1
Exhibit: 10.19FD
LICENSE AGREEMENT
This "Agreement" is entered into as of November 1, 1995, by and between
Hollywood Ventures Corporation ("HVC"), a California corporation, 9255 Sunset
Boulevard, Suite 405, Los Angeles, California 90069 and ("Licensor) and Third
Quarter Corporation d/b/a Fundex, an Indiana corporation ("Licensee"), 3570 West
16th Street, Indianapolis, Indiana 46222.
WHEREAS, Licensor is the owner of certain rights in the property described
and/or illustrated in Schedule A ("Property") including, but not limited to the
Trademarks listed in Schedule B ("Trademarks");
WHEREAS, Licensee desires to use the Property and/or the Trademarks on or
in connection with the products identified in Schedule C ("Licensed Products")
in the countries identified in Schedule D ("Territory"); and
WHEREAS, Licensor is willing to grant Licensee the right to use the
Property and/or the Trademarks on such Licensed Products.
NOW, THEREFORE, in consideration of their mutual promises, covenants and
conditions contained herein, it is agreed as follows:
1. OWNERSHIPS OF RIGHTS. Licensor is the exclusive owner of the right to
license the Property and Trademarks for use in association with the Licensed
Products in the Territory pursuant to a grant of rights by the owners, Nestor
Productions, Inc. and Big Comfy Corp. With the exception of the rights expressly
licensed hereunder to Licensee, all other rights relating thereto are expressly
reserved by Licensor, Nestor Productions, Inc. and Big Comfy Corp.
2. GRANT OF LICENSE. Licensor grants to Licensee an exclusive,
nontransferable, non-assignable license, without the right to grant
sub-licenses, to use the Property and/or the Trademarks solely on or in
connection with the manufacture, sale, offering for sale, advertising, promotion
and distribution of the Licensed Products and solely within the Territory and,
for this purpose only, to affix the Trademarks on or to packaging, displays,
sales, advertising and promotional materials sold, used or distributed in
connection with the Licensed Products ("Promotional and Packaging Material").
The foregoing notwithstanding, Licensee shall not directly nor indirectly
through any affiliate company in which Licensee or any of its controlling
shareholders, officers or directors own an interest individually or in the
aggregate in excess of ten percent (10%), sell any Licensed Products directly to
consumers, including but not limited to direct response sales, direct sales and
personal appearance sales. Licensee's sales shall be to bona fide retailers or
through bona fide wholesalers which shall sell the Licensed Products only to
retailers. Notwithstanding the foregoing, Licensee shall have the right to
engage a third party to manufacture the Licensed Products.
3. TERM AND OPTIONS. (a) This Agreement shall commence and be effective on
November 1, 1995 ("Effective Date") provided this Agreement has been executed by
both parties and Licensor has received the fully executed Agreement and the
Advance. Thereafter, this Agreement shall continue for an 'Initial Term"
terminating on December 31, 1997, unless terminated prior thereto pursuant to
this Agreement. An Advance of twenty-five thousand dollars ($25,000.00) is
payable upon execution of this Agreement as a non-refundable Advance against
Royalties ("Advance").
(b) If Licensee is in full compliance with this Agreement during the then
Initial Term and Licensee's sales during the Term will have resulted in Royalty
payments remitted to
2
Licensor of at least one hundred and fifty thousand dollars ($150,000.00),
Licensor agrees to grant to Licensee the option ('Option') to extend the Term
for additional two (2) years provided that Licensee gives Licensor at least
ninety (90) days prior written notice of its intention to exercise such Option.
4. ROYALTY PROVISIONS. (a) Licensee agrees to pay Licensor a 'Royalty" of
eight percent (8%) based upon Net Sales of the Licensed Products.
(b) "Net Sales" shall mean gross sales less actual quantity discounts and
returns actually credited. No deduction shall be made for cash or other
discounts, commissions or uncollectible accounts nor for any costs incurred in
the manufacture, sale, distribution or exploitation of the Licensed Products. A
Royalty shall also be paid by Licensee based on Licensee's usual Net Sales price
on all unbilled Licensed Products distributed by Licensee or any of its
affiliated companies. Licensee has discretion to set pricing; however, all
pricing shall be established by Licensee in a commercially reasonable manner and
all Licensed Products shall be sold by Licensee at competitive prices not
substantially more nor substantially less than the price customarily charged by
Licensee for similar products to unaffiliated businesses.
(c) For the Initial Term, Licensee agrees to pay Licensor a "Guaranteed
Minimum Royalty" of no less than forty-five thousand dollars ($45,000.00), of
which no less than one-quarter (1/4) of the Guaranteed Minimum Royalty shall be
paid to Licensor at the end of each six (6) month period of the Initial Term. If
upon expiration of the first six (6) month period and for each and every six (6)
month period thereafter (or upon termination of this Agreement in the event such
occurs less than six (6) months following the last Guaranteed Minimum Royalty
payment period) the total Royalties paid by Licensee to Licensor are less than
the Guaranteed Minimum Royalty for said six (6) month period, Licensee shall
immediately pay any such deficiency of the Guaranteed Minimum Royalty to
Licensor. Advances previously remitted to Licensor from Licensee for any such
six (6) month period shall be applied as a credit toward the current Guaranteed
Minimum Royalty.
5. STATEMENTS AND PAYMENTS. (a) Licensee shall provide Licensor within
thirty (30) days after the end of each calendar quarter ("Royalty Period") a
complete and accurate statement of its Net Sales for that quarter, said
statement to be certified as accurate by Licensee. Such statements, which shall
be in conformance with the requirements of Licensor, must be submitted whether
or not any Licensed Products have been shipped or Royalties have been earned.
(b) Acceptance. by Licensor of any statement furnished or Royalty paid
shall not preclude Licensor from questioning its correctness and in the event of
inconsistencies or mistakes, they shall be immediately rectified by Licensee.
(c) All payments shall be remitted in United States currency payable to
the order of Hollywood Ventures Corporation and mailed to the HVC address stated
in the preamble or as may be revised hereafter.
(d) Time is of the essence with respect to all payments and interest at
the rate of one and one-half percent (1 1/2%) per month shall accrue on any
amount due Licensor calculated from the date on which payment was due.
(e) Any and all Royalty payments, whether denoted as Advances, as
Guaranteed Minimum Royalty payments or otherwise, shall be non-refundable.
6. AUDIT. Licensee shall keep accurate books of account covering all
transactions relating to this Agreement. Licensor and/or its representatives
shall have the right, at reasonable hours of the day upon reasonable notice, to
examine such books and all other documents and material in the possession,
custody or control of Licensee with respect to this
2
3
Agreement and to make copies and summaries thereof no more than two (2) times
per twelve (12) month period. In the event an Audit reveals an underpayment,
Licensee shall immediately remit payment in the amount of the underpayment plus
interest calculated at the rate of one and one-half percent (1 1/2%) per month
from the date such Payments were due. In the event such underpayment is greater
than $1,000.00 or five percent (5%) of the reported royalty, whichever is
greater, for any Royalty Period, Licensee shall reimburse Licensor for the cost
and expense of such Audit. All books of account and records of Licensee relating
to this Agreement shall be retained for at least three years after termination
of this Agreement.
7. QUALITY, NOTICES, APPROVALS AND SAMPLES. (a) The quality and style of
the Licensed Products and all Promotional and Packaging Material relating to the
Licensed Products shall be at least as high as the best quality of similar goods
presently sold or distributed by Licensee in the Territory.
(b) All Promotional and Packaging Material and all Licensed Products on
which the Products and/or Trademarks are used shall contain the following legal
notices:
c 1995 Big Comfy Corp.
TM and designate trademark and copyrights of Big Comfy Corp. and are used
under license by (name of Licensee).
All Rights Reserved.
(c) Before commencing the design of the Licensed Products or Promotional
and Packaging Material which have not been previously approved, Licensee shall
submit for Licensor's written approval copies of all preliminary artwork.
Licensor shall have ten (10) business days to respond to submittals. If Licensor
fails to respond within such ten (10) business day period, such failure to
respond shall be deemed to constitute approval of the preliminary artwork.
(d) Prior to the use of any Promotional and Packaging Material and/or the
sale and distribution of the Licensed Products, Licensee shall submit at its
cost, but for Licensor's approval, three (3) complete sets of samples of all
Licensed Products intended to be sold and distributed and three (3) complete
sets of samples of all Promotional and Packaging Material intended to be used,
none of which may be used, sold, or distributed until receipt of written
approval of said samples from Licensor. Licensor shall have ten (10) business
days to respond to submittals. If Licensor fails to respond within such ten (10)
business day period, such failure to respond shall be deemed to constitute
approval of the samples.
(e) Upon commencement of distribution of the Licensed Products, Licensee
shall submit, at its own expense, an additional twenty-four (24) sets of the
above referenced samples.
(f) Thereafter, from time to time, Licensor may require Licensee to submit
at its own cost up to an additional five (5) sets of samples of Licensed
Products and/or Promotional and Packaging Material to monitor the quality for
continued approval.
(g) Licensor shall have the absolute right to inspect the facilities where
any Licensed Products are being manufactured and/or packaged from time to time
without notice.
(h) In the event the above quality standards are not maintained throughout
the Term, Licensor has the right to require Licensee to immediately discontinue
manufacturing, selling and distributing Licensed Products which do not meet such
quality standard.
8. ARTWORK. The form and content of all work relating to the Property and
Trademarks must be approved by Licensor prior to use. Licensor will provide to
Licensee upon request, at Licensee's expense, artwork which Licensee reasonably
requests. All artwork
3
4
relating to the Property and Trademarks, regardless of who created or
contributed to the works, shall be the sole and exclusive property of Licensor.
9. GOODWILL. Licensee recognizes the value of the goodwill associated with
the Property and Trademarks and acknowledges that each have acquired secondary
meaning. Licensee agrees, during the Term(s) and thereafter, never to attack the
rights of Licensor in such or the validity of this license. Licensee agrees that
its use of the Property and/or Trademarks inures to the benefit of Licensor and
that Licensee shall not acquire any rights in the Property or Trademarks.
10. TRADEMARK AND COPYRIGHT. (a) Licensor may obtain, at its own expense
and in its name, appropriate copyright and trademark protection for the Property
and/or Trademarks and Licensee agrees to cooperate with Licensor in all such
matters.
(b) Licensee agrees that it shall not at any time apply for any
registration of any copyright, trademark or any other designation which would
affect the ownership of the Property and/or Trademarks nor file any document
with any governmental authority to take any action which would affect the
ownership thereof; however, Licensee shall register as a registered
user/licensee, at Licensee's expense, in any country where registration of the
licensee of a trademark or copyright is required.
(c) Licensee agrees that it shall not at any time use or authorize the use
of any trademark, trade name or other designation identical with or
substantially similar to the Trademarks.
(d) Licensee agrees to assist Licensor in the enforcement of Licensor's
rights in the Property and/or Trademarks. With respect to any such claims and
suits, Licensor shall employ counsel of its own choosing and at its own expense
to direct the litigation and any settlement thereof. Licensor shall be entitled,
to receive and retain all amounts awarded as damages, profits or otherwise in
connection with such claims.
11. INDEMNIFICATION. Licensee agrees to defend, indemnify and hold
Licensor harmless against any claims, demands, causes of action and judgment
arising out of Licensees manufacture, sale, offering for sale, distribution,
promotion and/or advertising of Licensed Products. Licensor agrees to defend,
indemnify and hold Licensee harmless against any claims, demands, causes of
action and judgment arising out of any claim by a third party alleging a
violation of said claimant's copyrights or trademarks, provided and to the
extent that Licensee's utilization of the Licensed Products is in compliance
with the rights granted to Licensee herein.
12. INSURANCE. Licensee shall, throughout the Term, obtain and maintain at
its own expense standard product liability insurance, the form of which must be
acceptable to Licensor, naming Licensor as an additional named insured. Such
policy shall provide protection against all claims, demands and causes of action
arising out of any defects or failure to perform, alleged or otherwise, of the
Licensed Products or any use thereof. The amount of coverage shall be a minimum
of $1,000,000 for each claim and $3,000,000 in the aggregate with a deductible
not to exceed $5,000 for each single occurrence for bodily injury and/or
property damage. The policy shall provide for thirty (30) days notice to
Licensor from the insurer in the event of any modification or termination of
such coverage. Licensee shall furnish Licensor a certificate of insurance
evidencing same within thirty (30) days after execution of this Agreement but in
any event, prior to any manufacture and distribution of the Licensed Products.
13. EXPLOITATION BY LICENSEE. (a) Licensee shall commence manufacture,
distribution, and sale of the Licensed Products in commercially reasonable
quantities within six (6) months after the Effective Date and, thereafter, shall
continue to distribute and sell all of the Licensed Products throughout the
Territory on a continuous basis in a commercially reasonable
4
5
manner. Licensee shall spend a minimum of $15,000 during the Term on trade
promotion and point-of-sales materials according to a budget to be mutually
approved by Licensee and Licensor. Licensee shall provide a co-op advertising
fund to its clients in an amount no less than three percent (3%) of Net Sales.
Licensee shall additionally produce new and original sales materials no less
frequently than every twelve (12) months. Licensee shall also consult with
Licensor concerning possible updating of the Licensed Product line on an annual
basis. Any such updating and revisions shall be subject to the approval criteria
stated elsewhere in this Agreement.
(b) Any Property (Character), Trademark or Licensed Product which is not
diligently exploited at any time following the expiration of the initial twelve
(12) months after the Effective Date shall be deemed abandoned by Licensee, and
in such event the license for such Property, Trademark or Licensed Product shall
terminate and revert back to Licensor automatically. In the event of a dispute,
Licensee shall have the burden of establishing that Licensee was diligently
exploiting the Property, Trademark or Licensed Product as required herein.
14. PREMIUMS, PROMOTIONS AND SECONDS. (a) Licensor shall have the sole
right to license third parties to utilize any of the Licensed Products in
connection with premium, giveaway or promotional arrangements. For purposes of
this Agreement a "premium" is a product or a product combined with a service
which is sold or supplied in association with the promotion of another product
or service, or offered in association with the sales promotion activities of
retailers, wholesalers or manufacturers in association with incentive programs.
(b) Licensee shall not sell, distribute or use or permit any third party
to sell, distribute or use any Licensed Products which are damaged, defective,
seconds or otherwise fail to meet the specifications and/or quality control or
notice requirements of this Agreement.
15. TERMINATION. The following are in addition to the termination rights
provided elsewhere in this Agreement:
(a) Immediate Right of Termination. Licensor shall have the right to
immediately terminate this Agreement on written notice should Licensee:
i) Make, sell, offer for sale, use or distribute any Licensed
Product or Promotional or Packaging Material without having the
prior written approval of Licensor or continues to make, sell, offer
for sale, use or distribute such after receipt of notice from
Licensor withdrawing approval of same due to subsequent
non-compliance;
(ii) Fail, after receipt of written notice from Licensor to
immediately discontinue the distribution of sale of Licensed
Products or the use of any Promotional or Packaging Material which
does not contain the appropriate legal legend;
(iii) Subject to any voluntary or involuntary order of any
government agency involving the recall of any of the Licensed
Products;
(iv) Or its controlling shareholders, officers, directors or
employees take any actions in connection with the manufacture, sale,
distribution or advertising of the Licensed Products or the
Promotional and Packaging Material which damages or reflects
adversely upon Licensor, the Property and/or Trademarks;
(v) Breach any of the provisions of this Agreement relating to
the unauthorized assertion of rights in the Property or Trademarks;
5
6
(vi) Fail to make timely payment of Royalties when due or fail
to make timely submission of Royalty statements when due two or more
times during a twelve-month period or fail to pay the Guaranteed
Minimum Royalty; or
(vii) Breach any provision of this Agreement prohibiting
Licensee from directly or indirectly assigning, transferring,
sublicensing or other encumbering of this Agreement or any of its
rights or obligations hereunder.
(b) Right to Terminate on Notice. A party may terminate this
Agreement on thirty (30) days written notice to the other party, under any
of the following circumstances, provided that during the thirty (30) day
period, the defaulting party fails to cure the breach;
(i) Should Licensee fail to commence sale and distribution of
the Licensed Products in all countries in the Territory;
(ii) Should Licensee, after commencing to sell and distribute
Licensed Products, fail to continue to sell and distribute such in
commercially acceptable quantities in all countries in the Territory
for two consecutive Royalty Periods;
(iii) Should Licensee violate any of its obligations under
this Agreement;
(iv) Should Licensee file a petition in bankruptcy or be
adjudicated a bankrupt or insolvent, make an assignment for the
benefit of creditors, an arrangement pursuant to any bankruptcy law,
or if Licensee discontinues its business or if a receiver is
appointed for Licensee which is not discharged within thirty (30)
days thereafter;
(v) Should the other party commit a material breach of any
other provision of this Agreement which is not cured within thirty
(30) days after receiving notice from the non-breaching party; or
(vi) Should any Licensed Products be sold by Licensee at
prices which are clearly not competitive prices as such are
customarily charged by Licensee for similar products to unaffiliated
businesses.
16. EFFECT OF TERMINATION. (a) If this Agreement is terminated under
paragraph 15(a), no Licensed Products may be sold or distributed or any
Promotional or Packaging Material used without the prior expressed approval of
Licensor.
(b) Upon termination of this Agreement, notwithstanding anything to the
contrary herein, all Royalties on shipments made shall become immediately due
and payable.
(c) If this Agreement is terminated under provision other than paragraph
15(a), Licensed Products which are on hand or in process at the time the notice
of termination is received or at the time of the expiration of the Agreement, as
the case may be, may continue to be sold or distributed for a sixty (60) day
period, provided that all Royalties with respect to that period are paid and
that Licensor may itself use or license the use of the Property and/or
Trademarks in any manner.
(d) After termination of this Agreement, all rights hereunder shall
revert to Licensor who may license others to use the Property and/or Trademarks
in any way whatsoever. Thereafter, Licensee shall refrain from any further use
of the Property and/or Trademarks and turn over to Licensor all molds and other
materials which reproduce the Licensed Products or shall give Licensor
satisfactory evidence of their destruction, at Licensors sole option. Licensee
6
7
shall be responsible for any damages caused by the unauthorized use of such
molds or reproduction materials which are not turned over or destroyed.
(e) Licensee acknowledges that its failure to cease the manufacture, sale
or distribution of Licensed Products or any class or category thereof at the
time of termination or expiration will result in immediate and irreparable harm
to Licensor and to the rights of any subsequent licensee. Licensee acknowledges
that there is no adequate remedy at law for failure to cease the manufacture,
sale, or distribution and licensee agrees that in the event of such failure,
Licensor shall be entitled to equitable relief by way of injunctive relief and
such other relief as any court with jurisdiction may deem proper.
(f) Within thirty (30) days after termination or expiration of this
Agreement, Licensee shall provide Licensor with a statement indicating the
number and description of the Licensed Products which it had on hand or in the
process of manufacturing as of the expiration or termination. Licensor shall
have the option of conducting a physical inventory to ascertain or verify such.
In the event Licensee refuses to permit Licensor to conduct such physical
inventory, Licensee shall forfeit its rights hereunder to dispose of such
inventory.
17. FAN MAIL. Licensee agrees to include on its packaging of appropriate
Licensed Products, as determined by Licensor, the following message in prominent
position:
Write to your friends on "The Big Comfy Couch" at:
P.O. Box 15338, Beverly Hills, California 90209-1338.
18. PURCHASE OF LICENSED PRODUCTS. Licensor shall have the right to
purchase some or all of the Licensed Products from time to time, at such times
and in such quantities as Licensor desires.
(a) If Licensor desires to purchase Licensed Products for resale
through direct response, direct sales, personal appearances or other means
(other than to retailers or wholesalers to retailers), Licensee agrees to
sell such Licensed Products upon the most favorable terms and at the
lowest wholesale price offered by Licensee to any of its customers,
regardless of quantity requirements, less twenty-five percent (25%).
(b) If Licensor desires to purchase Licensed Products for
promotional purposes only (not for resale), Licensee agrees to sell such
Licensed Products at Licensee's cost plus ten percent (10%), with the
royalty owing to Licensor being waived for these purposes only.
19. NOTICES. All notices or payments required to be sent to either party
shall be in writing at the last known addresses of the parties. Any notice of
breach, default or termination shall be sent by certified mail, return receipt
requested.
20. MISCELLANEOUS. (a) This Agreement does not create a partnership or
joint venture and Licensee shall have no power to obligate or bind Licensor
whatsoever.
(b) This Agreement shall be governed by the law of the State of
California and any claims arising hereunder shall, at Licensor's election, be
maintained in Los Angeles, California.
(c) No waiver by either party of a breach or a default hereunder shall be
deemed a waiver of a subsequent breach or default.
(d) In the event that any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect, such shall not affect any other
provision and this Agreement shall
7
8
be interpreted and construed as if such provision, to the extent invalid,
illegal or unenforceable, had never been part of the Agreement.
(e) This Agreement represents the entire understanding between the parties
with respect to the subject matter and supersedes all previous representations,
understandings or agreements, written or oral, and cannot be modified except by
written instrument.
IN WITNESS WHEREOF, the parties execute this Agreement for the purposes
stated above.
HOLLYWOOD VENTURES CORPORATION
By: /s/ Richard Goldsmith
----------------------------------
(a duly authorized officer)
Name and Title: President
----------------------
(print)
Date: December 7, 1995
--------------------------------
THIRD QUARTER CORPORATION
By: /s/ Carl E. Voigt, IV
----------------------------------
(a duly authorized officer)
Name and Title: President
----------------------
(print)
Date: December 7, 1995
--------------------------------
8
9
SCHEDULE A
The PROPERTY is/are the following specific CHARACTERS associated with the
television series "The Big Comfy Couch": LOONETTE, MOLLY, MAJOR BEDHEAD, GRANNY
GARBANZO, AUNTIE MACASSER, DAD FOLEY, MOM FOLEY, ANDY FOLEY, FUZZY DUSTBUNNY,
WUZZY DUSTBUNNY, and SNICKLEFRITZ.
Note: All character names shall at all times be followed by the phrase:
from "The Big Comfy Couch"
SCHEDULE B
LIST OF TRADEMARKS: The Big Comfy Couch name and logo.
SCHEDULE C
LIST OF LICENSED PRODUCTS: Wooden inlay puzzles, paperboard inlay puzzles,
paperboard boxed puzzles, floor puzzles, and board games. In addition to the
general reservation of rights not expressly granted, Licensor expressly reserves
the right to license the above referenced products with electronics.
SCHEDULE D
LICENSED TERRITORY: The United States and Canada and their respective
territories and possessions.
HOLLYWOOD VENTURES CORPORATION
By: /s/ Richard Goldsmith
----------------------------------
THIRD QUARTER CORPORATION
By: /s/ Carl E. Voigt, IV
----------------------------------