIFUL CHARACTERS WITH LICENSED MATERIAL
-------------------------------------------------------------------
To preserve Disney's identification with Disney's characters and to avoid
confusion of the public, Licensee agrees not to associate other characters
or licensed properties with the Licensed Material or the Trademarks either
on the Articles or in their
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Agreement dated December 3, 1996
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packaging, or, without Disney's written permission, on advertising,
promotional or display materials. If Licensee wishes to use a character
which constitutes Licensee's trademark on the Articles or their packaging,
or otherwise in connection with the Articles, Licensee agrees to obtain
Disney's prior written permission.
15. ACTIVE MARKETING OF ARTICLES
----------------------------
Licensee agrees to manufacture (or have manufactured for Licensee) and
offer for sale all the Articles and to exercise the rights granted herein.
Licensee agrees that by the Marketing Date applicable to a particular
Article or, if such a date is not specified in Subparagraph 1.O., by six
(6) months from the commencement of the Principal Term or the date of any
applicable amendment, shipments to customers of such Article will have
taken place in sufficient time that such Article shall be available for
purchase in commercial quantities 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 in commercial quantities by the public, Disney may
either invoke Disney's remedies under Paragraph 28, or withdraw such
Article from the list of Articles licensed in this Agreement without
obligation to Licensee other than to give Licensee written notice thereof.
16. PROMOTION COMMITMENT
--------------------
Licensee agrees 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 Licensee hereunder shall inure to
Disney's benefit. Licensee acknowledges that Disney or its licensor is
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, Licensee hereby assigns to Disney 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. Licensee
agrees to execute and deliver to Disney such documents as Disney
requires to register Licensee as a Registered User or Permitted User
of the Trademarks or such trademarks and to follow Disney's
instructions for proper use thereof in order that protection and/or
registrations for the Trademarks and such trademarks may be obtained
or maintained.
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Agreement dated December 3, 1996
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B. Licensee agrees 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
Trademark as the name of Licensee's business or any division thereof,
unless otherwise agreed by Disney in writing.
C. Nothing contained herein shall prohibit Licensee from using Licensee's
own trademarks on the Articles or Licensee's copyright notice on the
Articles when the Articles contain independent material which is
Licensee's property. Nothing contained herein is intended to give
Disney any rights to, and Disney shall not use, any trademark,
copyright or patent used by Licensee in connection with the Articles
which is not derived or adapted from Licensed Material, Trademarks, or
other materials owned by Disney or its licensor.
18. REGISTRATIONS
-------------
Except with Disney's written consent, neither Licensee nor any of
Licensee's Affiliates 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 Disney or any of Disney's Affiliates. In the event of
breach of the foregoing Licensee agrees, at Licensee's expense and at
Disney's request, immediately to terminate the unauthorized registration
activity and promptly to execute and deliver, or cause to be delivered, to
Disney such assignments and other documents as Disney may require to
transfer to Disney all rights to the registrations, patents or applications
involved.
19. UNLICENSED USE OF LICENSED MATERIALS
------------------------------------
A. Licensee agrees that Licensee will not use the Licensed Material, or
the Trademarks, or any other material the copyright to which is owned
or licensed by Disney in any way other than as herein authorized (or
as is authorized in any other written contract in effect between the
parties). In addition to any other remedy Disney may have, Licensee
agrees that all revenues from any use thereof on products other than
the Articles (unless authorized by Disney in writing), and all
revenues from the use of any other copyrighted material of Disney's or
its licensor's without written authorization, shall be immediately
payable to Disney.
B. Licensee agrees to give Disney prompt written notice of any unlicensed
use by third parties of Licensed Material or Trademarks, and that
Licensee will
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Agreement dated December 3, 1996
Page 19
not, without Disney's 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, Licensee agrees to
cooperate with Disney, and, if necessary, to be named by Disney as a
sole complainant or co-complaimant in any action against an infringer
of the Licensed Material or Trademarks and, notwithstanding any right
of Licensee to recover same, legal or otherwise, Licensee agrees to
pay to Disney, and hereby waives 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 Licensee as a licensee hereunder; in any such action
against an infringer, Disney agrees to reimburse Licensee for
reasonable expenses incurred at Disney's request, including reasonable
attorney's fees if Disney has requested Licensee to retain separate
counsel.
20. STATEMENTS AND PAYMENTS OF ROYALTIES
------------------------------------
A. Licensee agrees to furnish to Disney by the 30th day after each
Royalty Payment Period full and accurate statements on statement forms
Disney designates for Licensee's use, showing all information
requested by such forms, including but not limited to, 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 Licensee will pay Disney all
Royalties due on xxxxxxxx shown by such statements. To the extent that
any Royalties are not paid, Licensee authorizes Disney to offset
Royalties due against any sums which Disney or any of Disney's
Affiliates may owe to Licensee or any of Licensee's Affiliates. No
deduction or withholding from Royalties payable to Disney shall be
made by reason of any tax. Any applicable tax on the manufacture,
distribution and sale of the Articles shall be borne by Licensee.
B. The statement forms Disney designates for Licensee's use may be
changed from time to time, and Licensee agrees to use the most current
form Disney provides to Licensee. Licensee agrees to fully comply with
all instructions supplied by Disney for completing such forms.
C. In addition to the other information requested by the statement forms,
Licensee's statement shall with respect to all Articles report
separately:
(1) F.O.B. In Sales;
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Agreement dated December 3, 1996
Page 20
(2) F.O.B. Out Sales;
(3) sales of Articles outside the Territory pursuant to a
distribution permission (indicating the country involved);
(4) Licensee's sales of Articles to any of Disney's licensees or
Disney's Affiliates' licensees who are licensed to sell the
Articles, and who are reselling such Articles and paying Disney
royalties on such resales;
(5) sales of Articles to Disney or any of Disney's Affiliates;
(6) sales of Articles to Licensee's or Disney's employees;
(7) sales of Articles under any brand or program identified in
Subparagraph 1.B. hereinabove;
(8) sales of Articles to or for distribution through any mail order
catalogs approved under this Agreement.
D. Sales of items licensed under contracts with Disney other than this
Agreement shall not be reported on the same statement as sales of
Articles under this Agreement.
E. Licensee's statements and payments, including all Royalties and
Advances, shall be delivered to Wachovia South Metro Center, DEI
Account, X.X. Xxx 000000, Xxxxxxx, Xxxxxxx 00000. A copy of each
statement must be sent to Disney at 000 Xxxxx Xxxxx Xxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000-0000, to the attention of the Contract
Administrator, Consumer Products Division. If Licensee wishes to send
statements and payments by overnight courier, please use the following
address: Wachovia South Metro Center, DEI Account, 0000 Xxxxxxx
Xxxxxx, Xxxxxxxxx, XX 00000, Attention Xxxxx Xxxxxx, Reference Lock
Box 101947.
21. CONFIDENTIALITY
---------------
Licensee agrees to keep the terms and conditions of this Agreement
confidential, and Licensee shall not disclose such terms and conditions to
any third party without obtaining Disney's prior written consent; provided,
however, that this Agreement may be disclosed on a need-to-know basis to
Licensee's attorneys and accountants who agree to be bound by this
confidentiality provision. In the event Licensee is required to disclose
this Agreement, or any part thereof, pursuant to any law, court
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Agreement dated December 3, 1996
Page 21
order or process, the rules and regulations of any governmental department,
agency or authority (including, but not limited to, the Securities and
Exchange Commission) or any generally accepted accounting rules mandating
disclosure in Licensee's financial statements, Licensee agrees to give
Disney prior written notice and to use its best efforts to obtain
confidential treatment of this Agreement. Upon Disney's request, Licensee
agrees to incorporate Disney's comments into Licensee's request for
confidential treatment, provided such request and comments are received in
writing by Licensee within five (5) business days after Disney's receipt of
the notice referred to in the preceding sentence.
22. INTEREST
--------
Royalties or any other payments due to Disney hereunder which are received
alter the due date shall bear interest at the rate of 18% per annum from
the due date (or the maximum permissible by law if less than 18%).
23. AUDITS AND MAINTAINING RECORDS
------------------------------
A. Licensee agrees to keep accurate records of all transactions relating
to this Agreement and any prior agreement with Disney regarding the
Licensed Material, including, without limitation, shipments to
Licensee of Articles and components thereof, inventory records,
records of sales and shipments by Licensee, 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.
X. Xxxxxx, or Disney's representatives, shall have the right from time to
time, during Licensee's normal business hours, but only for the
purpose of confirming Licensee's performance hereunder, to examine and
make extracts from all such records, including the general ledger,
invoices and any other records which Disney reasonably deems
appropriate to verify the accuracy of Licensee's statements or
Licensee's performance hereunder, including records of Licensee's
Affiliates if they are involved in activities which are the subject of
this Agreement. In particular, Licensee's invoices shall identify the
Articles separately from goods which are not licensed hereunder.
Licensee acknowledges that Disney may furnish Licensee with an audit
questionnaire, and Licensee agrees to fully and accurately complete
such questionnaire, and return it to Disney within the
designated-time. Disney's use of an audit questionnaire shall not
limit Disney's ability to conduct any on-site audit(s) as provided
above.
C. If in an audit of Licensee's records it is determined that there is a
short fall of five percent (5%) or more in Royalties reported for any
Royalty Payment
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Agreement dated December 3, 1996
Page 22
Period, Licensee shall upon request from Disney reimburse Disney for
the full out-of-pocket costs of the audit, including the costs of
employee auditors calculated at $60 per hour per person for travel
time during normal working hours and actual working time.
D. If Licensee has failed to keep adequate records for one or more
Royalty Payment Periods, Disney will assume that the Royalties owed to
Disney for such Royalty Payment Period(s) are equal to a reasonable
amount, determined in Disney's absolute discretion, which may be up to
but will not exceed the highest Royalties owed to Disney in a Royalty
Payment Period for which Licensee has kept adequate records; if
Licensee has failed to keep adequate records for any Royalty Payment
Period, Disney will assume a reasonable amount of Royalties which
Licensee will owe to Disney, based on the records Licensee has kept
and other reasonable assumptions Disney deems appropriate.
24. MANUFACTURE OF ARTICLES BY THIRD PARTY MANUFACTURERS
----------------------------------------------------
A. If Licensee at any time desires to have Articles or components thereof
containing Licensed Material manufactured by a third party, whether
the third party is located within or outside the United States,
Licensee must, as a condition to the continuation of this Agreement,
notify Disney of the name and address of such manufacturer and the
Articles or components involved and obtain Disney's prior written
permission to do so. If Disney is prepared to grant permission, Disney
will do so if Licensee and each of Licensee's manufacturers and any
submanufacturers sign a Consent/Manufacturer's Agreement in a form
which Disney will furnish to Licensee and Disney receives all such
agreements properly signed.
(A SAMPLE OF SAID AGREEMENT FORM IS AVAILABLE ON REQUEST)
B. It is not Disney's policy to reveal the names of Licensee's suppliers
to third parties or to any Disney division involved with buying
products, except as may be necessary to enforce Disney's contract
rights or protect Disney's trademarks and copyrights.
C. If any such manufacturer utilizes Licensed Material or Trademarks for
any unauthorized purpose, Licensee shall cooperate fully in bringing
such utilization to an immediate halt. If, by reason of Licensee's not
having supplied the above mentioned agreements to Disney or not having
given Disney the name of any supplier, Disney makes any representation
or takes any action and is thereby subjected to any penalty or
expense, Licensee will
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Agreement dated December 3, 1996
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fully compensate Disney for any cost or loss Disney sustains (in
addition to any other legal or equitable remedies available to Disney.
25. INDEMNITY
---------
A. Licensee shall indemnify Disney during and after the term hereof
against all claims, demands, suits, judgments, losses, liabilities
(including settlements entered into in good faith with Licensee's
consent, not to be unreasonably withheld) and expenses of any nature
(including reasonable attorneys' fees) arising out of Licensee's
activities under this Agreement, including but not limited to, any
actual or alleged: (1) negligent acts or omissions on Licensee's part,
(2) defect (whether obvious or hidden and whether or not present in
any Sample approved by Disney) in an Article, (3) personal injury, (4)
infringement of any rights of any other person by the manufacture,
sale, possession or use of Articles, (5) breach on Licensee's part of
any covenant contained in this Agreement, or (6) failure of the
Articles or by Licensee to comply with applicable Laws. The parties
indemnified hereunder shall include Disney Enterprises, Inc., its
licensor, and its and their parent, Affiliates and successors, and its
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 Licensee's utilization of
the Licensed Material and the Trademarks in accordance-with the
provisions hereof, unless such claim or liability arises out of
Licensee's failure to obtain the full assignment of rights referenced
in Paragraph 12.
X. Xxxxxx shall indemnify Licensee during and after the term hereof
against all claims, demands, suits, judgments, losses, liabilities
(including settlements entered into in good faith with Disney's
consent, not to be unreasonably withheld) and expenses of any nature
(including reasonable attorneys' fees) arising out of any claim that
Licensee's 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 Disney to such third party, except for claims arising
out of Licensee's failure to obtain the full assignment of rights
referenced in Paragraph 12. Licensee shall not, in any case, be
entitled to recover for lost profits.
C. Additionally, if by reason of any claims referred to in Subparagraph
25.B., Licensee is precluded from selling any stock of Articles or
utilizing any materials in Licensee's possession or which come into
Licensee's possession by reason of any required recall, Disney shall
be obligated to purchase such Articles and materials from Licensee at
their out-of-pocket cost to Licensee,
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Agreement dated December 3, 1996
Page 24
excluding overheads, but Disney shall have no other responsibility or
liability with respect to such Articles or materials.
X. Xxxxxx gives no warranty or indemnity 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 Disney. It is expressly agreed
that it is Licensee's responsibility to carry out such investigations
as Licensee may deem appropriate to establish that Articles,
packaging, and 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 Disney shall not be liable to Licensee
if such infringement occurs.
E. Licensee and Disney agree to give each other prompt written notice of
any claim or suit which may arise under the indemnity provisions set
forth above. Without limiting the foregoing, Licensee agrees to give
Disney written notice of any product liability claim made or suit
filed with respect to any Article, any investigations or directives
regarding the Articles issued by the Consumer Product Safety
Commission ("CPSC") or other federal, state or local consumer safety
agency, and any notices sent by Licensee to, or received by Licensee
from, the CPSC or other consumer safety agency regarding the Articles
within fourteen (14) days of Licensee's receipt or promulgation of the
claim, suit, investigation, directive, or notice.
26. INSURANCE
---------
Licensee 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 on a per occurrence form, including broad form coverage
for contractual liability, property damage, 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. Licensee also agrees to maintain in full force and
effect at all times while this Agreement is in effect such Worker's
Compensation Insurance as is required by applicable law and Employer's
Liability Insurance with minimum limits of one million dollars (US
$1,000,000.00) per occurrence. All insurance shall be primary and not
contributory. Licensee shall deliver to Disney a certificate or
certificates of insurance evidencing satisfactory coverage and indicating
that Disney shall receive thirty (30) days unrestricted prior written
notice of cancellation, non-renewal or of any material change in coverage.
Licensee's insurance
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Agreement dated December 3, 1996
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shall be carried by an insurer with a BEST Guide rating of B + VII or
better. Compliance herewith in no way limits Licensee's indemnity
obligations, except to the extent that Licensee's insurance company
actually pays Disney amounts which Licensee would otherwise pay Disney.
27. WITHDRAWAL OF LICENSED MATERIAL
-------------------------------
Licensee agrees that Disney may, without obligation to Licensee other than
to give Licensee written notice thereof, withdraw from the scope of this
Agreement any Licensed Material which by the Marketing Date or, if such a
date is not specified in Subparagraph 1.O., by six (6) months from the
commencement of the Principal Term or the date of any applicable amendment,
is not being used on or in connection with the Articles. Disney 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 Disney, in which case
Disney's obligations to Licensee 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 ease 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 Disney:
A. Disney shall have the right at any time to terminate this Agreement by
giving Licensee written notice thereof, if Licensee fails to
manufacture, sell and distribute the Articles, or to furnish
statements and pay Royalties as herein provided, or if Licensee
otherwise breaches the terms of this Agreement, and if any such
failure is not corrected within thirty (30) days (or, in the case of
non-payment of Royalties within fifteen (15) days) after Disney sends
Licensee written notice thereof.
X. Xxxxxx shall have the right at any time to terminate this Agreement
immediately by giving Licensee written notice thereof:
(1) if Licensee delivers to any customer without Disney's written
authorization merchandise containing representations of Licensed
Material or other material the copyright or other proprietary
rights to which are owned or licensed by Disney other than
Articles listed herein and approved in accordance with the
provisions hereof,
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(2) if Licensee delivers Articles outside the Territory or knowingly
sells Articles to a third party for delivery outside the
Territory, unless pursuant to a written distribution permission
or separate written license agreement with Disney or any of
Disney's Affiliates;
(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 Disney has previously given Licensee written notice;
(4) if Licensee breaches any material term of any other license
agreement between the parties, and Disney terminates such
agreement for cause;
(5) if Licensee shall make any assignment for the benefit of
creditors, or file a petition in bankruptcy, or is adjudged
bankrupt, or becomes insolvent, or is 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;
(6) if Licensee is not permitted or is unable to operate Licensee's
business in the usual manner, or is not permitted or is unable to
provide Disney with assurance satisfactory to Disney that
Licensee will so operate Licensee's business, as debtor in
possession or its equivalent, or is not permitted, or is unable
to otherwise meet Licensee's obligations under this Agreement or
to provide Disney with assurance satisfactory to Disney that
Licensee will meet such obligations; and/or
(7) if Licensee breaches any covenant set forth in Paragraph 11 of
this Agreement.
29. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
-----------------------------------------------------
A. Upon the expiration or termination of this Agreement, all rights
herein granted to Licensee shall revert to Disney, any unpaid portion
of the Guarantee shall be immediately due and payable, and Disney
shall be entitled to retain all Royalties and other things of value
paid or delivered to Disney. Licensee agrees 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.
Licensee agrees that from the expiration or termination of this
Agreement Licensee shall neither manufacture nor have manufactured for
Licensee any Articles, that Licensee will deliver to Disney any and
all artwork
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(including Style Guides, animation cels and drawings) which may have
been used or created by Licensee in connection with this Agreement,
that Licensee will at Disney's option either sell to Disney at cost or
destroy or efface any molds, plates and other items used to reproduce
Licensed Material or Trademarks, and that, except as hereinafter
provided, Licensee will cease selling Articles. Any unauthorized
distribution of Articles after the expiration or termination of this
Agreement shall constitute copyright infringement.
B. If Licensee has any unsold Articles in inventory on the expiration or
termination date, Licensee shall provide Disney with a full statement
of the kinds and numbers of such unsold Articles. If such statement
has been provided to Disney and if Licensee has fully complied with
the terms of this Agreement, including the payment of all Royalties
due and the Guarantee, upon notice from Disney Licensee shall have the
right for a limited period of three (3) calendar months from such
expiration or earlier termination date to sell off and deliver such
Articles as authorized under Subparagraph 2.A. Licensee shall furnish
Disney statements covering such sales and pay Disney Royalties in
respect of such sales. Such Royalties shall not be applied against the
Advance or towards meeting the Guarantee. If the sell-off period is
extended by Disney to a date which is not a quarter end month,
Licensee's statement and Royalties for such sell-off period shall be
due thirty (30) days after the last day of the sell-off period.
C. In recognition of Disney's interest in maintaining a stable and viable
market for the Articles during and after the Principal Term and any
sell-off period, Licensee agrees to refrain from "dumping" the
Articles in the market during any sell-off period granted to Licensee.
"Dumping" shall mean the distribution of product at volume levels
significantly above Licensee's prior sales practices with respect to
the Articles, and at price levels so far below Licensee's prior sales
practices with respect to the Articles as to disparage the Articles;
provided, however, that nothing contained herein shall be deemed to
restrict Licensee's ability to set product prices at Licensee's
discretion.
D. Except as otherwise agreed by Disney in writing, any inventory of
Articles in Licensee's 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 Disney supplies Licensee with forms regarding compliance with this
Paragraph 29, Licensee agrees to complete, execute and return such
forms to Disney expeditiously.
28
The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 28
F. Notwithstanding any provision to the contrary, in the case of
termination under Paragraph 28.B. (5) or (6), in order to protect the
value of the Articles and to avoid any disparagement of the Articles
which could occur as a result of the circumstances of termination,
Disney shall have the option, in Disney's absolute discretion, to
purchase any or all unsold Articles in Licensee's inventory on the
termination date at 20% over Licensee's cost of goods for such
Articles (not including overhead).
30. WAIVERS
-------
A waiver by either party 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 DISNEY
------------------------------
If Disney wishes to purchase Articles, Licensee agrees to sell such
Articles to Disney or any of Disney's Affiliates at as low a price as
Licensee charges for similar quantities sold to Licensee's regular
customers and to pay Disney Royalties on any such sales.
32. NON-ASSIGNABILITY
-----------------
A. Licensee shall not voluntarily or by operation of law assign,
sub-license, transfer, encumber or otherwise dispose of all or any
part of Licensee's interest in this Agreement without Disney's prior
written consent, to be granted or withheld in Disney's absolute
discretion. 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 Licensee or any directly or
indirectly controlling Affiliate(s) of Licensee ("Controlling
Affiliate"); any sale or transfer of all or substantially all of
Licensee's or its Controlling Affiliate(s)' assets; any transfer of
Licensee's rights hereunder to a division, business segment or other
entity different from 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); any public
offering, or series of public offerings, whereby a cumulative total of
thirty-three and one-third percent (33 1/3%) or more of the voting
stock of Licensee or its Controlling Affiliate(s) is offered for
purchase; and any acquisition or series
29
The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 29
of acquisitions, by any person or entity, or group of related persons
or entities, of a cumulative total of thirty-three and one-third
percent (33-1/3%) or more of the voting stock of Licensee or its
Controlling Affiliate(s), or the right to vote such percentage (or, if
Licensee is a partnership, resulting in the transfer of thirty-three
and one-third percent (33-1/3%) or more of the profit and loss
participation in Licensee, or the occurrence of any of the foregoing
with respect to any general partner of Licensee).
B. Licensee agrees to provide Disney with at least two (2) weeks prior
written notice of any desired assignment of this Agreement or other
transfer as defined in Subparagraph 32.A. At the time Licensee gives
such notice, Licensee shall provide Disney with the information and
documentation necessary to evaluate the contemplated transaction.
Disney's consent (if given) to any assignment of this Agreement or
other transfer as defined in Subparagraph 32A. shall be subject to
such terms and conditions as Disney deems appropriate, including but
not limited to, payment of a transfer fee. The amount of the transfer
fee shall be determined by Disney based upon the circumstances of the
particular assignment or transfer, taking into account such factors as
the estimated value of the license being assigned or otherwise
transferred; the risk of business interruption or loss of quality,
production or control Disney may suffer as a result of the assignment
or other transfer; the identity, reputation, creditworthiness,
financial condition and business capabilities of the proposed assignee
or transferee; and Disney's internal costs related to the assignment
or other transfer; provided, however, in no event shall the transfer
fee be less than $ * . The foregoing transfer fee shall not
apply if this Agreement is assigned to one of Licensee's Affiliates
as part of a corporate reorganization exclusively among some or all
of the entities existing in Licensee's corporate structure when this
Agreement is signed; provided, however, that Licensee must give
Disney written notice of such assignment and a description of the
reorganization. The provisions of this Subparagraph 32.B. shall
supersede any conflicting provisions on this subject in any
merchandise license agreement previously entered into between the
parties for this Territory.
C. Notwithstanding Subparagraphs 32.A. and B., Licensee may, upon written
notice to Disney, unless Disney has objected within thirty (30) days
of receipt of such notice, sublicense Licensee's rights hereunder to
Licensee's Affiliates. Licensee hereby irrevocably and unconditiona!ly
guarantees that they will observe and perform all of Licensee's
obligations hereunder, including, without limitation, the provisions
governing approvals, and compliance with approved samples, applicable
Laws. and all other provisions hereof, and that they will otherwise
adhere strictly to all of the terms hereof and act in accordance with
Licensee's obligations hereunder. Any involvement of an
30
The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 30
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; however such involvement may be treated by
Disney as a breach of this Agreement, unless Licensee has notified
Disney of Licensee's intent to sublicense an Affiliate in each
instance, and Disney has failed to object within thirty (30) days of
receipt of such notice.
33. RELATIONSHIP
------------
This Agreement does not provide for a joint venture, partnership, agency or
employment relationship between the parties, or any other relationship than
that of licensor and licensee.
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.
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; provided, however, that
certain modifications shall be effective if signed by the party to be
charged and communicated to the other party.
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 Disney shall be deemed to have been served
with a notice of a request for approval of materials under this Agreement
only upon Disney's actual receipt of the request and of any required
accompanying materials. Any notice sent to Disney hereunder shall be sent
to the attention of "Vice President, Licensing", unless Disney advises
Licensee in writing otherwise.
31
The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 31
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 Licensee may have signed
pertaining to any of the Licensed Material, contains the entire agreement
between the parties concerning the subject matter hereof and supersedes any
pre-existing or contemporaneous agreement and any oral or written
communications between the parties.
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.
40. EQUITABLE RELIEF
----------------
Licensee acknowledges that Disney will have no adequate remedy at law if
Licensee continues to manufacture, sell, advertise, promote or distribute
the Articles upon the expiration or termination of this Agreement. Licensee
acknowledges and agrees that, in addition to any and all other remedies
available to Disney, Disney shall have the right to have any such activity
by Licensee restrained 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 Disney posting any bond.
41. GOODWILL
--------
Licensee acknowledges that the rights and powers retained by Disney
hereunder are necessary to protect Disney's or its licensor's copyrights
and property rights, and, specifically, to conserve Disney's and its
licensor's goodwill and good name, and the name "Disney", and therefore
Licensee agrees that Licensee will not allow the same to become involved in
matters which will, or could, detract from or impugn the public acceptance
and popularity thereof, or impair their legal status.
32
The First Years, Inc.
Winnie The Pooh
Agreement dated December 3, 1996
Page 32
42. POWER TO SIGN
-------------
The parties warrant and represent that their respective representatives
signing this Agreement have full power and proper authority to sign this
Agreement and to bind the parties.
43. SURVIVAL OF OBLIGATIONS
-----------------------
The respective obligations of the parties under this Agreement, which by
their nature would continue beyond the termination, cancellation or
expiration of this Agreement, including but not limited to indemnification,
insurance, payment of Royalties, and Paragraph 29, shall survive
termination, cancellation or expiration of this Agreement.
Please sign below under the word "Agreed". When signed by both parties this
shall constitute an agreement between Disney and Licensee.
AGREED:
DISNEY ENTERPRISES, INC.
By: /s/ Xxxxxx Kristmor
-----------------------------------------------
Title: Vice President, Licensing
--------------------------------------------
Date: 12/23/96
---------------------------------------------
THE FIRST YEARS, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Title: President
--------------------------------------------
33
THE FIRST YEARS, INC.
WINNIE THE POOH
AGREEMENT DATED DECEMBER 3, 1996
SCHEDULE A
A. FEEDING AND SOOTHING ARTICLES:
1. Reusable and disposable bottles
2. Bibs
3. Cups
4. Pacifiers and attachers
5. Bowls
6. Dishes
7. Containers
8. Cool totes
9. Flatware
10. Placemats
11. Floormats
12. Teethers
13. Burp cloths
14. Toothbrushes
B. PLAY ARTICLES:
1. Handheld rattles (plastic and plush)
2. Suction toys
3. Blocks
4. Linking toys
5. Electronic handheld toys with rattle or squeaker function
6. Bath toys
7. Pull-down musical plush toys
8. Magnets
9. Foot rattles
C. CARE AND SAFETY ARTICLES:
1. Changing pads
2. Bouncy seats
3. Booster seats
4. Step stools
5. Front carriers
6. Back carriers
7. Handheld showers
8. Sponges
34
THE FIRST YEARS, INC.
WINNIE THE POOH
AGREEMENT DATED DECEMBER 3, 1996
SCHEDULE A - CONTINUED
C. CARE AND SAFETY ARTICLES:
9. Hooded towels
10. Washcloths
11. Spout guards
12. Shampoo visors
13. Nursery organizers
14. Car organizers
15. Non-activity crib lights
16. Xxxxx and brushes
17. Night lights
18. Car shades
19. Diaper pins
20. Nursery hampers
21. Scales
22. Light-up clip-ons
23. Tub thermometers
24. Tub Organizers
All of the Articles listed in A, B and C above may be sold separately or as part
as a set. Sets may include packaging appropriate for a gift set, or a card with
an instant gift; provided, however, that the packaging and cards may not be sold
separately.
35
CATALOG SCHEDULE
(LIST OF PRE-APPROVED CATALOGS)
HOME FURNISHINGS
Mass
----
Domestications
Xxxxxxxxx
Xxxxxxx Xxxxxx
One Step Ahead
The Right Start
This Catalog Schedule is subject to change. Disney reserves the right to add
catalogs to or delete catalogs from the Catalog Schedule without prior notice to
Licensee. Licensee agrees to cease selling Articles to a deleted catalog within
sixty (60) days after written notice of the deletion. Disney will consider new
catalogs requested by Licensee on a case-by-case basis.
6/15/96
