1
EXHIBIT 10.11
[WALT DISNEY COMPANY LOGO]
March 28, 1994
Kiddie Products, Inc.
dba The First Years
One Kiddie Drive
Avon, MA 02322-0382
Re: WINNIE THE POOH
Dear Sirs/Mesdames:
We hereby agree with you as follows:
1. MEANING OF TERMS As used in this Agreement:
A. "LICENSED MATERIAL" means the representations, movements and
personalities of the following:
WINNIE THE POOH, CHRISTOPHER ROBIN, EEYORE, KANGA, ROO,
RABBIT, PIGLET, OWL, GOPHER, AND TIGGER, ALL IN THE STYLE AS
DESIGNED BY US.
B. "TRADEMARKS" means "WALT DISNEY," "DISNEY", and the names for and
representations of Licensed Material included in Subparagraph 1.A.
above.
C. "ARTICLES" means the items set forth in Schedule A, which is attached
hereto and incorporated herein by reference, on or in connection with
which the Licensed Material and/or the Trademarks are reproduced or
used.
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 March 28, 1994, and ending
December 31, 1996.
2
Page 2
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
F. "TERRITORY" means the United States, United States PX's wherever
located, and United States territories and possessions, excluding
Puerto Rico. However, if sales are made to chain stores in the United
States which have stores in Puerto Rico, such chain stores may supply
Articles to such stores in Puerto Rico.
G. "ROYALTIES" means a copyright royalty in an amount equal to the greater
of:
(1)(a) Ten Percent (10%) of your Net Invoiced Billings to customers
for Articles sold F.O.B. a location in the Territory ("F.O.B.
In Sales") or, for Articles sold to a customer in the Territory
F.O.B. a location outside the Territory ("F.O.B. Out Sales"),
Fourteen Percent (14%) of your Net Invoiced Billings for
such Articles; or
(b) The Minimum Per Article Royalty, if any has been specified in
Subparagraph 1.D. above.
(2) The sums which we are paid as Royalties on any sales to
customers affiliated with you shall be no less than the sums
paid on sales to customers not affiliated with you, and if such
affiliated customer is a reseller of the Articles, the sale to
such customer shall not be counted as a sale for Royalty
calculation purposes; in such case, the relevant sale for
Royalty calculation purposes shall be that of such affiliated
customer. For the purposes of this Agreement, "affiliate"
shall mean your parent or subsidiary or any party in which a
controlling interest is held by the entity or persons who hold
a controlling interest in you.
(3) All sales of Articles shipped to a customer outside the
Territory pursuant to a distribution permission shall bear a
Royalty at the rate for F.O.B. Out Sales.
(4) Royalties payable shall be not less for each Article sold than
the Minimum per Article Royalty, if such a Royalty has been
specified in Subparagraph 1.D. No Royalties are payable on the
mere manufacture of Articles.
3
Page 3
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
(5) The full Royalty percentage shall be payable on close-out or
other deep discount sales of Articles, including sales to
employees, except that no Royalty shall be payable on Articles
sold with our written permission at or below your acquisition
cost or your cost of manufacture, excluding overheads.
H. "NET INVOICED BILLINGS" shall mean the following:
(1) actual invoiced billings (i.e., sales quantity multiplied by
your selling price) for Articles sold and all other receivables
of any kind whatsoever, related in any way to the sale or
purchase of the Articles, whether received by you or any parent,
subsidiary or affiliate of yours, except as provided in
Subparagraphs 1.G.(2) and 1.H.(2), less "Allowable Deductions"
as hereinafter defined;
(2) the following are not part of Net Invoiced Billings; invoiced
charges for transportation of Articles within the Territory
which are separately identified on the sales invoice, and taxes
on the sale.
I. "ALLOWABLE DEDUCTIONS" shall mean the following:
(1) volume discounts and other discounts separately identified on
your sales invoices as being applicable to sales of Articles
licensed hereunder or to combined sales of such Articles and
other products not licensed by us, and post-invoice credits
granted and properly documented as applicable to sales of
Articles licensed hereunder or to combined sales of such
Articles and other products not licensed by us; in the event
that a post-invoice credit is issued for combined sales of
Articles and other products not licensed by us, and you cannot
document the portion of the credit applicable to the Articles,
you may apply only a pro rata portion of the credit to the
Articles;
(2) the following are not Allowable Deductions, whether granted on
sales invoices or as post-invoice credits: cash discounts
granted as terms of payment; early payment discounts; allowances
or discounts relating to advertising; mark down
4
Page 4
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
allowances; costs incurred in manufacturing, importing, selling
or advertising Articles; freight costs incorporated in the
selling price; and uncollectible accounts.
J. "ROYALTY PAYMENT PERIOD" means each calendar quarterly period during
the Principal Term and during any other term.
K. "ADVANCE" means the following sum(s) payable by the following date(s)
as an advance on Royalties to accrue in the following period(s):
$112,500.00 payable upon your signing of this Agreement
for the period commencing March 28, 1994, and ending
December 31, 1996.
L. "GUARANTEE" means the following sums(s) which you guarantee to pay as
minimum Royalties on your cumulative sales in the following period(s):
$625,000.00 for the period commencing March 28, 1994,
and ending December 31, 1996.
M. "SAMPLES" means six (6) samples of each stock keeping unit ("SKU") of
each Article, from the first production run of each supplier of each
SKU of each Article.
N. "PROMOTION COMMITMENT" means the following sum(s) which you agree to
spend in the following way(s):
none.
O. "MARKETING DATE" means the following date(s) by which the following
Article(s) shall be available for purchase by the public at retail
outlets:
By March 1, 1995, but no earlier than January 1, 1995.
2. RIGHTS GRANTED
A. In consideration for your promise to pay and your payment of all
Royalties, Advances and Guarantees required hereunder, we grant
5
Page 5
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
you the non-exclusive right, during the Principal Term and any
extension thereof, and only within the Territory, to reproduce the
Licensed Material only on or in connection with the Articles, to use
the Trademarks, but only such Trademarks and uses thereof as may be
approved when the Articles are approved and only on or in connection
with the Articles, and to manufacture, distribute for sale and sell
(other than by direct marketing methods, including but not limited to
direct mail and door-to-door solicitation) the Articles. You will sell
the Articles only to retailers for resale to the public in the
Territory or to wholesalers for resale to such retailers; provided,
however, that the Articles listed on Schedule A as Article numbers 12,
13, 14, 15, 16, 17 and 18 must be carded, and sold only to infant
accessory departments and juvenile product departments of stores (or to
wholesalers for resale to such departments) and to such other accounts
or departments as we may from time to time approve in advance in
writing. If there is a question as to whether a particular department
is an "infant accessory department" or "juvenile product department",
our determination notified to you in writing shall be binding.
B. Unless we consent in writing, you shall not sell or otherwise provide
Articles for use as premiums (including those in purchase-with-purchase
promotions), promotions, give-aways, fund-raisers, or entries in
sweepstakes, or to customers for resale by direct mail or other direct
marketing methods, including, without limitation, home shopping
television programs, or to customers for inclusion in another product,
unless such product has been licensed by us. However, nothing
contained herein shall preclude you from soliciting orders by mail from
wholesalers or retail outlets specified in Subparagraph 2.A. above, nor
from selling to such retailers which sell predominantly at retail, but
which include the Articles in their mail order catalogs or otherwise
sell Articles by direct marketing methods as well as at retail. If you
wish to sell the Articles to other customers for resale through mail
order catalogs, you must obtain our prior written consent in each
instance.
C. Unless we consent in writing, you shall not give away or donate
Articles, except minor quantities of samples, not for onward
distribution, to your accounts or other persons for the purpose of
promoting Article sales.
6
Page 6
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
D. Nothing contained herein shall preclude you from selling Articles to
us or to any subsidiary of ours, or to your or our employees, subject
to the payment to us of Royalties on such sales.
E. We further grant you the right to reproduce the Licensed Material and
to use the Trademarks, only within the Territory, on containers,
packaging and display material for the Articles, and in advertising
for the Articles.
F. Nothing contained in the Agreement shall be deemed to imply any
restriction on your freedom and that of your customers to sell the
Articles at such prices as you or they shall determine.
G. You recognize and acknowledge the vital importance to us of the
characters and other proprietary material we own and create, and the
association of the Disney name with them. In order to prevent the
denigration of our products and the value of their association with
the Disney name, and in order to ensure the dedication of your best
efforts to preserve and maintain that value, you agree that, during
the Principal Term and any extension hereof, you will not manufacture
or distribute any merchandise embodying or bearing any artwork or
other representation which we determine, in our sole discretion, is
confusingly similar to our Disney characters or other proprietary
material.
3. ADVANCE
A. You agree to pay the Advance, which shall be on account of Royalties
to accrue during the Principal Term only, and only with respect to
sales in the Territory; provided, however, that if any part of the
Advance is specified hereinabove as applying to any period less than
the Principal Term, such part shall be on account of Royalties to
accrue during such lesser period only. If said Royalties should be
less than the Advance, no part of the Advance shall be repayable.
B. Royalties accruing during any sell-off period or extension of the
Principal Term shall not be offset against the Advance unless
otherwise agreed in writing. Royalties accruing during any extension
of the Principal Term or any other term shall be offset only against
an advance paid with respect to such extended term.
7
Page 7
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
C. In no event shall Royalties accruing by reason of any sales to us or a
subsidiary of ours or by reason of sales outside the Territory
pursuant to a distribution permission be offset against the Advance or
any subsequent advance.
4. GUARANTEE
A. You shall, with your statement for each Royalty Payment Period ending
on a date indicated in Subparagraph 1.L. hereof defining "Guarantee,"
pay us the amount, if any, by which cumulative Royalties paid with
respect to sales in the Territory during any period or periods covered
by the Guarantee provision, or any Guarantee provision contained in
any agreement extending the term hereof, fall short of the amount of
the Guarantee for such period.
B. Advances applicable to Royalties due on sales in the period to which
the Guarantee relates apply towards meeting the Guarantee.
C. In no event shall Royalties paid with respect to sales to us or to any
subsidiary or affiliate of ours, or with respect to sales outside the
Territory pursuant to a distribution permission, apply towards the
meeting of the Guarantee or any subsequent guarantee.
5. PRE-PRODUCTION APPROVALS
A. As early as possible, and in any case before commercial production
of any Article, you shall submit to us for our review and written
approval (to utilize such materials in preparing a pre-production
sample) all preliminary and proposed final artwork and
three-dimensional models which are to appear on or in the Article.
Thereafter, you shall submit to us for our written approval a
pre-production sample of each Article. We shall endeavor to respond
to such requests within a reasonable time, but such approvals should
be sought as early as possible in case of delays. In addition to
the foregoing, as early as possible, and in any case no later than
sixty (60) days following written conceptual approval, you shall
supply to us for our use for internal purposes, a mock-up, prototype
or pre-production sample of each style of each Article on or in
connection with which the Licensed Material is used.
8
Page 8
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
B. Approval or disapproval shall lie solely in our discretion, and any
Article not so approved in writing shall be deemed unlicensed and
shall not be manufactured or sold. If any unapproved Article is being
sold, we may, together with other remedies available to us, including
but not limited to, immediate termination of this Agreement, by
written notice require such Article to be immediately withdrawn from
the market. Any modification of an Article, including, but not
limited to, change of materials, color, design or size of the
representation of Licensed Material must be submitted in advance for
our written approval as if it were a new Article. Approval of an
Article which uses particular artwork does not imply approval of such
artwork for use with a different Article. The fact that artwork has
been taken from a Disney publication or a previously approved Article
does not mean that its use will necessarily be approved in connection
with an Article licensed hereunder.
C. If you submit for approval artwork from an article or book
manufactured or published by another licensee of ours or of any
subsidiary of ours, you must advise us in writing of the source of
such artwork. If you fail to do so, any approval which we may give
for use by you of such artwork may be withdrawn by giving you written
notice thereof, and you may be required by us not to sell Articles
using such artwork.
D. Notwithstanding the above, as we rely primarily on you for the
consistent quality and safety of the Articles and their compliance
with applicable laws and standards, we will not unreasonably object to
any change in the design of an Article or in the materials used in the
manufacture of the Article or in the process of manufacturing the
Articles which you advise us in writing is intended to make the
Article safer or more durable.
E. If we have supplied you with forms for use in applying for approval of
artwork, models, pre-production and production samples of Articles,
you shall use such forms when submitting anything for our approval.
6. APPROVAL OF PRODUCTION SAMPLES
A. Before shipping an Article to any customer, you agree to furnish to
us, from the first production run of each supplier of each of the
9
Page 9
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
Articles, for our approval of all aspects of the Article in question,
the number of Samples with packaging which is hereinabove set forth,
which shall conform to the approved artwork, three-dimensional models
and pre-production sample. Approval or disapproval of the artwork as
it appears on the Article, as well as of the quality of the Article,
shall lie in our sole discretion and may, among other things, be based
on unacceptable quality of the artwork or of the Article as
manufactured. Any Article not so approved shall be deemed unlicensed,
shall not be sold and, unless otherwise agreed by us in writing,
shall be destroyed. Such destruction shall be attested to in a
certificate signed by one of your officers. Production samples of
Articles for which we have approved a pre-production sample shall be
deemed approved, unless within 20 days of our receipt of such
production sample we notify you to the contrary.
B. You agree to make available at no charge such additional samples of
each Article as we may from time to time reasonably request for the
purpose of comparison with earlier samples, or to test for compliance
with applicable laws, regulations and standards, and to permit us upon
reasonable request to inspect your manufacturing operations and
testing records (and those of your suppliers) for the Articles.
C. It is specifically understood that we may disapprove an Article or a
production run of an Article because the quality is unacceptable to
us, and accordingly, we recommend that you submit production samples
to us for approval before committing to a large original production
run or to purchase a large shipment from a new supplier.
D. No modification of an approved production sample shall be made without
our further prior written approval. Articles being sold must conform
in all respects to the approved production sample. It is understood
that if in our reasonable judgement the quality of an Article
originally approved has deteriorated in later production runs, or if
the Article has otherwise been altered, we may, in addition to other
remedies available to us, by written notice require such Article to be
immediately withdrawn from the market.
E. The rights granted hereunder do no permit the sale of "seconds" or
"irregulars". All Articles not meeting the standard of approved
10
Page 10
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
samples shall be destroyed or all Licensed Material, New Materials and
Trademarks shall be removed or obliterated therefrom.
F. Notwithstanding the above, as we rely primarily on you for the
consistent quality and safety of the Articles and their compliance
with applicable laws and standards, we will not unreasonably object to
any change in the design of an Article or in the materials used in the
manufacture of the Article or in the process of manufacturing the
Articles which you advise us in writing is intended to make the
Article safer or more durable.
G. We shall have the right, by written notice to you, to require
modification of any Article approved by us under any previous
agreement between us. Likewise, if the Principal Term of this
Agreement is extended by mutual agreement, we shall have the right, by
written notice to you, to require modification of any Article approved
by us under this Agreement. It is understood that there is no
obligation upon either party to extend the Agreement.
H. If we notify you of a required modification under Subparagraph 6.G.
with respect to a particular Article, such notification shall advise
you of the nature of the changes required, and you shall not accept
any order for any such Article until the Article has been resubmitted
to us with such changes and you have received our written approval of
the Article as modified.
7. APPROVAL OF PACKAGING, PROMOTIONAL MATERIAL, AND ADVERTISING
A. All containers, packaging, display material, promotional material,
catalogs, and all advertising, including but not limited to,
television advertising and press releases, for Articles must be
submitted to us and receive our written approval before use. To avoid
unnecessary expense if changes are required, our approval thereof
should be procured when such is still in rough or storyboard format.
We shall endeavor to respond to requests for approval within a
reasonable time. Approval or disapproval shall lie in our sole
discretion, and the use of unapproved containers, packaging, display
material, promotional material, catalogs or advertising is
prohibited. Whenever you shall prepare catalog sheets or other
11
Page 11
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
printed matter containing illustrations of Articles, you will furnish
to us five (5) copies thereof when they are published.
B. If we have supplied you with forms for use in applying for approval of
artwork, models, pre-production and production samples of Articles,
you shall use such forms when submitting anything for our approval.
8. ARTWORK
You shall pay us, within 30 days of receiving an invoice therefor, for
artwork done at your request by us or third parties under contract to us in
the development and creation of Articles, display, packaging or promotional
material (including any artwork which in our opinion is necessary to modify
artwork initially prepared by you and submitted to us for approval) at our
then prevailing commercial art rates. Estimates of artwork charges are
available upon request. While you are not obligated to utilize the
services of our Art Department, you are encouraged to do so in order to
minimize delays which may occur if outside artists do renditions of
Licensed Material which we cannot approve and to maximize the
attractiveness of the Articles.
9. PRINT, RADIO OR TV ADVERTISING
You will obtain all approvals necessary in connection with print, radio or
television advertising, if any, which we may authorize. You represent and
warrant that all advertising and promotional materials shall comply with
all applicable laws and regulations. Our approval of copy or storyboards
for such advertising will not imply a representation or belief by us that
such copy or storyboards are sufficient to meet any applicable code,
standard, or other obligation. In the event we approve the use of film
clips of the motion picture from which the Licensed Material comes, for use
in a television commercial, you shall be responsible for any re-use fees
which may be applicable, including SAG payments for talent. No
reproduction of the film clip footage shall be made except for inclusion,
as approved by us, in such commercial and there shall be no modifications
of the film clip footage. All film clip footage shall be returned to us
immediately after its inclusion in such commercial. We shall have the
right to prohibit you from advertising the Articles by means of television
and/or billboards. Such right shall be exercised within our sole
discretion, including without limitation for reasons of overexposure of
the Licensed Material.
12
Page 12
Kiddie Products, Inc.
Winnie The Pooh
March 29, 1994
10. LICENSEE NAME AND ADDRESS ON ARTICLES
A. Your name, trade name (or a trademark of yours which you have advised
us in writing that you are using) and your address (at least city and
state) will appear on permanently affixed labeling on each Article or,
if the Article is sold to the public in packaging or a container,
printed on such packaging or a container so that the public can
identify the supplier of the Article. On soft goods "permanently
affixed" shall mean sewn on. RN numbers do not constitute a
sufficient label under this paragraph.
B. You shall advise us in writing of all trade names or trademarks you
wish to use on Articles being sold under this license. You may sell
the Articles only under mutually agreed upon trade names or
trademarks.
11. COMPLIANCE WITH APPROVED SAMPLES AND APPLICABLE LAWS AND STANDARDS
Each Article and component thereof distributed hereunder shall be of good
quality and free of defect in design, materials and workmanship, and shall
comply with all applicable laws, regulations and voluntary industry
standards and such specifications, if any, as may have been specified in
this Agreement, and shall conform to the Sample thereof approved by us.
Both before and after you put Articles on the market, you shall follow
reasonable and proper procedures for testing that Articles comply with such
laws, regulations, and standards, and shall, upon reasonable notice, permit
our designees to inspect testing, manufacturing and quality control records
and procedures and to test the Articles for compliance. You shall also
give due consideration to any recommendations of ours that Articles exceed
the requirements of applicable laws, regulations and standards. Articles
not complying with applicable laws, regulations and voluntary standards
shall be deemed unapproved, even if previously approved by us, and shall
not be shipped unless and until they have been brought into full compliance
therewith.
12. DISNEY OWNERSHIP OF ALL RIGHTS IN LICENSED MATERIAL
You acknowledge that the copyrights and all other proprietary rights in and
to Licensed Material are exclusively owned by and reserved to us.
13
Page 13
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
You shall neither acquire nor assert copyright ownership or any other
proprietary rights in Licensed Material or in any derivation, adaptation,
variation or name thereof. Without limiting the foregoing, you hereby
assign to us all your worldwide right, title and interest in the Licensed
Material and in any material objects (excluding the Articles themselves and
displays, catalogs and promotional material) consisting of or incorporating
drawings, paintings, animation cels, or sculptures, or other derivations,
adaptations, compilations, collective works, variations or names of
Licensed Material (herein called "New Materials") heretofore or hereafter
created by or for you or any parent, subsidiary or affiliate of yours,
which embody Licensed Material. If any third party makes or has made any
contribution to the creation of New Materials, you agree to obtain from
such a party a full assignment of rights so that the foregoing assignment
by you shall vest full rights to New Materials in us.
13. COPYRIGHT NOTICE
As a condition to the grant of rights hereunder, each Article and any other
matter containing Licensed Material or New Materials shall bear a properly
located permanently affixed copyright notice in our name (e.g.
"(C)Disney"), or such other notice as we may notify to you in writing.
You will comply with such instructions as to form, location and content
of the notice as we may give from time to time. You will not, without
our prior written consent, affix to any Article or any other matter
containing Licensed Material or New Materials a copyright notice in
any other name. If through inadvertence or otherwise a copyright notice
on any Article or other such matter should appear in your name or the
name of a third party, you hereby agree to assign to us the copyright
represented by any such copyright notice in your name and, upon request,
cause the execution and delivery to us of whatever documents are
necessary to convey to us that copyright represented by any such
copyright notice. If by inadvertence a proper copyright notice is
omitted from any Article or other matter containing Licensed Material
or New Materials, you agree at your expense to use all reasonable
efforts to correct the omission on all such Articles or other matter
in process of manufacture or in distribution. You agree to advise
us promptly and in writing of the steps being taken to correct any such
omission and to make the corrections on existing Articles which can be
located.
14
Page 14
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
14. NON-ASSOCIATION OF OTHER FANCIFUL CHARACTERS WITH LICENSED MATERIAL
To preserve our identification with our characters and to avoid confusion
of the public, you agree not to associate other characters (other than such
as constitute a trademark of yours) or licensed properties with the
Licensed Material, New Materials or the Trademarks either on the Articles
or in their packaging, or, without our written permission, on advertising,
promotional or display materials.
15. ACTIVE MARKETING OF ARTICLES
You agree to manufacture (or have manufactured for you) and offer for sale
all the Articles and to exercise the rights granted herein. You agree that
by the Marketing Date applicable to a particular Article or, in the absence
of such a date being specified in Subparagraph 1.O., by six (6) months from
the commencement of the Principal Term, shipments to customers of such
Article will have taken place in sufficient time that such Article shall be
available for purchase by the public at the retail outlets authorized
pursuant to Subparagraph 2.A. Any Article as to which such sales have not
the public or which are not then and thereafter available for purchase by
the public may be withdrawn from the list of Articles licensed in this
Agreement without obligation to you other than to give you written notice
thereof.
16. PROMOTION COMMITMENT
You agree to carry out the Promotion Commitment, if any, as defined in
Subparagraph 1.N.
17. TRADEMARK RIGHTS AND OBLIGATIONS
A. All uses of the Trademarks by you hereunder shall inure to our
benefit. You acknowledge that we are the exclusive owner of all the
Trademarks, and of any trademark incorporating all or any part of a
Trademark or any Licensed Material, and the trademark rights created
by such uses. Without limiting the foregoing, you hereby assign to us
all the Trademarks, and any trademark incorporating all or any part of
a Trademark or any Licensed Material, and the trademark rights created
by such uses, together with the goodwill attaching to that part of the
business in connection with which such
15
Page 15
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
Trademarks or trademarks are used. You agree to execute and deliver
to us such documents as we require to register you as a Registered
User or Permitted User of the Trademarks or such trademarks and to
follow our instructions for proper use thereof in order that
protection and/or registrations for the Trademarks and such trademarks
may be obtained or maintained.
B. You agree not to use any Licensed Material, New Materials 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, New Materials or Trademark as the name of your
business or any division thereof, unless otherwise agreed by us in
writing.
18. REGISTRATIONS
Except with our written consent, neither you, your parent, nor any
subsidiary or affiliate of yours will register or attempt in any country to
register copyrights in, or to register as a trademark, service mark, design
patent or industrial design, or business designation, any of the Licensed
Material, New Materials, Trademarks or derivations or adaptations thereof,
or any word, symbol or design which is so similar thereto as to suggest
association with or sponsorship by us or any subsidiary of ours. In the
event of breach of the foregoing, you agree, at your expense and at our
request, immediately to terminate the unauthorized registration activity
and promptly to execute and deliver, or cause to be delivered, to us such
assignments and other documents as we may require to transfer to us all
rights to the registrations, patents or applications involved.
19. UNLICENSED USE OF LICENSED MATERIALS
A. You agree that you will not use the Licensed Material, New Materials,
or the Trademarks, or any other material the copyright to which is
owned by us in any way other than as herein authorized (or as is
authorized in any other written contract in effect between us). In
addition to any other remedy we may have, you agree that the profits
from any use thereof on products other than the Articles (unless
authorized by us in writing), and all profits from the use of any
other copyrighted material of ours without written authorization,
shall be payable to us.
16
Page 16
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
B. You agree to give us prompt written notice of any unlicensed use by
third parties of Licensed Material, New Materials or Trademarks, and
that you will not, without our written consent, bring or cause to be
brought any criminal prosecution, lawsuit or administrative action for
infringement, interference with or violation of any rights to Licensed
Material, New Materials or Trademarks. Because of the need for and
the high costs of an effective anti-piracy enforcement program, you
agree to cooperate with us, and, if necessary, to be named by us as a
sole complainant or co-complainant in any action against an infringer
of the Licensed Material, New Materials or Trademarks and,
notwithstanding any right of yours to recover same, legal or
otherwise, you agree to pay to us, and hereby waive all claims to, all
damages or other monetary relief recovered in such action by reason of
a judgment or settlement (other than for reasonable expenses incurred
at our request, including reasonable attorney's fees if we have
requested you to retain separate counsel), whether or not such
damages or other monetary relief, or any part thereof, represent or
are intended to represent injury sustained by you as a licensee
hereunder.
20. STATEMENTS AND PAYMENTS OF ROYALTIES
A. You agree to furnish to us by the 30th day after each Royalty Payment
Period a full and accurate statement showing by Article, with stock
number and item description, the quantities, Net Invoiced Billings and
applicable Royalty rate(s) of Articles invoiced during the preceding
Royalty Payment Period, and the quantities and invoice value of
Articles returned for credit or refund in such period. At the same
time you will pay us all Royalties due on billings shown by such
statement. To the extent that any Royalties are not paid, you
authorize us to offset Royalties due against any sums which we or any
subsidiary of ours may owe to you or any parent or subsidiary or
affiliate of yours. No deduction or withholding from Royalties
payable to us shall be made by reason of any tax. Any applicable tax
on the manufacture, distribution and sale of the Articles shall be
borne by you.
B. If we at any time so request, your statements shall be made on
statement forms which we shall provide, and you will fully comply with
the instructions supplied by us for completing such forms. Except
as otherwise agreed in writing, such statements shall
17
Page 17
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
separately reflect the sales and applicable Royalties for each
individual Article. Apparel Articles shall be reported separately by
size range (e.g., "boys'", "girls'", "men's", etc.). Your statements
shall identify for each Article the character or other Licensed
Material used on each such Article or the motion picture or television
series from which such character derived. However, Articles which
differ only in that different characters or scenes appear on them may
be reported as a single Article if the characters or scenes used on
such Articles are from the same motion picture or television series.
C. Your statement shall with respect to all Articles report separately:
(1) F.O.B. In Sales;
(2) F.O.B. Out Sales;
(3) sales of Articles outside the Territory pursuant to a
distribution permission (indicating the country involved);
(4) sales of Articles to any licensee of ours for the Articles;
(5) sales of Articles to us or any subsidiary of ours;
(6) sales of Articles to your or our employees;
(7) sales of Articles under any brand or program identified in
Subparagraph 1.B. hereinabove.
D. Sales of items licensed under contracts with us other than this
Agreement shall not be reported on the same statement as sales of
Articles under this Agreement.
E. Your statements and payments shall be delivered to The Walt Disney
Company, P.O. Box 101947, Atlanta, Georgia 30392. However, Advances
should be mailed directly to the Contract Administrator at 500 South
Buena Vista Street, Burbank, California 91521-6880. A copy of each
statement must be sent to us at 500 South Buena Vista Street, Burbank,
California 91521-6880, to the attention of the Contract Administrator,
Consumer Products Division.
18
Page 18
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
21. ARTICLES RETURNED FOR CREDIT OR REFUND
Royalties reported on sales of Articles which have been returned to you for
credit or refund and on which a refund has been made or credit memo issued
may be credited against Royalties due. The credit shall be taken in the
Royalty Payment Period in which the refund is given or credit memo issued.
Unused credits may be carried forward, but in no event shall you be
entitled to a refund of Royalties.
22. INTEREST
Royalties or any other payments due to us hereunder which are received
after the due date shall bear interest at the rate of 10% per annum from
the due date (or the maximum permissible by law if less than 10%).
23. AUDITS AND MAINTAINING RECORDS
You agree to keep accurate records of all transactions relating to this
Agreement and any prior agreement with us, including, without limitation,
shipments to you of Articles and components thereof, inventory records,
records of sales and shipments by you, and records of returns, and to
preserve such records for the lesser of seven (7) years or two (2) years
after the expiration or termination of this Agreement. We, or our
representatives, shall have the right from time to time, during your normal
business hours, but only for the purpose of confirming your performance
hereunder, to examine and make extracts from all such records, including
the general ledger, invoices and any other records which we reasonably deem
appropriate to verify the accuracy of your statements or your performance
hereunder, including records of your parent, subsidiary and affiliated
companies, if they are involved in activities which are the subject of the
Agreement. In particular, your invoices shall identify the Articles
separately from goods which are not licensed hereunder. If in an audit of
your records it is determined that there is a short fall of five percent
(5%) or more in Royalties reported for any Royalty Payment Period, you
shall upon request from us reimburse us for the full out-of-pocket costs of
the audit, including the costs of employee auditors calculated at $60 per
hour per person for travel time during normal working hours and actual
working time.
19
Page 19
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
24. MANUFACTURE OF ARTICLES BY THIRD PARTY MANUFACTURERS
A. If you at any time desire to have Articles or components thereof
containing Licensed Material manufactured by a third party, you must,
as a condition to the continuation of this Agreement, notify us of the
name and address of such manufacturer and the Articles or components
involved and obtain our prior written permission to do so. The
granting of said permission, if we are prepared to grant the same,
will be conditioned upon:
(1) In the case of Manufacture outside the Territory
(a) your signing a consent agreement in a form which we will
furnish to you;
(b) your causing each such manufacturer and any
sub-manufacturer to sign an agreement in a form which we
will also furnish to you; and
(c) our receipt of such agreements properly signed; and
(2) In the case of Manufacture in the Territory
(a) if we so request, your causing each such manufacturer to
sign an agreement in a form which we will furnish to
you; and
(b) our receipt of such agreement properly signed.
(SAMPLES OF SAID AGREEMENT FORMS ARE AVAILABLE ON REQUEST)
B. We will not normally require agreements from suppliers of yours who
are manufacturing in the Territory, but your purchase of Articles
from a third party manufacturer without such agreements as are
required hereunder being signed and delivered to us shall be a
violation of this Agreement. It is not our policy to reveal the
names of your suppliers to third parties or to any division of ours
involved with buying products, except as may be necessary to enforce
our contract rights or protect our trademarks and copyrights.
20
Page 20
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
C. If any such manufacturer utilizes Licensed Material or Trademarks for
any unauthorized purpose, you shall cooperate fully in bringing such
utilization to an immediate halt. If, by reason of your not having
supplied the above mentioned agreements to us or not having given us
the name of any supplier, we make any representation or take any
action and are thereby subjected to any penalty or expense, you will
fully compensate us for any cost or loss we sustain.
25. INDEMNITY
A. You shall indemnify us during and after the term hereof against all
claims, liabilities (including settlements entered into in good faith
with your consent, not to be unreasonably withheld) and expenses
(including reasonable attorneys' fees) arising out of your activities
hereunder, or out of any defect (whether obvious or hidden and whether
or not present in any sample approved by us) in an Article, or arising
from personal injury or any infringement of any rights of any other
person by the manufacture, sale, possession or use of Articles, or
their failure to comply with applicable laws, regulations and
standards. The parties indemnified hereunder shall include The Walt
Disney Company and its subsidiaries, and their officers, directors,
employees and agents. The indemnity shall not apply to any claim or
liability relating to any infringement of the copyright of a third
party caused by your utilization of the Licensed Material and the
Trademarks in accordance with the provisions hereof.
B. We shall indemnify you during and after the term hereof against all
claims, liabilities (including settlements entered into in good faith
with our consent, not to be unreasonably withheld) and expenses
(including reasonable attorneys' fees) arising out of any claim that
your use of any representation of the Licensed Material or the
Trademarks approved in accordance with the provisions of this
Agreement infringes the copyright of any third party or infringes any
right granted by us to such third party. You shall not, however, be
entitled to recover for lost profits.
C. Additionally, if by reason of any claims referred to in Subparagraph
25.B., you are precluded from selling any stock of Articles or
utilizing any materials in your possession or which come into your
possession by reason of any required recall, we shall be obligated
21
Page 21
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
to purchase such Articles and materials from you at their
out-of-pocket cost to you, excluding overheads, but we shall have no
other responsibility or liability with respect to such Articles or
materials.
D. No warranty or indemnity is given with respect to any liability or
expense arising from any claim that use of the Licensed Material or
the Trademarks on or in connection with the Articles hereunder or any
packaging, advertising or promotional material infringes on any
trademark right of any third party or otherwise constitutes unfair
competition by reason of any prior rights acquired by such third party
other than rights acquired from us. It is expressly agreed that it is
your responsibility to carry out such investigations as you may deem
appropriate to establish that Articles, packaging, promotional and
advertising material which are manufactured or created hereunder,
including any use made of the Licensed Material and the Trademarks
therewith, do not infringe such right of any third party, and we shall
not be liable to you if such infringement occurs.
26. INSURANCE
You shall maintain in full force and effect at all times while this
Agreement is in effect and for three years thereafter comprehensive general
and commercial liability insurance, including broad form contractual and
products liability coverage waiving subrogation with combined single limits
of no less than two million dollars (US $2,000,000.00) and naming as
additional insured those indemnified in Paragraph 25 hereof. You shall
deliver to us a certificate or certificates of insurance evidencing
satisfactory coverage and indicating that we shall receive written notice
of cancellation, non-renewal or of any material change in coverage at
least 30 days prior to the effective date thereof. Your insurance shall be
carried by an insurer with a BEST rating of B + V or above. Compliance
herewith in no way limits your indemnity obligations, except to the extent
that your insurance company actually pays us amounts which you would
otherwise pay us.
27. WITHDRAWAL OF LICENSED MATERIAL
You agree that we may, without obligation to you other than to give you
written notice thereof, withdraw from the scope of this Agreement any
Licensed Material which by the Marketing Date or, in the absence of such
22
Page 22
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
a date being specified in Subparagraph 1.O., by six (6) months from the
commencement of the Principal Term, is not being used on or in connection
with the Articles. We may also withdraw any Licensed Material or Articles
the use or sale of which under this Agreement would infringe or reasonably
be claimed to infringe the rights of a third party, other than rights
granted by us, in which case our obligations to you shall be limited to the
purchase at cost of Articles and other materials utilizing such withdrawn
Licensed Material which cannot be sold or used.
28. TERMINATION
Without prejudice to any other right or remedy available to us:
A. If you fail to manufacture, sell and distribute the Articles, or to
furnish statements and pay Royalties as herein provided, or if you
otherwise breach the terms of this Agreement, and if any such failure
is not corrected within fifteen (15) days after we send you written
notice thereof, we shall have the right at any time to terminate this
Agreement by giving you written notice thereof.
B. We shall have the right at any time to terminate this Agreement by
giving you written notice thereof:
(1) If you deliver to any customer without our written
authorization merchandise containing representations of
Licensed Material or other material the copyright or other
proprietary rights to which are owned by us other than Articles
listed herein and approved in accordance with the provisions
hereof;
(2) If you deliver Articles outside the Territory or knowingly sell
Articles to a third party for delivery outside the Territory,
unless pursuant to a written distribution permission or
separate written license agreement with us or any subsidiary
of ours;
(3) If a breach occurs which is of the same nature, and which
violates the same provision of this Agreement, as a breach of
which we have previously given you written notice;
23
Page 23
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
(4) If you breach any material term of any other license agreement
between us, and we terminate such agreement for cause;
(5) If you shall make any assignment for the benefit of creditors,
or file a petition in bankruptcy, or are adjudged bankrupt, or
become insolvent, or are placed in the hands of a receiver, or
if the equivalent of any such proceedings or acts occurs,
though known by some other name or term; and/or
(6) If you are not permitted or are unable to operate your business
in the usual manner, or are not permitted or are unable to
provide us with assurance satisfactory to us that you will so
operate your business, as debtor in possession or its
equivalent, or are not permitted, or are unable to otherwise
meet your obligations under this Agreement or to provide us
with assurance satisfactory to us that you will meet such
obligations.
29. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
Upon the expiration or termination of this Agreement, all rights herein
granted to you shall revert to us, and we shall be entitled to retain all
Royalties and other things of value paid or delivered to us. You agree
that from the expiration or termination of this Agreement you shall neither
manufacture nor have manufactured for you any Articles, that you will
deliver to us any and all artwork (including animation cels and drawings)
which may have been used or created by you in connection with this
Agreement, that you will at our option either sell to us at cost or
destroy or efface any molds, plates and other items used to reproduce
Licensed Material, New Materials, or Trademarks, and that, subject as
hereinafter provided, you will cease selling Articles. If you have any
unsold Articles in inventory on the expiration or termination date, you
shall provide us with a full statement of the kinds and numbers of such
unsold Articles and shall thereupon, but only if such statement has been
provided to us and if you have fully complied with the terms of this
Agreement including the payment of all Royalties due and the Guarantee,
have the right for a limited period of 90 days from such expiration or
earlier termination date to sell off and deliver such Articles. You shall
furnish us statements covering such sales and pay us Royalties in respect
of such sales. Such Royalties shall not be applied against the Advance or
towards meeting
24
Page 24
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
the Guarantee. Except as otherwise agreed by us in writing, any inventory
of Articles in your possession or control after the expiration or
termination hereof and of any sell-off period granted hereunder shall be
destroyed, or all Licensed Material, New Materials and Trademarks removed
or obliterated therefrom.
30. WAIVERS
A waiver by either of us at any time of a breach of any provision of this
Agreement shall not apply to any breach of any other provision of this
Agreement, or imply that a breach of the same provision at any other time
has been or will be waived, or that this Agreement has been in any way
amended, nor shall any failure by either party to object to conduct of the
other be deemed to waive such party's right to claim that a repetition of
such conduct is a breach hereof.
31. PURCHASE OF ARTICLES BY US
If we wish to purchase Articles, you agree to sell such Articles to us or
any subsidiary of ours at as low a price as you charge for similar
quantities sold to your regular customers and to pay us Royalties on any
such sales.
32. NON-ASSIGNABILITY
A. You shall not voluntarily or by operation of law assign, sub-license,
transfer, encumber or otherwise dispose of all or any part of your
interest in this Agreement without our prior written consent. Any
attempted assignment, sub-license, transfer, encumbrance or other
disposal without such consent shall be void and shall constitute a
material default and breach of this Agreement. "Transfer" within the
meaning of this Paragraph 32 shall include any merger or consolidation
involving your company; any sale or transfer of all or substantially
all of your company's assets; any transfer of your rights hereunder to
a division, business segment or other entity of yours other than the
one specifically referenced on page 1 hereof (or any sale or attempted
sale of Articles under a trademark or trade name of such division,
business segment or other entity); and any transaction or series of
related transactions resulting in the transfer of thirty-three and
one-third percent (33-1/3%) or more of the voting stock of your
company (or, if your company is a
25
Page 25
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
partnership, thirty-three and one-third percent (33-1/3%) or more of
the profit and loss participation in your company and the occurrence of
any of the foregoing with respect to any general partner of your
company).
B. However, you may, upon written notice to us, unless we have objected
within 30 days of receipt of such notice, sublicense your rights
hereunder to your parent, subsidiary and affiliated companies. You
hereby irrevocably and unconditionally guarantee that they will observe
and perform all of your obligations hereunder, including, without
limitation, the provisions governing approvals, and compliance with
approved samples, applicable laws and standards, and all other
provisions hereof, and that they will otherwise adhere strictly to all
of the terms hereof and act in accordance with your obligations
hereunder. Any involvement of a parent, subsidiary or affiliate in the
activities which are the subject of this Agreement shall be deemed
carried on pursuant to such a sublicense and thus covered by such
guarantee, but, unless notified to us and not timely objected to, such
involvement may be treated by us as a breach of this Agreement.
33. RELATIONSHIP
This Agreement does not provide for a joint venture, partnership, agency or
employment relationship between us.
34. HEADINGS
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.
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
26
Page 26
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
personally or by depositing the same addressed as herein provided (unless
and until otherwise notified), postage prepaid, in the United States mail,
or by facsimile transmission confirmed by a transmission report. Such
notice shall be deemed served upon personal delivery, upon the date of
mailing, or upon the date shown on the facsimile transmission report;
provided, however, that we shall be deemed to have been served with a
notice of a request for approval of materials under this Agreement only
upon our actual receipt of the request and of any required accompanying
materials. Any notice sent to us hereunder shall be sent to the attention
of "Vice President, Licensing," unless we advise you in writing otherwise.
37. MUSIC
Music is not licensed hereunder. Any charges, fees or royalties payable
for music rights or any other rights not covered by this Agreement shall be
additional to the Royalties and covered by separate agreement.
38. PREVIOUS AGREEMENTS
This Agreement and any confidentiality agreement you may have signed
pertaining to any of the Licensed Material, contains the entire agreement
between us concerning the subject matter hereof and supersedes any
pre-existing agreement and any oral or written communications between us.
However, if pursuant to any such pre-existing agreement there was any
agreement(s) in effect permitting you to sell or distribute Articles
outside the Territory or to cause to be manufactured any Articles outside
the Territory, such agreement(s) shall be deemed to remain in effect to the
extent that they relate to Licensed Material and Articles licensed
hereunder.
39. CHOICE OF LAW AND FORUM
This Agreement shall be deemed to be entered into in California and shall
be governed and interpreted according to the laws of the State of
California. Any legal actions pertaining to this Agreement shall be
commenced within the State of California and within either Los Angeles or
27
Page 27
Kiddie Products, Inc.
Winnie The Pooh
March 28, 1994
Orange Counties. The prevailing party shall be entitled to recover
reasonable attorney's fees and costs incurred therein.
Please sign below under the word "Agreed". When signed by both parties this
shall constitute an agreement between us.
THE WALT DISNEY COMPANY
By: /s/ ANNE OSBERG
------------------------
Title: SENIOR VICE PRESIDENT
LICENSING
---------------------
Date: 4/28/94
---------------------
AGREED:
KIDDIE PRODUCTS, INC.
dba THE FIRST YEARS
By: /s/ RONALD J. SIDMAN
---------------------
Title: PRESIDENT
------------------
jaw