SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the 26 Weeks Ended July 5, 1996 Commission File Number 0-05083
HYDE ATHLETIC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-1465840
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
Centennial Industrial Park, 13 Centennial Drive, Peabody, MA 01960
(Address of principal executive offices)
508-532-9000
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Class Outstanding as of August 12, 1996
Class A Common Stock-$.33 1/3 Par Value 2,702,227
Class B Common Stock-$.33 1/3 Par Value 3,520,773
---------
6,223,000
HYDE ATHLETIC INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of July 5, 1996
and January 5, 1996
Condensed Consolidated Statements of Income for the
thirteen weeks and twenty-six weeks ended
July 5, 1996 and June 30, 1995
Condensed Consolidated Statements of Stockholders'
Equity for the twenty-six weeks ended July 5, 1996
and June 30, 1995
Condensed Consolidated Statements of Cash Flows for the
twenty-six weeks ended July 5, 1996 and June 30, 1995
Notes to Condensed Consolidated Financial Statements -
July 5, 1996
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
Item 6. Exhibits and Reports on Form 8-K
Signature
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
<CAPTION>
July 5, January 5,
1996 1996
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,818,715 $ 11,668,316
Marketable securities 303,672 307,500
Accounts receivable 28,814,632 17,361,195
Inventories 23,125,192 26,831,600
Prepaid expenses and other current assets 3,139,177 3,021,479
------------ ------------
TOTAL CURRENT ASSETS 59,201,388 59,190,090
------------ ------------
PROPERTY, PLANT, AND EQUIPMENT, NET 9,058,676 8,122,937
------------ ------------
OTHER ASSETS
Investments in limited partnerships 753,433 753,433
Other assets 1,429,018 1,404,829
------------ ------------
TOTAL OTHER ASSETS 2,182,451 2,158,262
------------ ------------
TOTAL ASSETS $ 70,442,515 $ 69,471,289
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 4,125,194 $ 4,336,940
Accounts payable 5,154,149 5,055,967
Accrued expenses and other current liabilities 3,393,516 3,136,653
Current maturities of long-term debt 2,459,146 2,199,225
------------ ------------
TOTAL CURRENT LIABILITIES 15,132,005 14,728,785
------------ ------------
LONG-TERM DEBT 3,468,711 4,205,568
------------ ------------
DEFERRED INCOME TAXES 1,981,802 2,001,655
------------ ------------
MINORITY INTEREST 482,919 170,227
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, $.33 1/3 par value 2,138,514 2,138,514
Additional paid in capital 15,521,470 15,521,470
Retained earnings 33,064,029 32,210,867
Accumulated translation (163,182) (257,694)
------------- -------------
Total 50,560,831 49,613,157
Less: Unearned compensation 129,963 194,313
Treasury stock 1,053,790 1,053,790
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 49,377,078 48,365,054
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 70,442,515 $ 69,471,289
============ ============
See notes to consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995
(Unaudited)
<CAPTION>
13 Weeks 13 Weeks 26 Weeks 26 Weeks
Ended Ended Ended Ended
July 5, June 30, July 5, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 29,040,990 $ 25,413,737 $ 60,932,883 $ 55,651,638
Other income 367,593 859,868 617,247 986,089
-------------- -------------- -------------- --------------
Total revenue 29,408,583 26,273,605 61,550,130 56,637,727
-------------- -------------- -------------- --------------
Costs and expenses
Cost of sales 20,848,665 17,380,076 43,436,453 37,756,810
Selling, general and
administrative expenses 8,052,403 7,395,735 15,941,466 15,873,765
Interest expense 239,047 311,463 502,245 746,631
-------------- -------------- -------------- --------------
Total costs and expenses 29,140,115 25,087,274 59,880,164 54,377,206
-------------- -------------- -------------- --------------
Income before income taxes
and minority interest 268,468 1,186,331 1,669,966 2,260,521
Provision for income taxes 61,309 460,844 587,927 877,947
Minority interest in income (loss) of
consolidated subsidiaries 93,466 (113,550) 228,877 (85,402)
-------------- --------------- -------------- ---------------
Net income $ 113,693 $ 839,037 $ 853,162 $ 1,467,976
============== ============== ============== ==============
Per share amounts:
Net income $0.02 $0.13 $0.14 $0.23
============= ============== ============== ==============
Weighted average common shares
and equivalents outstanding 6,244,225 6,245,913 6,235,093 6,249,313
============== ============== ============== ==============
Cash dividends per share of
common stock $ 0 $ 0 $ 0 $ 0
============== ============== ============== ==============
See notes to consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995
(Unaudited)
<CAPTION> Additional
Common Stock Paid-In Retained
Class A Class B Capital Earnings
------- ------ ------ --------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ 901,342 $ 1,236,705 $ 15,592,805 $30,619,761
Issuance of 1,400 shares of
common stock, stock option
exercise 233 234 3,184 --
Cancellation of below market
options -- -- (74,519) --
Amortization of unearned
compensation -- -- -- --
Acquisition of 17,700 shares
of common stock, at cost -- -- -- --
Net income -- -- -- 1,467,976
Foreign currency translation
adjustments -- -- -- --
---------- ------------ ------------ -----------
Balance, June 30, 1995 $ 901,575 $ 1,236,939 $ 15,521,470 $32,087,737
========== ============ ============ ===========
Balance, January 6, 1996 $ 901,575 $ 1,236,939 $ 15,521,470 $32,210,867
Amortization of unearned
compensation -- -- -- --
Net income -- -- -- 853,162
Foreign currency translation
adjustments -- -- -- --
---------- ------------ ------------ -----------
Balance, July 5, 1996 $ 901,575 $ 1,236,939 $ 15,521,470 $33,064,029
========== ============ ============ ===========
Treasury Stock Unearned Accumulated Stockholders'
Shares Amount Compensation Translation Equity
------ ------ ------------ ---------- ------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 180,700 ($ 977,103) ($ 447,211) ($ 171,471) $ 46,754,828
Issuance of 1,400 shares of
common stock, stock option
exercise -- -- -- -- 3,651
Cancellation of below market
options -- -- 74,519 -- --
Amortization of unearned
compensation -- -- 82,379 -- 82,379
Acquisition of 17,700 shares
of common stock, at cost 17,700 (76,687) -- -- (76,687)
Net income -- -- -- -- 1,467,976
Foreign currency translation
adjustments -- -- -- (103,459) (103,459)
-------- ------------ ------------ --------------------------
Balance, June 30, 1995 198,400 ($ 1,053,790) ($ 290,313) ($ 274,930) $ 48,128,688
======== ========================== =========== ============
Balance, January 6, 1996 198,400 ($ 1,053,790) ($ 194,313) ($ 257,694) $ 48,365,054
Amortization of unearned
compensation -- -- 64,350 -- 64,350
Net income -- -- -- -- 853,162
Foreign currency translation
adjustments -- -- -- 94,512 94,512
-------- ------------ ------------ ------------ ------------
Balance, July 5, 1996 198,400 ($ 1,053,790) ($ 129,963) ($ 163,182) $ 49,377,078
======== ========================== =========================
See notes to condensed consolidated financial statements
</TABLE>
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<CAPTION>
July 5, June 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 853,162 $ 1,467,976
--------------- ---------------
Adjustments to reconcile net income to
net cash
Provided (used) by operating activities:
Depreciation and amortization 730,526 577,275
Deferred income tax benefit (134,175) (375,806)
Provision for bad debts and discounts 3,075,765 2,778,129
Minority interest in consolidated
subsidiaries income (loss) 228,877 (85,402)
Compensation from stock grants and
stock options 64,350 82,379
(Gain) loss on sale of equipment 4,372 (1,375)
Gain on sale of investment in limited
partnership -- (397,645)
Changes in operating assets and liabilities:
Decrease (increase) in assets:
Marketable securities 3,828 --
Accounts receivable (14,249,400) (1,030,190)
Inventories 3,832,894 2,235,890
Prepaid expenses and other current
assets (73,729) (964,996)
Increase (decrease) in liabilities:
Accounts payable (42,333) 19,707
Accrued expenses 593,720 (942,916)
--------------- ----------------
Total adjustments (5,965,305) 1,895,050
---------------- ---------------
Net cash provided (used) by operating activities (5,112,143) 3,363,026
---------------- ---------------
Cash flows from investing activities:
Purchases of property, plant and
equipment (373,375) (146,027)
Increase in deferred charges,
deposits and other (402,803) (51,123)
Proceeds from sale of investment in
limited partnership -- 1,335,289
Proceeds from sale of equipment 76,896 846
--------------- ---------------
Net cash provided (used) by investing activities (699,282) 1,138,985
---------------- ---------------
Cash flows from financing activities:
Net short-term borrowings (323,505) (177,511)
Repayment of long-term debt
and capital lease obligations (2,146,271) (2,695,918)
Proceeds from long-term borrowings 419,766 --
Payment of termination benefit payable -- (26,866)
Common stock repurchased -- (76,687)
Issuances of common stock, including
options -- 3,651
--------------- ---------------
Net cash used by financing activities (2,050,010) (2,973,331)
Effect of exchange rate changes on cash
and cash equivalents 11,834 33,682
--------------- ---------------
Net increase (decrease) in cash
and cash equivalents (7,849,601) 1,562,362
Cash and equivalents at beginning of
period 11,668,316 3,349,776
--------------- ---------------
Cash and equivalents at end of period $ 3,818,715 $ 4,912,138
=============== ===============
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Incomes taxes, net of refunds $ 405,113 $ 1,204,406
=============== ===============
Interest $ 488,313 $ 1,015,067
=============== ===============
Non-cash investing and financing activities:
Property purchased under capital leases $ 1,108,510 $ 98,103
=============== ===============
Sale of investment in limited partnership
Cash received, net of broker fees -- $ 1,335,289
Reduction in short-term debt, long-term
debt and accrued liabilities -- 4,055,691
--------------- ---------------
Total proceeds -- 5,390,980
Investment in limited partnership, net
of distributions -- 4,993,335
--------------- ---------------
Gain realized on sale -- $ 397,645
=============== ===============
Reconciliation of assets acquired and
liabilities assumed, business acquisitions
Assets acquired -- 62,777
Liabilities assumed -- 62,777
--------------- ---------------
Cash paid for business acquisitions -- 0
=============== ===============
See notes to condensed consolidated financial statements
</TABLE>
HYDE ATHLETIC INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 5, 1996
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles. In the opinion of Management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation have been included. Operating results for the twenty-six
weeks ended July 5, 1996 are not necessarily indicative of the results for the
entire year.
NOTE B - INVENTORIES
Inventories at July 5, 1996 and January 5, 1996, consisted of the following:
July 5, January 5,
1996 1996
---- ----
Finished Goods $ 19,195,569 $ 22,954,048
Work in Process 367,218 20,243
Raw Materials and Supplies 3,562,405 3,857,309
---------------- ----------------
$ 23,125,192 $ 26,831,600
================ ================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth net sales of the Company's products for the
thirteen weeks and twenty-six weeks ended July 5, 1996 and June 30, 1995:
THIRTEEN WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995
--------------------------------------------------
1996 % 1995 %
---- -- ---- --
Saucony $21,178,000 72.9% $18,554,000 73.1%
Brookfield 4,645,000 16.0% 5,115,000 20.1%
Other 3,218,000 11.1% 1,745,000 6.9%
----------- -------- ----------- --------
Total $29,041,000 100.0% $25,414,000 100.0%
=========== ====== =========== ======
TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995
-----------------------------------------------------
1996 % 1995 %
---- -- ---- --
Saucony $46,887,000 77.0% $41,846,000 75.3%
Brookfield 7,898,000 13.0% 9,839,000 17.7%
Other 6,148,000 10.0% 3,967,000 7.1%
----------- -------- ----------- --------
Total $60,933,000 100.0% $55,652,000 100.0%
=========== ====== =========== ======
Thirteen Weeks Ended July 5, 1996 Compared to Thirteen Weeks Ended June 30, 1995
- --------------------------------------------------------------------------------
The Company's net sales increased 14.3% to $29,041,000 in the thirteen weeks
ended July 5, 1996 from $25,414,000 in the thirteen weeks ended June 30, 1995.
Net sales of the Company's Saucony products increased 14% to $21,178,000 in the
thirteen weeks ended July 5, 1996 from $18,554,000 in the thirteen weeks ended
June 30, 1995, primarily due to increased unit shipment volume and, to a lesser
extent, higher selling prices. Saucony domestic net sales increased 23% to
$15,688,000 in the thirteen weeks ended July 5, 1996 from $12,778,000 in the
thirteen weeks ended June 30, 1995, due to a 21% increase in unit shipment
volume and higher selling prices of the Company's recently introduced products
in comparison with the Company's existing products. Saucony foreign net sales
decreased 5% to $5,490,000 in the thirteen weeks ended July 5, 1996 from
$5,776,000 in the thirteen weeks ended June 30, 1995, due primarily to lower
unit shipment volume and, to a lesser extent, lower selling prices.
Net sales of the Company's Brookfield products decreased 9% to $4,645,000 in the
thirteen weeks ended July 5, 1996 from $5,115,000 in the thirteen weeks ended
June 30, 1995. Brookfield domestic sales decreased 65% to $1,384,000 in the
thirteen weeks ended July 5, 1996 from $3,933,000 in the thirteen weeks ended
June 30, 1995, as a result of lower unit shipment volume and a shift in the
sales mix to lower-priced products. Brookfield foreign net sales increased 176%
to $3,261,000 in the thirteen week ended July 5, 1996 from $1,182,000 in the
thirteen weeks ended June 30, 1995, due primiarily to increased unit shipment
volume and, to a lesser extent, higher selling prices.
Net sales of other products increased 84% to $3,218,000 in the thirteen weeks
ended July 5, 1996 from $1,745,000 in the thirteen weeks ended June 30, 1995,
due primarily to additional sales from the Company's wholly-owned subsidiary,
Quintana Roo, Inc. ("Quintana Roo"), which was acquired by the Company in August
1995, and increased sales of non-corporate brands.
Other income decreased 57% to $368,000 in the thirteen weeks ended July 5, 1996
from $860,000 in the thirteen weeks ended June 30, 1995, due primarily to the
gain on the sale of the Company's investment in a limited partnership and the
receipt of the final payment under a litigation settlement, both of which were
recognized in the thirteen weeks ended June 30, 1995.
The Company's gross profit increased to $8,192,000 in the thirteen weeks ended
July 5, 1996 from $8,034,000 in the thirteen weeks ended June 30, 1995. The
Company's gross margin decreased to 28.2% in the thirteen weeks ended July 5,
1996 from 31.6% in the thirteen weeks ended June 30, 1995, reflecting decreases
in gross margins for both Saucony and Brookfield products. The gross margin
decrease for Saucony products resulted primarily from the shipment of a single,
slow-moving non-current model, and, to a lesser extent, from increased freight
costs. The gross margin decrease for Brookfield products resulted from a shift
in the sales mix to lower-margin domestic Brookfield products and increased
international sales, which yield lower margins than domestic sales.
Selling, general and administrative expenses increased to $8,052,000, or 27.7%
of net sales, in the thirteen weeks ended July 5, 1996 from $7,396,000, or 29.1%
of net sales, in the thirteen weeks ended June 30, 1995. Advertising and
promotion expenses increased $598,000 in the thirteen weeks ended July 5, 1996
due primarily to increased Saucony domestic television and print media
advertising and increased promotion in Europe. Selling expenses decreased
$135,000 in such period due to increased sales of Saucony and Brookfield
products, which are commissionable at lower rates. General and administrative
expenses increased $194,000 in the thirteen weeks ended July 5, 1996 due to the
acquisition of Quintana Roo and increased bad-debt expense.
Interest expense decreased 23% to $239,000 in the thirteen weeks ended July 5,
1996 from $311,000 in the thirteen weeks ended June 30, 1995, reflecting the
paydown of the Company's senior notes and debt reduction realized as a result of
the sale by the Company of its limited partnership investment.
The effective tax rate decreased to 22.8% in the thirteen weeks ended July 5,
1996 from 38.8% in the thirteen weeks ended June 30, 1995, primarily due to a
shift in the composition of foreign and domestic pre-tax profits.
Twenty-Six Weeks Ended July 5, 1996 Compared to Twenty-Six Weeks Ended June 30,
1995
The Company's net sales increased 9.5% to $60,933,000 in the twenty-six weeks
ended July 5, 1996 from $55,652,000 in the twenty-six weeks ended June 30, 1995.
Net sales of the Company's Saucony products increased 12% to $46,887,000 in the
twenty-six weeks ended July 5, 1996 from $41,846,000 in the twenty-six weeks
ended June 30, 1995, due primarily to increased unit shipment volume and, to a
lesser extent, higher selling prices. Saucony domestic net sales increased 18%
to $34,257,000 in the twenty-six weeks ended July 5, 1996 from $28,924,000 in
the twenty-six weeks ended June 30, 1995, due primarily to increased unit
shipment volume and, to a lesser extent, higher selling prices for new product
introductions. Saucony foreign net sales decreased 2% to $12,629,000 in the
twenty-six weeks ended July 5, 1996 from $12,922,000 in the twenty-six weeks
ended June 30, 1995 due to lower selling prices.
Net sales of the Company's Brookfield products decreased 20% to $7,898,000 in
the twenty-six weeks ended July 5, 1996 from $9,839,000 in the twenty-six weeks
ended June 30, 1995. Brookfield domestic sales decreased 59% to $3,265,000 in
the twenty-six weeks ended July 5, 1996 from $8,024,000 in the twenty-six
weeks ended June 30, 1995 as a result of lower unit shipment volume and a shift
in sales mix to lower-priced product. Brookfield foreign net sales increased
155% to $4,633,000 in the twenty-six weeks ended July 5, 1996 from $1,815,000 in
the twenty-six weeks ended June 30, 1995, reflecting increased unit shipment
volume and, due to a lesser extent, higher selling prices.
Net sales of other products increased 55% to $6,148,000 in the twenty-six weeks
ended July 5, 1996 from $3,967,000 in the twenty-six weeks ended June 30, 1995,
due primarily to the addition of Quintana Roo, increased sales at the Company's
outlet stores and increased sales of non-corporate brands.
Other income decreased 37% to $617,000 in the twenty-six weeks ended July 5,
1996 from $986,000 in the twenty-six weeks ended June 5, 1995, due primarily to
the gain on the sale of the Company's investment in a limited partnership and
the receipt of the final payment under a litigation settlement, both of which
were recognized in the twenty-six weeks ended June 30, 1995.
The Company's gross profit decreased to $17,496,000 in the twenty-six weeks
ended July 5, 1996 from $17,895,000 in the twenty-six weeks ended June 30, 1995.
The Company's gross margin decreased to 28.7% in the twenty-six weeks ended July
5, 1996 from 32.2% in the twenty-six weeks ended June 30, 1995, reflecting
decreases in gross margins for both Saucony and Brookfield products. The gross
margin decrease for Saucony products resulted from the shipment of a single
slow-moving non-current model, increased sales of lower-priced, lower-margin
footwear and, to a lesser extent, from increased freight costs. The decline in
Brookfield gross margin resulted from a shift in the sales mix to lower-margin
domestic Brookfield products and increased international sales, which yield
lower margins than domestic sales.
Selling, general and administrative expenses increased to $15,941,000, or 26.2%
of net sales, in the twenty-six weeks ended July 5, 1996 from $15,874,000, or
28.5% of net sales, in the twenty-six weeks ended June 30, 1995. Advertising
and promotion expenses increased $616,000 in the twenty-six weeks ended July 5,
1996 due primarily to increased Saucony domestic television and print media
advertising and increased account specific advertising and promotions. Selling
expenses decreased $434,000 in such period, due to increased sales of Saucony
and Brookfield products which are commissionable at lower rates. General and
administrative expenses decreased $114,000 in the twenty-six weeks ended July 5,
1996 due to reductions in professional fees and payroll.
Interest expense decreased 33% to $502,000 in the twenty-six weeks ended July 5,
1996 from $747,000 in the twenty-six weeks ended June 30, 1995, reflecting the
paydown of the Company's senior notes and debt reduction realized as a result of
the sale by the Company of its limited partnership investment.
The effective tax rate decreased to 35.2% in the twenty-six weeks ended July 5,
1996 from 38.8% in the twenty-six weeks ended June 30, 1995, primarily due to a
shift in the composition of foreign and domestic pre-tax profits.
LIQUIDITY AND CAPITAL RESOURCES
As of July 5, 1996, the Company's cash and cash equivalents totalled $3,819,000,
a decrease of $7,849,000 from January 5, 1996. The decrease was the result of
an increase in accounts receivable of $11,173,000, net of the provision for bad
debts and discounts of $3,076,000, offset in part by a decrease of $3,833,000 in
inventory. The increase in accounts receivable was due to increased net sales
of Saucony products during the twenty-six weeks ended July 5, 1996. The
Company's days sales outstanding for its accounts receivable increased to 89
days in the twenty-six weeks ended July 5, 1996 from 77 days in the twenty-six
weeks ended June 30, 1995 due to increased payment terms given to the Company's
customers. Inventories decreased due to improved inventory planning and the
Company's decision to reduce inventories of slower-moving past-season styles.
As a result, the Company's inventory turn ratio increased to 3.5 turns in the
twenty-six weeks ended July 5, 1996 from 2.5 turns in the twenty-six weeks ended
June 30, 1995.
For the twenty-six weeks ended July 5, 1996, the Company used $5,965,000 of net
cash to finance operating activities, expended $776,000 to acquire capital
assets and information technology, received $77,000 from the sale of capital
assets, reduced short-term borrowings by $324,000, expended $2,146,000 to reduce
long-term debt and borrowed $420,000 on a long-term basis, secured by the
Company's facility in St. Peters, Australia.
Principal factors, other than net income, accounts receivable and inventory
affecting the operating cash flows included an increase in prepaid expenses of
$74,000 (due to advance payments for operating expenses) and an increase in
accrued expenses of $594,000 (due primarily to higher selling and marketing
expenses associated with the higher sales level). The strengthening of the U.S.
dollar increased the value of cash and cash equivalents by $12,000.
On June 27, 1996, the Company acquired an information technology system at a
cost of $991,000 and in consideration therefore, entered into a long-term
capital lease. The lease provides for a bargain purchase option at the
conclusion of the lease term.
As of July 5, 1996, the Company had various commitments for capital
expenditures, including information technology. During the balance of fiscal
1996, the Company expects to spend approximately an additional $1,350,000 for
capital expenditures, primarily information technology. The Company plans to
finance such expenditures with a mix of internally generated funds and asset-
based lending. The recently acquired information system is expected to be
operational in fiscal 1997.
The liquidity of the Company is contingent upon a number of factors, principally
the Company's future operating results. Management believes that the Company's
current cash and cash equivalents, credit facilities and internally generated
funds are adequate to meet its working capital requirements and to fund its
capital investment needs and debt service payments.
INFLATION AND CURRENCY RISK
The effect of inflation on the Company's results of operations over the past
three years has been minimal. The impact of currency fluctuation on the
purchase of inventory by the Company, from foreign suppliers, has been minimal
as the transactions were denominated in U.S. dollars. The Company, however, is
subject to currency fluctuation risk, with respect to the operating results of
the Company's foreign subsidiaries and certain foreign currency denominated
payables. The Company has entered into certain forward foreign exchange
contracts to minimize the transaction currency risk.
FASB 123
The Financial Accounting Standards Board issued Financial Accounting Standards
No. 123 "Accounting for Stock Based Compensation" (SFAS No. 123) in October
1995. SFAS 123 establishes the financial accounting and reporting standards for
all stock-based compensation. SFAS 123 prescribes a fair value method of
accounting for stock options and other similar equity instruments and encourages
companies to adopt this accounting treatment for all stock-based compensation
plans. However, under SFAS 123, companies are permitted to continue to measure
compensation expense using the intrinsic value based method of accounting as
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
provided that pro forma disclosures are made of net income and earnings per
share had the fair value method been adopted.
SFAS 123 is effective for fiscal years commencing after December 15, 1995. As
permitted by SFAS 123, the Company intends to continue to account for employee
stock compensation expense under the precepts of APB Opinion No. 25. The only
effect of adopting SFAS 123 will be the added disclosure requirements which will
be incorporated into the 10-K filing for fiscal year 1996.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
At the 1996 Annual Meeting of Stockholders of the Company (the "Annual Meeting")
held on May 22, 1996, the stockholders of the Company elected James A. Buchanan,
John H. Fisher, Phyllis H. Fisher, Charles A. Gottesman, Jonathan O. Lee and
John J. Neuhauser as directors of the Company. The stockholders also voted to
ratify the appointment of Coopers & Lybrand L.L.P. as the Company's independent
auditors for the 1996 fiscal year.
The results of the voting on each of the matters presented to stockholders at
the Annual Meeting are set forth below:
Votes Votes Votes Absten- Broker
For Withheld Against tions Non-votes
1. Election of Directors
James A. Buchanan 2,411,809 105,270 N.A. N.A. N.A.
John H. Fisher 2,410,727 106,352 N.A. N.A. N.A.
Phyllis H. Fisher 2,409,737 107,342 N.A. N.A. N.A.
Charles A. Gottesman2,410,809 106,270 N.A. N.A. N.A.
Jonathan O. Lee 2,411,809 105,270 N.A. N.A. N.A.
John J. Neuhauser 2,411,809 105,270 N.A. N.A. N.A.
2. Ratification of Independent
Auditors 2,432,259 N.A. 83,580 1,240 N.A.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1* - License Agreement, dated April 1, 1996, between Disney
Enterprises, Inc. and Brookfield Athletic Co., Inc.
10.2* - License Agreement, effective as of January 1, 1997, between
Mattel, Inc. and Brookfield Athletic Co., Inc.
11 - Computation of Earnings Per Share
27 - Financial Data Schedule
*Confidential treatment requested as to certain portions of such document.
b. Reports on Form 8-K.
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HYDE ATHLETIC INDUSTRIES, INC.
Date: August 16, 1996 By: /s/Charles A. Gottesman
-----------------------
Charles A. Gottesman
Executive Vice President and
Chief Operating Officer
(Duly authorized officer and
principal financial officer)
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
April 1, 1996
Brookfield Athletic Company, Inc.
13 Centennial Drive
Peabody, MA 01961
RE: DISNEY'S 101 DALMATIAN - LIVE ACTION
Dear Sirs/Mesdames:
We, Disney Enterprises, Inc., hereby agree with you, the licensee identified
above, as follows:
1. MEANING OF TERMS As used in this license agreement ("Agreement"):
A. "Licensed Material" means the graphic representations of the
following:
Designated characters of the live action version of DISNEY'S 101
DALMATIANS, but only such characters and depictions of such
characters as may be designated by us;
and designated still scenes from the motion picture identified in
Subparagraph 1.B. hereafter.
B. "Trademarks" means "Walt Disney", "Disney", the representations of
Licensed Material included in Subparagraph 1.A above, and the logo of
the following motion picture in which Licensed Material included in
Subparagraph 1.A above appears:
DISNEY'S 101 DALMATIANS
C. "Articles" means the following items on or in connection with which
the Licensed Material and/or the Trademarks are reproduced or used,
and includes each and every stock keeping unit ("SKU") of each
Article:
(1) Molded in-line roller skates
(2) Adjustable in-line roller skates
(3) Traditional booted upper roller skates
(4) Adjustable roller skates
(5) Elbow pads (to be identified and sold only as roller skate
accessories)
(6) Knee pads (to be identified and sold only as roller skate
accessories)
(7) Wrist guards (to be identified and sold only as roller skate
accessories)
(8) Skate bags (to be identified and sold only as roller skate
accessories)
(9) Skate gloves (to be identified and sold only as roller skate
accessories)
D. "Minimum Per Article Royalty" means for each Article identified herein
which is sold the sum indicated herein: *****
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
E. "Principal Term" means the period commencing ***** and ending *****
F. "Territory" means the United States, United States PX's wherever
located, and United States territories and possessions, excluding
Puerto Rico, Guam, Commonwealth of Northern Mariana Islands and Palau.
However, if sales are made to chain stores in the United States which
have stores in Puerto Rico, such chain stores may supply Articles to
such stores in Puerto Rico.
G. "Royalties" means a royalty in the amounts set forth below in
Subparagraphs 1.G.(1)(a), (b), and (c) and Royalties shall be further
governed by the provisions contained in Subparagraphs 1.G.(2)-(6).
(1) (a) ***** of your Net Invoiced Billings to authorized customers
for Articles shipped by you from a location in the Territory
for delivery to a customer located in the Territory ("F.O.B.
In Sales"); or
(b) ***** of your Net Invoiced Billings to authorized customers
when your customer located in the Territory takes title to
the Articles outside the Territory and/or bears the risk of
loss of Articles manufactured and shipped to the customer
from outside the Territory ("F.O.B. Out Sales"); or
(c) if a Minimum per Article Royalty has been specified in
Subparagraph 1.D. above, and it would result in a higher
royalty to be paid for the Articles, you agree to pay the
higher royalty amount.
(2) The sums which we are paid as Royalties on any sales to your
Affiliates shall be no less than the sums paid on sales to
customers not affiliated with 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. However, sales of Articles to our
Affiliates outside the Territory shall bear a Royalty at the rate
for F.O.B. In Sales.
(4) No Royalties are payable on the mere manufacture of Articles.
(5) The full Royalty percentage shall be payable on close-out or
other deep discount sales of Articles, including sales to
employees.
(6) Royalties reported on sales of Articles which have been returned
to 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 issues. Unused credits may be
carried forward, but in no event shall you be entitled to a
refund of Royalties.
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
H. "Net Invoiced Billings" means 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, received in payment for the Articles,
whether received by you or any Affiliate of yours, except as
provided in Subparagraph 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 invoices, and taxes on the
sale.
I. "Allowable Deductions" means the following:
(1) volume discounts, and other discounts from the invoice price (or
post-invoice credits) unilaterally imposed in the regular course
of business by your customers, so long as you document such
discounts (or credits) to our satisfaction. In the event a
documented unilateral discount (or credit) is taken with respect
to combined sales of Articles and other products not licensed by
us, and you cannot document the portion of the discount (or
credit) applicable to the Articles, you may apply on a pro rata
portion of the discount (or credit) to the Articles.
(2) The following are not Allowable Deductions, whether granted on
sales invoices or unilaterally imposed as discounts or as post-
invoice credits: cash discounts granted as terms of payment;
early payment discounts; allowances or discounts relating to
advertising; mark down allowances; new store 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 the sell-off period, if granted.
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):
***** payable upon your signing of this Agreement for the Principal
Term.
L. "Guarantee" means the following sum(s) which you guarantee to pay as
minimum Royalties on your cumulative sales in the following period(s):
***** for the Principal Term.
M. "Samples" means twelve (12) samples of each SKU of each Article, from
the first production run of each supplier of each SKU of each Article.
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
N. "Promotion Commitment" means the following sum(s) which you agree to
spend in the following way(s): *****
O. "Marketing Date" means the following date(s) by which the following
Article(s) shall be available for purchase by the public at the retail
outlets authorized pursuant to Subparagraph 2.A.:
By December 1, 1996, but no earlier than October 1, 1996, for all
Articles.
P. "Affiliate" means, with regard to you, any corporation or other entity
which directly or indirectly controls, is controlled by, or is under
common control with you; with regard to us, "Affiliate" means any
corporation or other entity which directly or indirectly controls, is
controlled by, or is under common control with us. "Control" of an
entity shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies of such
entity, whether through ownership of voting securities, by contract or
otherwise.
2. RIGHTS GRANTED
A. In consideration for your promise to pay and your payment of all
Royalties, Advances and Guarantees required hereunder, we grant you
the non-exclusive right, during the Principal Term, and only within
the Territory, to reproduce the Licensed Material only on or in
connection with the Articles, to use such Trademarks and uses thereof
as may be approved when each SKU of the Articles is approved and only
on or in connection with the Articles, and to manufacture, distribute
for sale and sell the Articles (other than by direct marketing
methods, which includes but is not limited to, computer on-line
advertising or selling, direct mail and door-to-door solicitation).
You will sell the Articles only to the following retailers in the
Territory for resale to the public in the Territory, or to wholesalers
in the Territory for resale only to the following retailers: (1) mass
market retailers (including such retailers as Target, Toys R Us,
WalMart, Kmart), (2) mid-tier department stores (including such
retailers as J.C. Penney and Kohl's), (3) value-oriented department
stores (including such retailers as Sears, Mervyn's and Montgomery
Ward), (4) value-oriented specialty stores (including such retailers
as Kids R Us and Baby Superstores), and (5) sporting goods stores.
You will not sell the Articles to other retailers or other
wholesalers. In addition, you may not sell the Articles to retailers
that sell the Articles on a duty-free basis, or to wholesalers for
resale to such retailers, unless such retailer or wholesaler has a
then-current license agreement with us or an Affiliate of ours
permitting it to make such duty-free sales. If there is a question as
to whether a particular customer falls within any of the categories
specified above, our determination shall be binding. In addition,
since the Articles identified in Subparagraph 1.C. as Articles Numbers
5, 6, 7, 8 and 9 are designed for use only in conjunction with the
Articles identified as Articles Numbers 1,2, 3 and 4 and not in
connection with other sports equipment or athletic activities, you
agree that you will sell the Articles identified in Subparagraph 1.C
as Articles Numbers 5, 6, 7, 8 and 9 only as part of an order which
includes Articles identified as Articles Numbers 1, 2, 3 and 4.
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, you may solicit
orders by mail from those wholesalers or retailers authorized pursuant
to Subparagraph 2.A. above, and you may sell to such authorized
retailers which sell predominantly at retail, but which include the
Articles in their mail order catalogs, or otherwise sell Articles by
direct marketing methods as well as at retail. 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 to your accounts or other persons for purpose of promoting
Article sales, except for minor quantities or samples which are not
for onward distribution.
D. Nothing contained herein shall preclude you from selling Articles to
us or to any Affiliate 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 approved Trademarks, only within the Territory, during the
Principal Term, on containers, packaging and display material for the
Articles, and in advertising for the Articles.
F. Nothing contained in this 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 reasonable 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.
C. In no event shall Royalties accruing by reason of any sales to us or
an Affiliate 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,"
or upon termination if the Agreement is terminated prior to the end of
the Principal Term, 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
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 concepts, all preliminary and proposed final artwork, and
all three-dimensional models which are to appear on or in any and all
SKU's of the Article. Thereafter, you shall submit to us for our
written approval a pre-production sample of each SKU 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 SKU of each
Article on or in connection with which the Licensed Material is used.
You acknowledge that we may not approve concepts or artwork submitted
near the end of the Principal Term. Any pre-production approval we
may give will not constitute or imply a representation or belief by us
that such materials comply with any applicable laws, rules,
regulations, voluntary industry standards, codes, or other obligations
(collectively referred to in this Agreement as "Laws").
B. Approval or disapproval shall lie solely in our discretion, and any
SKU of any Article not so approved in writing shall be deemed
unlicensed and shall not be manufactured or sold. If any unapproved
SKU of any Article is being sold, we may, together with other remedies
available to us, including but not limited to, immediate termination
of this Agreement, by written notice require such SKU of such Article
to be immediately withdrawn from the market. Any modification of any
SKU of an Article, including, but not limited to, change of materials,
color, design or size of the representation of Licensed Material must
be submitted in advance for our written approval as if it were a new
SKU of an Article. Approval of any SKU of an Article which uses
particular artwork does not imply approval of such artwork for use
with a different Article. The fact that artwork has been taken from a
Disney publication or a previously approved Article does not mean that
its use will necessarily be approved in connection with an Article
licensed hereunder.
C. If you submit for approval artwork from an article or book
manufactured or published by another licensee of ours or of any
Affiliate 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. You are responsible for the consistent quality and safety of the
Articles and their compliance with applicable Laws. 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.
F. The Articles are subject to any third party approvals we deem
necessary to obtain. We will act as the liaison with such third
parties during the approval process.
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
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 any SKU of 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 SKU of 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 twenty (20) days of our receipt of such
production sample we notify you to the contrary. Any approval of a
production sample attributable to us will not constitute or imply a
representation or belief by us that such production sample complies
with any applicable Laws.
B. You agree to make available at no charge such additional samples of
any or all SKUs 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, and to permit us to inspect your
manufacturing operations and testing records (and those of your third-
party manufacturers) for the Articles.
C. You acknowledge that we may disapprove any SKU of an Article or a
production run of any SKU 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. All SKUs of Articles being sold
must conform in all respects to the approved production sample. It is
understood that if in our reasonable judgment the quality of any SKU
of an Article originally approved has deteriorated in later production
runs, or if the SKU has otherwise been altered, we may, in addition to
other remedies available to us, by written notice require such SKU of
the Article to be immediately withdrawn from the market.
E. The rights granted hereunder do not permit the sale of "seconds" or
"irregulars". All Articles not meeting the standard of approved
samples shall be destroyed or all Licensed Material and Trademarks
shall be removed or obliterated therefrom.
F. You are responsible for the consistent quality and safety of the
Articles and their compliance with applicable Laws. 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 SKU of any Article approved by us under any
previous agreement between us pertaining to Licensed Material.
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 SKU 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 any SKU of 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 subject SKU has
been resubmitted to us with such changes and you have received our
written approval of the Article as modified. However, you may
continue to distribute your inventory of the previously approved
Articles until such inventory is exhausted (unless such Articles are
dangerously defective, as determined by us).
I. Upon our request, you agree to give us written notice of the first
ship date for each Article.
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, catalogs or advertising is prohibited. Our approval of any
containers, packaging, display material, promotional material,
catalogs or advertising under this Agreement will not constitute or
imply a representation or belief by us that such materials comply with
any applicable Laws. Whenever you shall prepare catalog sheets or
other 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.
C. We have designed character artwork and/or a brand name logo(s) to be
used by all licenses in connection with the packaging of all
merchandise using the Licensed Material, and, if applicable, on hang
tags and garment labels for such merchandise. We will supply you with
reproduction artwork thereof, and you agree to use such artwork and/or
logo(s) on the packaging of the Articles, and if applicable, on hang
tags and garment labels, which you will have printed and attached to
each Article at your cost. We recommend that you source the hang tags
and garment labels from our authorized manufacturer (if any) of pre-
approved hang tags and garment labels, the name of which will be
provided to you upon request. However, you may use another
manufacturer for the required hang tags and garment labels if the hang
tags and garment labels manufactured are of equivalent quality and are
approved by us in accordance with our usual approval process.
8. ARTWORK
You shall pay us, within thirty (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, subject to your prior written 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. Our approval of copy or storyboards for such
advertising will not constitute or imply a representation or belief by us
that such copy or storyboards comply with any applicable Laws. This
Agreement does not grant you any rights to use the Licensed Material in
animation. You may not use any animation or live action footage from the
motion picture from which the Licensed Material comes without our prior
written approval in each instance. 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 absolute
discretion, including without limitation for reasons of overexposure of the
Licensed Material.
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
A. Each Article and component thereof distributed hereunder shall be of
good quality and free of defects in design, materials and workmanship,
and shall comply with all applicable Laws, and such specifications, if
any, as may have been specified in connection with this Agreement
(e.g., Disney's Apparel Performance Specification Manual, if the
Articles are items of apparel),and shall conform to the Sample thereof
approved by us.
B. Without limiting the foregoing, you covenant on behalf of your own
company, and on behalf of all of your third-party manufacturers and
suppliers, as follows:
(1) You and they agree not to use child labor in the
manufacturing, packaging or distribution of Disney
merchandise. The term "child" refers to a person younger
than the age for completing compulsory education, but in no
case shall any child younger than fourteen (14) years of age
be employed in the manufacturing, packaging or distribution
of Disney merchandise.
(2) You and they agree to provide employees with a safe and
healthy workplace in compliance with all applicable Laws.
You and they agree to provide us with all information we may
request about manufacturing, packaging and distribution
facilities for the Articles.
(3) You and they agree only to employ persons whose presence is
voluntary. You and they agree not to use prison labor, or
to use corporal punishment or other forms of mental or
physical coercion as a form of discipline of employees.
(4) You and they agree to comply with all applicable wage and
hour Laws, including minimum wage, overtime, and maximum
hours. You and they agree to utilize fair employment
practices as defined by applicable Laws.
(5) You and they agree not to discriminate in hiring and
employment practices on grounds of race, religion, national
origin, political affiliation, sexual preference, or gender.
(6) You and they agree to comply with all applicable
environmental Laws.
(7) You and they agree that we may engage in activities such an
unannounced on-site inspections of manufacturing, packaging
and distribution facilities in order to monitor compliance
with applicable Laws.
C. Both before and after you put Articles on the market, you shall follow
reasonable and proper procedures for testing that Articles comply with
all applicable Laws, and shall permit our designees to inspect
testing, manufacturing and quality control records and procedures and
to test the Articles for compliance. You agree to promptly reimburse
us for the reasonable costs of such testing. You shall also give due
consideration to any recommendations of ours that Articles exceed the
requirements of applicable Laws. Articles not manufactured, packaged
or distributed in accordance with applicable Laws shall be deemed
unapproved, even if previously approved by 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. 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 consisting of or incorporating
drawings, paintings, animation cels, or sculptures of Licensed Material, or
other derivations, adaptations, compilations, collective works, variations
or names of Licensed Material, heretofore or hereafter created by or for
you or any Affiliate of yours. All such new materials shall be included in
the definition of "Licensed Material" under this Agreement. If any third
party makes or has made any contribution to the creation of any new
materials which are included in the definition of Licensed Material under
this Paragraph 12, you agree to obtain from such party a full assignment of
rights so that the foregoing assignment by you shall vest full rights to
such new materials in us. You further covenant that any such new materials
created by you or by any third party you have engaged are original to you
or such third party and do not violate the rights of any other person or
entity; this covenant regarding originality shall not extend to any
materials we supply to you, but does apply to all materials you or your
third party contractors may add thereto. The foregoing assignment to us of
material objects shall not include that portion of your displays, catalogs
or promotional material not containing Licensed Material, or the physical
items constituting the Articles, unless such items are in the shape of the
Licensed Material.
13. COPYRIGHT NOTICE
As a condition to the grant of rights hereunder, each Article and any other
matter containing Licensed Material shall bear a properly located
permanently affixed copyright notice in our name (e.g. "O 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 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, 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. 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 or licensed
properties with the Licensed Material or the Trademarks either on the
Articles or in their packaging, or, without our written permission, on
advertising, promotional or display materials. If you wish to use a
character which constitutes your trademark on the Articles or their
packaging, or otherwise in connection with the Articles, you agree to
obtain our prior written permission.
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 1.0., 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 in commercial quantities by the public at the retail
outlets authorized pursuant to Subparagraph 2.A. In any case in which such
sales have not taken place or when the Article is not then and thereafter
available for purchase in commercial quantities by the public, we may
either invoke our remedies under Paragraph 28, or withdraw such Article
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 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 or Trademarks, or any
trademark incorporating all or any part of a Trademark or of any
Licensed Material, on any business sign, business cards, stationery or
forms (except as licensed herein), or to use any Licensed Material or
Trademark as the name of your business or any division thereof, unless
otherwise agreed by us in writing.
C. Nothing contained herein shall prohibit you from using your own
trademarks on the Articles or your copyright notice on the Articles
when the Articles contain independent material which is your property.
Nothing contained herein is intended to give us any right to, and we
shall not use, any trademark, copyright or patent used by you in
connection with the Articles which is not derived or adapted from
Licensed Material, Trademarks, or other materials owned by us.
18. REGISTRATIONS
Except with our written consent, neither you nor any 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, Trademarks or
derivation 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 Affiliate 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, 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 immediately
payable to us.
B. You agree to give us prompt written notice of any unlicensed use by
third parties of Licensed Material 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 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 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 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; in any such action against an infringer, we agree to
reimburse you for reasonable expenses incurred at our request,
including reasonable attorney's fees if we have requested you to
retain separate counsel.
20. STATEMENTS AND PAYMENTS OF ROYALTIES
A. You agree to furnish to us by the 30th day after each Royalty Payment
Period full and accurate statements on statement forms we designate
for your use, showing all information requested by such forms,
including but not limited to, 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
statements. To the extent that any Royalties are not paid, you
authorize us to offset Royalties due against any sums which we or any
Affiliate of ours may owe to you or any 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. The statement forms we designate for your use may be changed from time
to time, and you agree to use the most current form we provide to you.
You agree to fully comply with all instructions supplied by us for
completing such forms.
C. In addition to the other information requested by the statement forms,
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 by SKU and character;
(4) sales of Articles outside the Territory pursuant to a
distribution permission (indicating the country involved);
(5) your sales of Articles as a supplier to any of our licensees or
our Affiliates' licensees for the Articles (which sales shall not
generate Royalties payable to us so long as such licensees are
reselling the Articles and paying us royalties on such resales);
(6) sales of Articles to us or any Affiliate of ours;
(7) sales of Articles to your or our employees;
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
(8) sales of Articles under any brand or program identified in
Subparagraph 1.B. hereinabove;
(9) sales of Articles to or for distribution through any mail order
catalogs approved under this Agreement.
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, including all Royalties and Advances,
shall be delivered to Disney Enterprises, Inc., P.O. Box 101947,
Atlanta, Georgia 30392. A copy of each statement must be sent to us
at 500 South Buena Vista Street, Burbank, California 91521-6771, to
the attention of the Contract Administrator, Consumer Products
Division. If you wish to send statements and payments by overnight
courier, please use the following address: Disney Enterprises, Inc.,
Wachovia South Metro Center, 3585 Atlanta Avenue, Hapeville, GA 30354,
Attention Peggy Morris, Reference Lock box 101947.
21. CONFIDENTIALITY
You represent and warrant that you did not disclose to any third party the
prospect of a license from us, and that you did not trade on the prospect
of a license from us, prior to full execution of this Agreement. you agree
to keep the terms and conditions of this Agreement confidential, and you
shall not disclose such terms and conditions to any third party without
obtaining our prior written consent. In the event you are required to
disclose this Agreement pursuant to federal securities laws, or any other
Laws, you agree to use best efforts to obtain confidential treatment of
this Agreement pursuant to the applicable rules regarding obtaining
confidential treatment. You agree to give us prior written notice of same
and to incorporate our comments into your request for confidential
treatment.
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 ***** per annum from
the due date (or the maximum permissible by law if less than *****).
23. AUDITS AND MAINTAINING RECORDS
A. You agree to keep accurate records of all transactions relating to
this Agreement and any prior agreement with us regarding the Licensed
Material, 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 of this Agreement.
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
B. 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 Affiliates if they are involved in activities which
are the subject of this Agreement. In particular, your invoices shall
identify the Articles separately from goods which are not licensed
hereunder. You acknowledge that we may furnish you with an audit
questionnaire, and you agree to fully and accurately complete such
questionnaire, and return it to us within the designated time. Our
use of an audit questionnaire shall not limit our ability to conduct
any on-site audit(s) as provided above.
C. If in an audit of your records it is determined that there is a short
fall of ***** 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.
D. If you have failed to keep adequate records for one or more Royalty
Payment Periods, we will assume that the Royalties owed to us for such
Royalty Payment Period(s) are equal to the highest Royalties owed to
us in a Royalty Payment Period for which you have kept adequate
records; if you have failed to keep adequate records for any Royalty
Payment Period, we will assume a reasonable amount of Royalties which
you will owe to us based on the records you have kept and other
reasonable assumptions we deem appropriate.
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, whether
the third party is located within or outside the United States, 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.
If we are prepared to grant permission, we will do so if you and each
of your manufacturers and any submanufacturers sign a
Consent/Manufacturer's Agreement in a form which we will furnish to
you and we receive all such agreements properly signed.
(A SAMPLE OF SAID AGREEMENT FORM IS AVAILABLE ON REQUEST)
B. 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.
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, demands, suits, judgments, losses, liabilities (including
settlements entered into in good faith with your consent, not to be
unreasonably withheld) and expenses of any nature (including
reasonable attorneys' fees) arising out of your activities under this
Agreement, including without limitation your negligent acts or
omissions, 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
your breach of any covenant contained in this Agreement, or their
failure or your failure to comply with applicable Laws. The parties
indemnified hereunder shall include Disney Enterprises, Inc. and its
parent, successors and 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, demands, suits, judgments, losses, liabilities (including
settlements entered into in good faith with our consent, not to be
unreasonably withheld) and expenses of any nature (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 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. We give no warranty or indemnity with respect to any liability or
expense arising from any claim that use of the Licensed Material or
the Trademarks on or in connection with the Articles hereunder or any
packaging, advertising or promotional material infringes on any
trademark right of any third party or otherwise constitutes unfair
competition by reason of any prior rights acquired by such third
party, other than rights acquired from 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, and
promotional and advertising material which are manufactured or created
hereunder, including any use made of the Licensed Material and the
Trademarks therewith, do not infringe such right of any third party,
and we shall not be liable to you if such infringement occurs.
E. You and we agree to give each other prompt written notice of any claim
or suit which may arise under the indemnity provisions set forth
above. Without limiting the foregoing, you agree to give us written
notice of any product liability claim made or suit filed with respect
to any Article, any investigations or directives regarding the
Articles issued by the Consumer Product Safety Commission ("CPSC") or
other federal, state or local consumer safety agency, and any notices
sent by you to, or received by you from, the CPSC or other consumer
safety agency regarding the Articles within seven (7) days of your
receipt or promulgation of the claim, suit, investigation, directive,
or notice.
26. INSURANCE
You shall maintain in full force and effect at all times while this
Agreement is in effect and for three years thereafter commercial
general liability insurance, including broad form coverage for
contractual liability, property damage, products liability and
personal injury liability (including bodily injury and death), waiving
subrogation, with minimum limits of no less than two million dollars
(US $2,000,000.00) per occurrence, and naming as additional insureds
those indemnified in Paragraph 25 hereof. You also agree to maintain
in full force and effect at all times while this Agreement is in
effect such Worker's Compensation Insurance as is required by
applicable law and Employer's Liability Insurance with minimum limits
of one million dollars (US $1,000,000.00) per occurrence. All
insurance shall be primary and not contributory. You shall deliver to
us a certificate or certificates of insurance evidencing satisfactory
coverage and indicating that we shall receive thirty (30) days
unrestricted prior written notice of cancellation, non-renewal or of
any material change in coverage. Your insurance shall be carried by
an insurer with a BEST Guide rating of B + VII or better. 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 a
date being specified in Subparagraph 1.0., 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. In the case of any
withdrawal under the preceding sentence, the Advances and Guarantees shall
be adjusted to correspond to the time remaining in the Principal Term, or
the number of Articles remaining under the Agreement, at the date of
withdrawal.
28. TERMINATION
Without prejudice to any other right or remedy available to us:
A. We shall have the right at any time to terminate this Agreement by
giving you written notice thereof, 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.
B. We shall have the right at any time to terminate this Agreement
immediately 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 Affiliate 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;
(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;
(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; and/or
(7) if you breach any covenant set forth in Paragraph 11 of this
Agreement.
29. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
A. Upon the expiration or termination of this Agreement, all rights
herein granted to 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 the Articles shall be manufactured during the
Principal Term in quantities consistent with anticipated demand
therefor so as not to result in an excessive inventory build-up
immediately prior to the end of the Principal Term. 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 Style Guides, 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 or Trademarks, and that,
except as hereinafter provided, you will cease selling Articles. Any
unauthorized distribution of Articles after the expiration or
termination of this Agreement shall constitute copyright infringement.
B. 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. 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, upon notice from us you shall have the right for a limited
period of three (3) calendar months from such expiration or earlier
termination date to sell off and deliver such Articles as authorized
under Subparagraph 2.A. 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 the
Guarantee.
C. In recognition of our interest in maintaining a stable and viable
market for the Articles during and after the Principal Term and any
sell-off period, you agree to refrain from "dumping" the Articles in
the market during any sell-off period granted to you. "Dumping" shall
mean the distribution of product at volume levels significantly above
your prior sales practices with respect to the Articles, and at price
levels so far below your prior sales practices with respect to the
Articles as to disparage the Articles; provided, however, that nothing
contained herein shall be deemed to restrict your ability to set
product prices at your discretion.
D. 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 and Trademarks removed or
obliterated therefrom.
E. If we supply you with forms regarding compliance with this Paragraph
29, you agree to complete, execute and return such forms to us
expeditiously.
F. Notwithstanding any provision to the contrary, in the case of
termination under Paragraph 28.B. (5) or (6), in order to protect the
value of the Articles and to avoid any disparagement of the Articles
which could occur as a result of the circumstances of termination, we
shall have the option, in our absolute discretion, to purchase any or
all unsold Articles in your inventory on the termination date at 20%
over your cost of goods for such Articles (not including overhead).
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 beach hereof.
31. PURCHASE OF ARTICLES BY US
If we wish to purchase Articles, you agree to sell such Articles to us or
any Affiliate of ours at as low a price as your 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, to be
granted or withheld in our absolute discretion. Any attempted
assignment, sub-license, transfer, encumbrance or other disposal
without such consent shall be void and shall constitute a material
default and breach of this Agreement. "Transfer" within the meaning of
this Paragraph 32 shall include any merger or consolidation involving
your company or your parent (if any); any sale or consolidation
involving your company or your parent (if any); any sale or transfer
of all or substantially all of your (or your parent) 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 (or your parent) company
(or, if your company is a partnership, thirty-three and one-third
percent (33-1/3%) or more of the profit and loss participation in your
company, or the occurrence of any of the foregoing with respect to any
general partner of your company).
B. You agree to provide us with at least two (2) weeks prior written
notice of any desired assignment of this Agreement or other transfer
as defined in Subparagraph 32.A. Our consent (if given) to any
assignment of this Agreement or other transfer as defined in
Subparagraph 32.A. shall be subject to such terms and conditions as we
deem appropriate, including but not limited to, payment of a transfer.
The amount of the transfer fee shall be determined by us based upon
the circumstances of the particular assignment or transfer, taking
into account such factors as the estimated value of the license being
assigned or otherwise transferred; the risk of business interruption
or loss of quality, production or control we may suffer as a result of
the assignment or other transfer; the identity, reputation,
creditworthiness, financial condition and business capabilities of the
proposed assignee or transferee; and our internal costs related to the
assignment or other transfer; provided, however, in no event shall the
transfer fee be less than $100,000.00. The foregoing transfer fee
shall not apply if this Agreement is assigned to one of your
Affiliates as part of a corporate reorganization involving some or all
of the entities existing in your corporate structure when this
Agreement is signed; provided, whoever, that you must give us written
notice of such assignment and a description of the reorganization. If
you have more than one merchandise license agreement with us for the
Territory, and an event occurs which would trigger the transfer fee
provisions of this Paragraph 32, you need only pay to us one transfer
fee, determined by us as set forth above. The provisions of this
Subparagraph 32.B. shall supersede any conflicting provisions on this
subject in any merchandise license agreement previously entered into
between you and us.
C. Notwithstanding Subparagraphs 32.A. and B., you may, upon written
notice to us, unless we have objected within thirty (30) days of
receipt of such notice, sublicense your rights hereunder to your
Affiliates. 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 all other
provisions hereof and act in accordance with your obligations
hereunder. Any involvement of an 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, or any other relationship than that of
licensor and licensee.
34. CONSTRUCTION
The language of all parts of this Agreement shall in all cases be construed
as a whole, according to its fair meaning and not strictly for or against
any of the parties. Headings of paragraphs herein are for convenience of
reference only and are without substantive significance.
35. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT
Except as otherwise provided herein, this Agreement can only be extended or
modified by a writing signed by both parties.
36. NOTICES
All notices which either party is required or may desire to serve upon the
other party shall be in writing, addressed to the party to be served at the
address set forth on page 1 of this Agreement, and may be served personally
or by deposing the same addressed as herein provided (unless and until
otherwise notified), postage prepaid, in the United States mail. Such
notice shall be deemed served upon personal delivery or upon the date of
mailing; provided, however, that 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 or contemporaneous agreement and any oral or written
communications between us.
39. CHOICE OF LAW AND FORUM
This Agreement shall be deemed to be entered into in California and shall
be governed and interpreted according to the laws of the State of
California. Any legal actions pertaining to this Agreement shall be
commenced within the State of California and within either Los Angeles or
Orange Counties. The prevailing party shall be entitled to recover
reasonable attorney's fees and costs incurred therein.
40. EQUITABLE RELIEF
You acknowledge that we will have no adequate remedy at law if you continue
to manufacture, sell, advertise, promote or distribute the Articles upon
the expiration or termination of this Agreement. You acknowledge and agree
that, in addition to any and all other remedies available to us, we shall
have the right to have any such activity by you restrained by equitable
relief, including, but not limited to, a temporary restraining order, a
preliminary injunction, a permanent injunction, or such other alternative
relief as may be appropriate, without the necessity of our posting any
bond.
41. GOODWILL
You acknowledge that the rights and powers retained by us hereunder are
necessary to protect our copyrights and property rights, and, specifically,
to conserve the goodwill and good name of our products and company, and the
name "Disney", and therefore you agree that you will not allow the same to
become involved in matters which will, or could, detract from or impugn the
public acceptance and popularity thereof, or impair their legal status.
42. POWER TO SIGN
The parties warrant and represent that their respective representatives
signing this Agreement have full power and proper authority to sign this
Agreement and to bind the parties.
43. SURVIVAL OF OBLIGATIONS
The respective obligations of the parties under this Agreement, which by
their nature would continue beyond the termination, cancellation or
expiration of this Agreement, including but not limited to indemnification,
insurance, payment of Royalties, and Paragraph 29, shall survive
termination, cancellation or expiration of this Agreement.
Please sign below under the word "Agreed". When signed by both parties this
shall constitute an agreement between us.
DISNEY ENTERPRISES, INC.
By: /s/ Steve Cipolla
Title: Vice President
Date: 5/1/96
AGREED:
BROOKFIELD ATHLETIC COMPANY, INC.
By: /s/ James A. Buchanan
Title: President
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
L I C E N S E A G R E E M E N T
050896DR03
THIS AGREEMENT is hereby made effective as of January 1, 1997 ("Effective
Date") between MATTEL, INC. ("Licensor"), a Delaware corporation, having its
principal place of business in El Segundo, California, U.S.A and the party
identified as "Licensee" in Paragraph A below (hereinafter the "Agreement").
R E C I T A L S
WHEREAS, Licensor represents and acknowledges that it:
1) owns or has acquired the rights to the property identified under
Paragraph B below, which rights, to the extent such rights are recognized in the
Territory (as defined below) include, copyrights, trademarks and other rights in
the design, style, character, likeness, and appearance of the material,
packaging, and accessories related thereto (the "Property"), and
2) is willing to grant a license to Licensee in accordance with the terms
and conditions set forth herein;
WHEREAS, Licensee represents and acknowledges that it:
1) possesses experience and skill in the business of the manufacture,
sale and distribution of the product or products identified under Paragraph C
below ("Products"), and
2) desires to obtain a license to use the Property of Licensor in
connection with the manufacture, sale and distribution of the Products in
accordance with the terms and conditions set forth herein.
The provisions in this Recitals Section do not reflect the entire agreement
between the parties hereto. This section only serves as a summary of the
Agreement between the parties and should not be construed as a contract alone
but only as a part of this Agreement. References in this Recitals Section to the
sections of this Agreement are not intended to be inclusive of all uses of the
defined term in this Agreement.
A. LICENSEE: BROOKFIELD ATHLETIC COMPANY, INC.
A Subsidiary of Hyde Athletic Industries, Inc.
Located at: 13 Centennial Drive, Peabody, MA 01961
A corporation of Massachusetts
B. PROPERTY: BARBIE. Excluded from the license granted to Licensee are
"NOSTALGIC BARBIE" and "CONTEMPORARY/COLLECTIBLE BARBIE", which Licensor
reserves and with respect to which Licensor has the full and exclusive right to
exploit and license others to exploit, notwithstanding the foregoing.
"NOSTALGIC BARBIE" refers to the depictions of the "BARBIE" doll as used
originally for the line, i.e., the early versions of the "BARBIE" doll,
particularly for the 1959-1975 era and accompanying "KEN", "MIDGE", and "ALAN"
dolls. "CONTEMPORARY/COLLECTIBLE BARBIE" refers to high-end collectible,
specialty BARBIE dolls, such as BARBIE dolls currently depicted in Licensor's
Timeless CreationsR catalog.
C. PRODUCTS is defined as: See attached Exhibit C.
D. TERRITORY is defined as: United States, its territories and possessions.
E. This License is:
( ) exclusive as to all Products (1.2)
( ) non-exclusive as to all Products
(X) other as follows: Exclusive as to all Products except as indicated on
the Product List in all approved Channels of Distribution, except Direct Mail
(Catalog), Warehouse Club and Internet which shall be non-exclusive as to all
Products.
F. MANUFACTURER'S AGREEMENT Attach Exhibit A (Manufacturer's Agreement) for
each manufacturing source (i.e. plant), including each subcontractor. In
addition, the form is to be submitted for each new manufacturing source during
the term of this Agreement.
G. Channels of Distribution are defined as:
(X) Mass Market (e.g. Wal-Mart, Target, Kmart)
( ) Gifts
(X) Specialty
(X) Mid-Tier (e.g. Mervyns, Sears, J.C. Penney)
( ) Direct Mail (All)
(X) Direct Mail (Catalog only)
( ) Direct Mail (Excluding Catalog)
( ) Department Store (e.g. Macy's Bloomingdale's)
( ) Supermarket
( ) Book Club
( ) Stationery
( ) Drug Store
(X) Warehouse Club (e.g. Costco-Price Club, Sam's Club)
( ) Duty-Free Shops
(X) Internet
( ) Interactive Shopping (e.g.: Television Home Shopping)
( ) Other Special Market as follows: N.A.
"Confidential material omitted and filed separately with the Securities and
Exchange Commission. Asterisk denotes such omission."
H. ENDING DATE is defined as: ***** (3.1)
MARKETING DATE is defined as: In market, which shall be the date(s) by
which the Products shall be available for purchase by the public at retail
outlets pursuant to Section 6.2.
I. ROYALTY RATE is defined as: ***** (4.1)
ACCESSORIES *****
F.O.B. ROYALTY RATE: *****
ACCESSORIES ***** (4.1)
J. ADVANCE GUARANTEED ROYALTY is defined as: ***** (4.1, 4.2)
K. MINIMUM GUARANTEED ROYALTY is defined as: ***** (4.1, 4.2)
L. MANDATORY MINIMUM ADVERTISING EXPENDITURE is defined as actual media
expenditures for advertising of the Products by the Licensee in the following
media and time periods:
Type of Media: (N/A) Print to Consumers
(N/A) Trade Print
(N/A) Trade Co-Op
(N/A) Television
(N/A) Direct Mail
(N/A) Other as follows:
Advertising Time Period: N/A
Minimum Amount Expended: N/A
M. Periodic Statements are due thirty (30) days after the close of each
calendar quarter sent with royalties to:
Attn: BARBIE Consumer Products, M1-1005
Mattel, Inc.
333 Continental Boulevard
El Segundo, California 90245
N. INSURANCE: Licensee shall maintain comprehensive liability insurance,
including product and contractual liability insurance in an amount of not less
than Two Million Dollars ($2,000,000.00), naming Licensor as an additional
insured, during the term of this Agreement (11).
O. ADDITIONAL PROVISIONS: N/A
NOW, THEREFORE, based on the foregoing premises and the covenants contained
herein, the parties hereto agree as follows:
1. RIGHTS
1.1 In accordance with the terms set forth herein, Licensor consents to
use of the Property by Licensee in the Territory for the life of this Agreement
solely and only upon and in connection with the manufacture, sale and
distribution of Products through the Channels of Distribution. Licensee shall
have no right to use of Licensor's corporate name or logo at any time, except as
permitted under Section 7.2.
1.2 For Products that are specifically covered by an exclusive license,
as identified in Paragraph E of the Recitals Section, Licensor agrees not to
expressly grant a license to a third party of the right to use the Property on
or in connection with said Products through the Channels of Distribution in the
Territory; PROVIDED, HOWEVER that Licensor itself use or may permit the use by
third parties of Products that are distributed solely as premium items. All
Products not specifically designated as exclusive in Paragraph E of the Recitals
Section are considered non-exclusive and, therefore, Licensor is free to license
third parties to use the Property on or in connection with the Products through
the Channels of Distribution in the Territory. Regardless of exclusivity
provisions contained herein, distribution through FAO Schwarz stores and
catalogs if applicable hereto remain non-exclusive. Licensor reserves and
retains the full right to use the Property on or in connection with any and all
Products through the Channels of Distribution in the Territory at all times. In
the event of any possible conflict in the definition of Products in this
Agreement and with the corresponding definition in any other license agreement
to which Licensor is a party, Licensor reserves the right to interpret the
language in such a manner as to resolve the conflict, and the Licensor's
decision in resolving any such conflict shall be final and binding upon the
Licensee.
1.3 Licensee agrees not to enter into any agreement relating to the
Property for commercial tie-ins or promotions with any party engaged in whole or
in part in the production of motion pictures or television shows, nor to sell
the Products for premium use or other use involving promotion of any third party
or other products or properties without the prior written consent of Licensor.
1.4 As an exception to the scope of the rights of Licensee under this
Section 1, Licensee does not have the right to display or sell the Products at
entertainment events and shows, excluding trade shows. Licensor reserves and has
the right to grant licenses to third parties to use the Property on and in
connection with the manufacture and/or sale of the Products for sale to members
of the audience at any show or other entertainment event, including but not
limited to stage and arena shows.
1.5 With respect to each vendor or other manufacturing source, Licensee
shall have the attached Manufacturer's Agreement executed prior to manufacture
of such Products and promptly provide a fully executed copy of any such
agreement(s) to Licensor. Licensee agrees to follow the same procedures for any
additional manufacturing source used during the term of this Agreement.
1.6 Licensee agrees to meet or exceed the Mandatory Minimum Advertising
Expenditure.
1.7 Licensee agrees to sell the Products, exclusive of required free
samples specified in Section 2.3 hereof, to Licensor at as low a price as the
Licensee sells similar quantities of the same to any third party.
1.8 To the extent that the Territory is included within the European
Economic Community ("EEC") and with respect to permitted activities of the
Licensee within the EEC, the following provisions shall apply:
(a) Notwithstanding anything to the contrary herein contained,
Licensor and Licensee agree that the rights granted herein and the restrictions
herein contained shall be subject to the laws of the Territory and the Treaty of
Rome (if applicable) and all rules, regulations, directives, laws and
legislation associated therewith as the same may be in force from time to time.
(b) Nothing in this Agreement shall be construed as preventing
Licensee from accepting bona fide unsolicited orders for the Product (a) for
sale otherwise than through Licensee's permitted Channels of Distribution within
the EEC, or (b) from customers or potential customers outside the Territory but
within the EEC.
(c) However, it is agreed that Licensee shall not establish an
office, advertise or otherwise actively seek customers for the Products outside
of the Territory or the permitted Channels of Distribution.
(d) If this Agreement is exclusive, it will not be an
infringement of Licensee's rights for Licensor to permit the sale in the
Territory or in the Channels of Distribution of Products made by licensees of
other territories in the EEC or other Channels of Distribution in the Territory.
2. CONTROL BY LICENSOR
2.1 Licensor shall have the right to control all uses of the Property
on or in connection with the Products, including but not limited to advertising,
and also have the right to control the nature and quality of the Products
associated with the Property.
2.2 Pursuant to this right of control, Licensor, through such agents or
representatives as it may designate, shall have free access to Licensee's
facilities, upon reasonable notice, at all times during business hours with the
right to full disclosure of all apparatus, methods, and materials used by
Licensee in the production of the Products and shall have the right to take
reasonable free samples of Licensee's Products and all of the materials used in
the manufacture thereof for the purpose of examination or testing. If requested
by Licensee, Licensor agrees to sign a non-disclosure agreement as necessary to
protect the secrecy of such apparatus, methods, and material.
2.3 At least one (1) representative copy or sample of all proposed
material using the Property (including the proposed Products, packaging,
advertising and all other material of any character whatsoever) together with a
description of the intended use of the material shall be submitted to Licensor
without cost for written approval prior to using the same. Licensee agrees not
to display or offer for sale to any third party any Products or sample thereof
using the Property without Licensor's prior written approval of such Products or
sample thereof. Licensor shall make every reasonable attempt to provide written
approval/disapproval of any copy or sample, submitted by Licensee for review, by
the end of fifteen (15) business days after actual receipt of such copy or
sample by Licensor. Failure by Licensor to provide written approval/disapproval
within the specified time period shall not be deemed approval of any copy or
sample. Failure by the Licensee to comply with the approval process identified
in this Section 2.3 is grounds for immediate termination by Licensor. The
copies, sample and description may be retained by Licensor at its option.
Licensee shall not manufacture, sell or distribute any Products or other
materials that depart from Licensor-approved samples in any material respect
without a separate submission of samples with respect to such modification and
separate written approval from the Licensor. Licensor shall not withdraw its
approval of the approved samples without good cause. Licensee shall thereafter
submit to Licensor's Licensing Department, without cost to Licensor, ten (10)
samples of finished Products, as approved, upon commencement of production and
sale, and annually thereafter. Licensor reserves the right to request additional
samples of the Products at no cost to the Licensor on a regular basis, but not
more frequently than quarterly, to verify compliance of the Products with the
provisions of this Agreement. Except where Licensor's request for samples is to
monitor compliance after a prior non-conformity, Licensee shall not be obligated
to provide more than twenty (20) samples of a Product on an annual basis without
charge to the Licensor.
2.4 Licensee agrees that the Products covered by this Agreement shall
be of high standard and of such style, appearance, and quality as to be adequate
and suited to its exploitation to the best advantage and to the protection and
enhancement of the Property and the good will pertaining thereto; that such
Products will be manufactured, advertised, sold and distributed in accordance
with all applicable laws; and that the policies of sale and distribution by
Licensee shall be of high standard and to the best advantage and shall in no
manner reflect adversely upon the good will of Licensor or the Property.
2.5 Licensee agrees that the Products shall equal or exceed all
industry and government standards established in respect of safety and fitness
for use. All applicable government standards of the Territory shall apply,
whether federal, state or local. If the Territory is the U.S. or is inclusive of
the U.S., such standards shall include, but not be limited to, the Consumer
Product Safety Act and all appropriate sections of the Code of Federal
Regulations, and to the extent applicable, the Products shall equal or exceed
the standards set forth in the Hazardous Substances Act, the Flammable Fabrics
Act, the Child Safety Protection Act and the Toy Manufacturers of America Safety
Standards as contained in ASTM F963 and comparable industry standards. Prior to
commencing shipment of each Products and on a regular basis thereafter but no
less frequently than annually, or as otherwise requested by Licensor, Licensee
agrees to provide to Licensor at Licensee's expense a certificate of an approved
independent testing laboratory certifying that the Products comply with such
standards and regulations. Each certificate that is provided must specifically
describe the Products that are covered by the certificate, including the
manufacturing source of the Products being tested. Products that are shipped
into more than one country must be certified separately with respect to the
applicable requirements of each such country. Additional certificates shall be
supplied with respect to any design or manufacturing change that may affect the
Product's compliance with applicable standards. If there is any disagreement
between Licensee and Licensor regarding compliance with safety standards, the
Licensor's decision shall be final and Licensee agrees to fully comply with such
decision.
2.6 Licensee agrees that it shall not contract with a third party
distributor for the marketing, distribution or sale of the Products without the
prior written consent of the Licensor.
3. TERM
3.1 The term of this Agreement will commence as of the Effective Date
and terminate automatically on the Ending Date, unless terminated sooner under
the other provisions of this Agreement.
3.2 Unless express renewal rights are granted herein, Licensee shall
have no right to renew this Agreement, regardless of its performance during the
term hereof. Further, Licensor shall not be required to give any notice to
Licensee of Licensor's intention not to extend the term of this Agreement. No
promise or expressed intention to renew this Agreement shall be binding upon the
Licensor unless stated in a written document, signed by the Licensor.
3.3 Nothing stated in this Agreement shall prevent the Licensor from
negotiating or entering into an agreement with any other party on or before the
expiration date of this Agreement, provided that no Products which are exclusive
under this Agreement shall be marketed or shipped under such other agreement
prior to the expiration date of this Agreement.
4. ROYALTIES
4.1 In consideration for the license granted herein, Licensee agrees to
pay royalties to Licensor. Royalties will be calculated by applying the Royalty
Rate to the "Gross Sales" of all Products sold or otherwise disposed of by
Licensee under this Agreement except that, in the event Licensee sells or
otherwise disposes of Products on an F.O.B. place of manufacture outside of the
Territory basis, the F.O.B. Royalty Rate shall be applied to the "Gross Sales"
of such Products. "Gross Sales" herein employed shall mean the gross sales
billed by Licensee less credit notes for accepted returns not to exceed five
percent (5%) of gross amount invoiced and sales and excise taxes separately
stated, but no deduction shall be made for cash or other discounts or
uncollectible accounts whether or not stated on invoice. No other costs incurred
in the manufacture, sale, distribution, or marketing of the Products shall be
deducted from gross sales in determining the royalty payable by Licensee. For
purposes of this Agreement, Products shall be considered sold on the date of
shipment or the date that the shipment is invoiced by the Licensee, whichever is
earlier.
4.2 Licensee agrees to pay to Licensor the non-refundable Advance
Guaranteed Royalty at the time of execution of this Agreement. Licensee may
offset the Advance Guaranteed Royalty against royalties payable under Section
4.1 as they become due. Payment of the Advance Guaranteed Royalty by Licensee is
a condition precedent to Licensee's right to exercise any rights hereunder, and
Licensee's failure to promptly tender such payment shall entitle Licensor to
unilaterally and immediately rescind this Agreement.
4.3 If the Minimum Guaranteed Royalty is not otherwise paid pursuant to
Section 4.1 hereof, the balance of said Minimum Guaranteed Royalty shall be paid
to Licensor with Licensee's final quarterly royalty payment for the applicable
year or period. Licensee's failure to achieve sales of the Products for the
applicable year or period that will cause Licensor to earn royalties equal to or
greater than the Minimum Guaranteed Royalty shall give Licensor the right to
terminate this Agreement, which right shall be exercisable within sixty (60)
days after Licensor's receipt of the final royalty report for such year or
period.
4.4 If Licensee does not meet or exceed the Mandatory Minimum
Advertising Expenditure, Licensee shall pay to Licensor, within thirty (30) days
after the earlier of (a) the Ending Date or (b) the date of termination of this
Agreement, the difference between said Minimum Amount required to be expended
under Paragraph L of the Recitals Section and the actual amount expended by
Licensee.
4.5 Royalties shall be paid to Licensor on any Products conveyed for
any purpose whatsoever by Licensee to a third party free of charge or for which
only nominal consideration was paid, including samples (other than those samples
referred to in Section 2.3 hereof, and other than sales samples, not to exceed
five percent (5%) of total production). The royalty on such Products shall be
calculated by applying the Royalty Rate or F.O.B. Royalty Rate, whichever is
higher, to the customary Gross Sales price of the Products as defined by Section
4.1.
4.6 If Licensee sells the Products to any of its subsidiaries or
affiliated organizations or companies for subsequent resale by such subsidiary
or affiliated organization or company to customary trade buyers, or sells the
Products in any way other than at arm's length, Licensee agrees that the Royalty
Rate or F.O.B. Royalty Rate, whichever is higher, will be based on the Gross
Sales, as defined above, charged by the subsidiary, affiliated organization or
company to such buyers.
4.7 Any payment not paid when due in accordance with the terms of this
Agreement, including any deficit disclosed through the audit procedures provided
for in Section 5, shall bear interest from the due date until received by
Licensor at the maximum interest rate permitted by law. The obligation to pay,
and the payment of, such interest will not operate to extend any payment due
date, and Licensor waives no rights by accepting late payment with interest.
Interest under this Section 4.7 will be due and payable on the date the
outstanding balance is paid to Licensor.
4.8 If Licensee requests and Licensor provides finished artwork for
Licensee's use, Licensee agrees to remit to Licensor its then normal and
customary charge for providing such artwork.
5. RECORDS AND REPORTS
5.1 Licensee agrees to keep such full and accurate records as are
necessary to verify Licensee's compliance with its obligations under this
Agreement, including without limitation the safety requirements of Section 2.5
and the royalty payment requirements of Section 4.1. Licensee shall maintain all
records necessary to determine the royalties payable hereunder including, but
not limited to, financial statements; general ledgers; and production, sales,
purchases and inventory records; promotional activity reports and other records
reflecting the transfer of Products whether or not full price was paid. Licensee
also agrees to keep such full and accurate records as are necessary to determine
Licensee's compliance with the Mandatory Minimum Advertising Expenditure
required hereunder including, but not limited to, receipts or other proof of
placement of ads. Licensee agrees to permit Licensor or its authorized
representative to have full access to such records required under this Section
5, to examine them, and to make copies of them during normal business hours upon
reasonable notice. Licensee agrees to preserve and keep available to Licensor
all such records for a period of three (3) years after the termination of this
Agreement, including any renewals thereof. If any underpayment is identified as
a result of this examination, Licensee shall pay to Licensor within ten (10)
days of demand the amount of the underpayment, together with interest as
provided under Section 4.7, which shall accrue from the original due date. In
addition, if the amount of the underpayment discovered as a result of the
examination equals or exceeds five percent (5%) of the royalties reported and
paid over the period covered by the examination, Licensee's payment shall
include the Licensor's reasonable cost of such examination. Such costs shall
include, in the case of Licensor's internal auditors, travel expenses and the
full labor costs attributable to the man-hours related to the examination.
5.2 Licensee agrees to provide to the Licensor, at the address
specified in Paragraph M of the Recitals Section, within thirty (30) days after
the close of each calendar quarter: (1) a true and full report of advertising
expenditures during said quarter pursuant to this Agreement and (2) a true and
full report in triplicate of royalties accrued during said quarter under this
Agreement. Licensee agrees to make payment in the amount of said reported
royalties with submission of such royalty report. Such royalty reports shall
show the Property licensed, the specific Channel of Distribution, the stock
number and descriptions, and, for each country in which sold, the total Gross
Sales as calculated, showing the quantity sold and returned, the unit price of
the Products sold and all permitted deductions as set forth in Section 4.1. Each
such report shall be certified to be accurate by the Licensee. Such royalty
reports shall also include a list of sales to subsidiaries and affiliates and
all transactions not at arm's length. For this purpose, Licensee shall use the
royalty report form or forms attached hereto, additional copies of which may be
obtained by Licensee from Licensor. All quarterly reports shall be furnished to
Licensor whether or not any of the Products has been sold or advertised during
the preceding calendar quarter.
5.3 Receipt or acceptance by Licensor of any of the statements
furnished pursuant to this Agreement or of any sums paid hereunder shall not
preclude Licensor from questioning the correctness thereof at any time. In the
event that any inconsistencies or mistakes are discovered in such statements or
payments, Licensee shall immediately notify Licensor, correct such
inconsistencies or mistakes, and render the appropriate payments due, if any.
5.4 Upon demand of Licensor, but not more than once in any twelve (12)
month period, Licensee shall furnish to Licensor at Licensee's expense a
detailed audit statement certified by an independent certified public accountant
restating or verifying the accuracy of the reports described in Section 5.2. up
to the date of Licensor's demand.
5.5 Licensee agrees to provide to the Licensor, at the address
specified in Paragraph M of the Recitals Section and for each country included
in the Territory: (1) within thirty (30) days prior to the beginning of each
calendar quarter, a forecast of the expected gross sales and royalties for the
succeeding quarter; and (2) within ninety (90) days prior to the beginning of
each calendar year, a forecast of the expected gross sales and royalties for
each calendar quarter of the succeeding year.
6. DILIGENCE AND GOOD WILL
6.1 Licensee agrees to exercise its best efforts in the performance of
this Agreement and, especially, in developing a market for the Products in
connection with the Property and supplying such market demand.
6.2 If Licensee does not commence in good faith to manufacture and
distribute all of the Products in commercially substantial quantities through
each of the Channels of Distribution in each country in the Territory by the
Marketing Date, or if at any time thereafter in any calendar quarter Licensee
fails to manufacture and distribute any of the Products through each of the
Channels of Distribution in each country in the Territory, Licensor, in addition
to all other remedies available to it, may terminate this Agreement in its
entirety, or may terminate Licensee's rights under this Agreement in the
particular Products that were not manufactured and/or distributed during such
quarter, or may terminate Licensee's rights under this Agreement for the
particular Channels of Distribution through which Products were not distributed
during such quarter, or may terminate Licensee's rights under this Agreement
with respect to the country in which the Products were not manufactured and/or
distributed during such quarter by giving written notice of such termination to
Licensee.
6.3 Licensee acknowledges the importance and great value of the good
will associated with Licensor and the Property. Licensee shall uphold Licensor's
good name and protect Licensor's Property rights and associated rights or
interests during the term of this Agreement and thereafter. Licensor shall have
the right to immediately terminate this Agreement in the event that Licensee
engages in any illegal, indecent, immoral, harmful or scandalous behavior or
activities that may directly or indirectly damage Licensor's reputation or good
will.
7. INTELLECTUAL PROPERTY
7.1 Licensee hereby acknowledges the validity of the Property and of
any copyright or trademark pertaining thereto and Licensor's exclusive rights
therein. Licensee will not make any representation or do any act which may be
taken to indicate that it has any right, title or interest in or to the
ownership or use of any of the Property except as licensed under the terms of
this Agreement, and acknowledges that nothing contained in this Agreement shall
give Licensee any continuing right, title or interest in or to the Property.
Licensee agrees not to contest the validity of Licensor's rights or perform any
act or omission adverse to the Property or to said exclusive rights, and agrees
that any use of the Property by Licensee hereunder shall inure to the benefit of
Licensor.
7.2 Licensee agrees to take whatever action is appropriate or necessary
to protect Licensor's rights in the Property including, but not limited to:
cooperating in any new domestic or foreign applications for intellectual
property registration pursued by Licensor, at Licensor's expense (including
registration of any of Licensor's trademarks to be used on the Products);
registering as a licensee of the Licensor's trademark on the Products upon
request by Licensor, at Licensor's expense; and permanently affixing on the
Products and all materials used in the advertising, packaging, sale, marketing
and distribution thereof, or other materials utilizing the Property, the
following language, and any other notice requested by Licensor:
[Name of each Property appearing on the Products] and associated
trademarks are owned by and used under license from Mattel, Inc.
c 19 [year of first publication by Licensee] Mattel, Inc. All Rights
Reserved.
7.3 During and after the term of this Agreement, Licensee agrees and
warrants that it will not reproduce or use, or cause or enable another to
reproduce or use, either within or outside the Territory, any trademarks or
other related rights derived from or confusingly similar to the Property.
7.4 Licensee agrees to promptly notify Licensor of conflicting
activities by third parties of which Licensee becomes aware. On written notice
from Licensee of such activities, Licensor may, but is not required to, take
appropriate legal action. Licensee shall take no legal action, however, without
Licensor's prior written consent. Licensee agrees to cooperate fully in any
action taken by Licensor, at Licensor's expense. Licensor may, but is not
required to, control any legal action undertaken pursuant to this provision. If
Licensor takes legal action, any settlement proceeds, damage or other recovery
shall be for the sole benefit and account of the Licensor. If Licensee takes
legal action with written permission from Licensor, any settlement proceeds,
damage or other recovery remaining, after attorneys' fees and costs are
deducted, shall be for the sole benefit and account of the Licensee.
7.5 Licensee agrees that all artwork and designs, and all copyrights
pertaining thereto, involving the Property, or derived from the Property,
created or produced by the Licensee shall be and remain the sole property of
Licensor. Licensee further agrees that it will provide to Licensor a full
assignment in favor of the Licensor of all rights, free of any claim, interest
or right, from any third party who shall have created or produced under contract
with Licensee any artwork involving the Property or derived from the Property.
All costs and expenses for the creation or production of artwork under this
Section 7.5 shall be paid by Licensee, and Licensor shall not be liable to
Licensee or any third party for any costs or expenses incurred in the creation
or production of such artwork. Licensor shall be entitled to use, and license
others to use, all artwork created or produced pursuant to this Section 7.5.
7.6 Except with respect to the rights to the Property licensed
hereunder, the Licensee shall ensure that all Products as marketed, sold and
distributed do not infringe the rights of any third party and are distributed in
compliance with all relevant copyright, trademark, design right, registered
design and other relevant laws in the Territory.
8. CONFIDENTIALITY
During and subsequent to the term of this Agreement, Licensee, its agents
and employees shall not make any unauthorized use or disclosure of any knowledge
or information of a confidential or proprietary nature concerning the Products,
or other private or confidential matters of Licensor, and shall refrain from any
acts or omissions that would reduce the value of such confidential matters to
Licensor or that would deprive or tend to deprive Licensor of trade secret or
other intellectual property protection with respect to such confidential
matters.
9. TRANSFERABILITY
9.1 Licensor shall have the right to assign its rights and obligations
under this Agreement.
9.2 The rights and obligations of the Licensee under this Agreement are
of a personal nature, and Licensee may not assign, sublicense or otherwise
transfer any or all of its rights and/or obligations hereunder without prior
written consent of Licensor.
10. WARRANTY AND INDEMNIFICATION
10.1 Licensee warrants and represents that:
(a) Licensee is free to enter into this Agreement and has the
capability to fully perform its obligations under this Agreement;
(b) all ideas, creations, materials and intellectual property
furnished by Licensee in connection with the Products will be Licensee's own and
original creation (except for matters in the public domain or material which
Licensee is fully licensed to use); and
(c) the Products and the manufacture, advertisement,
distribution and sale thereof pursuant to this Agreement will not infringe or
violate any rights of any third party of any nature whatsoever.
10.2 Licensee agrees to indemnify Licensor, its officers, agents and
employees and to undertake to defend and hold them and each of them harmless
from and against any and all claims, demands, causes of action, damages,
liabilities, costs and expenses, including reasonable attorneys' fees, arising
from the activities of Licensee under this Agreement, or out of any breach by
Licensee of any warranty or agreement made by Licensee herein, including but not
limited to any product liability claims or actions or to the unauthorized use of
any trademark, copyright, design, patent, process, method or device by Licensee.
10.3 Licensor warrants and represents that:
(a) Licensor is free to enter into this Agreement and has the
capability to fully perform its obligations under this Agreement; and
(b) Licensor has acquired such rights to the Property stated in
the Recitals Section of this Agreement.
10.4 Licensor agrees to indemnify Licensee, its officers, agents and
employees and to undertake to defend and hold them and each of them harmless
from and against any and all claims, demands, causes of action, damages,
liabilities, costs and expenses, including reasonable attorneys' fees, arising
from use of the Property in connection with Products under this Agreement in the
manner approved by Licensor, or arising out of any breach by Licensor of any
warranty or agreement made by Licensor herein.
11. INSURANCE
11.1 Licensee will obtain and maintain a comprehensive liability
insurance policy, including coverage for product and contractual liability,
providing, but not limited to, protection for Licensor, its officers, agents and
employees against any claims, damages, liabilities, costs and expenses
(including counsel fees) arising out of any alleged defects (whether latent or
patent) in the Products manufactured, distributed, sold or otherwise disposed of
by Licensee.
11.2 Such policy shall have a combined single coverage in the amount of
Two Million Dollars ($2,000,000.00), shall be with a qualified insurance company
currently rated A - V or better with Best's Key Rating Guide for Property
Casualty Insurers, and shall be kept in force for twelve (12) months after final
disposal of inventory.
11.3 As proof of such insurance, a fully paid certificate of insurance
naming Licensor as an insured party and indicating thereon that the insurance
may not be changed, cancelled, or allowed to lapse through non-renewal or
failure to pay the premium therefor except upon not less than thirty (30) days
written notice to Licensor will be submitted to Licensor by the Licensee within
thirty (30) days after the Effective Date of this Agreement. The Licensee's
failure to comply with the provisions regarding insurance set forth in this
Section will constitute a default giving the Licensor the right to terminate
this Agreement in accordance with the terms of Section 13.1.
11.4 If Licensee fails to furnish proof of such insurance as required
above, or if at any time during the life of this Agreement Licensor is notified
of the change, cancellation or lapse of such insurance, which change,
cancellation or lapse Licensee does not rectify within ten (10) days of the
insurance status change, Licensor, in addition to all other remedies available
to it hereunder, may at its option obtain such insurance coverage and bill the
Licensee for the premium cost thereof. Licensee agrees to remit such premium to
Licensor within ten (10) days of receipt of notice from Licensor of the amount
of such premium cost. Such premium cost is in addition to any other payments due
under this Agreement.
12. BANKRUPTCY
In the event that Licensee makes any assignment for the benefit of
creditors, or files a petition in bankruptcy (whether voluntary or involuntary),
or becomes insolvent, or is similarly prevented from or unable to fulfill its
duties hereunder, Licensor may terminate this Agreement immediately upon giving
notice to Licensee. In the event of actual bankruptcy or receivership of
Licensee, this Agreement shall automatically terminate.
13. TERMINATION
13.1 Licensor may terminate this Agreement pursuant to any provision of
this Agreement providing for termination or in the event of any default of any
provision of this Agreement by Licensee, such as failure to make a report or a
payment required hereunder, which default Licensee does not rectify within ten
(10) days after notice thereof from Licensor.
13.2 Licensor may terminate this Agreement if there is a transfer of
twenty-five percent (25%) or more of the common capital stock of the Licensee,
in a single transaction or a series of transactions; or if there is a transfer
of the business and/or substantially all of the assets of the Licensee, subject
to the following provisions. If the Licensee has reason to believe that such a
stock transfer has occurred, or will occur in the reasonably foreseeable future,
or if the Licensee proposes to make a transfer of its business and/or
substantially all of its assets, it shall give written notice thereof to the
Licensor. Within a reasonable time after receiving such notice, the Licensor
shall give the Licensee written notice stating whether it approves or
disapproves any such transfer or proposed transfer, and, in the case of its
disapproval thereof, whether it exercises its right of termination hereunder if
the transfer has already occurred or will exercise its right of termination if
the proposed transfer is subsequently made. The foregoing shall not limit in any
way the right of the Licensor under Section 9.2 to disapprove assignments and
other transfers of this Agreement and the rights hereunder.
14. EFFECT OF TERMINATION
14.1 In the event of termination of this Agreement under any of its
provisions, Licensee is not relieved of its liabilities accruing up to the time
of termination. Any and all patents, trademarks, copyrights or related rights
accruing to Licensee by virtue of its activities under this Agreement shall vest
automatically at the time of accrual solely and exclusively in Licensor, and
Licensor may execute documents on behalf of Licensee to secure or effectuate
such rights; Licensee shall assist Licensor in securing and effectuating such
rights after termination as well as before termination.
14.2 Licensee agrees that upon termination of this Agreement based on
default of Licensee and provided Licensor has given the termination notice in
accordance with Section 13 hereof, Licensee shall forthwith cease and desist in
the manufacture and sale of Products.
14.3 Licensor agrees that at the termination of this Agreement for any
reason other than the default of the Licensee (including, but not limited to,
termination by reason of a variance by Licensee from the quality and style
approved by Licensor pursuant to Section 2), the Licensee shall have the non-
exclusive right for a period of not more than ninety (90) days thereafter to
dispose of all of the unsold Products that has been completed by it prior to
such termination. It is further provided under this Section 14.3 that Licensee
shall, prior to disposing of said unsold Products, give Licensor a true itemized
statement of all such unsold Products in inventory and sufficient detailed
manufacturing information to substantiate the applicability of this Section 14.3
to said Products. Licensor shall have the option to conduct a physical inventory
in order to verify such inventory statement.
14.4 Nothing in Section 14.3 shall be construed as authorizing the
Licensee to (a) sell Products not approved by Licensor, or to sell Products in
job lots at reduced prices or otherwise than set forth or contemplated in this
Agreement or (b) manufacture, sell or dispose of any Products covered by this
Agreement after its expiration or its termination based on the failure of
Licensee to affix notice of copyright, trademark or service mark registration or
any other notice to the Products cartons, containers, packing or wrapping
material or advertising, promotional or display material.
14.5 Licensee agrees that upon termination of this Agreement under any
of its provisions, Licensee shall deliver to Licensor without cost all plates,
molds, preprints, matrices and other devices using the Property.
14.6 Licensee agrees that in the event that it engaged in any
unauthorized use of the Property in violation of any of the provisions of this
Agreement, Licensor may recover all profits derived by Licensee from such
unauthorized use, in addition to any other remedies available to Licensor.
15. REMEDIES
15.1 Licensee acknowledges that its failure (except as otherwise
provided herein) to cease the manufacture, sale or distribution of the Products
covered by this Agreement at the termination or expiration of this Agreement
will result in immediate and irreparable harm to Licensor and to the rights of
any subsequent licensee. Licensee agrees that in the event of such failure to
cease manufacture, sale, or distribution, Licensor shall be entitled to
equitable relief by way of temporary and permanent injunctions and such other
further relief as any court with jurisdiction may deem just and proper.
15.2 In the event Licensor is required to take legal action against
Licensee to recover royalties or other amounts payable to the Licensor or to
enforce the provisions of this Agreement, Licensee agrees to pay Licensor's
attorneys' fees, expenses and court costs.
15.3 Licensee agrees not to hold Licensor liable for any indirect,
punitive, special, incidental or consequential damages, including lost profits,
caused by any breach of this Agreement by Licensor.
16. GENERAL PROVISIONS
16.1 ENTIRE AGREEMENT. This writing represents and expresses the entire
agreement of the parties hereto. It replaces and supersedes all prior contracts,
representations and understandings (written or oral) between the parties
concerning the within subject matter.
16.2 WAIVER. Any waiver, modification, or cancellation of any term or
condition of this Agreement must be in writing. Licensee further understands and
agrees that any oral representations, which have not been reduced to a formal
writing signed by both parties, cannot be construed as a promise or obligation
by Licensor to renew or extend this Agreement. No waiver by either party,
whether express or implied, of any provisions of this Agreement or of any breach
or default of either party shall constitute a continuing waiver of any other
provision of this Agreement, and no such waiver by either party shall prevent
such party from enforcing any and all provisions of this Agreement or from
acting upon the same on any subsequent breach or default of the other party.
16.3 HEADINGS. Captions and headings to sections are included solely for
convenience and are not intended to affect interpretation of any provision of
this Agreement.
16.4 FORCE MAJEURE. In the event an act of the government, war
conditions, fire, flood, or other act of God prevents either party from
performing in accordance with the provisions of this Agreement, such
nonperformance shall be excused and shall not be considered a breach or default
for so long as the said conditions prevail. However, at any time after a six (6)
month period of such nonperformance, either party may terminate this Agreement
on thirty (30) days written notice thereof to the other party.
16.5 FORM OF NOTICES AND PAYMENTS. All notices and statements shall be
in writing and, together with all payments provided for herein, shall be given
at the respective addresses of the parties set forth above, or at such changed
address as the recipient shall have provided in writing. All notices to Licensee
required hereunder shall be deemed given when mailed by certified mail, return
receipt requested, by courier or overnight delivery service, or by telex or
telecopier and addressed to Licensee at the address specified in Paragraph A of
the Recitals Section.
16.6 GOVERNING LAW. This Agreement and the relationship of the parties
will be governed by, and interpreted in accordance with, the laws of the State
of California, U.S.A., excluding its conflict of laws rules.
16.7 JURISDICTION. With respect to any disputes arising out of this
Agreement that pertain to sales within the United States of America, the parties
hereby submit exclusively to the personal jurisdiction of the federal and state
courts located in Los Angeles County, California, U.S.A. The parties consent and
agree that each such court is a convenient forum for and has proper venue over
the resolution of all legal actions, proceedings and disputes arising out of or
relating to this Agreement. Licensee does by this Agreement appoint the
Secretary of the State of California as its agent for service of process, or in
the alternative consents to accept service of process during and after the term
of this Agreement by regular mail or any other method in accordance with
California law. Each party agrees that if so served it will raise no objection
to the personal jurisdiction of the court on any matter connected with this
Agreement that is within the court's subject matter jurisdiction. Each party
hereby waives all rights it has or which may hereafter arise to contest such
exclusive jurisdiction or venue.
16.8 SEVERABILITY. If any provision of this Agreement is found to be
illegal or unenforceable, then such provision will be deemed severable from the
remainder of this Agreement, and the remaining provisions will continue in full
force and effect. If any such unenforceability causes or may cause an injustice
to a party, then that party may terminate this Agreement upon notice to the
other party.
IN WITNESS WHEREOF, the parties hereto intending to be bound hereby
execute this Agreement by their duly authorized representatives on or about the
date indicated below in El Segundo, California.
MATTEL, INC. BROOKFIELD ATHLETIC COMPANY
By: /s/ Jean McKenzie By: /s/ James A. Buchanan
Name: Jean McKenzie Name: James A. Buchanan
Title: Senior Vice President Title: President
Date: 9/2/95 Date: 5/15/96
EXHIBIT A
MANUFACTURER'S AGREEMENT FOR TRADEMARK LICENSE
LICENSOR: MATTEL, INC.
LICENSEE: BROOKFIELD ATHLETIC COMPANY, INC.
TERRITORY OF
MANUFACTURE:
PRODUCTS:
PROPERTY: BARBIE
TO: MATTEL, INC. 333 Continental Blvd.,
El Segundo, California 90245, U.S.A.
Attn: Director of Licensing
The undersigned understands that MATTEL, INC., ("MATTEL"), has
licensed the above-named Licensee to manufacture or have manufactured for it the
above-named products (the "Products") utilizing certain designs and names owned
by MATTEL identified as BARBIE ("the Property"). In order to induce MATTEL to
consent to the manufacture of the Products by the undersigned, the undersigned
agrees that it will not manufacture the Products using the Property for anyone
but the Licensee; that it will not manufacture the Products in any territory
other than the above-named Territory; that it will not (unless MATTEL otherwise
consents in writing) manufacture any other merchandise utilizing any of the
Property; that it will permit such representative as MATTEL may from time to
time (but not more than twice annually for each of the Products) designate to
inspect the activities of the undersigned with relation to its manufacture of
the Products; and that whenever the Licensee ceases to require the undersigned
to manufacture the Products, the undersigned will deliver to MATTEL or the
Licensee any molds, plates, engravings or other devices used to reproduce the
said designs and Property or will give satisfactory evidence of the destruction
thereof. MATTEL shall be entitled to invoke any remedy permitted by law for
violation of this Agreement by the undersigned.
MANUFACTURER: TRIPLE WIN SPORTS INDUSTRY INC.
Address: 8TH FL. NO.310, SEC4, CHUNG HSIAO E.RD
TAIPEI, TAIWAN, R.O.C.
By: /s/ SUPER HSIEH
Name: SUPER HSIEH
Title: G. MANAGER
Date: MAY 2, 1996
EXHIBIT A
MANUFACTURER'S AGREEMENT FOR TRADEMARK LICENSE
LICENSOR: MATTEL, INC.
LICENSEE: BROOKFIELD ATHLETIC COMPANY, INC.
TERRITORY OF
MANUFACTURE:
PRODUCTS:
PROPERTY: BARBIE
TO: MATTEL, INC. 333 Continental Blvd.,
El Segundo, California 90245, U.S.A.
Attn: Director of Licensing
The undersigned understands that MATTEL, INC., ("MATTEL"), has
licensed the above-named Licensee to manufacture or have manufactured for it the
above-named products (the "Products") utilizing certain designs and names owned
by MATTEL identified as BARBIE ("the Property"). In order to induce MATTEL to
consent to the manufacture of the Products by the undersigned, the undersigned
agrees that it will not manufacture the Products using the Property for anyone
but the Licensee; that it will not manufacture the Products in any territory
other than the above-named Territory; that it will not (unless MATTEL otherwise
consents in writing) manufacture any other merchandise utilizing any of the
Property; that it will permit such representative as MATTEL may from time to
time (but not more than twice annually for each of the Products) designate to
inspect the activities of the undersigned with relation to its manufacture of
the Products; and that whenever the Licensee ceases to require the undersigned
to manufacture the Products, the undersigned will deliver to MATTEL or the
Licensee any molds, plates, engravings or other devices used to reproduce the
said designs and Property or will give satisfactory evidence of the destruction
thereof. MATTEL shall be entitled to invoke any remedy permitted by law for
violation of this Agreement by the undersigned.
MANUFACTURER: AMULA'S ENTERPRISE CORP.
Address: 2F. No. 17, Lane 280, Hsueh Fu Rd., Sec. 1,
Tu-Cheng City, Taipei Hsien, Taiwan, R.O.C.
By: /s/ Yu Chun-Chin
Name: Chun-Chin Yiu
Title: President
Date: May 1, 1996
EXHIBIT C
PRODUCT LIST
1. Children's boot style roller skates in shoe sizes 10-4.
2. Molded in-line skates (specifically non-adjustable).
3. Double runner ice skates.
4. Figure skates (single blade).
5. Knee Pads (may be sold individually or in a set with other products).
6. Elbow Pads (may be sold individually or in a set with other products).
7. Wrist Guards (may be sold individually or in a set with other products).
8. *Gloves (may be sold individually or in a set with other products).
9. *Skate Bag (may be sold individually or in a set with other products).
*Indicates non-exclusive
<TABLE>
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
For the For the
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
July 5, June 30, July 5, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Net income applicable to
common stock $ 113,693 $ 839,037 $ 853,162 $ 1,467,976
------------ ------------- ------------- ------------
Weighted average shares:
Average shares outstanding 6,217,142 6,232,105 6,217,142 6,232,774
Dilutive stock options
based upon application
of the treasury stock
method using average
market price 27,083 13,808 17,951 16,539
------------ ------------- ------------- ------------
Total shares 6,244,225 6,245,913 6,235,093 6,249,313
============ ============= ============= ============
Net income per share $ 0.02 $ 0.13 $ 0.14 $ 0.23
============ ============= ============= ============
FULLY DILUTED
Net income applicable to
common stock $ 113,693 $ 839,037 $ 853,162 $ 1,467,976
------------ ------------- ------------- ------------
Weighted average shares:
Average shares outstanding 6,217,142 6,232,105 6,217,142 6,232,774
Dilutive stock options
based upon application of
the treasury stock method
using market price at end
of period or average market
price, if greater 36,070 13,793 36,070 17,313
------------ ------------- ------------- ------------
Total shares 6,253,212 6,245,898 6,253,212 6,250,087
============ ============= ============= ============
Net income per share $ 0.02 $ 0.13 $ 0.14 $ 0.23
============ ============= ============= ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Hyde
Athletic Industries, Inc. Form 10-Q for the period ended July 5, 1996 and is
qualified in its entirety by reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> JUL-05-1996
<CASH> 3,818,715
<SECURITIES> 303,672
<RECEIVABLES> 28,814,632
<ALLOWANCES> 645,589
<INVENTORY> 23,125,192
<CURRENT-ASSETS> 59,271,931
<PP&E> 16,120,367
<DEPRECIATION> 7,061,691
<TOTAL-ASSETS> 70,442,515
<CURRENT-LIABILITIES> 15,132,005
<BONDS> 3,468,711
0
0
<COMMON> 2,138,514
<OTHER-SE> 47,238,564
<TOTAL-LIABILITY-AND-EQUITY> 70,442,515
<SALES> 60,932,883
<TOTAL-REVENUES> 61,550,130
<CGS> 43,436,453
<TOTAL-COSTS> 43,436,453
<OTHER-EXPENSES> 15,941,466
<LOSS-PROVISION> 457,083
<INTEREST-EXPENSE> 502,245
<INCOME-PRETAX> 1,669,966
<INCOME-TAX> 587,927
<INCOME-CONTINUING> 853,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 853,162
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
