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EXHIBIT 10(w)
NOTE: THE OMITTED PORTIONS OF THIS DOCUMENT MARKED WITH AN ASTERISK ARE SUBJECT
TO A CONFIDENTIAL TREATMENT REQUEST AND HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION
LICENSE AGREEMENT
Date: August 1, 2000
Re: CONSUMER PRODUCTS LICENSE - DISNEY PROPERTIES
This license agreement, including one or more schedules ("Schedule") attached
hereto (such agreement and each such Schedule, jointly and severally, depending
on context, referred to herein as "Agreement"), is entered into by and between
Disney Enterprises, Inc. ("Disney"), with a principal place of business at 500
South Buena Vista Street, Burbank, California 91521, and THE FIRST YEARS, INC.
("Licensee"), with its principal place of business at One Kiddie Drive, Avon, MA
02322. Disney and Licensee agree as follows:
1. MEANING OF TERMS
A. "LICENSED MATERIAL" means the graphic representations of the
following:
Such characters and depictions of such characters, and such still
scenes and accompanying design elements, as may be designated by
Disney, from those Disney properties as are licensed hereunder (the
"Properties") and are the subject of separate written Schedule(s)
attached hereto and incorporated herein by this reference, pursuant to
such specifications as are set forth in the applicable Schedule(s) for
each individual Property licensed hereunder. At the time of execution
of this Agreement, there are three Schedules attached hereto.
B. "TRADEMARKS" (which is deemed to read "Trade marks" if applicable)
means "WALT DISNEY", "DISNEY", the representations of Licensed
Material included in Paragraph 1.A. above, the brand name(s) (if any)
and logo(s) (if any) of the Properties in which Licensed Material
included in Paragraph 1.A. above appears, and such other marks as are
licensed hereunder, pursuant to the specifications stated in the
applicable Schedule for each such Property.
C. "ARTICLES" means the items on or in connection with which the Licensed
Material, the Trademarks, or both, are reproduced or used, and
includes each and every stock keeping unit ("SKU") of each Article as
are specified on the applicable Schedule for each Property licensed
hereunder.
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D. "MINIMUM PER ARTICLE ROYALTY" means for each Article identified herein
which is sold the sum indicated herein:
None.
E. "TERM" of this Agreement means the period commencing as of August 1,
2000, and ending upon the expiration of the latest Schedule entered
into hereunder. The term applicable for each specific Property
licensed hereunder shall be the period commencing as of the Effective
Date and ending on the Termination Date stated on the applicable
Schedule for each such Property.
F. "TERRITORY" means the countries, regions or other geographic
designations specified on each applicable Schedule.
G. "ROYALTIES" means a copyright royalty (no royalty is chargeable for
use of the Trademarks) in the amounts set forth below in Paragraphs
1.G.(1)(a), (b), and (c) and Royalties shall be further governed by
the provisions contained in Paragraphs 1.G.(2)-(6):
(1)(a) A royalty in the amount set forth on the applicable
Schedule for each Property for "F.O.B. In Sales" of
Articles. F.O.B. In Sales occur when Articles are shipped by
or on behalf of Licensee from a location within or outside
the Territory for delivery to a customer located in the
Territory; or
(b) A royalty in the amount set forth on the applicable Schedule
for each Property for "F.O.B. Out Sales" of Articles. F.O.B.
Out Sales occur when Licensee's customer located in the
Territory takes title to the Articles outside the Territory,
bears the risk of loss of Articles manufactured and shipped
to the customer from outside the Territory, or both; or
(c) if a Minimum Per Article Royalty has been specified in
Paragraph 1.D. above, and it would result in a higher
royalty to be paid for the Articles, Licensee agrees to pay
the higher royalty amount.
(2) The sums paid to Disney as Royalties on any sales to
Licensee's Affiliates shall be no less than the sums paid on
sales to customers not affiliated with Licensee.
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(3) All sales of Articles shipped to a customer outside the
Territory pursuant to a distribution permission shall bear a
Royalty at the rate for F.O.B. Out Sales. However, sales of
Articles to Disney's Affiliates outside the Territory shall
bear a Royalty at the rate for F.O.B. In Sales.
(4) No Royalties are payable on the mere manufacture of
Articles.
(5) The full Royalty percentage shall be payable on close-out or
other deep discount sales of Articles, including sales to
employees.
(6) Royalties reported on sales of Articles which have been
returned to Licensee for credit or refund and on which a
refund has been made or credit memo issued may be credited
against Royalties due. The credit shall be taken in the
Royalty Payment Period in which the refund is given or
credit memo issued. Unused credits may be carried forward,
but in no event shall Licensee be entitled to a refund of
Royalties.
H. "NET INVOICED BILLINGS" means the following:
(1) actual invoiced billings (i.e., sales quantity multiplied by
Licensee's selling price) for Articles sold, less "Allowable
Deductions" as hereinafter defined.
(2) The following are not part of Net Invoiced Billings: invoiced
charges for transportation of Articles within the Territory which
are separately identified on the sales invoice, and sales taxes.
I. "ALLOWABLE DEDUCTIONS" means the following:
(1) volume discounts, and other discounts from the invoice price (or
post-invoice credits) unilaterally imposed in the regular course
of business by Licensee's customers, so long as Licensee
documents such discounts (or credits) to Disney's satisfaction.
In the event a documented unilateral discount (or credit) is
taken with respect to combined sales of Articles and other
products not licensed by Disney, and Licensee cannot document the
portion of the discount (or credit) applicable to the Articles,
Licensee may apply only a pro rata portion of the discount (or
credit) to the Articles. Unilateral discounts or credits are
never deductible if they represent items listed below in
Paragraph 1.I.(2).
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(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;
defective goods allowances or allowances taken by customers in
lieu of returning goods; costs incurred in manufacturing,
importing, selling or advertising Articles; freight costs
incorporated in the selling price; and uncollectible accounts.
J. "ROYALTY PAYMENT PERIOD" means each calendar quarterly period during
the Term and during the sell-off period, if granted.
K. "ADVANCE" means the non-refundable sum(s), plus any applicable goods
and services tax or other value added tax ("VAT"), payable by the
date(s) indicated in Paragraphs 1.K.(1) and (2) below, as advances on
Royalties to accrue in the following period(s):
*
L. "GUARANTEE" means the sum(s), plus VAT if applicable, set forth in
Paragraphs 1.L.(1) and (2) below, which Licensee guarantees to pay as
minimum Royalties on Licensee's cumulative sales of Articles for the
stated period. Any shortfall shall be payable with the Royalty
statement due at the end of the applicable Guarantee period
*
M. "SAMPLES" means the number of samples stated in the applicable
Schedule for each Property from the first production run of each
supplier of each SKU of each Article.
N. "PROMOTION COMMITMENT" means the following sum(s) which Licensee
agrees to spend in the following way(s), in accordance with the
provisions of Paragraph 16.A.:
*
O. "MARKETING DATE" means the date(s) specified on the applicable
Schedule for each Property by which the specified Article(s) shall be
available for purchase by the public at the retail outlets authorized
pursuant to Paragraph 2.A.
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P. "AFFILIATE" means, with regard to Licensee, any corporation or other
entity which directly or indirectly controls, is controlled by, or is
under common control with Licensee; with regard to Disney, "Affiliate"
means any corporation or other entity which directly or indirectly
controls, is controlled by, or is under common control with Disney.
"Control" of an entity shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies of
such entity, whether through ownership of voting securities, by
contract or otherwise.
Q. "LAWS" means any and all applicable laws, rules, and regulations,
including but not limited to, local and national laws, rules and
regulations, treaties, voluntary industry standards, association laws,
codes or other obligations pertaining to the grant and exercise of the
license granted herein and to any of Licensee's activities under this
Agreement, including but not limited to those applicable to any tax,
and to the manufacture, pricing, sale, or distribution of the
Articles.
R. "RETAILER" means independent and chain retail outlets which have
storefronts and business licenses, and which customers walk into, not
up to; "WHOLESALER" means a seller of products to retailers, not
consumers, and includes the term "distributor"; "ETAILER" means
internet-based retailers that sell products to consumers and which
have few or no physical store locations. The following do not qualify
as authorized sales outlets for Articles under this Agreement under
any circumstances: swap meets, flea markets, street peddlers,
unauthorized kiosks, and the like.
S. "MANUFACTURER" means any of Licensee's third-party manufacturers,
factories, suppliers and facilities (and their sub-manufacturers,
factories, suppliers and facilities), which reproduce or use the
Licensed Material, the Trademarks, or both, on Articles, components of
Articles, labels, hang-tags, packaging, or any other item related to
the Articles, or which assemble the Articles, or which assemble a
final product which includes one or more Articles.
T. "SCHEDULE" means each separate "Schedule to License Agreement" entered
into between Disney and Licensee on a Property-by-Property (or other
designated) basis, the terms of each of which are hereby incorporated
herein by reference and made a part hereof as though fully set forth.
The Schedule for each Property licensed hereunder shall state any and
all contract terms as are specific to such Property.
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2. RIGHTS GRANTED
A. (1) In consideration for Licensee's promise to pay and Licensee's
payment of all monetary obligations required hereunder, and
Licensee's performance of all obligations required of Licensee
hereunder for each Property that becomes the subject of a
separate Schedule entered into between Disney and Licensee,
Disney grants Licensee the non-exclusive right, during the term
of the relevant Schedule for each subject Property, and only
within the Territory, to reproduce the subject Licensed Material
only on or in connection with the Articles, to use such specified
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 as authorized by this Paragraph 2.
(2) Licensee will sell the Articles only to authorized customers in
the Territory as specified herein or in the relevant Schedule for
the subject Property, as applicable.
(3) Licensee may not sell the Articles by direct marketing methods,
which includes but is not limited to, direct mail and
door-to-door solicitation. Licensee may not sell the Articles to
Retailers selling merchandise on a duty-free basis, or to
Wholesalers for resale to such Retailers, unless such Retailer or
Wholesaler has a then-current license agreement with Disney or
any of Disney's Affiliates permitting it to make such duty-free
sales.
(4) Licensee may sell the Articles to authorized customers for resale
through the pre-approved mail order catalogs listed on the
Catalog Schedule(s) to this Agreement, and Licensee shall pay
Royalties on such sales at the rate specified for Retailers in
the applicable Schedule.
(5) Licensee may sell the Articles to authorized Etailers for resale
to consumers by computer online selling, and Licensee shall pay
Royalties on such sales at the rate specified for Retailers in
the applicable Schedule. From time to time, Licensee may request
from Disney the then current list of pre-approved Etailers, which
are the only Etailers to which Licensee is authorized to sell
Articles. Authorized Etailers may display, promote and sell
Articles on their online venues, subject to Disney's "eCommerce
Creative
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Requirements and Prohibitions." Sales may only be made to
consumers physically located in the Territory.
(6) All rights not expressly granted to Licensee herein are reserved
to Disney.
B. Unless Disney consents in writing, Licensee shall not sell or
otherwise provide Articles for use as premiums (including those in
purchase-with-purchase promotions), promotions, give-aways,
fund-raisers, or entries in sweepstakes, or through unapproved direct
marketing methods, including but not limited to, home shopping
television programs, or to customers for inclusion in another product.
Licensee shall not sell Articles to any customer which Licensee knows
or reasonably should know engages in illegal business practices or
ethically questionable distribution methods. If Licensee wishes to
sell the Articles to customers for resale through mail order catalogs
other than those listed on the Catalog Schedule hereto, Licensee must
obtain Disney's prior written consent in each instance. However,
Licensee may solicit orders by mail from Wholesalers or Retailers
authorized herein or pursuant to the applicable Schedule for the
subject Property, and Licensee may sell to Retailers which sell
predominantly at retail, but which include the Articles in their mail
order catalogs, or otherwise sell Articles by direct marketing methods
as well as at retail.
C. In addition to the online selling permitted by authorized Etailers,
Articles approved by Disney may be displayed and promoted on
Disney-controlled on-line venues, only within the Territory. Articles
approved by Disney also may be displayed and promoted on Licensee's
own on-line venue, and may be displayed, promoted and sold on
authorized Retailers' on-line venues, subject to Disney's applicable
policies and guidelines; however, Licensee must obtain Disney's prior
written approval of all creative and editorial elements of such uses,
in accordance with the provisions of Paragraph 7 of this Agreement. If
Licensee wishes to sell the Articles to any Etailers other than those
listed on the pre-approved list provided by Disney, Licensee must
obtain Disney's prior written consent in each instance. Any Etailer
which violates Disney's eCommerce policies shall be deleted from the
list of approved Etailers, and Licensee may not sell Articles to such
Etailer after notice from Disney.
D. Unless Disney consents in writing, Licensee shall not give away or
donate Articles to Licensee's accounts or other persons for the
purpose of promoting sales of Articles, except for minor quantities or
samples which are not for onward distribution.
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E. Nothing contained herein shall preclude Licensee from selling Articles
to Disney or to any of Disney's Affiliates, or to Licensee's or
Disney's employees, subject to the payment to Disney of Royalties on
such sales.
F. Disney further grants Licensee the non-exclusive right to reproduce
the Licensed Material and to use the approved Trademarks, only within
the Territory, during the term of the relevant Schedule for each
subject Property, on containers, packaging and display material for
the Articles, and in advertising for the Articles.
G. Nothing contained in this Agreement shall be deemed to imply any
restriction on Licensee's freedom and that of Licensee's customers to
sell the Articles at such prices as Licensee or they shall determine.
H. Licensee recognizes and acknowledges the vital importance to Disney of
the characters and other proprietary material Disney owns and creates,
and the association of the Disney name with them. In order to prevent
the denigration of Disney's products and the value of their
association with the Disney name, and in order to ensure the
dedication of Licensee's best efforts to preserve and maintain that
value, Licensee agrees that, during the Term and any extension hereof,
Licensee will not manufacture or distribute any merchandise embodying
or bearing any artwork or other representation which Disney
determines, in Disney's reasonable discretion, is confusingly similar
to Disney's characters or other proprietary material.
3. ADVANCE
A. Licensee agrees to pay the Advance, which shall be on account of
Royalties to accrue during the Term , and only with respect to sales
in the Territory; provided, however, that if any part of the Advance
is specified as applying to any period less than the entire 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 Term
or any term of any relevant Schedule shall not be offset against the
Advance for any given Property unless otherwise agreed in writing.
Royalties accruing during any extension of the Term or any other term
shall be offset only against an advance paid with respect to such
extended term.
C. In no event shall Royalties accruing by reason of any sales to Disney
or any of Disney's Affiliates or by reason of sales outside the
Territory pursuant to a
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distribution permission be offset against the Advance for any given
Property or any subsequent advance.
4. GUARANTEE
A. Licensee shall, with Licensee's statement for each Royalty Payment
Period ending on a date indicated in Paragraph 1.L. hereof defining
"Guarantee" and in each relevant Schedule, or upon termination if the
Agreement or the relevant Schedule for the subject Property is
terminated prior to the end of the Term or the stated term of such
Schedule, as applicable, pay Disney the amount, if any, by which
cumulative Royalties paid on a Property-by-Property basis with respect
to sales in the Territory during any period or periods covered by the
subject 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 for a Property applicable to Royalties due on sales in the
period to which the Guarantee for said Property relates apply towards
meeting the Guarantee for that Property.
C. In no event shall Royalties paid with respect to sales to Disney or to
any of Disney's Affiliates, or with respect to sales outside the
Territory pursuant to a distribution permission, apply towards the
meeting of any Guarantee or any subsequent guarantee. If any sell-off
period is granted under this Agreement, Royalties generated from sales
during such period may not be applied towards the meeting of any
Guarantee.
5. PRE-PRODUCTION APPROVALS
A. As early as possible, and in any case before commercial production of
any Article, Licensee shall submit to Disney for Disney's review and
written approval (to utilize such materials in preparing a
pre-production sample) all concepts, all preliminary and proposed
final artwork, and all three-dimensional models which are to appear on
or in any and all SKUs of the Article. Thereafter, Licensee shall
submit to Disney for Disney's written approval a pre-production sample
of each SKU of each Article. Disney shall endeavor to respond to such
requests within a reasonable time, but such approvals should be sought
as early as possible in case of delays. In addition to the foregoing,
as early as possible, and in any case no later than sixty (60) days
following written conceptual approval, Licensee shall supply to Disney
for Disney's use for internal purposes, a mock-up, prototype or
pre-production sample of each SKU of each Article on or in connection
with
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which the Licensed Material is used. Licensee acknowledges that Disney
may not approve concepts or artwork submitted near the end of the term
of the relevant Schedule for the subject Property, or concepts or
artwork perceived to be for selling periods beyond the applicable
Termination Date. Any pre-production approval Disney may give will not
constitute or imply a representation or belief by Disney that such
materials comply with any applicable Laws.
B. Approval or disapproval shall lie solely in Disney's discretion, and
any SKU of any Article not so approved in writing shall be deemed
unlicensed and shall not be manufactured or sold. If any unapproved
SKU of any Article is being sold, Disney may, together with other
remedies available to Disney, including but not limited to, immediate
termination of this Agreement, by written notice require such SKU of
such Article to be immediately withdrawn from the market. Any
modification of any SKU of an Article, including, but not limited to,
change of materials, color, design or size of the representation of
Licensed Material must be submitted in advance for Disney's written
approval as if it were a new SKU of an Article. Approval of any SKU of
an Article which uses particular artwork does not imply approval of
such artwork for use with a different Article. The fact that artwork
has been taken from a Disney publication or a previously approved
Article does not mean that its use will necessarily be approved in
connection with an Article licensed hereunder.
C. If Licensee submits for approval artwork from an article or book
manufactured or published by another licensee of Disney's or of any of
Disney's Affiliates, Licensee must advise Disney in writing of the
source of such artwork. If Licensee fails to do so, any approval which
Disney may give for use by Licensee of such artwork may be withdrawn
by giving Licensee written notice thereof, and Licensee may be
required by Disney not to sell Articles using such artwork.
D. Licensee is responsible for the consistent quality and safety of the
Articles and their compliance with applicable Laws. Disney will not
unreasonably object to any change in the design of an Article or in
the materials used in the manufacture of the Article or in the process
of manufacturing the Articles which Licensee advises Disney in writing
is intended to make the Article safer or more durable.
E. If Disney has supplied Licensee with forms for use in applying for
approval of artwork, models, pre-production and production samples of
Articles,
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Licensee shall use such forms when submitting anything for Disney's
approval.
F. If and as applicable, the likenesses and product application of the
characters used on or in connection with the Articles are subject to
any third party approvals Disney deems necessary to obtain, Disney
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, Licensee agrees to furnish
to Disney, from the first production run of each supplier of each of
the Articles, for Disney's approval of all aspects of the Article in
question, the number of Samples with packaging which is hereinabove
set forth, which shall conform to the approved artwork,
three-dimensional models and pre-production sample. Approval or
disapproval of the artwork as it appears on any SKU of the Article, as
well as of the quality of the Article, shall lie in Disney's sole
discretion and may, among other things, be based on unacceptable
quality of the artwork or of the Article as manufactured. Any SKU of
any Article not so approved shall be deemed unlicensed, shall not be
sold and, unless otherwise agreed by Disney in writing, shall be
destroyed. Such destruction shall be attested to in a certificate
signed by one of Licensee's officers. Production samples of Articles
for which Disney has approved a pre-production sample shall be deemed
approved, unless within twenty (20) days of Disney's receipt of such
production sample Disney notifies Licensee to the contrary. Any
approval of a production sample attributable to Disney will not
constitute or imply a representation or belief by Disney that such
production sample complies with any applicable Laws.
B. Licensee agrees to make available at no charge such additional samples
of any or all SKUs of each Article as Disney may from time to time
reasonably request for the purpose of comparison with earlier samples,
or for Disney's anti-piracy efforts, or to test for compliance with
applicable Laws, and to permit Disney to inspect Licensee's
manufacturing operations and testing records (and those of Licensee's
Manufacturers) for the Articles in accordance with Paragraphs 11 and
24.
C. Licensee acknowledges that Disney may disapprove any SKU of an Article
or a production run of any SKU of an Article because the quality is
unacceptable to Disney, and accordingly, Disney recommends that
Licensee submit production samples to Disney for approval before
committing to a
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large original production run or to purchase a large shipment from a
new supplier.
D. No modification of an approved production sample shall be made without
Disney's further prior written approval. All SKUs of Articles being
sold must conform in all respects to the approved production sample.
It is understood that if in Disney's reasonable judgment the quality
of any SKU of an Article originally approved has deteriorated in later
production runs, or if the SKU has otherwise been altered, Disney may,
in addition to other remedies available to Disney, by written notice
require such SKU of the Article to be immediately withdrawn from the
market.
E. The rights granted hereunder do not permit the sale of "seconds" or
"irregulars". All Articles not meeting the standard of approved
samples shall be destroyed or all Licensed Material and Trademarks
shall be removed or obliterated therefrom.
F. Licensee is responsible for the consistent quality and safety of the
Articles and their compliance with applicable Laws. Disney will not
unreasonably object to any change in the design of an Article or in
the materials used in the manufacture of the Article or in the process
of manufacturing the Articles which Licensee advises Disney in writing
is intended to make the Article safer or more durable.
G. Disney shall have the right, by written notice to Licensee, to require
modification of any SKU of any Article approved by Disney under this
or any previous agreement between the parties pertaining to Licensed
Material. Likewise, if the Term of this Agreement is extended by
mutual agreement, Disney shall have the right, by written notice to
Licensee, to require modification of any SKU of any Article approved
by Disney under this Agreement. It is understood that there is no
obligation upon either party to extend the Agreement.
H. If Disney notifies Licensee of a required modification under Paragraph
6.G. with respect to any SKU of a particular Article, such
notification shall advise Licensee of the nature of the changes
required, and Licensee shall not accept any order for any such Article
until the subject SKU has been resubmitted to Disney with such changes
and Licensee has received Disney's written approval of the Article as
modified. However, Licensee may continue to distribute Licensee's
inventory of the previously approved Articles until such inventory is
exhausted (unless such Articles are dangerously defective or are
alleged to be violative of any third party rights, as determined by
Disney).
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I. Upon Disney's request, Licensee agrees to give Disney written notice
of the first ship date for each Article.
J. If Disney has inadvertently approved a concept, pre-production sample,
or production sample of a product which is not included in the
Articles under this Agreement, or if Disney has inadvertently approved
an Article using artwork or trademarks not included in the Agreement,
such approval may be revoked at any time without any obligation
whatsoever on Disney's part to Licensee. Any such product as to which
Disney's approval is revoked shall be deemed unauthorized and shall
not be distributed or sold by or for Licensee.
7. APPROVAL OF PACKAGING, PROMOTIONAL MATERIAL, AND ADVERTISING
A. All containers, packaging, display material, promotional material,
catalogs, and all advertising, including but not limited to,
television advertising and press releases, for Articles must be
submitted to Disney and receive Disney's written approval before use.
To avoid unnecessary expense if changes are required, Disney's
approval thereof should be procured when such is still in rough or
storyboard format. Disney shall endeavor to respond to requests for
approval within a reasonable time. Approval or disapproval shall lie
in Disney's sole discretion, and the use of unapproved containers,
packaging, display material, promotional material, catalogs or
advertising is prohibited. Disney's approval of any containers,
packaging, display material, promotional material, catalogs or
advertising under this Agreement will not constitute or imply a
representation or belief by Disney that such materials comply with any
applicable Laws. Whenever Licensee prepares catalog sheets or other
printed matter containing illustrations of Articles, Licensee will
furnish to Disney five (5) copies thereof when they are published.
B. If Disney has supplied Licensee with forms for use in applying for
approval of materials referenced in this Paragraph 7, Licensee shall
use such forms when submitting anything for Disney's approval.
C. Disney has designed character artwork or a brand name logo(s) to be
used by all licensees in connection with the packaging of all
merchandise using the Licensed Material, and, if applicable, on hang
tags and garment labels for such merchandise. Disney will supply
Licensee with reproduction artwork thereof, and Licensee agrees to use
such artwork or logo(s) on the packaging of the Articles, and, if
applicable, on hang tags and garment labels, which
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Licensee will have printed and attached to each Article at Licensee's
cost. Disney recommends that Licensee source the hang tags and garment
labels from Disney's authorized manufacturer (if any) of pre-approved
hang tags and garment labels, the name of which will be provided to
Licensee upon request. However, Licensee may use another manufacturer
for the required hang tags and garment labels if the hang tags and
garment labels manufactured are of equivalent quality and are approved
by Disney in accordance with Disney's usual approval process. The
packaging may be different for different distribution channels, and
Licensee agrees to use the packaging designated by Disney for the
applicable distribution channel.
8. ARTWORK
Licensee shall pay Disney, within thirty (30) days of receiving an invoice
therefor, for Style Guides and for artwork done at Licensee's request by
Disney or third parties under contract to Disney in the development and
creation of Articles, display, packaging or promotional material (including
any artwork which in Disney's opinion is necessary to modify artwork
initially prepared by Licensee and submitted to Disney for approval,
subject to Licensee's prior written approval) at Disney's then prevailing
commercial art rates, plus VAT if applicable. Estimates of artwork charges
are available upon request. While Licensee is not obligated to utilize the
services of Disney's Art Department, Licensee is encouraged to do so in
order to minimize delays which may occur if outside artists do renditions
of Licensed Material which Disney cannot approve and to maximize the
attractiveness of the Articles. Artwork will be returned to Licensee by
overnight courier, at Licensee's cost (unless other arrangements are made).
9. PRINT, RADIO OR TV ADVERTISING
Licensee will obtain all approvals necessary in connection with print,
radio or television advertising, if any, which Disney may authorize.
Licensee represents and warrants that all advertising and promotional
materials shall comply with all applicable Laws. Disney's approval of copy
or storyboards for such advertising will not constitute or imply a
representation or belief by Disney that such copy or storyboards comply
with any applicable Laws. This Agreement does not grant Licensee any rights
to use the Licensed Material in animation. Licensee may not use any
animation or live action footage from the Property from which the Licensed
Material comes without Disney's prior written approval in each instance. In
the event Disney approves the use of film clips of the Property from which
the Licensed Material comes, for use in a television commercial, Licensee
shall be responsible for any re-use fees which may be applicable, including
SAG payments for talent. No reproduction of the film clip footage shall be
made except for inclusion, as approved
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by Disney, in such commercial and there shall be no modifications of the
film clip footage. All film clip footage shall be returned to Disney
immediately after its inclusion in such commercial. Disney shall have the
right to prohibit Licensee from advertising the Articles by means of
television, billboards, or both. Such right shall be exercised within
Disney's absolute discretion, including without limitation for reasons of
overexposure of the Licensed Material.
10. LICENSEE NAME AND ADDRESS ON ARTICLES
A. Licensee's name, trade name (or Licensee's trademark which Licensee
has advised Disney in writing that Licensee is using) and Licensee's
address (at least city and state or province) will appear on
permanently affixed labeling on each Article and, 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 or CA numbers do not constitute a sufficient label under this
paragraph.
B. Licensee shall advise Disney in writing of all trade names or
trademarks Licensee wishes to use on Articles being sold under this
license. Licensee may sell the Articles only under mutually agreed
upon trade names or trademarks.
11. COMPLIANCE WITH APPROVED SAMPLES AND APPLICABLE LAWS AND STANDARDS
A. Licensee covenants that each Article and component thereof distributed
hereunder shall be of good quality and free of defects in design,
materials and workmanship, and shall comply with all applicable Laws,
and such specifications, if any, as may have been specified in
connection with this Agreement (e.g., Disney's Apparel Performance
Specification Manual, if the Articles are items of apparel), and shall
conform to the Sample thereof approved by Disney. Licensee covenants
that it will comply with all applicable Laws in performing this
Agreement, including but not limited to, those pertaining to the
manufacture, pricing, sale and distribution of the Articles.
B. Without limiting the foregoing, Licensee covenants on behalf of
Licensee's own manufacturing facilities, and agrees to require all
Manufacturers to covenant by signing the Manufacturer's Agreement
(referenced in Paragraph 24), as follows:
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(1) Licensee and the Manufacturers agree not to use child labor in
the manufacturing, packaging or distribution of Disney
merchandise. The term "child" refers to a person younger than the
local legal minimum age for employment or the age for completing
compulsory education, but in no case shall any child younger than
fifteen (15) years of age (or fourteen (14) years of age where
local law allows) be employed in the manufacturing, packaging or
distribution of Disney merchandise. Licensee and the
Manufacturers employing young persons who do not fall within the
definition of "children" agree also to comply with any Laws
applicable to such persons.
(2) Licensee and the Manufacturers agree only to employ persons whose
presence is voluntary. Licensee and the Manufacturers agree not
to use any forced or involuntary labor, whether prison, bonded,
indentured or otherwise.
(3) Licensee and the Manufacturers agree to treat each employee with
dignity and respect, and not to use corporal punishment, threats
of violence, or other forms of physical, sexual, psychological or
verbal harassment or abuse.
(4) Unless required by applicable Laws to treat a specific group of
employees differently, Licensee and the Manufacturers agree not
to discriminate in hiring and employment practices, including
salary, benefits, advancement, discipline, termination, or
retirement, on the basis of race, religion, age, nationality,
social or ethnic origin, sexual orientation, gender, political
opinion or disability.
(5) Licensee and the Manufacturers recognize that wages are essential
to meeting employees' basic needs. Licensee and Manufacturers
agree to comply, at a minimum, with all applicable wage and hour
Laws, including minimum wage, overtime, maximum hours, piece
rates and other elements of compensation, and to provide legally
mandated benefits. If local Laws do not provide for overtime pay,
Licensee and Manufacturers agree to pay at least regular wages
for overtime work. Except in extraordinary business
circumstances, Licensee and the Manufacturers will not require
employees to work more than the lesser of (a) 48 hours per week
and 12 hours overtime or (b) the limits on regular and overtime
hours allowed by local law, or, where local law does not limit
the hours of work, the regular work week in such country plus 12
hours overtime. In addition, except in extraordinary business
circumstances, employees will be entitled to
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at least one day off in every seven-day period. Licensee and the
Manufacturers agree that, where local industry standards are
higher than applicable legal requirements, they will meet the
higher standards.
(6) Licensee and the Manufacturers agree to provide employees with a
safe and healthy workplace in compliance with all applicable
Laws, ensuring, at a minimum, reasonable access to potable water
and sanitary facilities, fire safety, and adequate lighting and
ventilation. Licensee and the Manufacturers also agree to ensure
that the same standards of health and safety are applied in any
housing they provide for employees. Licensee and the
Manufacturers agree to provide Disney with all information Disney
may request about manufacturing, packaging and distribution
facilities for the Articles.
(7) Licensee and the Manufacturers agree to respect the rights of
employees to associate, organize and bargain collectively in a
lawful and peaceful manner, without penalty or interference, in
accordance with applicable Laws.
(8) Licensee and the Manufacturers agree to comply with all
applicable environmental Laws.
(9) Licensee and the Manufacturers agree to comply with all
applicable Laws, including those pertaining to the manufacture,
pricing, sale and distribution of the Articles.
(10) Licensee and the Manufacturers agree that Disney and its
designated agents (including third parties) may engage in
monitoring activities to confirm compliance with this Paragraph
11, including unannounced on-site inspections of manufacturing,
packaging and distribution facilities, and employer-provided
housing, such inspections to include reviews of books and records
relating to employment matters and private interviews with
employees. Licensee and the Manufacturers agree to maintain on
site all documentation necessary to demonstrate compliance with
this Paragraph 11. Licensee agrees to promptly reimburse Disney
for the reasonable cost of inspections performed pursuant to this
Paragraph 11 when any of Licensee's manufacturing facilities or
any Manufacturer does not pass the inspection(s). The amount
reimbursed will not be pro-rated in the event the Manufacturer is
also used by other licensees or vendors.
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(11) Licensee and the Manufacturers agree to take appropriate steps to
ensure that the provisions of this Code of Conduct are
communicated to employees, including the prominent posting of a
copy of the Code of Conduct for Manufacturers (copy attached) in
the local language and in a place readily accessible to employees
at all times.
C. Licensee agrees to be bound by the Code of Conduct for Licensees (copy
attached). This includes, but is not limited to, taking appropriate
steps, in consultation with Disney, and as required by Disney's
Compliance Program for licensees, to develop, implement and maintain
procedures to evaluate and monitor the Manufacturers it uses to
manufacture the Articles or components thereof, and to ensure
compliance with Paragraph 11.B., including but not limited to,
unannounced on-site inspections of manufacturing, packaging and
distribution facilities and employer-provided housing, reviews of
books and records relating to employment matters and private
interviews with employees. Licensee acknowledges that Disney may
require a pre-approval compliance inspection of any Manufacturers
Licensee wishes to use to produce the Articles, components, or related
items.
D. Both before and after Licensee puts Articles on the market, Licensee
shall follow reasonable and proper procedures for testing that
Articles comply with all applicable product safety Laws, and shall
permit Disney's designees to inspect testing, manufacturing and
quality control records and procedures and to test the Articles for
compliance with product safety and other applicable Laws. Licensee
agrees to promptly reimburse Disney for the actual costs of such
testing. Licensee shall also give due consideration to any
recommendations by Disney that Articles exceed the requirements of
applicable Laws. Articles not manufactured, packaged or distributed in
accordance with applicable Laws shall be deemed unapproved, even if
previously approved by Disney, and shall not be shipped unless and
until they have been brought into full compliance therewith.
12. DISNEY OWNERSHIP OF ALL RIGHTS IN LICENSED MATERIAL
Licensee acknowledges that the copyrights and all other proprietary rights
in and to Licensed Material are exclusively owned by and reserved to Disney
or its licensors, if applicable to any Property. Licensee shall neither
acquire nor assert copyright ownership or any other proprietary rights in
the Licensed Material or in any derivation, adaptation, variation or name
thereof. Without limiting the foregoing, Licensee hereby assigns to Disney
all Licensee's worldwide right, title and interest in the Licensed Material
and in any material objects consisting of or to the extent
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that they incorporate drawings, paintings, animation cels, or sculptures of
Licensed Material, or other adaptations, compilations, collective works,
derivative works, variations or names of Licensed Material, heretofore or
hereafter created by or for Licensee or any of Licensee's Affiliates. All
such new materials shall be included in the definition of "Licensed
Material" under this Agreement. If any third party makes or has made any
contribution to the creation of any new materials which are included in the
definition of Licensed Material under this Paragraph 12, Licensee agrees to
obtain from such party a full assignment of rights so that the foregoing
assignment by Licensee shall vest full rights to such new materials in
Disney. Licensee further covenants that any such new materials created by
Licensee or by any third party Licensee has engaged are original to
Licensee or such third party and do not violate the rights of any other
person or entity; this covenant regarding originality shall not extend to
any materials Disney supplies to Licensee, but does apply to all materials
Licensee or Licensee's third party contractors may add thereto. The
foregoing assignment to Disney of material objects shall not include that
portion of Licensee's displays, catalogs, or promotional material not
containing Licensed Material, or the physical items constituting the
Articles, unless such items are in the shape of the Licensed Material.
13. COPYRIGHT NOTICE
As a condition to the grant of rights hereunder, each Article and any other
matter containing Licensed Material shall bear a properly located
permanently affixed copyright notice in Disney's name (e.g., "(C) Disney"),
or such other notice as Disney specifies to Licensee in writing. Licensee
will comply with such instructions as to form, location and content of the
notice as Disney may give from time to time. Licensee will not, without
Disney's prior written consent, affix to any Article or any other matter
containing Licensed Material a copyright notice in any other name. If
through inadvertence or otherwise a copyright notice on any Article or
other such matter should appear in Licensee's name or the name of a third
party, Licensee hereby agrees to assign to Disney the copyright represented
by any such copyright notice in Licensee's name and, upon request, cause
the execution and delivery to Disney of whatever documents are necessary to
convey to Disney that copyright represented by any such copyright notice.
If by inadvertence a proper copyright notice is omitted from any Article or
other matter containing Licensed Material, Licensee agrees at Licensee's
expense to use all reasonable efforts to correct the omission on all such
Articles or other matter in process of manufacture or in distribution.
Licensee agrees to advise Disney promptly and in writing of the steps being
taken to correct any such omission and to make the corrections on existing
Articles which can be located.
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14. NON-ASSOCIATION OF OTHER MATERIAL WITH LICENSED MATERIAL
To preserve Disney's identification with Disney's Licensed Material and to
avoid confusion of the public, Licensee agrees not to associate other
characters or licensed properties with the Licensed Material or the
Trademarks either on the Articles or in their packaging, or, without
Disney's written permission, on advertising, promotional or display
materials. If Licensee wishes to use a character which constitutes
Licensee's trademark on the Articles or their packaging, or otherwise in
connection with the Articles, Licensee agrees to obtain Disney's prior
written permission.
15. ACTIVE MARKETING OF ARTICLES
Licensee agrees to manufacture (or have manufactured for Licensee) and
actively offer for sale all the Articles and to actively exercise the
rights granted herein. Licensee agrees that by the Marketing Date
applicable to a particular Article or, if such a date is not specified in
Paragraph 1.S., by six (6) months from the commencement of the term of the
applicable Schedule or the date of any applicable amendment, shipments to
customers of such Article will have taken place in sufficient time that
such Article shall be available for purchase in commercial quantities by
the public at the retail outlets in all distribution channels authorized
pursuant to Paragraph 2.A. In any case in which such sales have not taken
place or when the Article is not then and thereafter available for purchase
in commercial quantities by the public, Disney may either invoke Disney's
remedies under Paragraph 28, or withdraw such Article from the list of
Articles licensed in this Agreement, or withdraw the applicable
distribution channel, or withdraw such Article from the applicable
Schedule, without obligation to Licensee other than to give Licensee
written notice thereof.
16. PROMOTION COMMITMENT
A. Promotion Commitment
(1) Licensee agrees to carry out the Promotion Commitment, as defined
in Paragraph 1.N. The advertising and promotion activities
required thereunder to promote the sale of the Articles shall
include one or more of the following activities:
- point of purchase displays (not including packaging or other
individual product costs)
- media advertising
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- measurable public relations programs
- sampling
- contests and games approved in advance in writing by Disney
- trade shows, catalog or trade activities, fashion shows
- participation in group promotions organized by Disney
- other activities as agreed in advance in writing with Disney
All promotional material is subject to the approval provisions of
Paragraph 7 hereof.
(2) For purposes of determining Licensee's satisfaction of the
Promotion Commitment, all consumer advertising and merchandising
costs associated with the above-listed activities for the
Articles, but not including packaging or other individual product
costs, will be counted toward the requirement; provided, however,
that any advertising discounts given in connection with
cooperative advertising may not be included in the calculation.
(3) One time during each twelve (12) month period during the Term,
Licensee also shall provide Disney with a statement describing
the funds theretofore spent and consumer exposure provided as
required in this Paragraph, together with a description of the
manner in which such funds were spent, all of which information
shall be broken down by country within the Territory, and
provided in such detail as Disney may specify from time to time.
Amounts spent in excess of the Promotion Commitment during any
Royalty Payment Period may be credited against the Promotion
Commitment for any other Royalty Payment Period occurring in the
same annual twelve month period during the Term. If in any
Royalty Payment Period Licensee has not satisfied the Promotion
Commitment, Licensee (i) may carry forward such shortfall into
the next succeeding Royalty Payment Period (other than in the
case of a shortfall in the final Royalty Payment Period
hereunder, in which case no carry forwards shall be permitted),
or (ii) shall pay Disney the amount of such shortfall as
liquidated damages; provided, however, no shortfall (or fraction
thereof) may be carried forward more than twelve months. Licensee
acknowledges that its expenditure of the Promotion Commitment as
provided for herein increases the value of the business from
which Disney benefits as licensor. Licensee and Disney agree that
it is impracticable and extremely difficult to fix the actual
damages which may proximately result from Licensee's failure to
fulfill its obligation as provided for herein, and Licensee's
liability for failure to do so
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shall, for each Royalty Payment Period, be limited to and fixed
at the sum of an amount equal to the shortfall between the amount
Licensee actually spends on the Promotion Commitment during such
Royalty Payment Period as theretofore reported to Disney and the
amount required to be expended hereunder. Such cumulative amount
shall be considered liquidated damages and not a penalty.
17. TRADEMARK RIGHTS AND OBLIGATIONS
A. All uses of the Trademarks by Licensee hereunder shall inure to
Disney's benefit. Licensee acknowledges that Disney (or its licensors,
if applicable) is the exclusive owner of all the Trademarks, and of
any trademark incorporating all or any part of a Trademark or any
Licensed Material, and the trademark rights created by such uses.
Without limiting the foregoing, Licensee hereby assigns to Disney all
the Trademarks, and any trademark incorporating all or any part of a
Trademark or any Licensed Material, and the trademark rights created
by such uses, together with the goodwill attaching to that part of the
business in connection with which such Trademarks or trademarks are
used. Licensee agrees to follow Disney's instructions for proper use
of the Trademarks and trademarks, and to execute and deliver to Disney
such documents as Disney requires to protect and register the
Trademarks and trademarks.
B. Licensee agrees not to use any Licensed Material or Trademarks, or any
trademark incorporating all or any part of a Trademark or of any
Licensed Material, on any business sign, business cards, stationery or
forms (except as licensed herein), or to use any Licensed Material or
Trademark as the name of Licensee's business or any division thereof,
unless otherwise agreed by Disney in writing.
C. Nothing contained herein shall prohibit Licensee from using Licensee's
own trademarks on the Articles or Licensee's copyright notice on the
Articles when the Articles contain independent material which is
Licensee's property. Nothing contained herein is intended to give
Disney any rights to, and Disney shall not use, any trademark,
copyright or patent used by Licensee in connection with the Articles
which is not derived or adapted from Licensed Material, Trademarks, or
other materials owned by Disney (or its licensors, if applicable).
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18. REGISTRATIONS
Except with Disney's written consent, neither Licensee nor any of
Licensee's Affiliates will register or attempt in any country to register
copyrights in, or to register as a trademark, service mark, design patent
or industrial design, or business designation, any of the Licensed
Material, Trademarks or derivations or adaptations thereof, or any word,
symbol or design which is so similar thereto as to suggest association with
or sponsorship by Disney or any of Disney's Affiliates. In the event of
breach of the foregoing, Licensee agrees, at Licensee's expense and at
Disney's request, immediately to terminate the unauthorized registration
activity and promptly to execute and deliver, or cause to be delivered, to
Disney such assignments and other documents as Disney may require to
transfer to Disney all rights to the registrations, patents or applications
involved.
19. UNLICENSED USE OF LICENSED MATERIALS
A. Licensee agrees that Licensee will not use the Licensed Material, or
the Trademarks, or any other material the copyright to which is owned
by Disney in any way other than as herein authorized (or as is
authorized in any other written contract in effect between the
parties). In addition to any other remedy Disney may have, Licensee
agrees that all revenues from any unauthorized use thereof, and all
revenues from the use of any other copyrighted material of Disney's
(or its licensors', if applicable) without written authorization from
Disney, shall be immediately payable to Disney.
B. Licensee agrees to give Disney prompt written notice of any unlicensed
use by third parties of Licensed Material or Trademarks, and that
Licensee will not, without Disney's written consent, bring or cause to
be brought any criminal prosecution, lawsuit or administrative action
for infringement, interference with or violation of any rights to
Licensed Material or Trademarks. Because of the need for and the high
costs of an effective anti-piracy enforcement program, Licensee agrees
to cooperate with Disney, and, if necessary, to be named by Disney as
a sole complainant or co-complainant in any action against an
infringer of the Licensed Material or Trademarks and, notwithstanding
any right of Licensee to recover same, legal or otherwise, Licensee
agrees to pay to Disney, and hereby waives all claims to, all damages
or other monetary relief recovered in such action by reason of a
judgment or settlement whether or not such damages or other monetary
relief, or any part thereof, represent or are intended to represent
injury sustained by Licensee as a licensee hereunder; in any such
action against an infringer, Disney agrees to reimburse Licensee for
reasonable expenses
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incurred at Disney's request, including reasonable attorney's fees if
Disney has requested Licensee to retain separate counsel.
20. STATEMENTS AND PAYMENTS OF ROYALTIES
A. Licensee agrees to furnish to Disney by the 25th day after each
Royalty Payment Period full and accurate statements on statement forms
Disney designates for Licensee's use, showing all information
requested by such forms separately for each Property licensed
hereunder, including but not limited to, the name of the subject
Property, the quantities, Net Invoiced Billings (reported in U.S.
Dollars and, if the Territory includes any country other than the
U.S., Net Invoiced Billings also should be reported in the currency
invoiced to customers) and applicable Royalty rate(s) of Articles
using Licensed Material from such Property invoiced during the
preceding Royalty Payment Period, and the quantities and invoice value
of Articles returned for credit or refund in such period, as well as
sales forecasts (if requested), and the country of sale. At the same
time Licensee will pay Disney all Royalties plus VAT (if applicable)
due on billings shown by such statements. All monies owed to Disney
shall be sent to the address identified in Paragraph 20.E., or, if
requested by Disney, by electronic transfer to such account as Disney
may designate. To the extent that any monies owed to Disney under this
Agreement are not paid, Licensee authorizes Disney to offset any
amount(s) which is due at any time against any sums which Disney or
any of Disney's Affiliates may owe to Licensee or any of Licensee's
Affiliates. No deduction or withholding from Royalties payable to
Disney shall be made by reason of any tax. Any applicable tax on the
manufacture, distribution and sale of the Articles shall be borne by
Licensee. All payments are to be made in U.S. Dollars. In the event
that an exchange rate is necessary, Licensee shall use the official
buying rate of exchange as published in the Wall Street Journal, New
York Edition, on the last business day of the applicable Royalty
Payment Period, and Licensee shall identify such exchange rate on the
Royalty reporting forms.
B. The statement forms Disney designates for Licensee's use may be
changed from time to time, and Licensee agrees to use the most current
form designated by Disney (including, for example, forms to be sent by
electronic transmission). If it is necessary for Licensee to adapt its
system to be able to report statements by electronic transmission, or
to make payments by electronic transfer, all costs of such adaptation
shall be borne entirely by Licensee. Licensee agrees to fully comply
with all instructions supplied by Disney for completing any reporting
forms, or adhering to any required format. Upon at least six (6)
months' notice from Disney, the Royalty
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Payment Period may be changed from quarterly to monthly, unless this
Agreement already provides for a monthly Royalty Payment Period.
C. In addition to the other information requested by the statement forms,
and any special requirements stated in the applicable Schedule for any
Property licensed hereunder, Licensee's statement shall with respect
to all Articles report separately:
(1) F.O.B. In Sales;
(2) F.O.B. Out Sales;
(3) sales of Articles outside the Territory pursuant to a
distribution permission (indicating the country involved);
(4) Licensee's sales of Articles to any of Disney's licensees or
Disney's Affiliates' licensees who are licensed to sell the
Articles, and who are reselling such Articles and paying Disney
royalties on such resales; in such cases, Licensee need only
report the sales on the statements, because double royalties are
not owed to Disney on these sales;
(5) sales of Articles to Disney or any of Disney's Affiliates;
(6) sales of Articles to Licensee's or Disney's employees;
(7) sales of Articles designating the Licensed Material used from
each brand or property, motion picture, television series and
other Property identified in Paragraph 1.B. hereinabove or in any
Schedule attached hereto;
(8) sales of Articles to or for distribution through any mail order
catalogs and any Etailers approved under this Agreement.
D. Sales of items licensed under contracts with Disney other than this
Agreement shall not be reported on the same statement as sales of
Articles under this Agreement.
E. Licensee's statements and payments, including all Royalties, shall be
delivered to such address as Disney designates; currently, such
address is: Wachovia South Metro Center, DEI Account, P.O. Box 101947,
Atlanta, Georgia 30392. A copy of each statement must be sent to
Disney at 500
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South Buena Vista Street, Burbank, California 91521-6653, to the
attention of the Contract Administrator, Consumer Products Division.
If Licensee wishes to send statements and payments by overnight
courier, the current address is: Wachovia South Metro Center, DEI
Account, 3585 Atlanta Avenue, Hapeville, GA 30354, Attention Peggy
Morris, Reference Lock box 101947. However, Advances should be mailed
directly to Disney at 500 South Buena Vista Street, Burbank,
California 91521-6653, to the attention of the Contract Administrator
or Legal Department, Consumer Products Division.
F. From time to time, upon request by Disney, Licensee shall furnish to
Disney's Credit Department, no later than seven days after such
request, such financial reports, including balance sheets, statements
of income and cash flows, as Disney deems necessary to evaluate
Licensee's ongoing creditworthiness and ability to perform this
Agreement.
21. CONFIDENTIALITY
Licensee represents and warrants that Licensee did not disclose to any
third party the prospect of a license from Disney, and that Licensee did
not trade on the prospect of a license from Disney, prior to full execution
of this Agreement. Licensee agrees not to issue any press release regarding
this Agreement or Disney without obtaining Disney's prior written consent.
Licensee agrees to keep the terms and conditions of this Agreement
confidential, and Licensee shall not disclose such terms and conditions to
any third party without obtaining Disney's prior written consent; provided,
however, that this Agreement may be disclosed on a need-to-know basis to
Licensee's attorneys and accountants who agree to be bound by this
confidentiality provision. In addition, Licensee may have access to
information concerning Disney's or its Affiliates' business and operations,
or information concerning works in progress, artwork, plots, characters or
other matters relating to Disney's or its Affiliates' artistic creations,
which information may not be accessible or known to the general public.
Licensee agrees not to use or disclose such information to any third party
without obtaining Disney's prior written consent. In the event Licensee is
required to disclose this Agreement, or any part thereof, pursuant to any
law, court order or process, the rules and regulations of any governmental
department, agency or authority (including, but not limited to, the
Securities and Exchange Commission) or any generally accepted accounting
rules mandating disclosure in Licensee's financial statements, Licensee
agrees to give Disney prior written notice and to use its best efforts to
obtain confidential treatment of this Agreement. Upon Disney's request,
Licensee agrees to incorporate Disney's comments into Licensee's request
for confidential treatment, provided such request
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and comments are received in writing by Licensee within five (5) business
days after Disney's receipt of the notice referred to in the preceding
sentence.
22. INTEREST
Royalties or any other payments due to Disney hereunder which are received
after the due date shall bear interest at the rate of 18% per annum from
the due date (or the maximum permissible by law if less than 18%).
23. AUDITS AND MAINTAINING RECORDS
A. Licensee agrees to keep accurate records of all transactions relating
to this Agreement and any prior agreement with Disney regarding the
Licensed Material, including, without limitation, shipments to
Licensee of Articles and components thereof, inventory records,
records of sales and shipments by Licensee, and records of returns,
and to preserve such records for the lesser of seven (7) years or two
(2) years after the expiration or termination of this Agreement.
B. Disney, or Disney's representatives, shall have the right from time to
time, during Licensee's normal business hours, but only for the
purpose of confirming Licensee's performance hereunder, to examine and
make extracts and photocopies from all such records, including the
general ledger, invoices and any other records which Disney reasonably
deems appropriate to verify the accuracy of Licensee's statements or
Licensee's performance hereunder, including records of Licensee's
Affiliates and unaffiliated sublicensees if they are involved in
activities which are the subject of this Agreement. In particular,
Licensee's invoices shall identify the Articles separately from goods
which are not licensed hereunder. Licensee acknowledges that Disney
may furnish Licensee with an audit questionnaire, and Licensee agrees
to fully and accurately complete such questionnaire, and return it to
Disney within the designated time. Disney's use of an audit
questionnaire shall not limit Disney's ability to conduct any on-site
audit(s) as provided above. Licensee acknowledges that an audit
conducted by Disney or its representatives, may involve one or more
license agreements at a time.
C. If in an audit of Licensee's records it is determined that there is a
short fall of five percent (5%) or more in Royalties reported for any
Royalty Payment Period, Licensee shall upon request from Disney
reimburse Disney for the full out-of-pocket costs of the audit,
including the costs of employee auditors calculated at U.S. $60 per
hour per person for travel time during normal working hours and actual
working time.
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D. If Licensee has failed to keep adequate records for one or more
Royalty Payment Periods, Disney will assume that the Royalties owed to
Disney for such Royalty Payment Period(s) are equal to a reasonable
amount, determined in Disney's absolute discretion, which may be up to
but will not exceed the highest Royalties owed to Disney in a Royalty
Payment Period for which Licensee has kept adequate records; if
Licensee has failed to keep adequate records for any Royalty Payment
Period, Disney will assume a reasonable amount of Royalties which
Licensee will owe to Disney, based on the records Licensee has kept
and other reasonable assumptions Disney deems appropriate.
24. MANUFACTURE OF ARTICLES BY THIRD PARTY MANUFACTURERS
A. Licensee agrees to supply Disney with the names and addresses of all
of its own manufacturing facilities for the Articles. If Licensee at
any time desires to use a third-party Manufacturer to produce the
Articles, components of Articles, or related items bearing Licensed
Material, Trademarks, or both, whether the third party is located
within or outside the Territory, Licensee must, as a condition to the
continuation of this Agreement, notify Disney of the accurate name and
complete address of such Manufacturer and the Articles, components, or
related items, and obtain Disney's prior written permission to do so.
If Disney is prepared to grant permission, Disney will do so if each
of Licensee's Manufacturers signs a Manufacturer's Agreement in a form
which Disney will furnish to Licensee, and Disney receives all such
agreements properly signed. Disney also may require a pre-approval
compliance inspection of a Manufacturer prior to the production of any
Articles, components, or other items involved. Licensee must
immediately notify Disney if Licensee is no longer using a
Manufacturer to manufacture the Articles, components, or related
items.
(A SAMPLE OF SAID AGREEMENT FORM IS AVAILABLE ON REQUEST)
B. If any such Manufacturer utilizes Licensed Material or Trademarks for
any unauthorized purpose, Licensee shall cooperate fully in bringing
such utilization to an immediate halt. If, by reason of Licensee's not
having supplied the above mentioned agreements to Disney or not having
given Disney the name of any Manufacturer, Disney makes any
representation or takes any action and is thereby subjected to any
penalty or expense, Licensee will fully compensate Disney for any cost
or loss Disney sustains (in addition to any other legal or equitable
remedies available to Disney).
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C. If any Manufacturer fails to pass a compliance inspection as
referenced in Paragraph 11, and thereafter fails to remedy the cited
failure(s) within the time designated by Disney, or if the
Manufacturer otherwise breaches the Manufacturer's Agreement, the
Manufacturer's Agreement for such Manufacturer may be terminated
immediately by Disney, and Licensee shall not thereafter use such
Manufacturer to manufacture Articles, components, or related items. In
the case of a pre-approval compliance inspection, if a Manufacturer
fails to pass the compliance inspection, and thereafter fails to
remedy the cited failure(s) within the time designated by Disney,
Licensee shall not use such Manufacturer to produce Articles,
components or related items. If Licensee fails to notify Disney that
it has ceased using a particular Manufacturer, and Disney or its
designated agent conducts a compliance inspection of such
Manufacturer, Licensee remains obligated to work with the Manufacturer
to remedy any cited failure(s), or, in the alternative, the
Manufacturer's Agreement shall be deemed terminated for purposes of
Paragraph 28.B. (10), and Licensee shall promptly reimburse Disney for
the reasonable cost of the compliance inspection.
25. INDEMNITY
A. Licensee shall indemnify Disney during and after the term hereof
against all claims, demands, suits, judgments, losses, liabilities
(including settlements entered into in good faith with Licensee's
consent, not to be unreasonably withheld) and expenses of any nature
(including reasonable attorneys' fees) arising out of Licensee's
activities under this Agreement, including but not limited to, any
actual or alleged: (1) negligent acts or omissions on Licensee's part,
(2) defect (whether obvious or hidden and whether or not present in
any Sample approved by Disney) in an Article, (3) personal injury, (4)
infringement of any rights of any other person by the manufacture,
sale, possession or use of Articles, (5) breach on Licensee's part of
any covenant, representation or warranty contained in this Agreement,
or (6) failure of the Articles or by Licensee to comply with
applicable Laws. The parties indemnified hereunder shall include
Disney Enterprises, Inc., its licensors, if applicable, and its and
their Affiliates and successors, and its and their officers,
directors, employees and agents. The indemnity shall not apply to any
claim or liability relating to any infringement of the copyright of a
third party caused by Licensee's utilization of the Licensed Material
and the Trademarks in accordance with the provisions hereof, unless
such claim or liability arises out of Licensee's failure to obtain the
full assignment of rights referenced in Paragraph 12.
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B. Disney shall indemnify Licensee during and after the term hereof
against all claims, demands, suits, judgments, losses, liabilities
(including settlements entered into in good faith with Disney's
consent, not to be unreasonably withheld) and expenses of any nature
(including reasonable attorneys' fees) arising out of any claim that
Licensee's use of any representation of the Licensed Material or the
Trademarks approved in accordance with the provisions of this
Agreement infringes the copyright of any third party or infringes any
right granted by Disney to such third party, except for claims arising
out of Licensee's failure to obtain the full assignment of rights
referenced in Paragraph 12. Licensee shall not, in any case, be
entitled to recover for lost profits.
C. Additionally, if by reason of any claims referred to in Paragraph
25.B., Licensee is precluded from selling any stock of Articles or
utilizing any materials in Licensee's possession or which come into
Licensee's possession by reason of any required recall, Disney shall
be obligated to purchase such Articles and materials from Licensee at
their out-of-pocket cost to Licensee, excluding overheads, but Disney
shall have no other responsibility or liability with respect to such
Articles or materials.
D. Disney gives no warranty or indemnity with respect to any liability or
expense arising from any claim that use of the Licensed Material or
the Trademarks on or in connection with the Articles hereunder or any
packaging, advertising or promotional material infringes on any
trademark right of any third party or otherwise constitutes unfair
competition by reason of any prior rights acquired by such third
party, other than rights acquired from Disney. It is expressly agreed
that it is Licensee's responsibility to carry out such investigations
as Licensee may deem appropriate to establish that Articles,
packaging, and promotional and advertising material which are
manufactured or created hereunder, including any use made of the
Licensed Material and the Trademarks therewith, do not infringe such
right of any third party, and Disney shall not be liable to Licensee
if such infringement occurs.
E. Licensee and Disney agree to give each other prompt written notice of
any claim or suit which may arise under the indemnity provisions set
forth above. Without limiting the foregoing, Licensee agrees to give
Disney written notice of any product liability claim made or suit
filed with respect to any Article, any investigations or directives
regarding the Articles issued by the U.S. Consumer Product Safety
Commission ("CPSC") or other federal, state, provincial, or local
consumer safety agency, and any notices sent by Licensee to, or
received by Licensee from, the CPSC or other consumer
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safety agency regarding the Articles within fourteen (14) days of
Licensee's receipt or promulgation of the claim, suit, investigation,
directive, or notice.
26. INSURANCE
Licensee shall maintain in full force and effect at all times while this
Agreement and any Schedule(s) entered into hereunder are in effect and for
three years thereafter commercial general liability insurance on a per
occurrence form, including broad form coverage for contractual liability,
property damage, products liability and personal injury liability
(including bodily injury and death), waiving subrogation, with minimum
limits of no less than two million dollars (US $2,000,000.00) per
occurrence, and naming as an additional "insured" each party indemnified in
Paragraph 25 hereof. Licensee also agrees to maintain in full force and
effect at all times while this Agreement and any Schedule(s) entered into
hereunder are in effect such Worker's Compensation Insurance as is required
by applicable provincial or state law and, if Licensee is a U.S.-based
licensee, Employer's Liability Insurance with minimum limits of one million
dollars (US $1,000,000.00) per occurrence. All insurance shall be primary
and not contributory. Licensee shall deliver to Disney a certificate or
certificates of insurance evidencing satisfactory coverage and indicating
that Disney shall receive thirty (30) days unrestricted prior written
notice of cancellation, non-renewal or of any material change in coverage.
Licensee's insurance shall be carried by an insurer with a BEST Guide
rating of B + VII or better. Compliance herewith in no way limits
Licensee's indemnity obligations, except to the extent that Licensee's
insurance company actually pays Disney amounts which Licensee would
otherwise pay Disney.
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27. WITHDRAWAL OF LICENSED MATERIAL
Licensee agrees that Disney may, without obligation to Licensee other than
to give Licensee written notice thereof, withdraw from the scope of this
Agreement any Licensed Material which by the Marketing Date or, if such a
date is not specified in Paragraph 1.S., by six (6) months from the
commencement of the term of the applicable Schedule or the date of any
applicable amendment, is not being used on or in connection with the
Articles. Disney may also withdraw any Licensed Material or Articles the
use or sale of which under this Agreement would infringe or reasonably be
claimed to infringe the rights of a third party, other than rights granted
by Disney, in which case Disney's obligations to Licensee shall be limited
to the purchase at cost of Articles and other materials utilizing such
withdrawn Licensed Material which cannot be sold or used. In the case of
any withdrawal under the preceding sentence, the Advances and Guarantees
shall be adjusted to correspond to the time remaining in the term of the
affected Schedule(s), or the number of Articles remaining under such
Schedule(s), at the date of withdrawal.
28. TERMINATION
Without prejudice to any other right or remedy available to Disney:
A. Disney shall have the right at any time to terminate this Agreement
(or any Schedule(s) entered into hereunder) by giving Licensee written
notice thereof, if Licensee (i) fails to manufacture, sell or
distribute the Articles in accordance with this Agreement, (ii) fails
to timely furnish statements and timely pay Royalties or any other
amounts due to Disney hereunder, (iii) fails to notify Disney of the
accurate name and complete address of Licensee's manufacturing
facilities or any Manufacturer of the Articles, (iv) fails to have any
such Manufacturer execute the Manufacturer's Agreement, or (v)
otherwise fails to comply with or perform any other obligation or
covenant hereunder or breaches any other term of this Agreement (other
than those set forth in Paragraph 28.B. below); provided that Licensee
shall have thirty (30) days (or, in the case of non-payment of any
monetary obligations due Disney under the Agreement within fifteen
(15) days) after Disney sends Licensee written notice of termination
to correct any such failure or breach capable of being corrected and
avoid termination.
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B. Disney shall have the right at any time to terminate this Agreement
immediately upon giving Licensee written notice thereof if one or more
of the following events occur (provided, however, that with respect to
clause (6) below such termination shall occur immediately without the
need for any notice):
(1) if Licensee delivers to any customer without Disney's written
authorization merchandise containing representations of Licensed
Material or other material the copyright or other proprietary
rights to which are owned by Disney other than Articles listed
herein and approved in accordance with the provisions hereof;
(2) if Licensee delivers Articles outside the Territory or knowingly
sells Articles to a third party for delivery outside the
Territory, unless pursuant to a written distribution permission
or separate written license agreement with Disney or any of
Disney's Affiliates;
(3) if a breach occurs which is of the same nature, and which
violates the same provision of this Agreement, as a breach of
which Disney has previously given Licensee written notice;
(4) if Licensee breaches any material term of any other license
agreement between the parties, and Disney terminates such
agreement for cause;
(5) if Licensee breaches any surviving obligation under any other
license agreement between the parties, even if such agreement has
expired;
(6) if Licensee shall generally not pay its debts as such debts
become due, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against
Licensee seeking to adjudicate it as bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of any
order for relief or the appointment of a receiver, trustee or
other similar official for all or for any substantial part of its
property or assets;
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(7) if Licensee is not permitted or is unable to operate Licensee's
business in the usual manner, or is not permitted or is unable to
provide Disney with assurance satisfactory to Disney that
Licensee will so operate Licensee's business, as debtor in
possession or its equivalent;
(8) if any event shall occur or condition shall exist under any
agreement or instrument relating to institutional indebtedness or
financial obligations owed by Licensee, including the failure to
pay principal or interest thereon, and such event or condition
shall continue after any applicable grace period specified in
such agreement or instrument, and the effect of such event or
condition is to accelerate, or to permit the acceleration of, the
maturity of such indebtedness or obligations or otherwise cause,
or to permit the holder thereof to cause, such indebtedness or
obligations to mature;
(9) if Licensee, due to material changes in its financial position,
or for other reasons, is unable to meet Licensee's obligations
under this Agreement, or is unable to provide Disney with
assurance satisfactory to Disney that Licensee will be able to
meet such obligations;
(10) if Licensee breaches any covenant set forth in Paragraph 11 of
this Agreement; or
(11) if more than three Manufacturer's Agreements are terminated in
any twelve-month period by Disney for the Manufacturers' failure
to pass compliance inspections as referenced in Paragraphs 11 and
24.
C. If Disney terminates this Agreement pursuant to this Paragraph 28,
Licensee shall not be permitted to seek injunctive relief to contest
Disney's determination that a termination event has occurred or to
otherwise affect Disney's full and absolute control of the Licensed
Material and the Trademarks; provided however, Licensee may bring an
action for damages, but prior to and during any such action, Disney
shall have full and absolute control over the Licensed Material and
the Trademarks.
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29. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION
A. Upon the expiration or termination of this Agreement, all rights
herein granted to Licensee shall revert to Disney, any unpaid portion
of the Guarantee shall be immediately due and payable (together with
the Royalty statement due at such time), and Disney shall be entitled
to retain all Royalties and other things of value paid or delivered to
Disney. Licensee agrees that the Articles shall be manufactured during
the term of each applicable Schedule 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 term thereof.
Licensee agrees that from the expiration or termination of this
Agreement Licensee shall neither manufacture nor have manufactured for
Licensee any Articles, that Licensee will deliver to Disney any and
all artwork (including Style Guides, animation cels and drawings)
which may have been used or created by Licensee in connection with
this Agreement, that Licensee will at Disney's option either sell to
Disney at cost or destroy or efface any molds, plates and other items
used to reproduce Licensed Material or Trademarks, and that, except as
hereinafter provided, Licensee will cease selling Articles. Any
unauthorized distribution of Articles after the expiration or
termination of this Agreement or any applicable Schedule shall
constitute copyright infringement.
B. If Licensee has any unsold Articles in inventory on the expiration or
termination date of the applicable Schedule, Licensee shall provide
Disney with a full statement of the kinds and numbers of such unsold
Articles. If such statement has been provided to Disney and if
Licensee has fully complied with the terms of this Agreement,
including the payment of all Royalties due and the Guarantee, upon
notice from Disney, Licensee shall have the right for a limited period
of two (2) calendar months from such expiration or earlier termination
date to sell off and deliver such Articles as authorized under
Paragraph 2.A. Licensee shall furnish Disney statements covering such
sales and pay Disney Royalties in respect of such sales. Such
Royalties shall not be applied against the applicable Advance or
towards meeting the applicable Guarantee. If the sell-off period is
extended by Disney to a date which is not the last day of the Royalty
Payment Period, Licensee's statement and Royalties for such sell-off
period shall be due twenty-five (25) days after the last day of the
sell-off period. All rights and remedies available to Disney during
the Term shall be equally available to Disney during the sell-off
period.
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C. In recognition of Disney's interest in maintaining a stable and viable
market for the Articles during and after the Term and any sell-off
period, Licensee agrees to refrain from "dumping" the Articles in the
market during the Term and any sell-off period granted to Licensee.
"Dumping" shall mean the distribution of product at volume levels
significantly above Licensee's prior sales practices with respect to
the Articles, and at price levels so far below Licensee's prior sales
practices with respect to the Articles as to disparage the Articles;
provided, however, that nothing contained herein shall be deemed to
restrict Licensee's ability to set product prices at Licensee's
discretion.
D. Except as otherwise agreed by Disney in writing, any inventory of
Articles in Licensee's possession or control after the expiration or
termination of the term of the applicable Schedule hereof and of any
sell-off period granted hereunder shall be destroyed, or all Licensed
Material and Trademarks removed or obliterated therefrom.
E. If Disney supplies Licensee with forms regarding compliance with this
Paragraph 29, Licensee agrees to complete, execute and return such
forms to Disney expeditiously. Licensee acknowledges that this will be
necessary at the end of the term of each Schedule entered into under
this Agreement.
F. Notwithstanding any provision to the contrary, in the case of
termination under Paragraph 28.B. (6) or (7), in order to protect the
value of the Articles and to avoid any disparagement of the Articles
which could occur as a result of the circumstances of termination,
Disney shall have the option, in Disney's absolute discretion, to
purchase any or all unsold Articles in Licensee's inventory on the
termination date at 20% over Licensee's cost of goods for such
Articles (not including overhead).
30. WAIVERS
A waiver by either party at any time of a breach of any provision of this
Agreement shall not apply to any breach of any other provision of this
Agreement, or imply that a breach of the same provision at any other time
has been or will be waived, or that this Agreement has been in any way
amended, nor shall any failure by either party to object to conduct of the
other be deemed to waive such party's right to claim that a repetition of
such conduct is a breach hereof.
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31. PURCHASE OF ARTICLES BY DISNEY
If Disney wishes to purchase Articles, Licensee agrees to sell such
Articles to Disney or any of Disney's Affiliates at as low a price as
Licensee charges for similar quantities sold to Licensee's regular
customers and to pay Disney Royalties on any such sales.
32. NON-ASSIGNABILITY
A. This Agreement, and the rights granted hereunder to Licensee, are
personal to Licensee, who was specifically chosen by Disney to be
licensed hereunder because of Licensee's and certain employees'
particular expertise and ability to design, produce and sell the
Articles in ways which maximize the value of the Articles, and to
otherwise perform the Agreement. Licensee shall not voluntarily or by
operation of law assign, sub-license, transfer, encumber or otherwise
dispose of all or any part of Licensee's interest in this Agreement
(including, but not limited to, any encumbrance of the Articles)
without Disney's prior written consent, to be granted or withheld in
Disney's absolute discretion. Any attempted assignment, sub-license,
transfer, encumbrance or other disposal without such consent shall be
void and shall constitute a material default and breach of this
Agreement. "Transfer" within the meaning of this Paragraph 32 shall
include any merger or consolidation involving Licensee or any directly
or indirectly controlling Affiliate(s) of Licensee ("Controlling
Affiliate"); any sale or transfer of all or substantially all of
Licensee's or its Controlling Affiliate(s)' assets; any transfer of
Licensee's rights, obligations, or both, under this Agreement, to a
division, business segment or other entity different from the one
specifically referenced on page 1 hereof (or any sale or attempted
sale of Articles under a trademark or trade name of such division,
business segment or other entity); any public offering, or series of
public offerings, whereby a cumulative total of thirty-three and
one-third percent (33 1/3%) or more of the voting stock of Licensee or
its Controlling Affiliate(s) is offered for purchase; and any
acquisition, or series of acquisitions, by any person or entity, or
group of related persons or entities, of a cumulative total of
thirty-three and one-third percent (33-1/3%) or more of the voting
stock of Licensee or its Controlling Affiliate(s), or the right to
vote such percentage (or, if Licensee is a partnership, resulting in
the transfer of thirty-three and one-third percent (33-1/3%) or more
of the profit and loss participation in Licensee, or the occurrence of
any of the foregoing with respect to any general partner of Licensee;
or, if Licensee is a legal entity other than a corporation or
partnership, resulting in the transfer of thirty-three and one-third
percent (33-
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1/3%) or more of the control of Licensee, or the occurrence of any of
the foregoing with respect to any manager or administrator of the
legal entity).
B. Licensee agrees to provide Disney with at least thirty (30) days prior
written notice of any desired assignment of this Agreement or other
transfer as defined in Paragraph 32.A. At the time Licensee gives such
notice, Licensee shall provide Disney with the information and
documentation necessary to evaluate the contemplated transaction.
Disney's consent (if given) to any assignment of this Agreement or
other transfer as defined in Paragraph 32.A. shall be subject to such
terms and conditions as Disney deems appropriate, including but not
limited to, payment of a transfer fee. The amount of the transfer fee
shall be determined by Disney based upon the circumstances of the
particular assignment or transfer, taking into account such factors as
the estimated value of the license being assigned or otherwise
transferred; the risk of business interruption or loss of quality,
production or control Disney may suffer as a result of the assignment
or other transfer; the identity, reputation, creditworthiness,
financial condition and business capabilities of the proposed assignee
or other entity involved in the transfer; and Disney's internal costs
related to the assignment or other transfer; provided, however, in no
event shall the transfer fee be in an amount less than U.S. $ * for
each Disney license (or Schedule), brand and/or property (as
applicable) involved in an assignment or other transfer, up to a
maximum total fee of U.S. $ * per transfer for all affected Disney
licenses (or Schedules), brands and/or properties (as applicable)
within the Territory and Canada at the time of the subject transfer.
The foregoing transfer fee shall not apply if this Agreement is
assigned to one of Licensee's Affiliates as part of a corporate
reorganization exclusively among some or all of the entities existing
in Licensee's corporate structure when this Agreement is signed;
provided, however, that Licensee must give Disney written notice of
such assignment and a description of the reorganization.
Notwithstanding the foregoing, a transfer fee will not be triggered by
any of the following transfers of voting stock or other beneficial
interest in Licensee, unless occurring as part of or in conjunction
with a transaction that would trigger a transfer fee: (1)
distribution(s) in the ordinary course of Licensee's business on
employee or director stock option plans; or (2) transfers for estate
planning purposes among the current shareholders of Licensee who are
members of the Sidman family (including their spouses and children) as
their interests appear when this Agreement is signed; or (3)
repurchases of its own stock by Licensee as part of a corporate stock
repurchase program but not including any issuer tender offer or
exchange offer; provided, however, that Licensee shall maintain
substantially the same management and continue to operate in
substantially the same fashion as prior to any of the transfers
described
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above, and provided further, that in any event, any of the transfers
described above shall remain subject to Disney's consent as set forth
in Paragraph 32.A. The provisions of this Paragraph 32 shall supersede
any conflicting provisions on this subject in any merchandise license
agreement previously entered into between the parties for this
Territory.
C. Licensee acknowledges that it has read and understands the Transfer
Fee Policy attached hereto, which governs transfer fee procedures
under this Agreement. The Transfer Fee Policy is incorporated herein
by this reference.
D. Notwithstanding Paragraphs 32.A. and B., Licensee may, upon Disney's
prior written consent, sublicense Licensee's rights, obligations, or
both, under this Agreement, to any of Licensee's Affiliates, provided
that each such Affiliate agrees to be bound by all of the terms and
conditions of this Agreement, and provided that each such Affiliate
agrees to guarantee Licensee's full performance of this Agreement
(including, but not limited to, Paragraph 25) and to indemnify Disney
for any failure of such performance, and further provided that
Licensee and each such Affiliate agree to provide Disney with
satisfactory documentation of such agreement(s), guarantee(s), and
indemnification upon Disney's request therefor, and in a form
satisfactory to Disney. Licensee hereby represents and irrevocably and
unconditionally guarantees that any and all Affiliates sublicensed
hereunder will observe and perform all of Licensee's obligations under
this Agreement, including, but not limited to, the provisions
governing approvals, and compliance with approved samples, applicable
Laws, indemnification and all other provisions hereof, and that they
will otherwise adhere strictly to all of the terms hereof and act in
accordance with Licensee's obligations hereunder. Any involvement of
an Affiliate in the activities which are the subject of this Agreement
shall be deemed carried on pursuant to such a sublicense and thus
covered by such guarantee; however, unless Licensee has obtained
Disney's consent to sublicense an Affiliate in each instance, such
Affiliate shall be deemed to be included in the term "Licensee" for
all purposes under this Agreement, and Disney may treat such
unapproved involvement of the Affiliate as a breach of the Agreement.
In the event of any sublicense to an Affiliate hereunder, the
reference in Paragraph 32.A. to "Controlling Affiliate" shall include
such Affiliate sublicensee.
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33. RELATIONSHIP
This Agreement does not provide for a joint venture, partnership, agency or
employment relationship between the parties, or any other relationship than
that of licensor and licensee.
34. CONSTRUCTION
The language of all parts of this Agreement shall in all cases be construed
as a whole, according to its fair meaning and not strictly for or against
any of the parties. Headings of paragraphs herein are for convenience of
reference only and are without substantive significance.
35. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT
Except as otherwise provided herein, this Agreement can only be extended or
modified by a writing signed by authorized representatives of both parties;
provided, however, that certain modifications shall be effective if signed
by the party to be charged and communicated to the other party.
36. NOTICES
All notices which either party is required or may desire to serve upon the
other party shall be in writing, addressed to the party to be served at the
address set forth on page 1 of this Agreement, and may be served personally
or by depositing the same addressed as herein provided (unless and until
otherwise notified), postage prepaid, in the United States mail. Such
notice shall be deemed served upon personal delivery or upon the date of
mailing; provided, however, that Disney shall be deemed to have been served
with a notice of a request for approval of materials under this Agreement
only upon Disney's actual receipt of the request and of any required
accompanying materials. Any notice sent to Disney hereunder shall be sent
to the attention of "Vice President, Licensing", unless Disney advises
Licensee in writing otherwise.
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.
<PAGE> 41
The First Years, Inc.
CONSUMER PRODUCTS LICENSE - DISNEY PROPERTIES
Agreement dated August 1, 2000
Page 41
38. PREVIOUS AGREEMENTS
This Agreement, and any confidentiality agreement Licensee may have signed
pertaining to any of the Licensed Material, contains the entire agreement
between the parties concerning the subject matter hereof and supersedes any
pre-existing or contemporaneous agreement and any oral or written
communications between the parties.
39. CHOICE OF LAW AND FORUM
This Agreement shall be deemed to be an executory agreement entered into in
California and shall be governed and interpreted according to the laws of
the State of California applicable to contracts made and to be fully
performed in California. Any legal actions pertaining to this Agreement
shall be commenced within the State of California and within either Los
Angeles or Orange Counties, and Licensee consents to the jurisdiction of
the courts located in Los Angeles or Orange Counties.
40. EQUITABLE RELIEF
Licensee acknowledges that Disney will have no adequate remedy at law if
Licensee continues to manufacture, sell, advertise, promote or distribute
the Articles upon the expiration or termination of the term of any
applicable Schedule under this Agreement. Licensee acknowledges and agrees
that, in addition to any and all other remedies available to Disney, Disney
shall have the right to have any such activity by Licensee restrained by
equitable relief, including, but not limited to, a temporary restraining
order, a preliminary injunction, a permanent injunction, or such other
alternative relief as may be appropriate, without the necessity of Disney
posting any bond.
41. GOODWILL
Licensee acknowledges that the rights and powers retained by Disney
hereunder are necessary to protect Disney's (or its licensors', if
applicable) copyrights and property rights, and, specifically, to conserve
Disney's (and its licensors', if applicable) goodwill and good name, and
the name "Disney", and therefore Licensee agrees that Licensee will not
allow the same to become involved in matters which will, or could, detract
from or impugn the public acceptance and popularity thereof, or impair
their legal status.
<PAGE> 42
The First Years, Inc.
CONSUMER PRODUCTS LICENSE - DISNEY PROPERTIES
Agreement dated August 1, 2000
Page 42
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, audits, and Paragraph 29, shall survive
termination, cancellation or expiration of this Agreement.
44. SEVERABILITY OF PROVISIONS
The terms of this Agreement are severable and the invalidity of any term of
this Agreement shall not affect the validity of any other term.
Please sign below under the word "Agreed". When signed by both parties this
shall constitute an agreement between Disney and Licensee.
AGREED:
DISNEY ENTERPRISES, INC.
By: /s/ Jeffery Fradin
----------------------------------
Title: Vice President
-------------------------------
Date: 9/20/00
--------------------------------
THE FIRST YEARS, INC.
By: /s/ Ronald J. Sidman
----------------------------------
Title: President
-------------------------------
<PAGE> 43
CATALOG SCHEDULE
(LIST OF PRE-APPROVED CATALOGS)
HOME FURNISHINGS/HOUSEWARES
Upscale
-------
Ballard Design
Casual Living
Celebration Fantastic
Chambers
Charles Keath
Chef's Catalog
Faith Mountain
Garnett Hill
Hand-in-Hand
Horchow
Kitchen & Home
Kitchen Kaboodle
Linda Anderson
Metropolitan Museum of Art
Museum of Fine Arts, Boston
Norm Thompson
Nursery Works
One Step Ahead
Potpourri
Reader's Digest Home Life
Ross-Simons
Seasons
Sensational Beginnings
Signals
This Catalog Schedule is subject to change. Disney reserves the right to add
catalogs to or delete catalogs from the Catalog Schedule without prior notice to
Licensee. Licensee agrees to cease selling Articles to a deleted catalog within
sixty (60) days after written notice of the deletion. Disney will consider new
catalogs requested by Licensee on a case-by-case basis.
05/01/98
<PAGE> 44
CATALOG SCHEDULE
(LIST OF PRE-APPROVED CATALOGS)
HOME FURNISHINGS/HOUSEWARES
Upscale
-------
(Continued)
Smithsonian
Spiegel
Sugar Hill
The Cotton Gin
The Linen Source
The Paragon
The Right Start
The Wish List
Touch of Class
Touchstone
Trifles
Wireless
This Catalog Schedule is subject to change. Disney reserves the right to add
catalogs to or delete catalogs from the Catalog Schedule without prior notice to
Licensee. Licensee agrees to cease selling Articles to a deleted catalog within
sixty (60) days after written notice of the deletion. Disney will consider new
catalogs requested by Licensee on a case-by-case basis.
05/01/98
<PAGE> 45
CATALOG SCHEDULE
(LIST OF PRE-APPROVED CATALOGS)
HOME FURNISHINGS/HOUSEWARES
Mass
----
Apple Creek
Armchair Shopper
Avon (EXCLU. PERSONAL CARE)
Domestications
Fingerhut
Lillian Vernon
Miles Kimball
Popular Club
This Catalog Schedule is subject to change. Disney reserves the right to add
catalogs to or delete catalogs from the Catalog Schedule without prior notice to
Licensee. Licensee agrees to cease selling Articles to a deleted catalog within
sixty (60) days after written notice of the deletion. Disney will consider new
catalogs requested by Licensee on a case-by-case basis.
05/01/98
<PAGE> 46
SCHEDULE TO LICENSE AGREEMENT
1. Schedule #1 to License Agreement Dated August 1, 2000 between Disney
Enterprises, Inc. and THE FIRST YEARS, INC. ("Agreement").
2. Effective date of this Schedule: January 1, 2001.
3. Termination date of this Schedule: *.
4. Property: Winnie The Pooh characters (i.e., WINNIE THE POOH, CHRISTOPHER
ROBIN, PIGLET, RABBIT, EEYORE, TIGGER, OWL, GOPHER, KANGA AND ROO), all in
the style as designed by Disney, but only depictions of such characters,
and accompanying design elements, as may be designated by Disney.
5. Territory: The United States, United States PX's wherever located, and
United States territories and possessions, excluding Puerto Rico,
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 also may supply Articles to such stores in Puerto Rico.
6. Marketing Date: By January 1, 2001, for all Articles.
7. Royalty Advance payment(s) and due date(s): * .
8. Royalty Guarantee increments during the term of this Schedule:
*
9. Royalty rate:
*
10. Articles:
A. FEEDING AND SOOTHING:
(1) Bottles
(2) Bibs (vinyl only)
(3) Cups
(4) Pacifiers and attachers
(5) Bowls
(6) Dishes
(7) Feeding utensils
(8) Snack containers
(9) Cool totes
(10) Placemats
(11) Floor mats
(12) Burp cloths
<PAGE> 47
Schedule 1 to Agreement dated Auguest 1, 2000
Page 2
(13) Toddler sports bottles
B. CARE AND SAFETY:
(1) Changing pads
(2) Carriers (front and back)
(3) Handheld showers
(4) Sponges
(5) Spout guards
(6) Shampoo visors
(7) Car organizers
(8) Non-activity crib lights
(9) Combs and brushes
(10) Night lights
(11) Car shades
(12) Diaper pins
(13) Tub thermometers
(14) Tub organizers
(15) Infant bath tubs
(16) Baby bathers
(17) Hooded towels
(18) Wash cloths/wash mitts
(19) Booster seats
(20) Step stools
(21) Infant toothbrushes and toothcare organizers
(22) Bed rails
(23) Monitors
(24) Scratch mitts
(25) Bath mats
(26) Hampers
C. PLAYTHINGS:
(1) Hand-held rattles
(2) Teethers
(3) Suction toys
(4) Linking toys
(5) Electronic hand-held toys (with rattle or squeaker functions)
(6) Bath toys
(7) Crib toys
(8) Foot rattles and wrist rattles
(9) Squeeze toys
(10) Infant rings
(11) Chime balls
(12) Bouncy seats
(13) Accessory toys (i.e., stroller toys, carrier toys and high
chair toys)
For the period commencing * , and ending * , the SKU designs for Articles
Numbers A.1, A.2, A.3, B.11 and C.1 shall be refreshed and renewed. For the
period commencing
<PAGE> 48
Schedule 1 to Agreement dated Auguest 1, 2000
Page 3
* , and ending * , the SKU designs for Articles Numbers A.4 through A.7,
B.9, B.21 and C.2 shall be refreshed and renewed.
Articles Numbers C.1 through C.13 shall be replaced as mutually agreed upon
by Disney and Licensee during the designated planning process.
One "marquee" Article utilizing the Property set forth in section 4 above
shall be presented at the Juvenile Products Manufacturers Association
(JPMA) during each calendar year of the term of this Schedule. For purposes
of this Schedule, a "marquee" Article is defined as an Article which
contains or includes an innovation or technological advance, or has
strategic significance in the industry, as mutually determined by Disney
and Licensee during mutually designated planning meetings.
Licensee shall produce between one to two category "breakout" Articles
utilizing the Property set forth in section 4 above during each calendar
year of the term of this Schedule. For purposes of this Schedule, a
"breakout" Article is defined as an existing Article which contains or
includes a new innovative or technological feature or advancement, but on a
lower level than a marquee Article, as mutually determined by Disney and
Licensee during mutually designated planning meetings.
11. Samples: Six (6) of each SKU of each Article.
12. Distribution:
Licensee 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 to such Retailers: (1) mass market Retailers
(including such Retailers as Target, Toys R Us, WalMart and Kmart), (2)
value-oriented department stores (including such Retailers as Sears and
Mervyn's), (3) value-oriented specialty stores, (4) drug store chains, and
(5) supermarkets and food chains; provided, however, that Article Number
C.13 may be sold only to the infant buyers of supermarkets and food chains.
Articles Numbers A.1 through A.4, A.9, A.13, B.2, B.5, B.14, B.21, B.25,
C.1, C.2, C.5 through C.8 and C.11 also may be sold to the following
Retailers in the Territory for resale to the public in the Territory, or to
Wholesalers in the Territory for resale to such Retailers: (1) upscale
Retailers (including such Retailers as Robinsons-May, Nordstrom's and
Bloomingdale's), (2) better specialty stores, and (3) mid-tier department
stores (including such Retailers as J.C. Penney and Kohl's). Licensee will
not sell the Articles to unauthorized Retailers or Wholesalers, or to
warehouse clubs, convenience stores or gas stations. If there is a question
as to whether a particular customer falls within any of the categories
specified herein, Disney's determination shall be binding. Licensee may
sell the Articles utilizing the Property set forth in section 4 above to
customers for resale through the mass catalogs listed on the Mass Catalog
Schedule to the Agreement, subject to Paragraph 2.A.(4) of the Agreement
and this Schedule 1. In addition, Articles Numbers A.1 through A.4, A.9,
A.13, B.2, B.5, B.14, B.21, B.25, C.1, C.2, C.5 through C.8 and C.11 may be
sold to customers for resale through the upscale catalogs listed on the
Upscale Catalog Schedule to the Agreement, subject to Paragraph 2.A.(4) of
the Agreement and this Schedule 1.
13. Special provisions:
A. Copyright notice:
<PAGE> 49
Schedule 1 to Agreement dated Auguest 1, 2000
Page 4
Without limiting the provisions of Paragraph 13 of the Agreement,
Licensee agrees to include on the Article, or the packaging for the
Article, or the hang tag for the Article (if applicable), the
following language: Based on the "Winnie The Pooh" works, copyright
A.A. Milne and E.H. Shepard.
<PAGE> 50
SCHEDULE TO LICENSE AGREEMENT
1. Schedule #2 to License Agreement Dated August 1, 2000 between Disney
Enterprises, Inc. and THE FIRST YEARS, INC. ("Agreement").
2. Effective date of this Schedule: January 1, 2001.
3. Termination date of this Schedule: * .
4. Properties: DISNEY CLASSICS, comprised of the following individual
Properties (collectively, the "Disney Classics Properties"):
A. WALT DISNEY'S BAMBI characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
B. WALT DISNEY'S SLEEPING BEAUTY characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
C. WALT DISNEY'S SNOW WHITE AND THE SEVEN DWARFS characters, but only
such characters and depictions of such characters, and accompanying
design elements, as may be designated by Disney;
D. WALT DISNEY'S THE JUNGLE BOOK characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
E. WALT DISNEY'S CINDERELLA characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
F. WALT DISNEY'S DUMBO characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
G. WALT DISNEY'S LADY AND THE TRAMP characters, but only such characters
and depictions of such characters, and accompanying design elements,
as may be designated by Disney;
H. WALT DISNEY'S PINOCCHIO characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
I. WALT DISNEY'S ALICE IN WONDERLAND characters, but only such characters
and depictions of such characters, and accompanying design elements,
as may be designated by Disney;
J. WALT DISNEY'S PETER PAN characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
K. WALT DISNEY'S THE ARISTOCATS characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
<PAGE> 51
Schedule 2 to Agreement dated August 1, 2000
Page 2
L. DISNEY'S ALADDIN characters, but only such characters and depictions
of such characters, and accompanying design elements, as may be
designated by Disney;
M. DISNEY'S BEAUTY AND THE BEAST characters, but only such characters and
depictions of such characters, and accompanying design elements, as
may be designated by Disney;
N. DISNEY'S PRINCESS characters, but only such characters and depictions
of such characters, and accompanying design elements, as may be
designated by Disney.
5. Territory: The United States, United States PX's wherever located, and
United States territories and possessions, excluding Puerto Rico,
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 also may supply Articles to such stores in Puerto Rico.
6. Marketing Date: Any time during the term of this Schedule for all Articles
using all Disney Classics Properties constituting the Properties.
7. Royalty Advance payment(s) and due date(s): * .
8. Royalty Guarantee increments during the term of this Schedule:
*
9. Royalty rate:
*
10. Articles:
A. FEEDING AND SOOTHING:
(1) Bottles
(2) Bibs (vinyl only)
(3) Cups
(4) Pacifiers and attachers
(5) Bowls
(6) Dishes
(7) Feeding utensils
(8) Snack containers
(9) Cool totes
(10) Placemats
(11) Floor mats
(12) Burp cloths
(13) Toddler sports bottles
B. CARE AND SAFETY:
(1) Changing pads
<PAGE> 52
Schedule 2 to Agreement dated Auguest 1, 2000
Page 3
(2) Carriers (front and back)
(3) Hand-held showers
(4) Sponges
(5) Spout guards
(6) Shampoo visors
(7) Car organizers
(8) Non-activity crib lights
(9) Combs and brushes
(10) Night lights
(11) Car shades
(12) Diaper pins
(13) Tub thermometers
(14) Tub organizers
(15) Infant bath tubs
(16) Baby bathers
(17) Hooded towels
(18) Wash cloths/wash mitts
(19) Booster seats
(20) Step stools
(21) Infant toothbrushes and toothcare organizers
(22) Bed rails
(23) Monitors
(24) Scratch mitts
(25) Bath mats
(26) Hampers
C. PLAYTHINGS:
(1) Hand-held rattles
(2) Teethers
(3) Suction toys
(4) Linking toys
(5) Electronic hand-held toys (with rattle or squeaker functions)
(6) Bath toys
(7) Crib toys
(8) Foot rattles and wrist rattles
(9) Squeeze toys
(10) Infant rings
(11) Chime balls
(12) Bouncy seats
(13) Accessory toys (i.e., stroller toys, carrier toys, and high
chair toys)
For the period commencing * , and ending * , the SKU designs for Articles
Numbers A.1, A.2, A.3, B.11 and C.1 shall be refreshed and renewed. For the
period commencing *, and ending *, the SKU designs for Articles Numbers A.4
through A.7, B.9, B.21 and C.2 shall be refreshed and renewed.
Articles Numbers C.1 through C.13 shall be replaced as mutually agreed upon
by Disney and Licensee during the designated planning process.
<PAGE> 53
Schedule 2 to Agreement dated Auguest 1, 2000
Page 4
One "marquee" Article utilizing the Property set forth in section 4 above
shall be presented at the Juvenile Products Manufacturers Association
(JPMA) during each calendar year of the term of this Schedule. For purposes
of this Schedule, a "marquee" Article is defined as an Article which
contains or includes an innovation or technological advance, or has
strategic significance in the industry, as mutually determined by Disney
and Licensee during the designated planning process.
Licensee shall produce between one to two category "breakout" Articles
utilizing the Property set forth in section 4 above during each calendar
year of the term of this Schedule. For purposes of this Schedule, a
"breakout" Article is defined as an existing Article which contains or
includes a new innovative or technological feature or advancement, but on a
lower level than a marquee Article, as mutually determined by Disney and
Licensee during the designated planning process.
11. Samples: Six (6) of each SKU of each Article.
12. Distribution:
Licensee 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 to such Retailers: (1) mass market Retailers
(including such Retailers as Target, Toys R Us, WalMart and Kmart), (2)
value-oriented department stores (including such Retailers as Sears and
Mervyn's), (3) value-oriented specialty stores, (4) drug store chains, and
(5) supermarkets and food chains; provided, however, that Article Number
C.13 may be sold only to the infant buyers of supermarkets and food chains.
Articles Numbers A.1 through A.4, A.9, A.13, B.2, B.5, B.14, B.21, B.25,
C.1, C.2, C.5 through C.8 and C.11 also may be sold to the following
Retailers in the Territory for resale to the public in the Territory, or to
Wholesalers in the Territory for resale to such Retailers: (1) upscale
Retailers (including such Retailers as Robinsons-May, Nordstrom's and
Bloomingdale's), (2) better specialty stores, and (3) mid-tier department
stores (including such Retailers as J.C. Penney and Kohl's). Licensee will
not sell the Articles to unauthorized Retailers or Wholesalers, or to
warehouse clubs, convenience stores or gas stations. If there is a question
as to whether a particular customer falls within any of the categories
specified herein, Disney's determination shall be binding. Licensee may
sell the Articles utilizing the Property set forth in section 4 above to
customers for resale through the mass catalogs listed on the Mass Catalog
Schedule to the Agreement, subject to Paragraph 2.A.(4) of the Agreement
and this Schedule 2. In addition, Articles Numbers A.1 through A.4, A.9,
A.13, B.2, B.5, B.14, B.21, B.25, C.1, C.2, C.5 through C.8 and C.11 may be
sold to customers for resale through the upscale catalogs listed on the
Upscale Catalog Schedule to the Agreement, subject to Paragraph 2.A.(4) of
the Agreement and this Schedule 2.
13. Special provisions:
A. Alternative releases:
Licensee acknowledges that the individual Disney Classics Properties
constituting the Property are Disney's original animated features,
some or all of which may be released on video during the term of this
Schedule, and include any theatrical re-releases of said Disney
Classics Properties. Licensee further acknowledges that Licensee's
license hereunder does not extend to any live action versions of these
<PAGE> 54
Schedule 2 to Agreement dated Auguest 1, 2000
Page 5
Disney Classics Properties (whether or not animation is included in
such versions), any remakes, prequels or sequels of these Disney
Classics Properties, any direct to video remakes, prequels or sequels
of these or any other derivation or adaptation of these Disney
Classics Properties in any media whatsoever. All of the foregoing
variations shall be referred to as "Alternative Releases." In the
event there is an Alternative Release of any of the Disney Classics
Properties during the term of this Schedule, upon written notice from
Disney, Licensee shall have the right to negotiate with Disney as to
the terms and conditions applicable to a license for any such
Alternative Release. If after good faith negotiations for up to thirty
(30) days, the parties are not able to reach agreement as to the terms
and conditions for any such license, Disney may, upon written notice
to Licensee, withdraw the affected Disney Classics Property(ies) from
the Licensed Material. In such case, Licensee will immediately cease
manufacturing Articles using such Disney Classics Property(ies) except
as necessary to fulfill orders in hand, and Licensee may continue to
sell its then current inventory of Articles using such Disney Classics
Property(ies) until the end of the term of this Schedule or ninety
(90) days after Disney's written notice, whichever is earlier. Disney
shall also consider, in good faith, whether there should be a
reduction of the Guarantee because of the deletion of any Disney
Classics Property.
B. Statements and Payments of Royalties:
In addition to the information requested pursuant to Paragraph 20 of
the Agreement, Licensee shall separately report all information
required under the Agreement regarding the Disney's Princess Property,
and may report collectively for all of the other Disney Classics
Properties.
<PAGE> 55
SCHEDULE TO LICENSE AGREEMENT
1. Schedule #3 to License Agreement Dated August 1, 2000 between Disney
Enterprises, Inc. and THE FIRST YEARS, INC. ("Agreement").
2. Effective date of this Schedule: August 1, 2000.
3. Termination date of this Schedule: *.
4. Property: Disney's Standard Characters (i.e., MICKEY MOUSE, MINNIE MOUSE,
DONALD DUCK, DAISY DUCK, PLUTO and GOOFY, but not SPORT GOOFY), but only
depictions of such characters, and accompanying design elements, as may be
designated by Disney.
5. Territory: The United States, United States PX's wherever located, and
United States territories and possessions, excluding Puerto Rico,
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 also may supply Articles to such stores in Puerto Rico.
6. Marketing Date: By December 1, 2000, for all Articles.
7. Royalty Advance payment(s) and due date(s): * .
8. Royalty Guarantee increments during the term of this Schedule:
*
9. Royalty rate:
*
10. Articles:
A. FEEDING AND SOOTHING:
(1) Bottles
(2) Bibs (vinyl only)
(3) Cups
(4) Pacifiers and attachers
(5) Bowls
(6) Dishes
(7) Feeding utensils
(8) Snack containers
(9) Cool totes
(10) Placemats
(11) Floor mats
(12) Burp cloths
(13) Toddler sports bottles
<PAGE> 56
Schedule 3 to Agreement dated Auguest 1, 2000
Page 2
B. CARE AND SAFETY:
(1) Changing pads
(2) Carriers (front and back)
(3) Hand-held showers
(4) Sponges
(5) Spout guards
(6) Shampoo visors
(7) Car organizers
(8) Non-activity crib lights
(9) Combs and brushes
(10) Night lights
(11) Car shades
(12) Diaper pins
(13) Tub thermometers
(14) Tub organizers
(15) Infant bath tubs
(16) Baby bathers
(17) Hooded towels
(18) Wash cloths/wash mitts
(19) Booster seats
(20) Step stools
(21) Infant toothbrushes and toothcare organizers
(22) Bed rails
(23) Monitors
(24) Scratch mitts
(25) Bath mats
(26) Hampers
C. PLAYTHINGS:
(1) Hand-held rattles
(2) Teethers
(3) Suction toys
(4) Linking toys
(5) Electronic hand-held toys (with rattle or squeaker functions)
(6) Bath toys
(7) Crib toys
(8) Foot rattles and wrist rattles
(9) Squeeze toys
(10) Infant rings
(11) Chime balls
(12) Bouncy seats
(13) Accessory toys (i.e., stroller toys, carrier toys and high
chair toys)
For the period commencing * , and ending * , the SKU designs for Articles
Numbers A.1, A.2, A.3, B.11 and C.1 shall be refreshed and renewed. For the
period commencing *, and ending *, the SKU designs for Articles Numbers A.4
through A.7, B.9, B.21 and C.2 shall be refreshed and renewed.
<PAGE> 57
Schedule 3 to Agreement dated Auguest 1, 2000
Page 3
Articles Numbers C.1 through C.13 shall be replaced as mutually agreed upon
by Disney and Licensee during the designated planning process.
One "marquee" Article utilizing the Property set forth in section 4 above
shall be presented at the Juvenile Products Manufacturers Association
(JPMA) during each calendar year of the term of this Schedule. For purposes
of this Schedule, a "marquee" Article is defined as an Article which
contains or includes an innovation or technological advance, or has
strategic significance in the industry, as mutually determined by Disney
and Licensee during the designated planning process.
Licensee shall produce between one to two category "breakout" Articles
utilizing the Property set forth in section 4 above during each calendar
year of the term of this Schedule. For purposes of this Schedule, a
"breakout" Article is defined as an existing Article which contains or
includes a new innovative or technological feature or advancement, but on a
lower level than a marquee Article, as mutually determined by Disney and
Licensee during the designated planning process.
11. Samples: Six (6) of each SKU of each Article.
12. Distribution:
Licensee 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 to such Retailers: (1) mass market Retailers
(including such Retailers as Target, Toys R Us, WalMart and Kmart), (2)
value-oriented department stores (including such Retailers as Sears and
Mervyn's), (3) value-oriented specialty stores, (4) drug store chains, and
(5) supermarkets and food chains; provided, however, that Article Number
C.13 may be sold only to the infant buyers of supermarkets and food chains.
Articles Numbers A.1 through A.4, A.9, A.13, B.2, B.5, B.14, B.21, B.25,
C.1, C.2, C.5 through C.8 and C.11 also may be sold to the following
Retailers in the Territory for resale to the public in the Territory, or to
Wholesalers in the Territory for resale to such Retailers: (1) upscale
Retailers (including such Retailers as Robinsons-May, Nordstrom's and
Bloomingdale's), (2) better specialty stores, and (3) mid-tier department
stores (including such Retailers as J.C. Penney and Kohl's). Licensee will
not sell the Articles to unauthorized Retailers or Wholesalers, or to
warehouse clubs, convenience stores or gas stations. If there is a question
as to whether a particular customer falls within any of the categories
specified herein, Disney's determination shall be binding. Licensee may
sell the Articles utilizing the Property set forth in section 4 above to
customers for resale through the mass catalogs listed on the Mass Catalog
Schedule to the Agreement, subject to Paragraph 2.A.(4) of the Agreement
and this Schedule 3. In addition, Articles Numbers A.1 through A.4, A.9,
A.13, B.2, B.5, B.14, B.21, B.25, C.1, C.2, C.5 through C.8 and C.11 may be
sold to customers for resale through the upscale catalogs listed on the
Upscale Catalog Schedule to the Agreement, subject to Paragraph 2.A.(4) of
the Agreement and this Schedule 3.
<PAGE> 58
TRANSFER FEE POLICY
As provided in Paragraph 32.B. of the License Agreement, it is Disney's policy
to charge a transfer fee in connection with any permitted assignment of the
license or other "transfer," as that term is defined in Paragraph 32.A. The
amount of the transfer fee is based on the circumstances of the particular
assignment or transfer, taking into account such factors as:
- the estimated value of the license being assigned or involved in the
transfer
- the risk of business interruption
- the risk of loss of quality, production or control
- the identity, reputation, creditworthiness, financial condition and
business capabilities of the proposed assignee or entity involved in
the transfer
- Disney's internal costs related to the assignment or transfer
At a minimum, the transfer fee will be U.S. $ * for each license, brand and/or
property (as applicable), and as agreed between Disney and The First Years, the
transfer fee may be in an amount up to a maximum total fee of U.S. $ * per
transfer for all affected licenses within the Territory and Canada at the time
of the subject transfer, subject to those exceptions stated in Paragraph 32.B.
of the License Agreement. No Licensee or any company involved with a Licensee in
an assignment or transfer situation should rely upon any express or implied
verbal representations that are purported to be made on Disney's behalf as to
the amount of any given fee to be assessed. Disney Licensing's Finance
Department will communicate the actual amount of the fee calculated in each
approved transaction.
In any prospective assignment or transfer situations, Licensees must inform the
persons and companies with which they are dealing that no assignment or transfer
may occur without Disney's prior written consent, to be granted or withheld in
Disney's absolute discretion, and that any approved transaction will also entail
a transfer fee. Licensees must give Disney at least 30 days prior written notice
of any desired assignment or other transfer, together with any information and
documentation necessary to evaluate the contemplated transaction. Licensees
should not endanger the closing of their desired transactions by failing to
comply with these provisions of the License Agreement.
If Disney grants consent to a proposed transaction subject to the payment of a
transfer fee, and the transaction is concluded but the transfer fee is not paid
within the designated time, the subject License Agreement(s) shall automatically
terminate and any Guarantee shortfall(s) shall be immediately due and payable to
Disney. If Disney does not grant consent to a proposed assignment or transfer
and the Licensee nevertheless closes the transaction, the subject License
Agreement(s) shall automatically terminate and any Guarantee shortfall(s) shall
be immediately due and payable to Disney.
Disney's consent to any assignment or other transfer should in no way be
understood to be a guarantee or promise by Disney of a grant of any future
license(s), as those determinations will continue to be made on a contract by
contract basis.
Licensees must keep confidential all of the terms and conditions of Disney's
determinations regarding any transfer, including but not limited to, the amount
of any transfer fee required, except to the extent that Licensee is required to
disclose the terms and conditions of Disney's determination regarding any
transfer pursuant to any law, court order or process, the rules and regulations
of any governmental department, agency or authority (including, but not limited
to, the Securities and Exchange Commission) or generally accepted accounting
rules mandating disclosure in Licensee's financial statements. However, Disney
shall be permitted to review such disclosures in advance of their publication to
verify accuracy and to verify that the confidential information so disclosed
does not extend beyond what is necessary.
<PAGE> 59
CODE OF CONDUCT FOR MANUFACTURERS
At The Walt Disney Company, we are committed to:
- a standard of excellence in every aspect of our business and in every
corner of the world;
- ethical and responsible conduct in all of our operations;
- respect for the rights of all individuals; and
- respect for the environment.
We expect these same commitments to be shared by all manufacturers of Disney
merchandise. At a minimum, we require that all manufacturers of Disney
merchandise meet the following standards:
CHILD LABOR Manufacturers will not use child labor.
The term "child" refers to a person younger than 15
(or 14 where local law allows) or, if higher, the
local legal minimum age for employment or the age for
completing compulsory education.
Manufacturers employing young persons who do not fall
within the definition of "children" will also comply
with any laws and regulations applicable to such
persons.
INVOLUNTARY LABOR Manufacturers will not use any forced or involuntary
labor, whether prison, bonded, indentured or otherwise.
COERCION AND
HARASSMENT Manufacturers will treat each employee with dignity
and respect, and will not use corporal punishment,
threats of violence or other forms of physical,
sexual, psychological or verbal harassment or abuse.
NONDISCRIMINATION Manufacturers will not discriminate in hiring and
employment practices, including salary, benefits,
advancement, discipline, termination or retirement,
on the basis of race, religion, age, nationality,
social or ethnic origin, sexual orientation, gender,
political opinion or disability.
ASSOCIATION Manufacturers will respect the rights of employees to
associate, organize and bargain collectively in a
lawful and peaceful manner, without penalty or
interference.
HEALTH AND SAFETY Manufacturers will provide employees with a safe and
healthy workplace in compliance with all applicable
laws and regulations, ensuring at a minimum, reasonable
access to potable water and sanitary facilities, fire
safety, and adequate lighting and ventilation.
Manufacturers will also ensure that the same
standards of health and safety are applied in any
housing that they provide for employees.
<PAGE> 60
COMPENSATION We expect manufacturers to recognize that wages are
essential to meeting employees' basic needs.
Manufacturers will, at a minimum, comply with all
applicable wage and hour laws and regulations,
including those relating to minimum wages, overtime,
maximum hours, piece rates and other elements of
compensation, and provide legally mandated benefits. If
local laws do not provide for overtime pay,
manufacturers will pay at least regular wages for
overtime work. Except in extraordinary business
circumstances, manufacturers will not require employees
to work more than the lesser of (a) 48 hours per week
and 12 hours overtime or (b) the limits on regular and
overtime hours allowed by local law or, where local law
does not limit the hours of work, the regular work week
in such country plus 12 hours overtime. In addition,
except in extraordinary business circumstances,
employees will be entitled to at least one day off in
every seven-day period.
Where local industry standards are higher than
applicable legal requirements, we expect
manufacturers to meet the higher standards.
PROTECTION OF THE
ENVIRONMENT Manufacturers will comply with all applicable
environmental laws and regulations.
OTHER LAWS Manufacturers will comply with all applicable laws
and regulations, including those pertaining to the
manufacture, pricing, sale and distribution of
merchandise.
All references to "applicable laws and regulations"
in this Code of Conduct include local and national
codes, rules and regulations as well as applicable
treaties and voluntary industry standards.
SUBCONTRACTING Manufacturers will not use subcontractors for the
manufacture of Disney merchandise or components
thereof without Disney's express written consent, and
only after the subcontractor has entered into a
written commitment with Disney to comply with this
Code of Conduct.
MONITORING AND
COMPLIANCE Manufacturers will authorize Disney and its
designated agents (including third parties) to engage
in monitoring activities to confirm compliance with
this Code of Conduct, including unannounced on-site
inspections of manufacturing facilities and
employer-provided housing; reviews of books and
records relating to employment matters; and private
interviews with employees. Manufacturers will
maintain on site all documentation that may be needed
to demonstrate compliance with this Code of Conduct.
PUBLICATION Manufacturers will take appropriate steps to ensure
that the provisions of this Code of Conduct are
communicated to employees, including the prominent
posting of a copy of this Code of Conduct, in the
local language and in a place readily accessible to
employees, at all times.
<PAGE> 61
CODE OF CONDUCT FOR LICENSEES
At The Walt Disney Company, we are committed to:
- a standard of excellence in every aspect of our business and in every
corner of the world;
- ethical and responsible conduct in all of our operations;
- respect for the rights of all individuals; and
- respect for the environment.
We expect these same commitments to be shared by all Disney licensees and the
manufacturers with which they work in the production of Disney merchandise. At a
minimum, we require that all Disney licensees meet the following standards:
CONDUCT OF
MANUFACTURING Licensees that engage directly in the manufacturing
of Disney merchandise will comply with all of the
standards set forth in Disney's Code of Conduct for
Manufacturers, a copy of which is attached.
Licensees will ensure that each manufacturer other
than the licensee also enters into a written
commitment with Disney to comply with the standards
set forth in Disney's Code of Conduct for
Manufacturers.
Licensees will prohibit manufacturers from
subcontracting the manufacture of Disney merchandise
or components thereof without Disney's express
written consent, and only after the subcontractor has
entered into a written commitment with Disney to
comply with Disney's Code of Conduct for
Manufacturers.
MONITORING AND
COMPLIANCE Licensees will take appropriate steps, in
consultation with Disney, to develop, implement and
maintain procedures to evaluate and monitor
manufacturers of Disney merchandise and ensure
compliance with Disney's Code of Conduct for
Manufacturers, including unannounced on-site
inspections of manufacturing facilities and
employer-provided housing; review of books and
records relating to employment matters; and private
interviews with employees.
Licensees will authorize Disney and its designated
agents (including third parties) to engage in similar
monitoring activities to confirm Licensees'
compliance with this Code of Conduct. Licensees will
maintain on site all documentation that may be needed
to demonstrate such compliance.
