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EXHIBIT 10.31
CONSENT TO ASSIGNMENT
ERO Marketing, Inc. ("ERO Marketing"), Impact International, Inc. ("Impact"),
Priss Prints, Inc. ("Priss"), AMAV Industries, Ltd. ("AMAV") and ERO Canada,
Inc. ("ERO Canada") (sometimes collectively referred to herein as the
"Licensees") have represented to Disney Enterprises, Inc. ("Disney") that
Hedstrom Corporation ("Hedstrom") will acquire one hundred percent (100%) of
the stock of ERO, Inc., the parent corporation of each of the Licensees, by
virtue of a merger between ERO, Inc., and a wholly owned subsidiary of Hedstrom
(the "Merger"). It has been further represented that the Merger transaction is
anticipated to close on or about June 12, 1997, and that immediately after the
Merger each of ERO Marketing, Impact, Priss, AMAV and ERO Canada shall operate
as wholly owned subsidiaries of the acquired company. Effective as of June 12,
1997 based on the representations to Disney concerning the Merger, and provided
that the Merger closes as planned and is not later rescinded, Disney hereby
consents to the above described Merger and the resulting assignment and
transfer by ERO Marketing, Impact, Priss, AMAV and ERO Canada of all of the
rights and obligations of each of them under those certain license agreements
as referenced on Exhibit A attached hereto (collectively the "Transferred
Agreements"), subject to the terms stated herein.
Nothing contained herein shall be construed to modify, waive or impair any of
the provisions, terms and conditions of any of the Transferred Agreements
except as specified herein. Moreover, such assignment and transfer of the
Transferred Agreements shall not be effective unless and until Hedstrom agrees
by signing below to assume the payment and performance of all liabilities and
obligations of ERO Marketing, Impact, Priss, AMAV and ERO Canada respectively,
under the Transferred Agreements, as if Hedstrom had been an original party
thereto, and assumes all rights, obligations and liabilities of each of the
Licensees respectively, under the Transferred Agreements, whether incurred
prior to or after the effective date of the Merger described herein. Hedstrom
hereby further assumes full liability for any and all audit findings determined
by Disney to be payable in relation to all prior and current license
agreements, including but not limited to the Transferred Agreements, of any of
the Licensees.
Disney's consent herein is further based upon the representation that the
above-described Merger shall not cause the interruption of the businesses of
the Licensees as regards the Transferred Agreements, and is conditional upon
the following agreed terms and conditions:
1. Disney shall receive a transfer fee in the amount and according to the
terms and conditions set forth in that certain Transfer Fee Agreement
concurrently entered into by and between the parties, dated effective as of
June 12, 1997.
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2. The Royalty rates and Principal Terms for the Transferred Agreements
for the United States and Canada only shall be as follows:
a. The Royalty rates shall [*] all Transferred Agreements through
December 31, 1997. On all Standard Character and Pooh Transferred Agreements,
the Principal Terms shall be extended through December 31, 1999 and the Royalty
rate shall [*] on F.O.B.-In Sales ([*] on F.O.B-Out Sales).
b. The Principal Terms of Filmed Entertainment Transferred
Agreements for "Hercules", "Toy Story", "101 Dalmatians (live action)", and
"The Little Mermaid" shall be extended through December 31, 1999 and the
Royalty rates on each of them shall [*] through June 30, 1998. Effective for
sales periods from July 1, 1998 through December 31, 1999, Royalty rates for
any and all Filmed Entertainment Transferred Agreements shall be [*] on
F.O.B.-In Sales ([*] on F.O.B.-Out Sales).
c. The Royalty Payment Period for all Transferred Agreements
shall be monthly.
d. Nothing contained herein shall be deemed to modify the Royalty
rates, Principal Terms or Royalty Payment Periods of any of the European
Transferred Agreements.
3. Guarantee amounts for the extended terms of the Transferred Agreements
for the United States and Canada only shall be stated on the attached Exhibit
B.
4. Disney shall offer to appropriate Licensee(s) future licenses for
"Mulan", "Simba's Pride" and "A Bug's Life" in the United States and Canada at
the following Royalty rates:
a. The licenses for "Mulan" shall be at [*] on F.O.B.-In Sales
([*] on F.O.B.-Out Sales).
b. For all other Filmed Entertainment licenses, for sales periods
effective on or after July 1, 1998, through December 31, 1999, the Royalty rate
shall be [*] on F.O.B.-In Sales ([*] on F.O.B.-Out Sales).
c. Except as to the Royalty rates set forth above, any and all
future licenses shall be subject to the parties' good faith negotiation of all
other terms and conditions, and their execution of a formal written contract
for each subject property. If after a reasonable period
__________________________________
* FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
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of negotiations, the parties were unable to agree upon the terms and conditions
for any such license, Disney may withdraw its offer to the subject license
without any further obligation to the subject Licensee(s).
5. Royalty rates for any license(s) in effect after December 31, 1999,
shall be governed by the applicable license as agreed between the parties.
6. Disney's consent herein shall not be construed to create or evidence
any obligation on the part of Disney to grant any renewals, extensions or
re-licenses of the Transferred Agreements, or to grant any future license(s),
except as specified herein.
7. All capitalized terms used herein shall have the same meanings as
ascribed to them in the most recent Transferred Agreement.
8. Except as expressly modified by this Consent to Assignment or the
corresponding Transfer Fee Agreement, the Transferred Agreements shall remain
unchanged and in full force and effect according to their terms. To the extent
required by Disney, ERO Marketing, Impact, Priss, AMAV and ERO Canada hereby
agree to execute formal written amendments to their respective Transferred
Agreements to memorialize the modifications set forth herein.
9. All terms and conditions stated in this Consent to Assignment shall be
treated by the parties as confidential and maintained with the same degree of
protection as each uses in protection of its own confidential information.
10. ERO, Inc. represents and warrants that it is the parent corporation of
each of the Licensees and that it has the full power and authority to bind each
Licensee and to execute this Consent to Assignment on behalf of each of them.
The parties hereto are not presently aware of any additional ERO, Inc.
subsidiaries that are parties to current Disney licenses in Europe and would be
affected by this Merger transaction. However, if any such additional
subsidiaries are found to exist, they shall be deemed to be included within the
definition of "Licensees" and their licenses that are transferred hereunder
shall be deemed to be included within the definition of "Transferred
Agreements" under this Consent to Assignment.
11. Each of the signatories below hereby expressly represents and warrants
that he or she has the full power and authority to execute this Consent to
Assignment on behalf of the party for which he or she is signing, and to so
bind said party to the terms hereof, without any further consents, approvals or
authorizations being required for such binding execution. Specifically, and
without limitation of the foregoing, Hedstrom hereby represents and warrants
that it has the full power and authority to execute this Consent to Assignment
on behalf of
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ERO, Inc., and to bind ERO, Inc., and thereby each of the Licenses, to the
terms and conditions stated herein.
12. Disney's execution of this Consent to Assignment shall not be binding
or effective unless and until this Consent to Assignment and the separate
corresponding Transfer Fee Agreement have been executed by all parties and a
fully executed copy of each has been returned to Disney. No modification of
any provision of this Consent to Assignment shall be binding upon Disney unless
specifically agreed to in writing by Disney.
DISNEY ENTERPRISES, INC.
By: /s/ [ILLEGIBLE]
-----------------------------
Title: [ILLEGIBLE]
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ACCEPTED AND AGREED:
ERO, INC. (On behalf of itself and each of its wholly-owned subsidiaries, ERO
Marketing, Inc., Impact International, Inc., Priss Prints, Inc., AMAV
Industries, Ltd. and ERO Canada, Inc.)
By: /s/ Alan Plotkin
-----------------------------
Title: Vice President
--------------------------
HEDSTROM CORPORATION
By: /s/ Alan Plotkin
-----------------------------
Title: Vice President
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EXHIBIT A
TRANSFERRED AGREEMENTS: USA
Contract Name Start Date End Date
- -------------------------------------------------------- --------------- --------------
Impact International, Inc.
- --------------------------
The Hunchback of Notre Dame 06/01/95 12/31/98
Toy Story 02/01/96 12/31/97
Disney's 101 Dalmatians - Live Action 02/01/96 06/30/98
Mighty Ducks - Animated TV Show 05/31/96 06/30/98
Disney's Hercules 07/18/96 12/31/98
The Little Mermaid 11/04/96 06/30/99
Brand Spanking New Doug 12/13/96 12/31/99
Disney's George of the Jungle 12/13/96 12/31/99
Winnie the Pooh 10/01/96 12/31/98
Mickey's Stuff for Kids 04/01/96 12/31/98
Mickey's Stuff for Kids 09/01/96 12/31/98
Priss Prints, Inc.
- ------------------
The Hunchback of Notre Dame 08/15/95 12/31/97
Disney's 101 Dalmatians - Live Action 02/12/96 12/31/98
Disney's Hercules 10/10/96 12/31/98
The Little Mermaid 01/14/97 12/31/99
Toy Story 01/01/97 12/31/97
Winnie the Pooh 01/01/97 12/31/98
Disney Babies 01/01/97 12/31/98
Mickey's Stuff for Kids 01/01/97 12/31/98
ERO Marketing, Inc.
- -------------------
The Hunchback of Notre Dame 05/03/95 12/31/97
Cinderella 04/01/95 12/31/97
The Hunchback of Notre Dame (Home Furnishings) 09/25/95 12/31/97
Disney's 101 Dalmatians - Live Action 02/01/96 12/31/97
Disney's 101 Dalmatians - Live Action (Home Furnishings) 03/01/96 06/30/98
Toy Story 04/26/96 12/31/97
Disney's Hercules 09/17/96 12/31/98
The Little Mermaid 01/01/97 07/31/99
Winnie the Pooh 07/01/96 12/31/97
Mickey's Stuff for Kids/Disney Babies 01/01/97 12/31/98
AMAV Industries, Ltd.
- ---------------------
Mickey's Stuff for Kids 01/15/97 12/31/99
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TRANSFERRED AGREEMENTS: CANADA
Contract Name Start Date End Date
- -------------------------------------------------------- --------------- --------------
ERO Canada, Inc.
- ----------------
Mickey's Stuff for Kids 01/01/97 12/31/97
The Hunchback of Notre Dame (Home Furnishings) 10/01/95 03/31/97**
The Hunchback of Notre Dame (Stationery) 10/01/95 12/31/97
The Hunchback of Notre Dame (Home Furnishings) 10/01/95 12/31/97
Disney's 101 Dalmatians - Live Action (Home Furnishings) 03/01/96 06/30/98
Disney's 101 Dalmatians - Live Action (Stationery) 08/01/96 12/31/97
Toy Story 05/01/96 12/31/97
Winnie the Pooh 01/01/96 12/31/97
Disney's Hercules 01/01/97 12/31/98
Priss Prints, Inc.
- ------------------
Mickey's Stuff for Kids/Disney Babies 01/01/97 12/31/98
The Lion King 01/01/97 12/31/97
The Little Mermaid 01/01/97 12/31/98
Cinderella 01/01/97 12/31/97
Disney's 101 Dalmatians - Live Action 01/01/96 12/31/97
Toy Story 01/01/97 12/31/97
Winnie the Pooh 01/01/97 12/31/98
Disney's Hercules 10/01/96 12/31/98
Impact International, Inc.
- --------------------------
Mighty Ducks - Animated TV Show 01/01/97 06/30/98
Disney's Hercules 01/01/97 12/31/98
Winnie the Pooh 01/01/97 12/31/98
**Sell off: 270 days
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TRANSFERRED AGREEMENTS: INTERNATIONAL
License No. 7960310, for various film properties and Winnie the Pooh, expiring
June 30, 1997.
License No. 7960321, for standard characters, expiring June 30, 1997.
License No. 7960326, for 101 Dalmatians (animated and live action), expiring
June 30, 1997.
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EXHIBIT B
IMPACT INTERNATIONAL/PRISS PRINTS/ERO MARKETING - PROPOSED CONTRACT EXTENSIONS
UNITED STATES AND CANADA ONLY*
========================================================================================================================
CONTRACT RENEWAL PERIOD '98 EXTENSION GUARANTEE '99 EXTENSION GUARANTEE
- ---------------------------- ---------------- ------------------ ----------------------- -----------------------
Impact International, Inc. Toy Story 1/1/98-12/31/99 * *
101 Dalmatians 7/1/98-12/31/99 * *
Hercules 1/1/99-12/31/99 * *
Little Mermaid 7/1/99-12/31/99 * *
MFK 1/1/99-12/31/99 * *
Winnie-The-Pooh 1/1/99-12/31/99 * *
Doug No Change * *
George of the No Change * *
Jungle
Mighty Ducks TV None * *
MFK (Sandwich None * *
Bags)
Hunchback None * *
========================================================================================================================
========================================================================================================================
CONTRACT RENEWAL PERIOD '98 EXTENSION GUARANTEE '99 EXTENSION GUARANTEE
- ---------------------------- ---------------- ------------------ ----------------------- -----------------------
Priss Prints Hercules 1/1/99-12/31/99 * *
Little Mermaid No Change * *
101 Dalmatians 1/1/99-12/31/99 * *
Toy Story 1/1/98-12/31/99 * *
Disney Babies 1/1/99-12/31/99 * *
MFK 1/1/99-12/31/99 * *
Winnie-The-Pooh 1/1/99-12/31/99 * *
Hunchback None * *
========================================================================================================================
CONTRACT RENEWAL PERIOD '98 EXTENSION GUARANTEE '99 EXTENSION GUARANTEE
- ---------------------------- ---------------- ------------------ ----------------------- -----------------------
Ero Marketing, Inc. 101 Dalmatians 7/1/98-12/31/99 * *
(HF)
101 Dalmatians 1/1/98-12/31/99 * *
Toy Story 1/1/98-12/31/99 * *
Hercules 1/1/99-12/31/99 * *
Little Mermaid 1/1/97-12/31/97 * *
MFK/Disney 1/1/99-12/31/99 * *
Babies
Winnie-The-Pooh 1/1/98-12/31/99 * *
Hunchback None * *
Hunchback (HF) None * *
Cinderella None * *
========================================================================================================================
========================================================================================================================
CONTRACT RENEWAL PERIOD '98 EXTENSION GUARANTEE '99 EXTENSION GUARANTEE
- ---------------------------- ---------------- ------------------ ----------------------- -----------------------
AMAV MFK No Change * *
========================================================================================================================
* FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.