-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KRpPNpIBm9O04/G2qsWhpJuIbm5ZcC5toRkCGulw1Gafue4QTmHl6zftqF6fzsgw 7tEVrEz3hrFu1UX7N5r+fQ== 0000049401-96-000017.txt : 19960819 0000049401-96-000017.hdr.sgml : 19960819 ACCESSION NUMBER: 0000049401-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960705 FILED AS OF DATE: 19960816 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HYDE ATHLETIC INDUSTRIES INC CENTRAL INDEX KEY: 0000049401 STANDARD INDUSTRIAL CLASSIFICATION: RUBBER & PLASTICS FOOTWEAR [3021] IRS NUMBER: 041465840 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05083 FILM NUMBER: 96616871 BUSINESS ADDRESS: STREET 1: 13 CENTENNIAL DR STREET 2: CENTENNIAL INDUSTRIAL PK CITY: PEABODY STATE: MA ZIP: 01961 BUSINESS PHONE: 5085329000 MAIL ADDRESS: STREET 1: 13 CENTENNIAL DRIVE STREET 2: CENTENNIAL INDUSTRIAL PARK CITY: PEABODY STATE: MA ZIP: 01960 FORMER COMPANY: FORMER CONFORMED NAME: HYDE A R & SONS CO DATE OF NAME CHANGE: 19701030 10-Q 1 2ND QUARTER 10Q 1996 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the 26 Weeks Ended July 5, 1996 Commission File Number 0-05083 HYDE ATHLETIC INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-1465840 (State or other jurisdiction of (I.R.S. employer identification number) incorporation or organization) Centennial Industrial Park, 13 Centennial Drive, Peabody, MA 01960 (Address of principal executive offices) 508-532-9000 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Class Outstanding as of August 12, 1996 Class A Common Stock-$.33 1/3 Par Value 2,702,227 Class B Common Stock-$.33 1/3 Par Value 3,520,773 --------- 6,223,000 HYDE ATHLETIC INDUSTRIES, INC. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of July 5, 1996 and January 5, 1996 Condensed Consolidated Statements of Income for the thirteen weeks and twenty-six weeks ended July 5, 1996 and June 30, 1995 Condensed Consolidated Statements of Stockholders' Equity for the twenty-six weeks ended July 5, 1996 and June 30, 1995 Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended July 5, 1996 and June 30, 1995 Notes to Condensed Consolidated Financial Statements - July 5, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders Item 6. Exhibits and Reports on Form 8-K Signature PART I. FINANCIAL INFORMATION Item 1. Financial Statements HYDE ATHLETIC INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) ASSETS
July 5, January 5, 1996 1996 ---- ---- CURRENT ASSETS Cash and cash equivalents $ 3,818,715 $ 11,668,316 Marketable securities 303,672 307,500 Accounts receivable 28,814,632 17,361,195 Inventories 23,125,192 26,831,600 Prepaid expenses and other current assets 3,139,177 3,021,479 ------------ ------------ TOTAL CURRENT ASSETS 59,201,388 59,190,090 ------------ ------------ PROPERTY, PLANT, AND EQUIPMENT, NET 9,058,676 8,122,937 ------------ ------------ OTHER ASSETS Investments in limited partnerships 753,433 753,433 Other assets 1,429,018 1,404,829 ------------ ------------ TOTAL OTHER ASSETS 2,182,451 2,158,262 ------------ ------------ TOTAL ASSETS $ 70,442,515 $ 69,471,289 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 4,125,194 $ 4,336,940 Accounts payable 5,154,149 5,055,967 Accrued expenses and other current liabilities 3,393,516 3,136,653 Current maturities of long-term debt 2,459,146 2,199,225 ------------ ------------ TOTAL CURRENT LIABILITIES 15,132,005 14,728,785 ------------ ------------ LONG-TERM DEBT 3,468,711 4,205,568 ------------ ------------ DEFERRED INCOME TAXES 1,981,802 2,001,655 ------------ ------------ MINORITY INTEREST 482,919 170,227 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, $.33 1/3 par value 2,138,514 2,138,514 Additional paid in capital 15,521,470 15,521,470 Retained earnings 33,064,029 32,210,867 Accumulated translation (163,182) (257,694) ------------- ------------- Total 50,560,831 49,613,157 Less: Unearned compensation 129,963 194,313 Treasury stock 1,053,790 1,053,790 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 49,377,078 48,365,054 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 70,442,515 $ 69,471,289 ============ ============ See notes to consolidated financial statements
HYDE ATHLETIC INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995 (Unaudited)
13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended July 5, June 30, July 5, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $ 29,040,990 $ 25,413,737 $ 60,932,883 $ 55,651,638 Other income 367,593 859,868 617,247 986,089 -------------- -------------- -------------- -------------- Total revenue 29,408,583 26,273,605 61,550,130 56,637,727 -------------- -------------- -------------- -------------- Costs and expenses Cost of sales 20,848,665 17,380,076 43,436,453 37,756,810 Selling, general and administrative expenses 8,052,403 7,395,735 15,941,466 15,873,765 Interest expense 239,047 311,463 502,245 746,631 -------------- -------------- -------------- -------------- Total costs and expenses 29,140,115 25,087,274 59,880,164 54,377,206 -------------- -------------- -------------- -------------- Income before income taxes and minority interest 268,468 1,186,331 1,669,966 2,260,521 Provision for income taxes 61,309 460,844 587,927 877,947 Minority interest in income (loss) of consolidated subsidiaries 93,466 (113,550) 228,877 (85,402) -------------- --------------- -------------- --------------- Net income $ 113,693 $ 839,037 $ 853,162 $ 1,467,976 ============== ============== ============== ============== Per share amounts: Net income $0.02 $0.13 $0.14 $0.23 ============= ============== ============== ============== Weighted average common shares and equivalents outstanding 6,244,225 6,245,913 6,235,093 6,249,313 ============== ============== ============== ============== Cash dividends per share of common stock $ 0 $ 0 $ 0 $ 0 ============== ============== ============== ============== See notes to consolidated financial statements
HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995 (Unaudited)
Additional Common Stock Paid-In Retained Class A Class B Capital Earnings ------- ------ ------ -------- Balance, December 31, 1994 $ 901,342 $ 1,236,705 $ 15,592,805 $30,619,761 Issuance of 1,400 shares of common stock, stock option exercise 233 234 3,184 -- Cancellation of below market options -- -- (74,519) -- Amortization of unearned compensation -- -- -- -- Acquisition of 17,700 shares of common stock, at cost -- -- -- -- Net income -- -- -- 1,467,976 Foreign currency translation adjustments -- -- -- -- ---------- ------------ ------------ ----------- Balance, June 30, 1995 $ 901,575 $ 1,236,939 $ 15,521,470 $32,087,737 ========== ============ ============ =========== Balance, January 6, 1996 $ 901,575 $ 1,236,939 $ 15,521,470 $32,210,867 Amortization of unearned compensation -- -- -- -- Net income -- -- -- 853,162 Foreign currency translation adjustments -- -- -- -- ---------- ------------ ------------ ----------- Balance, July 5, 1996 $ 901,575 $ 1,236,939 $ 15,521,470 $33,064,029 ========== ============ ============ =========== Treasury Stock Unearned Accumulated Stockholders' Shares Amount Compensation Translation Equity ------ ------ ------------ ---------- ------ Balance, December 31, 1994 180,700 ($ 977,103) ($ 447,211) ($ 171,471) $ 46,754,828 Issuance of 1,400 shares of common stock, stock option exercise -- -- -- -- 3,651 Cancellation of below market options -- -- 74,519 -- -- Amortization of unearned compensation -- -- 82,379 -- 82,379 Acquisition of 17,700 shares of common stock, at cost 17,700 (76,687) -- -- (76,687) Net income -- -- -- -- 1,467,976 Foreign currency translation adjustments -- -- -- (103,459) (103,459) -------- ------------ ------------ -------------------------- Balance, June 30, 1995 198,400 ($ 1,053,790) ($ 290,313) ($ 274,930) $ 48,128,688 ======== ========================== =========== ============ Balance, January 6, 1996 198,400 ($ 1,053,790) ($ 194,313) ($ 257,694) $ 48,365,054 Amortization of unearned compensation -- -- 64,350 -- 64,350 Net income -- -- -- -- 853,162 Foreign currency translation adjustments -- -- -- 94,512 94,512 -------- ------------ ------------ ------------ ------------ Balance, July 5, 1996 198,400 ($ 1,053,790) ($ 129,963) ($ 163,182) $ 49,377,078 ======== ========================== ========================= See notes to condensed consolidated financial statements
HYDE ATHLETIC INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Unaudited)
July 5, June 30, 1996 1995 ---- ---- Cash flows from operating activities: Net income $ 853,162 $ 1,467,976 --------------- --------------- Adjustments to reconcile net income to net cash Provided (used) by operating activities: Depreciation and amortization 730,526 577,275 Deferred income tax benefit (134,175) (375,806) Provision for bad debts and discounts 3,075,765 2,778,129 Minority interest in consolidated subsidiaries income (loss) 228,877 (85,402) Compensation from stock grants and stock options 64,350 82,379 (Gain) loss on sale of equipment 4,372 (1,375) Gain on sale of investment in limited partnership -- (397,645) Changes in operating assets and liabilities: Decrease (increase) in assets: Marketable securities 3,828 -- Accounts receivable (14,249,400) (1,030,190) Inventories 3,832,894 2,235,890 Prepaid expenses and other current assets (73,729) (964,996) Increase (decrease) in liabilities: Accounts payable (42,333) 19,707 Accrued expenses 593,720 (942,916) --------------- ---------------- Total adjustments (5,965,305) 1,895,050 ---------------- --------------- Net cash provided (used) by operating activities (5,112,143) 3,363,026 ---------------- --------------- Cash flows from investing activities: Purchases of property, plant and equipment (373,375) (146,027) Increase in deferred charges, deposits and other (402,803) (51,123) Proceeds from sale of investment in limited partnership -- 1,335,289 Proceeds from sale of equipment 76,896 846 --------------- --------------- Net cash provided (used) by investing activities (699,282) 1,138,985 ---------------- --------------- Cash flows from financing activities: Net short-term borrowings (323,505) (177,511) Repayment of long-term debt and capital lease obligations (2,146,271) (2,695,918) Proceeds from long-term borrowings 419,766 -- Payment of termination benefit payable -- (26,866) Common stock repurchased -- (76,687) Issuances of common stock, including options -- 3,651 --------------- --------------- Net cash used by financing activities (2,050,010) (2,973,331) Effect of exchange rate changes on cash and cash equivalents 11,834 33,682 --------------- --------------- Net increase (decrease) in cash and cash equivalents (7,849,601) 1,562,362 Cash and equivalents at beginning of period 11,668,316 3,349,776 --------------- --------------- Cash and equivalents at end of period $ 3,818,715 $ 4,912,138 =============== =============== Supplemental disclosure of cash flow information: Cash paid during the period for: Incomes taxes, net of refunds $ 405,113 $ 1,204,406 =============== =============== Interest $ 488,313 $ 1,015,067 =============== =============== Non-cash investing and financing activities: Property purchased under capital leases $ 1,108,510 $ 98,103 =============== =============== Sale of investment in limited partnership Cash received, net of broker fees -- $ 1,335,289 Reduction in short-term debt, long-term debt and accrued liabilities -- 4,055,691 --------------- --------------- Total proceeds -- 5,390,980 Investment in limited partnership, net of distributions -- 4,993,335 --------------- --------------- Gain realized on sale -- $ 397,645 =============== =============== Reconciliation of assets acquired and liabilities assumed, business acquisitions Assets acquired -- 62,777 Liabilities assumed -- 62,777 --------------- --------------- Cash paid for business acquisitions -- 0 =============== =============== See notes to condensed consolidated financial statements
HYDE ATHLETIC INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS July 5, 1996 (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of Management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation have been included. Operating results for the twenty-six weeks ended July 5, 1996 are not necessarily indicative of the results for the entire year. NOTE B - INVENTORIES Inventories at July 5, 1996 and January 5, 1996, consisted of the following: July 5, January 5, 1996 1996 ---- ---- Finished Goods $ 19,195,569 $ 22,954,048 Work in Process 367,218 20,243 Raw Materials and Supplies 3,562,405 3,857,309 ---------------- ---------------- $ 23,125,192 $ 26,831,600 ================ ================ ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth net sales of the Company's products for the thirteen weeks and twenty-six weeks ended July 5, 1996 and June 30, 1995: THIRTEEN WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995 -------------------------------------------------- 1996 % 1995 % ---- -- ---- -- Saucony $21,178,000 72.9% $18,554,000 73.1% Brookfield 4,645,000 16.0% 5,115,000 20.1% Other 3,218,000 11.1% 1,745,000 6.9% ----------- -------- ----------- -------- Total $29,041,000 100.0% $25,414,000 100.0% =========== ====== =========== ====== TWENTY-SIX WEEKS ENDED JULY 5, 1996 AND JUNE 30, 1995 ----------------------------------------------------- 1996 % 1995 % ---- -- ---- -- Saucony $46,887,000 77.0% $41,846,000 75.3% Brookfield 7,898,000 13.0% 9,839,000 17.7% Other 6,148,000 10.0% 3,967,000 7.1% ----------- -------- ----------- -------- Total $60,933,000 100.0% $55,652,000 100.0% =========== ====== =========== ====== Thirteen Weeks Ended July 5, 1996 Compared to Thirteen Weeks Ended June 30, 1995 - -------------------------------------------------------------------------------- The Company's net sales increased 14.3% to $29,041,000 in the thirteen weeks ended July 5, 1996 from $25,414,000 in the thirteen weeks ended June 30, 1995. Net sales of the Company's Saucony products increased 14% to $21,178,000 in the thirteen weeks ended July 5, 1996 from $18,554,000 in the thirteen weeks ended June 30, 1995, primarily due to increased unit shipment volume and, to a lesser extent, higher selling prices. Saucony domestic net sales increased 23% to $15,688,000 in the thirteen weeks ended July 5, 1996 from $12,778,000 in the thirteen weeks ended June 30, 1995, due to a 21% increase in unit shipment volume and higher selling prices of the Company's recently introduced products in comparison with the Company's existing products. Saucony foreign net sales decreased 5% to $5,490,000 in the thirteen weeks ended July 5, 1996 from $5,776,000 in the thirteen weeks ended June 30, 1995, due primarily to lower unit shipment volume and, to a lesser extent, lower selling prices. Net sales of the Company's Brookfield products decreased 9% to $4,645,000 in the thirteen weeks ended July 5, 1996 from $5,115,000 in the thirteen weeks ended June 30, 1995. Brookfield domestic sales decreased 65% to $1,384,000 in the thirteen weeks ended July 5, 1996 from $3,933,000 in the thirteen weeks ended June 30, 1995, as a result of lower unit shipment volume and a shift in the sales mix to lower-priced products. Brookfield foreign net sales increased 176% to $3,261,000 in the thirteen week ended July 5, 1996 from $1,182,000 in the thirteen weeks ended June 30, 1995, due primiarily to increased unit shipment volume and, to a lesser extent, higher selling prices. Net sales of other products increased 84% to $3,218,000 in the thirteen weeks ended July 5, 1996 from $1,745,000 in the thirteen weeks ended June 30, 1995, due primarily to additional sales from the Company's wholly-owned subsidiary, Quintana Roo, Inc. ("Quintana Roo"), which was acquired by the Company in August 1995, and increased sales of non-corporate brands. Other income decreased 57% to $368,000 in the thirteen weeks ended July 5, 1996 from $860,000 in the thirteen weeks ended June 30, 1995, due primarily to the gain on the sale of the Company's investment in a limited partnership and the receipt of the final payment under a litigation settlement, both of which were recognized in the thirteen weeks ended June 30, 1995. The Company's gross profit increased to $8,192,000 in the thirteen weeks ended July 5, 1996 from $8,034,000 in the thirteen weeks ended June 30, 1995. The Company's gross margin decreased to 28.2% in the thirteen weeks ended July 5, 1996 from 31.6% in the thirteen weeks ended June 30, 1995, reflecting decreases in gross margins for both Saucony and Brookfield products. The gross margin decrease for Saucony products resulted primarily from the shipment of a single, slow-moving non-current model, and, to a lesser extent, from increased freight costs. The gross margin decrease for Brookfield products resulted from a shift in the sales mix to lower-margin domestic Brookfield products and increased international sales, which yield lower margins than domestic sales. Selling, general and administrative expenses increased to $8,052,000, or 27.7% of net sales, in the thirteen weeks ended July 5, 1996 from $7,396,000, or 29.1% of net sales, in the thirteen weeks ended June 30, 1995. Advertising and promotion expenses increased $598,000 in the thirteen weeks ended July 5, 1996 due primarily to increased Saucony domestic television and print media advertising and increased promotion in Europe. Selling expenses decreased $135,000 in such period due to increased sales of Saucony and Brookfield products, which are commissionable at lower rates. General and administrative expenses increased $194,000 in the thirteen weeks ended July 5, 1996 due to the acquisition of Quintana Roo and increased bad-debt expense. Interest expense decreased 23% to $239,000 in the thirteen weeks ended July 5, 1996 from $311,000 in the thirteen weeks ended June 30, 1995, reflecting the paydown of the Company's senior notes and debt reduction realized as a result of the sale by the Company of its limited partnership investment. The effective tax rate decreased to 22.8% in the thirteen weeks ended July 5, 1996 from 38.8% in the thirteen weeks ended June 30, 1995, primarily due to a shift in the composition of foreign and domestic pre-tax profits. Twenty-Six Weeks Ended July 5, 1996 Compared to Twenty-Six Weeks Ended June 30, 1995 The Company's net sales increased 9.5% to $60,933,000 in the twenty-six weeks ended July 5, 1996 from $55,652,000 in the twenty-six weeks ended June 30, 1995. Net sales of the Company's Saucony products increased 12% to $46,887,000 in the twenty-six weeks ended July 5, 1996 from $41,846,000 in the twenty-six weeks ended June 30, 1995, due primarily to increased unit shipment volume and, to a lesser extent, higher selling prices. Saucony domestic net sales increased 18% to $34,257,000 in the twenty-six weeks ended July 5, 1996 from $28,924,000 in the twenty-six weeks ended June 30, 1995, due primarily to increased unit shipment volume and, to a lesser extent, higher selling prices for new product introductions. Saucony foreign net sales decreased 2% to $12,629,000 in the twenty-six weeks ended July 5, 1996 from $12,922,000 in the twenty-six weeks ended June 30, 1995 due to lower selling prices. Net sales of the Company's Brookfield products decreased 20% to $7,898,000 in the twenty-six weeks ended July 5, 1996 from $9,839,000 in the twenty-six weeks ended June 30, 1995. Brookfield domestic sales decreased 59% to $3,265,000 in the twenty-six weeks ended July 5, 1996 from $8,024,000 in the twenty-six weeks ended June 30, 1995 as a result of lower unit shipment volume and a shift in sales mix to lower-priced product. Brookfield foreign net sales increased 155% to $4,633,000 in the twenty-six weeks ended July 5, 1996 from $1,815,000 in the twenty-six weeks ended June 30, 1995, reflecting increased unit shipment volume and, due to a lesser extent, higher selling prices. Net sales of other products increased 55% to $6,148,000 in the twenty-six weeks ended July 5, 1996 from $3,967,000 in the twenty-six weeks ended June 30, 1995, due primarily to the addition of Quintana Roo, increased sales at the Company's outlet stores and increased sales of non-corporate brands. Other income decreased 37% to $617,000 in the twenty-six weeks ended July 5, 1996 from $986,000 in the twenty-six weeks ended June 5, 1995, due primarily to the gain on the sale of the Company's investment in a limited partnership and the receipt of the final payment under a litigation settlement, both of which were recognized in the twenty-six weeks ended June 30, 1995. The Company's gross profit decreased to $17,496,000 in the twenty-six weeks ended July 5, 1996 from $17,895,000 in the twenty-six weeks ended June 30, 1995. The Company's gross margin decreased to 28.7% in the twenty-six weeks ended July 5, 1996 from 32.2% in the twenty-six weeks ended June 30, 1995, reflecting decreases in gross margins for both Saucony and Brookfield products. The gross margin decrease for Saucony products resulted from the shipment of a single slow-moving non-current model, increased sales of lower-priced, lower-margin footwear and, to a lesser extent, from increased freight costs. The decline in Brookfield gross margin resulted from a shift in the sales mix to lower-margin domestic Brookfield products and increased international sales, which yield lower margins than domestic sales. Selling, general and administrative expenses increased to $15,941,000, or 26.2% of net sales, in the twenty-six weeks ended July 5, 1996 from $15,874,000, or 28.5% of net sales, in the twenty-six weeks ended June 30, 1995. Advertising and promotion expenses increased $616,000 in the twenty-six weeks ended July 5, 1996 due primarily to increased Saucony domestic television and print media advertising and increased account specific advertising and promotions. Selling expenses decreased $434,000 in such period, due to increased sales of Saucony and Brookfield products which are commissionable at lower rates. General and administrative expenses decreased $114,000 in the twenty-six weeks ended July 5, 1996 due to reductions in professional fees and payroll. Interest expense decreased 33% to $502,000 in the twenty-six weeks ended July 5, 1996 from $747,000 in the twenty-six weeks ended June 30, 1995, reflecting the paydown of the Company's senior notes and debt reduction realized as a result of the sale by the Company of its limited partnership investment. The effective tax rate decreased to 35.2% in the twenty-six weeks ended July 5, 1996 from 38.8% in the twenty-six weeks ended June 30, 1995, primarily due to a shift in the composition of foreign and domestic pre-tax profits. LIQUIDITY AND CAPITAL RESOURCES As of July 5, 1996, the Company's cash and cash equivalents totalled $3,819,000, a decrease of $7,849,000 from January 5, 1996. The decrease was the result of an increase in accounts receivable of $11,173,000, net of the provision for bad debts and discounts of $3,076,000, offset in part by a decrease of $3,833,000 in inventory. The increase in accounts receivable was due to increased net sales of Saucony products during the twenty-six weeks ended July 5, 1996. The Company's days sales outstanding for its accounts receivable increased to 89 days in the twenty-six weeks ended July 5, 1996 from 77 days in the twenty-six weeks ended June 30, 1995 due to increased payment terms given to the Company's customers. Inventories decreased due to improved inventory planning and the Company's decision to reduce inventories of slower-moving past-season styles. As a result, the Company's inventory turn ratio increased to 3.5 turns in the twenty-six weeks ended July 5, 1996 from 2.5 turns in the twenty-six weeks ended June 30, 1995. For the twenty-six weeks ended July 5, 1996, the Company used $5,965,000 of net cash to finance operating activities, expended $776,000 to acquire capital assets and information technology, received $77,000 from the sale of capital assets, reduced short-term borrowings by $324,000, expended $2,146,000 to reduce long-term debt and borrowed $420,000 on a long-term basis, secured by the Company's facility in St. Peters, Australia. Principal factors, other than net income, accounts receivable and inventory affecting the operating cash flows included an increase in prepaid expenses of $74,000 (due to advance payments for operating expenses) and an increase in accrued expenses of $594,000 (due primarily to higher selling and marketing expenses associated with the higher sales level). The strengthening of the U.S. dollar increased the value of cash and cash equivalents by $12,000. On June 27, 1996, the Company acquired an information technology system at a cost of $991,000 and in consideration therefore, entered into a long-term capital lease. The lease provides for a bargain purchase option at the conclusion of the lease term. As of July 5, 1996, the Company had various commitments for capital expenditures, including information technology. During the balance of fiscal 1996, the Company expects to spend approximately an additional $1,350,000 for capital expenditures, primarily information technology. The Company plans to finance such expenditures with a mix of internally generated funds and asset- based lending. The recently acquired information system is expected to be operational in fiscal 1997. The liquidity of the Company is contingent upon a number of factors, principally the Company's future operating results. Management believes that the Company's current cash and cash equivalents, credit facilities and internally generated funds are adequate to meet its working capital requirements and to fund its capital investment needs and debt service payments. INFLATION AND CURRENCY RISK The effect of inflation on the Company's results of operations over the past three years has been minimal. The impact of currency fluctuation on the purchase of inventory by the Company, from foreign suppliers, has been minimal as the transactions were denominated in U.S. dollars. The Company, however, is subject to currency fluctuation risk, with respect to the operating results of the Company's foreign subsidiaries and certain foreign currency denominated payables. The Company has entered into certain forward foreign exchange contracts to minimize the transaction currency risk. FASB 123 The Financial Accounting Standards Board issued Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" (SFAS No. 123) in October 1995. SFAS 123 establishes the financial accounting and reporting standards for all stock-based compensation. SFAS 123 prescribes a fair value method of accounting for stock options and other similar equity instruments and encourages companies to adopt this accounting treatment for all stock-based compensation plans. However, under SFAS 123, companies are permitted to continue to measure compensation expense using the intrinsic value based method of accounting as prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees," provided that pro forma disclosures are made of net income and earnings per share had the fair value method been adopted. SFAS 123 is effective for fiscal years commencing after December 15, 1995. As permitted by SFAS 123, the Company intends to continue to account for employee stock compensation expense under the precepts of APB Opinion No. 25. The only effect of adopting SFAS 123 will be the added disclosure requirements which will be incorporated into the 10-K filing for fiscal year 1996. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS At the 1996 Annual Meeting of Stockholders of the Company (the "Annual Meeting") held on May 22, 1996, the stockholders of the Company elected James A. Buchanan, John H. Fisher, Phyllis H. Fisher, Charles A. Gottesman, Jonathan O. Lee and John J. Neuhauser as directors of the Company. The stockholders also voted to ratify the appointment of Coopers & Lybrand L.L.P. as the Company's independent auditors for the 1996 fiscal year. The results of the voting on each of the matters presented to stockholders at the Annual Meeting are set forth below: Votes Votes Votes Absten- Broker For Withheld Against tions Non-votes 1. Election of Directors James A. Buchanan 2,411,809 105,270 N.A. N.A. N.A. John H. Fisher 2,410,727 106,352 N.A. N.A. N.A. Phyllis H. Fisher 2,409,737 107,342 N.A. N.A. N.A. Charles A. Gottesman2,410,809 106,270 N.A. N.A. N.A. Jonathan O. Lee 2,411,809 105,270 N.A. N.A. N.A. John J. Neuhauser 2,411,809 105,270 N.A. N.A. N.A. 2. Ratification of Independent Auditors 2,432,259 N.A. 83,580 1,240 N.A. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits 10.1* - License Agreement, dated April 1, 1996, between Disney Enterprises, Inc. and Brookfield Athletic Co., Inc. 10.2* - License Agreement, effective as of January 1, 1997, between Mattel, Inc. and Brookfield Athletic Co., Inc. 11 - Computation of Earnings Per Share 27 - Financial Data Schedule *Confidential treatment requested as to certain portions of such document. b. Reports on Form 8-K. None. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HYDE ATHLETIC INDUSTRIES, INC. Date: August 16, 1996 By: /s/Charles A. Gottesman ----------------------- Charles A. Gottesman Executive Vice President and Chief Operating Officer (Duly authorized officer and principal financial officer) EX-10 2 "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." April 1, 1996 Brookfield Athletic Company, Inc. 13 Centennial Drive Peabody, MA 01961 RE: DISNEY'S 101 DALMATIAN - LIVE ACTION Dear Sirs/Mesdames: We, Disney Enterprises, Inc., hereby agree with you, the licensee identified above, as follows: 1. MEANING OF TERMS As used in this license agreement ("Agreement"): A. "Licensed Material" means the graphic representations of the following: Designated characters of the live action version of DISNEY'S 101 DALMATIANS, but only such characters and depictions of such characters as may be designated by us; and designated still scenes from the motion picture identified in Subparagraph 1.B. hereafter. B. "Trademarks" means "Walt Disney", "Disney", the representations of Licensed Material included in Subparagraph 1.A above, and the logo of the following motion picture in which Licensed Material included in Subparagraph 1.A above appears: DISNEY'S 101 DALMATIANS C. "Articles" means the following items on or in connection with which the Licensed Material and/or the Trademarks are reproduced or used, and includes each and every stock keeping unit ("SKU") of each Article: (1) Molded in-line roller skates (2) Adjustable in-line roller skates (3) Traditional booted upper roller skates (4) Adjustable roller skates (5) Elbow pads (to be identified and sold only as roller skate accessories) (6) Knee pads (to be identified and sold only as roller skate accessories) (7) Wrist guards (to be identified and sold only as roller skate accessories) (8) Skate bags (to be identified and sold only as roller skate accessories) (9) Skate gloves (to be identified and sold only as roller skate accessories) D. "Minimum Per Article Royalty" means for each Article identified herein which is sold the sum indicated herein: ***** "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." E. "Principal Term" means the period commencing ***** and ending ***** F. "Territory" means the United States, United States PX's wherever located, and United States territories and possessions, excluding Puerto Rico, Guam, Commonwealth of Northern Mariana Islands and Palau. However, if sales are made to chain stores in the United States which have stores in Puerto Rico, such chain stores may supply Articles to such stores in Puerto Rico. G. "Royalties" means a royalty in the amounts set forth below in Subparagraphs 1.G.(1)(a), (b), and (c) and Royalties shall be further governed by the provisions contained in Subparagraphs 1.G.(2)-(6). (1) (a) ***** of your Net Invoiced Billings to authorized customers for Articles shipped by you from a location in the Territory for delivery to a customer located in the Territory ("F.O.B. In Sales"); or (b) ***** of your Net Invoiced Billings to authorized customers when your customer located in the Territory takes title to the Articles outside the Territory and/or bears the risk of loss of Articles manufactured and shipped to the customer from outside the Territory ("F.O.B. Out Sales"); or (c) if a Minimum per Article Royalty has been specified in Subparagraph 1.D. above, and it would result in a higher royalty to be paid for the Articles, you agree to pay the higher royalty amount. (2) The sums which we are paid as Royalties on any sales to your Affiliates shall be no less than the sums paid on sales to customers not affiliated with you. (3) All sales of Articles shipped to a customer outside the Territory pursuant to a distribution permission shall bear a Royalty at the rate for F.O.B. Out Sales. However, sales of Articles to our Affiliates outside the Territory shall bear a Royalty at the rate for F.O.B. In Sales. (4) No Royalties are payable on the mere manufacture of Articles. (5) The full Royalty percentage shall be payable on close-out or other deep discount sales of Articles, including sales to employees. (6) Royalties reported on sales of Articles which have been returned to you for credit or refund and on which a refund has been made or credit memo issued may be credited against Royalties due. The credit shall be taken in the Royalty Payment Period in which the refund is given or credit memo issues. Unused credits may be carried forward, but in no event shall you be entitled to a refund of Royalties. "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." H. "Net Invoiced Billings" means the following: (1) actual invoiced billings (i.e. sales quantity multiplied by your selling price) for Articles sold, and all other receivables of any kind whatsoever, received in payment for the Articles, whether received by you or any Affiliate of yours, except as provided in Subparagraph 1.H.(2), less "Allowable Deductions" as hereinafter defined. (2) The following are not part of Net Invoiced Billings: invoiced charges for transportation of Articles within the Territory which are separately identified on the sales invoices, and taxes on the sale. I. "Allowable Deductions" means the following: (1) volume discounts, and other discounts from the invoice price (or post-invoice credits) unilaterally imposed in the regular course of business by your customers, so long as you document such discounts (or credits) to our satisfaction. In the event a documented unilateral discount (or credit) is taken with respect to combined sales of Articles and other products not licensed by us, and you cannot document the portion of the discount (or credit) applicable to the Articles, you may apply on a pro rata portion of the discount (or credit) to the Articles. (2) The following are not Allowable Deductions, whether granted on sales invoices or unilaterally imposed as discounts or as post- invoice credits: cash discounts granted as terms of payment; early payment discounts; allowances or discounts relating to advertising; mark down allowances; new store allowances; costs incurred in manufacturing, importing, selling or advertising Articles; freight costs incorporated in the selling price; and uncollectible accounts. J. "Royalty Payment Period" means each calendar quarterly period during the Principal Term and during the sell-off period, if granted. K. "Advance" means the following sum(s) payable by the following date(s) as an advance on Royalties to accrue in the following period(s): ***** payable upon your signing of this Agreement for the Principal Term. L. "Guarantee" means the following sum(s) which you guarantee to pay as minimum Royalties on your cumulative sales in the following period(s): ***** for the Principal Term. M. "Samples" means twelve (12) samples of each SKU of each Article, from the first production run of each supplier of each SKU of each Article. "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." N. "Promotion Commitment" means the following sum(s) which you agree to spend in the following way(s): ***** O. "Marketing Date" means the following date(s) by which the following Article(s) shall be available for purchase by the public at the retail outlets authorized pursuant to Subparagraph 2.A.: By December 1, 1996, but no earlier than October 1, 1996, for all Articles. P. "Affiliate" means, with regard to you, any corporation or other entity which directly or indirectly controls, is controlled by, or is under common control with you; with regard to us, "Affiliate" means any corporation or other entity which directly or indirectly controls, is controlled by, or is under common control with us. "Control" of an entity shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies of such entity, whether through ownership of voting securities, by contract or otherwise. 2. RIGHTS GRANTED A. In consideration for your promise to pay and your payment of all Royalties, Advances and Guarantees required hereunder, we grant you the non-exclusive right, during the Principal Term, and only within the Territory, to reproduce the Licensed Material only on or in connection with the Articles, to use such Trademarks and uses thereof as may be approved when each SKU of the Articles is approved and only on or in connection with the Articles, and to manufacture, distribute for sale and sell the Articles (other than by direct marketing methods, which includes but is not limited to, computer on-line advertising or selling, direct mail and door-to-door solicitation). You will sell the Articles only to the following retailers in the Territory for resale to the public in the Territory, or to wholesalers in the Territory for resale only to the following retailers: (1) mass market retailers (including such retailers as Target, Toys R Us, WalMart, Kmart), (2) mid-tier department stores (including such retailers as J.C. Penney and Kohl's), (3) value-oriented department stores (including such retailers as Sears, Mervyn's and Montgomery Ward), (4) value-oriented specialty stores (including such retailers as Kids R Us and Baby Superstores), and (5) sporting goods stores. You will not sell the Articles to other retailers or other wholesalers. In addition, you may not sell the Articles to retailers that sell the Articles on a duty-free basis, or to wholesalers for resale to such retailers, unless such retailer or wholesaler has a then-current license agreement with us or an Affiliate of ours permitting it to make such duty-free sales. If there is a question as to whether a particular customer falls within any of the categories specified above, our determination shall be binding. In addition, since the Articles identified in Subparagraph 1.C. as Articles Numbers 5, 6, 7, 8 and 9 are designed for use only in conjunction with the Articles identified as Articles Numbers 1,2, 3 and 4 and not in connection with other sports equipment or athletic activities, you agree that you will sell the Articles identified in Subparagraph 1.C as Articles Numbers 5, 6, 7, 8 and 9 only as part of an order which includes Articles identified as Articles Numbers 1, 2, 3 and 4. B. Unless we consent in writing, you shall not sell or otherwise provide Articles for use as premiums (including those in purchase-with- purchase promotions), promotions, give-aways, fund-raisers, or entries in sweepstakes, or to customers for resale by direct mail or other direct marketing methods, including, without limitation, home shopping television programs, or to customers for inclusion in another product, unless such product has been licensed by us. However, you may solicit orders by mail from those wholesalers or retailers authorized pursuant to Subparagraph 2.A. above, and you may sell to such authorized retailers which sell predominantly at retail, but which include the Articles in their mail order catalogs, or otherwise sell Articles by direct marketing methods as well as at retail. If you wish to sell the Articles to other customers for resale through mail order catalogs, you must obtain our prior written consent in each instance. C. Unless we consent in writing, you shall not give away or donate Articles to your accounts or other persons for purpose of promoting Article sales, except for minor quantities or samples which are not for onward distribution. D. Nothing contained herein shall preclude you from selling Articles to us or to any Affiliate of ours, or to your or our employees, subject to the payment to us of Royalties on such sales. E. We further grant you the right to reproduce the Licensed Material and to use the approved Trademarks, only within the Territory, during the Principal Term, on containers, packaging and display material for the Articles, and in advertising for the Articles. F. Nothing contained in this Agreement shall be deemed to imply any restriction on your freedom and that of your customers to sell the Articles at such prices as you or they shall determine. G. You recognize and acknowledge the vital importance to us of the characters and other proprietary material we own and create, and the association of the Disney name with them. In order to prevent the denigration of our products and the value of their association with the Disney name, and in order to ensure the dedication of your best efforts to preserve and maintain that value, you agree that, during the Principal Term and any extension hereof, you will not manufacture or distribute any merchandise embodying or bearing any artwork or other representation which we determine, in our reasonable discretion, is confusingly similar to our Disney characters or other proprietary material. 3. ADVANCE A. You agree to pay the Advance, which shall be on account of Royalties to accrue during the Principal Term only, and only with respect to sales in the Territory; provided, however, that if any part of the Advance is specified hereinabove as applying to any period less than the Principal Term, such part shall be on account of Royalties to accrue during such lesser period only. If said Royalties should be less than the Advance, no part of the Advance shall be repayable. B. Royalties accruing during any sell-off period or extension of the Principal Term shall not be offset against the Advance unless otherwise agreed in writing. Royalties accruing during any extension of the Principal Term or any other term shall be offset only against an advance paid with respect to such extended term. C. In no event shall Royalties accruing by reason of any sales to us or an Affiliate of ours or by reason of sales outside the Territory pursuant to a distribution permission be offset against the Advance or any subsequent advance. 4. GUARANTEE A. You shall, with your statement for each Royalty Payment Period ending on a date indicated in Subparagraph 1.L. hereof defining "Guarantee," or upon termination if the Agreement is terminated prior to the end of the Principal Term, pay us the amount, if any, by which cumulative Royalties paid with respect to sales in the Territory during any period or periods covered by the Guarantee provision, or any Guarantee provision contained in any agreement extending the term hereof, fall short of the amount of the Guarantee for such period. B. Advances applicable to Royalties due on sales in the period to which the Guarantee relates apply towards meeting the Guarantee. C. In no event shall Royalties paid with respect to sales to us or to any Affiliate of ours, or with respect to sales outside the Territory pursuant to a distribution permission, apply towards the meeting of the Guarantee or any subsequent guarantee. 5. PRE-PRODUCTION APPROVALS A. As early as possible, and in any case before commercial production of any Article, you shall submit to us for our review and written approval (to utilize such materials in preparing a pre-production sample) all concepts, all preliminary and proposed final artwork, and all three-dimensional models which are to appear on or in any and all SKU's of the Article. Thereafter, you shall submit to us for our written approval a pre-production sample of each SKU of each Article. We shall endeavor to respond to such requests within a reasonable time, but such approvals should be sought as early as possible in case of delays. In addition to the foregoing, as early as possible, and in any case no later than sixty (60) days following written conceptual approval, you shall supply to us for our use for internal purposes, a mock-up, prototype or pre-production sample of each SKU of each Article on or in connection with which the Licensed Material is used. You acknowledge that we may not approve concepts or artwork submitted near the end of the Principal Term. Any pre-production approval we may give will not constitute or imply a representation or belief by us that such materials comply with any applicable laws, rules, regulations, voluntary industry standards, codes, or other obligations (collectively referred to in this Agreement as "Laws"). B. Approval or disapproval shall lie solely in our discretion, and any SKU of any Article not so approved in writing shall be deemed unlicensed and shall not be manufactured or sold. If any unapproved SKU of any Article is being sold, we may, together with other remedies available to us, including but not limited to, immediate termination of this Agreement, by written notice require such SKU of such Article to be immediately withdrawn from the market. Any modification of any SKU of an Article, including, but not limited to, change of materials, color, design or size of the representation of Licensed Material must be submitted in advance for our written approval as if it were a new SKU of an Article. Approval of any SKU of an Article which uses particular artwork does not imply approval of such artwork for use with a different Article. The fact that artwork has been taken from a Disney publication or a previously approved Article does not mean that its use will necessarily be approved in connection with an Article licensed hereunder. C. If you submit for approval artwork from an article or book manufactured or published by another licensee of ours or of any Affiliate of ours, you must advise us in writing of the source of such artwork. If you fail to do so, any approval which we may give for use by you of such artwork may be withdrawn by giving you written notice thereof, and you may be required by us not to sell Articles using such artwork. D. You are responsible for the consistent quality and safety of the Articles and their compliance with applicable Laws. We will not unreasonably object to any change in the design of an Article or in the materials used in the manufacture of the Article or in the process of manufacturing the Articles which you advise us in writing is intended to make the Article safer or more durable. E. If we have supplied you with forms for use in applying for approval of artwork, models, pre-production and production samples of Articles, you shall use such forms when submitting anything for our approval. F. The Articles are subject to any third party approvals we deem necessary to obtain. We will act as the liaison with such third parties during the approval process. 6. APPROVAL OF PRODUCTION SAMPLES A. Before shipping an Article to any customer, you agree to furnish to us, from the first production run of each supplier of each of the Articles, for our approval of all aspects of the Article in question, the number of Samples with packaging which is hereinabove set forth, which shall conform to the approved artwork, three-dimensional models and pre-production sample. Approval or disapproval of the artwork as it appears on any SKU of the Article, as well as of the quality of the Article, shall lie in our sole discretion and may, among other things, be based on unacceptable quality of the artwork or of the Article as manufactured. Any SKU of any Article not so approved shall be deemed unlicensed, shall not be sold and, unless otherwise agreed by us in writing, shall be destroyed. Such destruction shall be attested to in a certificate signed by one of your officers. Production samples of Articles for which we have approved a pre-production sample shall be deemed approved, unless within twenty (20) days of our receipt of such production sample we notify you to the contrary. Any approval of a production sample attributable to us will not constitute or imply a representation or belief by us that such production sample complies with any applicable Laws. B. You agree to make available at no charge such additional samples of any or all SKUs of each Article as we may from time to time reasonably request for the purpose of comparison with earlier samples, or to test for compliance with applicable Laws, and to permit us to inspect your manufacturing operations and testing records (and those of your third- party manufacturers) for the Articles. C. You acknowledge that we may disapprove any SKU of an Article or a production run of any SKU of an Article because the quality is unacceptable to us, and accordingly, we recommend that you submit production samples to us for approval before committing to a large original production run or to purchase a large shipment from a new supplier. D. No modification of an approved production sample shall be made without our further prior written approval. All SKUs of Articles being sold must conform in all respects to the approved production sample. It is understood that if in our reasonable judgment the quality of any SKU of an Article originally approved has deteriorated in later production runs, or if the SKU has otherwise been altered, we may, in addition to other remedies available to us, by written notice require such SKU of the Article to be immediately withdrawn from the market. E. The rights granted hereunder do not permit the sale of "seconds" or "irregulars". All Articles not meeting the standard of approved samples shall be destroyed or all Licensed Material and Trademarks shall be removed or obliterated therefrom. F. You are responsible for the consistent quality and safety of the Articles and their compliance with applicable Laws. We will not unreasonably object to any change in the design of an Article or in the materials used in the manufacture of the Article or in the process of manufacturing the Articles which you advise us in writing is intended to make the Article safer or more durable. G. We shall have the right, by written notice to you, to require modification of any SKU of any Article approved by us under any previous agreement between us pertaining to Licensed Material. Likewise, if the Principal Term of this Agreement is extended by mutual agreement, we shall have the right, by written notice to you, to require modification of any SKU of any Article approved by us under this Agreement. It is understood that there is no obligation upon either party to extend the Agreement. H. If we notify you of a required modification under Subparagraph 6.G. with respect to any SKU of a particular Article, such notification shall advise you of the nature of the changes required, and you shall not accept any order for any such Article until the subject SKU has been resubmitted to us with such changes and you have received our written approval of the Article as modified. However, you may continue to distribute your inventory of the previously approved Articles until such inventory is exhausted (unless such Articles are dangerously defective, as determined by us). I. Upon our request, you agree to give us written notice of the first ship date for each Article. 7. APPROVAL OF PACKAGING, PROMOTIONAL MATERIAL, AND ADVERTISING A. All containers, packaging, display material, promotional material, catalogs, and all advertising, including but not limited to, television advertising and press releases, for Articles must be submitted to us and receive our written approval before use. To avoid unnecessary expense if changes are required, our approval thereof should be procured when such is still in rough or storyboard format. We shall endeavor to respond to requests for approval within a reasonable time. Approval or disapproval shall lie in our sole discretion, and the use of unapproved containers, packaging, display material, catalogs or advertising is prohibited. Our approval of any containers, packaging, display material, promotional material, catalogs or advertising under this Agreement will not constitute or imply a representation or belief by us that such materials comply with any applicable Laws. Whenever you shall prepare catalog sheets or other printed matter containing illustrations of Articles, you will furnish to us five (5) copies thereof when they are published. B. If we have supplied you with forms for use in applying for approval of artwork, models, pre-production and production samples of Articles, you shall use such forms when submitting anything for our approval. C. We have designed character artwork and/or a brand name logo(s) to be used by all licenses in connection with the packaging of all merchandise using the Licensed Material, and, if applicable, on hang tags and garment labels for such merchandise. We will supply you with reproduction artwork thereof, and you agree to use such artwork and/or logo(s) on the packaging of the Articles, and if applicable, on hang tags and garment labels, which you will have printed and attached to each Article at your cost. We recommend that you source the hang tags and garment labels from our authorized manufacturer (if any) of pre- approved hang tags and garment labels, the name of which will be provided to you upon request. However, you may use another manufacturer for the required hang tags and garment labels if the hang tags and garment labels manufactured are of equivalent quality and are approved by us in accordance with our usual approval process. 8. ARTWORK You shall pay us, within thirty (30) days of receiving an invoice therefor, for artwork done at your request by us or third parties under contract to us in the development and creation of Articles, display, packaging or promotional material (including any artwork which in our opinion is necessary to modify artwork initially prepared by you and submitted to us for approval, subject to your prior written approval) at our then prevailing commercial art rates. Estimates of artwork charges are available upon request. While you are not obligated to utilize the services of our Art Department, you are encouraged to do so in order to minimize delays which may occur if outside artists do renditions of Licensed Material which we cannot approve and to maximize the attractiveness of the Articles. 9. PRINT, RADIO OR TV ADVERTISING You will obtain all approvals necessary in connection with print, radio or television advertising, if any, which we may authorize. You represent and warrant that all advertising and promotional materials shall comply with all applicable Laws. Our approval of copy or storyboards for such advertising will not constitute or imply a representation or belief by us that such copy or storyboards comply with any applicable Laws. This Agreement does not grant you any rights to use the Licensed Material in animation. You may not use any animation or live action footage from the motion picture from which the Licensed Material comes without our prior written approval in each instance. In the event we approve the use of film clips of the motion picture from which the Licensed material comes, for use in a television commercial, you shall be responsible for any re-use fees which may be applicable, including SAG payments for talent. No reproduction of the film clip footage shall be made except for inclusion, as approved by us, in such commercial and there shall be no modifications of the film clip footage. All film clip footage shall be returned to us immediately after its inclusion in such commercial. We shall have the right to prohibit you from advertising the Articles by means of television and/or billboards. Such right shall be exercised within our absolute discretion, including without limitation for reasons of overexposure of the Licensed Material. 10. LICENSEE NAME AND ADDRESS ON ARTICLES A. Your name, trade name (or a trademark of yours which you have advised us in writing that you are using) and your address (at least city and state) will appear on permanently affixed labeling on each Article or, if the Article is sold to the public in packaging or a container, printed on such packaging or a container so that the public can identify the supplier of the Article. On soft goods "permanently affixed" shall mean sewn on. RN numbers do not constitute a sufficient label under this paragraph. B. You shall advise us in writing of all trade names or trademarks you wish to use on Articles being sold under this license. You may sell the Articles only under mutually agreed upon trade names or trademarks. 11. COMPLIANCE WITH APPROVED SAMPLES AND APPLICABLE LAWS AND STANDARDS A. Each Article and component thereof distributed hereunder shall be of good quality and free of defects in design, materials and workmanship, and shall comply with all applicable Laws, and such specifications, if any, as may have been specified in connection with this Agreement (e.g., Disney's Apparel Performance Specification Manual, if the Articles are items of apparel),and shall conform to the Sample thereof approved by us. B. Without limiting the foregoing, you covenant on behalf of your own company, and on behalf of all of your third-party manufacturers and suppliers, as follows: (1) You and they agree not to use child labor in the manufacturing, packaging or distribution of Disney merchandise. The term "child" refers to a person younger than the age for completing compulsory education, but in no case shall any child younger than fourteen (14) years of age be employed in the manufacturing, packaging or distribution of Disney merchandise. (2) You and they agree to provide employees with a safe and healthy workplace in compliance with all applicable Laws. You and they agree to provide us with all information we may request about manufacturing, packaging and distribution facilities for the Articles. (3) You and they agree only to employ persons whose presence is voluntary. You and they agree not to use prison labor, or to use corporal punishment or other forms of mental or physical coercion as a form of discipline of employees. (4) You and they agree to comply with all applicable wage and hour Laws, including minimum wage, overtime, and maximum hours. You and they agree to utilize fair employment practices as defined by applicable Laws. (5) You and they agree not to discriminate in hiring and employment practices on grounds of race, religion, national origin, political affiliation, sexual preference, or gender. (6) You and they agree to comply with all applicable environmental Laws. (7) You and they agree that we may engage in activities such an unannounced on-site inspections of manufacturing, packaging and distribution facilities in order to monitor compliance with applicable Laws. C. Both before and after you put Articles on the market, you shall follow reasonable and proper procedures for testing that Articles comply with all applicable Laws, and shall permit our designees to inspect testing, manufacturing and quality control records and procedures and to test the Articles for compliance. You agree to promptly reimburse us for the reasonable costs of such testing. You shall also give due consideration to any recommendations of ours that Articles exceed the requirements of applicable Laws. Articles not manufactured, packaged or distributed in accordance with applicable Laws shall be deemed unapproved, even if previously approved by us, and shall not be shipped unless and until they have been brought into full compliance therewith. 12. DISNEY OWNERSHIP OF ALL RIGHTS IN LICENSED MATERIAL You acknowledge that the copyrights and all other proprietary rights in and to Licensed Material are exclusively owned by and reserved to us. You shall neither acquire nor assert copyright ownership or any other proprietary rights in Licensed Material or in any derivation, adaptation, variation or name thereof. Without limiting the foregoing, you hereby assign to us all your worldwide right, title and interest in the Licensed Material and in any material objects consisting of or incorporating drawings, paintings, animation cels, or sculptures of Licensed Material, or other derivations, adaptations, compilations, collective works, variations or names of Licensed Material, heretofore or hereafter created by or for you or any Affiliate of yours. All such new materials shall be included in the definition of "Licensed Material" under this Agreement. If any third party makes or has made any contribution to the creation of any new materials which are included in the definition of Licensed Material under this Paragraph 12, you agree to obtain from such party a full assignment of rights so that the foregoing assignment by you shall vest full rights to such new materials in us. You further covenant that any such new materials created by you or by any third party you have engaged are original to you or such third party and do not violate the rights of any other person or entity; this covenant regarding originality shall not extend to any materials we supply to you, but does apply to all materials you or your third party contractors may add thereto. The foregoing assignment to us of material objects shall not include that portion of your displays, catalogs or promotional material not containing Licensed Material, or the physical items constituting the Articles, unless such items are in the shape of the Licensed Material. 13. COPYRIGHT NOTICE As a condition to the grant of rights hereunder, each Article and any other matter containing Licensed Material shall bear a properly located permanently affixed copyright notice in our name (e.g. "O Disney"), or such other notice as we may notify to you in writing. You will comply with such instructions as to form, location and content of the notice as we may give from time to time. You will not, without our prior written consent, affix to any Article or any other matter containing Licensed Material a copyright notice in any other name. If through inadvertence or otherwise a copyright notice on any Article or other such matter should appear in your name or the name of a third party, you hereby agree to assign to us the copyright represented by any such copyright notice in your name and, upon request, cause the execution and delivery to us of whatever documents are necessary to convey to us that copyright represented by any such copyright notice. If by inadvertence a proper copyright notice is omitted from any Article or other matter containing Licensed Material, you agree at your expense to use all reasonable efforts to correct the omission on all such Articles or other matter in process of manufacture or in distribution. You agree to advise us promptly and in writing of the steps being taken to correct any such omission and to make the corrections on existing Articles which can be located. 14. NON-ASSOCIATION OF OTHER FANCIFUL CHARACTERS WITH LICENSED MATERIAL To preserve our identification with our characters and to avoid confusion of the public, you agree not to associate other characters or licensed properties with the Licensed Material or the Trademarks either on the Articles or in their packaging, or, without our written permission, on advertising, promotional or display materials. If you wish to use a character which constitutes your trademark on the Articles or their packaging, or otherwise in connection with the Articles, you agree to obtain our prior written permission. 15. ACTIVE MARKETING OF ARTICLES You agree to manufacture (or have manufactured for you) and offer for sale all the Articles and to exercise the rights granted herein. You agree that by the Marketing Date applicable to a particular Article or, in the absence of such a date being specified in Subparagraph 1.0., by six (6) months from the commencement of the Principal Term, shipments to customers of such Article will have taken place in sufficient time that such Article shall be available for purchase in commercial quantities by the public at the retail outlets authorized pursuant to Subparagraph 2.A. In any case in which such sales have not taken place or when the Article is not then and thereafter available for purchase in commercial quantities by the public, we may either invoke our remedies under Paragraph 28, or withdraw such Article from the list of Articles licensed in this Agreement without obligation to you other than to give you written notice thereof. 16. PROMOTION COMMITMENT You agree to carry out the Promotion Commitment, if any, as defined in Subparagraph 1.N. 17. TRADEMARK RIGHTS AND OBLIGATIONS A. All uses of the Trademarks by you hereunder shall inure to our benefit. You acknowledge that we are the exclusive owner of all the Trademarks, and of any trademark incorporating all or any part of a Trademark or any Licensed Material, and the trademark rights created by such uses. Without limiting the foregoing, you hereby assign to us all the Trademarks, and any trademark incorporating all or any part of a Trademark or any Licensed Material, and the trademark rights created by such uses, together with the goodwill attaching to that part of the business in connection with which such Trademarks or trademarks are used. You agree to execute and deliver to us such documents as we require to register you as a Registered User or Permitted User of the Trademarks or such trademarks and to follow our instructions for proper use thereof in order that protection and/or registrations for the Trademarks and such trademarks may be obtained or maintained. B. You agree not to use any Licensed Material or Trademarks, or any trademark incorporating all or any part of a Trademark or of any Licensed Material, on any business sign, business cards, stationery or forms (except as licensed herein), or to use any Licensed Material or Trademark as the name of your business or any division thereof, unless otherwise agreed by us in writing. C. Nothing contained herein shall prohibit you from using your own trademarks on the Articles or your copyright notice on the Articles when the Articles contain independent material which is your property. Nothing contained herein is intended to give us any right to, and we shall not use, any trademark, copyright or patent used by you in connection with the Articles which is not derived or adapted from Licensed Material, Trademarks, or other materials owned by us. 18. REGISTRATIONS Except with our written consent, neither you nor any Affiliate of yours will register or attempt in any country to register copyrights in, or to register as a trademark, service mark, design patent or industrial design, or business designation, any of the Licensed Material, Trademarks or derivation or adaptations thereof, or any word, symbol or design which is so similar thereto as to suggest association with or sponsorship by us or any Affiliate of ours. In the event of breach of the foregoing, you agree, at your expense and at our request, immediately to terminate the unauthorized registration activity and promptly to execute and deliver, or cause to be delivered, to us such assignments and other documents as we may require to transfer to us all rights to the registrations, patents or applications involved. 19. UNLICENSED USE OF LICENSED MATERIALS A. You agree that you will not use the Licensed Material, or the Trademarks or any other material the copyright to which is owned by us in any way other than as herein authorized (or as is authorized in any other written contract in effect between us). In addition to any other remedy we may have, you agree that the profits from any use thereof on products other than the Articles (unless authorized by us in writing), and all profits from the use of any other copyrighted material of ours without written authorization, shall be immediately payable to us. B. You agree to give us prompt written notice of any unlicensed use by third parties of Licensed Material or Trademarks, and that you will not, without our written consent, bring or cause to be brought any criminal prosecution, lawsuit or administrative action for infringement, interference with or violation of any rights to Licensed Material or Trademarks. Because of the need for and the high costs of an effective anti-piracy enforcement program, you agree to cooperate with us, and, if necessary, to be named by us as a sole complainant or co-complainant in any action against an infringer of the Licensed Material or Trademarks and, notwithstanding any right of yours to recover same, legal or otherwise, you agree to pay to us, and hereby waive all claims to, all damages or other monetary relief recovered in such action by reason of a judgment or settlement whether or not such damages or other monetary relief, or any part thereof, represent or are intended to represent injury sustained by you as a licensee hereunder; in any such action against an infringer, we agree to reimburse you for reasonable expenses incurred at our request, including reasonable attorney's fees if we have requested you to retain separate counsel. 20. STATEMENTS AND PAYMENTS OF ROYALTIES A. You agree to furnish to us by the 30th day after each Royalty Payment Period full and accurate statements on statement forms we designate for your use, showing all information requested by such forms, including but not limited to, the quantities, Net Invoiced Billings and applicable Royalty rate(s) of Articles invoiced during the preceding Royalty Payment Period, and the quantities and invoice value of Articles returned for credit or refund in such period. At the same time you will pay us all Royalties due on billings shown by such statements. To the extent that any Royalties are not paid, you authorize us to offset Royalties due against any sums which we or any Affiliate of ours may owe to you or any Affiliate of yours. No deduction or withholding from Royalties payable to us shall be made by reason of any tax. Any applicable tax on the manufacture, distribution and sale of the Articles shall be borne by you. B. The statement forms we designate for your use may be changed from time to time, and you agree to use the most current form we provide to you. You agree to fully comply with all instructions supplied by us for completing such forms. C. In addition to the other information requested by the statement forms, your statement shall with respect to all Articles report separately: (1) F.O.B. In Sales; (2) F.O.B. Out Sales; (3) sales of Articles by SKU and character; (4) sales of Articles outside the Territory pursuant to a distribution permission (indicating the country involved); (5) your sales of Articles as a supplier to any of our licensees or our Affiliates' licensees for the Articles (which sales shall not generate Royalties payable to us so long as such licensees are reselling the Articles and paying us royalties on such resales); (6) sales of Articles to us or any Affiliate of ours; (7) sales of Articles to your or our employees; "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." (8) sales of Articles under any brand or program identified in Subparagraph 1.B. hereinabove; (9) sales of Articles to or for distribution through any mail order catalogs approved under this Agreement. D. Sales of items licensed under contracts with us other than this Agreement shall not be reported on the same statement as sales of Articles under this Agreement. E. Your statements and payments, including all Royalties and Advances, shall be delivered to Disney Enterprises, Inc., P.O. Box 101947, Atlanta, Georgia 30392. A copy of each statement must be sent to us at 500 South Buena Vista Street, Burbank, California 91521-6771, to the attention of the Contract Administrator, Consumer Products Division. If you wish to send statements and payments by overnight courier, please use the following address: Disney Enterprises, Inc., Wachovia South Metro Center, 3585 Atlanta Avenue, Hapeville, GA 30354, Attention Peggy Morris, Reference Lock box 101947. 21. CONFIDENTIALITY You represent and warrant that you did not disclose to any third party the prospect of a license from us, and that you did not trade on the prospect of a license from us, prior to full execution of this Agreement. you agree to keep the terms and conditions of this Agreement confidential, and you shall not disclose such terms and conditions to any third party without obtaining our prior written consent. In the event you are required to disclose this Agreement pursuant to federal securities laws, or any other Laws, you agree to use best efforts to obtain confidential treatment of this Agreement pursuant to the applicable rules regarding obtaining confidential treatment. You agree to give us prior written notice of same and to incorporate our comments into your request for confidential treatment. 22. INTEREST Royalties or any other payments due to us hereunder which are received after the due date shall bear interest at the rate of ***** per annum from the due date (or the maximum permissible by law if less than *****). 23. AUDITS AND MAINTAINING RECORDS A. You agree to keep accurate records of all transactions relating to this Agreement and any prior agreement with us regarding the Licensed Material, including, without limitation, shipments to you of Articles and components thereof, inventory records, records of sales and shipments by you, and records of returns, and to preserve such records for the lesser of seven (7) years or two (2) years after the expiration of this Agreement. "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." B. We, or our representatives, shall have the right from time to time, during your normal business hours, but only for the purpose of confirming your performance hereunder, to examine and make extracts from all such records, including the general ledger, invoices and any other records which we reasonably deem appropriate to verify the accuracy of your statements or your performance hereunder, including records of your Affiliates if they are involved in activities which are the subject of this Agreement. In particular, your invoices shall identify the Articles separately from goods which are not licensed hereunder. You acknowledge that we may furnish you with an audit questionnaire, and you agree to fully and accurately complete such questionnaire, and return it to us within the designated time. Our use of an audit questionnaire shall not limit our ability to conduct any on-site audit(s) as provided above. C. If in an audit of your records it is determined that there is a short fall of ***** or more in Royalties reported for any Royalty Payment Period, you shall upon request from us reimburse us for the full out- of-pocket costs of the audit, including the costs of employee auditors calculated at $60 per hour per person for travel time during normal working hours and actual working time. D. If you have failed to keep adequate records for one or more Royalty Payment Periods, we will assume that the Royalties owed to us for such Royalty Payment Period(s) are equal to the highest Royalties owed to us in a Royalty Payment Period for which you have kept adequate records; if you have failed to keep adequate records for any Royalty Payment Period, we will assume a reasonable amount of Royalties which you will owe to us based on the records you have kept and other reasonable assumptions we deem appropriate. 24. MANUFACTURE OF ARTICLES BY THIRD PARTY MANUFACTURERS A. If you at any time desire to have Articles or components thereof containing Licensed Material manufactured by a third party, whether the third party is located within or outside the United States, you must, as a condition to the continuation of this Agreement, notify us of the name and address of such manufacturer and the Articles or components involved and obtain our prior written permission to do so. If we are prepared to grant permission, we will do so if you and each of your manufacturers and any submanufacturers sign a Consent/Manufacturer's Agreement in a form which we will furnish to you and we receive all such agreements properly signed. (A SAMPLE OF SAID AGREEMENT FORM IS AVAILABLE ON REQUEST) B. It is not our policy to reveal the names of your suppliers to third parties or to any division of ours involved with buying products, except as may be necessary to enforce our contract rights or protect our trademarks and copyrights. C. If any such manufacturer utilizes Licensed Material or Trademarks for any unauthorized purpose, you shall cooperate fully in bringing such utilization to an immediate halt. If, by reason of your not having supplied the above mentioned agreements to us or not having given us the name of any supplier, we make any representation or take any action and are thereby subjected to any penalty or expense, you will fully compensate us for any cost or loss we sustain. 25. INDEMNITY A. You shall indemnify us during and after the term hereof against all claims, demands, suits, judgments, losses, liabilities (including settlements entered into in good faith with your consent, not to be unreasonably withheld) and expenses of any nature (including reasonable attorneys' fees) arising out of your activities under this Agreement, including without limitation your negligent acts or omissions, or out of any defect (whether obvious or hidden and whether or not present in any Sample approved by us) in an Article, or arising from personal injury, or any infringement of any rights of any other person by the manufacture, sale, possession or use of Articles, or your breach of any covenant contained in this Agreement, or their failure or your failure to comply with applicable Laws. The parties indemnified hereunder shall include Disney Enterprises, Inc. and its parent, successors and subsidiaries, and their officers, directors, employees and agents. The indemnity shall not apply to any claim or liability relating to any infringement of the copyright of a third party caused by your utilization of the Licensed Material and the Trademarks in accordance with the provisions hereof. B. We shall indemnify you during and after the term hereof against all claims, demands, suits, judgments, losses, liabilities (including settlements entered into in good faith with our consent, not to be unreasonably withheld) and expenses of any nature (including reasonable attorneys' fees) arising out of any claim that your use of any representation of the Licensed Material or the Trademarks approved in accordance with the provisions of this Agreement infringes the copyright of any third party or infringes any right granted by us to such third party. You shall not, however, be entitled to recover for lost profits. C. Additionally, if by reason of any claims referred to in Subparagraph 25.B., you are precluded from selling any stock of Articles or utilizing any materials in your possession or which come into your possession by reason of any required recall, we shall be obligated to purchase such Articles and materials from you at their out-of-pocket cost to you, excluding overheads, but we shall have no other responsibility or liability with respect to such Articles or materials. D. We give no warranty or indemnity with respect to any liability or expense arising from any claim that use of the Licensed Material or the Trademarks on or in connection with the Articles hereunder or any packaging, advertising or promotional material infringes on any trademark right of any third party or otherwise constitutes unfair competition by reason of any prior rights acquired by such third party, other than rights acquired from us. It is expressly agreed that it is your responsibility to carry out such investigations as you may deem appropriate to establish that Articles, packaging, and promotional and advertising material which are manufactured or created hereunder, including any use made of the Licensed Material and the Trademarks therewith, do not infringe such right of any third party, and we shall not be liable to you if such infringement occurs. E. You and we agree to give each other prompt written notice of any claim or suit which may arise under the indemnity provisions set forth above. Without limiting the foregoing, you agree to give us written notice of any product liability claim made or suit filed with respect to any Article, any investigations or directives regarding the Articles issued by the Consumer Product Safety Commission ("CPSC") or other federal, state or local consumer safety agency, and any notices sent by you to, or received by you from, the CPSC or other consumer safety agency regarding the Articles within seven (7) days of your receipt or promulgation of the claim, suit, investigation, directive, or notice. 26. INSURANCE You shall maintain in full force and effect at all times while this Agreement is in effect and for three years thereafter commercial general liability insurance, including broad form coverage for contractual liability, property damage, products liability and personal injury liability (including bodily injury and death), waiving subrogation, with minimum limits of no less than two million dollars (US $2,000,000.00) per occurrence, and naming as additional insureds those indemnified in Paragraph 25 hereof. You also agree to maintain in full force and effect at all times while this Agreement is in effect such Worker's Compensation Insurance as is required by applicable law and Employer's Liability Insurance with minimum limits of one million dollars (US $1,000,000.00) per occurrence. All insurance shall be primary and not contributory. You shall deliver to us a certificate or certificates of insurance evidencing satisfactory coverage and indicating that we shall receive thirty (30) days unrestricted prior written notice of cancellation, non-renewal or of any material change in coverage. Your insurance shall be carried by an insurer with a BEST Guide rating of B + VII or better. Compliance herewith in no way limits your indemnity obligations, except to the extent that your insurance company actually pays us amounts which you would otherwise pay us. 27. WITHDRAWAL OF LICENSED MATERIAL You agree that we may, without obligation to you other than to give you written notice thereof, withdraw from the scope of this Agreement any Licensed Material which by the Marketing Date or, in the absence of such a date being specified in Subparagraph 1.0., by six (6) months from the commencement of the Principal Term, is not being used on or in connection with the Articles. We may also withdraw any Licensed Material or Articles the use or sale of which under this Agreement would infringe or reasonably be claimed to infringe the rights of a third party, other than rights granted by us, in which case our obligations to you shall be limited to the purchase at cost of Articles and other materials utilizing such withdrawn Licensed Material which cannot be sold or used. In the case of any withdrawal under the preceding sentence, the Advances and Guarantees shall be adjusted to correspond to the time remaining in the Principal Term, or the number of Articles remaining under the Agreement, at the date of withdrawal. 28. TERMINATION Without prejudice to any other right or remedy available to us: A. We shall have the right at any time to terminate this Agreement by giving you written notice thereof, if you fail to manufacture, sell and distribute the Articles, or to furnish statements and pay Royalties as herein provided, or if you otherwise breach the terms of this Agreement, and if any such failure is not corrected within fifteen (15) days after we send you written notice thereof. B. We shall have the right at any time to terminate this Agreement immediately by giving you written notice thereof: (1) if you deliver to any customer without our written authorization merchandise containing representations of Licensed Material or other material the copyright or other proprietary rights to which are owned by us other than Articles listed herein and approved in accordance with the provisions hereof; (2) if you deliver Articles outside the Territory or knowingly sell Articles to a third party for delivery outside the Territory, unless pursuant to a written distribution permission or separate written license agreement with us or any Affiliate of ours; (3) if a breach occurs which is of the same nature, and which violates the same provision of this Agreement, as a breach of which we have previously given you written notice; (4) if you breach any material term of any other license agreement between us, and we terminate such agreement for cause; (5) if you shall make any assignment for the benefit of creditors, or file a petition in bankruptcy, or are adjudged bankrupt, or become insolvent, or are placed in the hands of a receiver, or if the equivalent of any such proceedings or acts occurs, though known by some other name or term; (6) if you are not permitted or are unable to operate your business in the usual manner, or are not permitted or are unable to provide us with assurance satisfactory to us that you will so operate your business, as debtor in possession or its equivalent, or are not permitted, or are unable to otherwise meet your obligations under this Agreement or to provide us with assurance satisfactory to us that you will meet such obligations; and/or (7) if you breach any covenant set forth in Paragraph 11 of this Agreement. 29. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION A. Upon the expiration or termination of this Agreement, all rights herein granted to you shall revert to us, and we shall be entitled to retain all Royalties and other things of value paid or delivered to us. You agree that the Articles shall be manufactured during the Principal Term in quantities consistent with anticipated demand therefor so as not to result in an excessive inventory build-up immediately prior to the end of the Principal Term. You agree that from the expiration or termination of this Agreement you shall neither manufacture nor have manufactured for you any Articles, that you will deliver to us any and all artwork (including Style Guides, animation cels and drawings) which may have been used or created by you in connection with this Agreement, that you will at our option either sell to us at cost or destroy or efface any molds, plates and other items used to reproduce Licensed Material or Trademarks, and that, except as hereinafter provided, you will cease selling Articles. Any unauthorized distribution of Articles after the expiration or termination of this Agreement shall constitute copyright infringement. B. If you have any unsold Articles in inventory on the expiration or termination date, you shall provide us with a full statement of the kinds and numbers of such unsold Articles. If such statement has been provided to us and if you have fully complied with the terms of this Agreement, including the payment of all Royalties due and the Guarantee, upon notice from us you shall have the right for a limited period of three (3) calendar months from such expiration or earlier termination date to sell off and deliver such Articles as authorized under Subparagraph 2.A. You shall furnish us statements covering such sales and pay us Royalties in respect of such sales. Such Royalties shall not be applied against the Advance or towards meeting the Guarantee. C. In recognition of our interest in maintaining a stable and viable market for the Articles during and after the Principal Term and any sell-off period, you agree to refrain from "dumping" the Articles in the market during any sell-off period granted to you. "Dumping" shall mean the distribution of product at volume levels significantly above your prior sales practices with respect to the Articles, and at price levels so far below your prior sales practices with respect to the Articles as to disparage the Articles; provided, however, that nothing contained herein shall be deemed to restrict your ability to set product prices at your discretion. D. Except as otherwise agreed by us in writing, any inventory of Articles in your possession or control after the expiration or termination hereof and of any sell-off period granted hereunder shall be destroyed, or all Licensed Material and Trademarks removed or obliterated therefrom. E. If we supply you with forms regarding compliance with this Paragraph 29, you agree to complete, execute and return such forms to us expeditiously. F. Notwithstanding any provision to the contrary, in the case of termination under Paragraph 28.B. (5) or (6), in order to protect the value of the Articles and to avoid any disparagement of the Articles which could occur as a result of the circumstances of termination, we shall have the option, in our absolute discretion, to purchase any or all unsold Articles in your inventory on the termination date at 20% over your cost of goods for such Articles (not including overhead). 30. WAIVERS A waiver by either of us at any time of a breach of any provision of this Agreement shall not apply to any breach of any other provision of this Agreement, or imply that a breach of the same provision at any other time has been or will be waived, or that this Agreement has been in any way amended, nor shall any failure by either party to object to conduct of the other be deemed to waive such party's right to claim that a repetition of such conduct is a beach hereof. 31. PURCHASE OF ARTICLES BY US If we wish to purchase Articles, you agree to sell such Articles to us or any Affiliate of ours at as low a price as your charge for similar quantities sold to your regular customers and to pay us Royalties on any such sales. 32. NON-ASSIGNABILITY A. You shall not voluntarily or by operation of law assign, sub-license, transfer, encumber or otherwise dispose of all or any part of your interest in this Agreement without our prior written consent, to be granted or withheld in our absolute discretion. Any attempted assignment, sub-license, transfer, encumbrance or other disposal without such consent shall be void and shall constitute a material default and breach of this Agreement. "Transfer" within the meaning of this Paragraph 32 shall include any merger or consolidation involving your company or your parent (if any); any sale or consolidation involving your company or your parent (if any); any sale or transfer of all or substantially all of your (or your parent) company's assets; any transfer of your rights hereunder to a division, business segment or other entity of yours other than the one specifically referenced on page 1 hereof (or any sale or attempted sale of Articles under a trademark or trade name of such division, business segment or other entity); and any transaction or series of related transactions resulting in the transfer of thirty-three and one-third percent (33- 1/3%) or more of the voting stock of your (or your parent) company (or, if your company is a partnership, thirty-three and one-third percent (33-1/3%) or more of the profit and loss participation in your company, or the occurrence of any of the foregoing with respect to any general partner of your company). B. You agree to provide us with at least two (2) weeks prior written notice of any desired assignment of this Agreement or other transfer as defined in Subparagraph 32.A. Our consent (if given) to any assignment of this Agreement or other transfer as defined in Subparagraph 32.A. shall be subject to such terms and conditions as we deem appropriate, including but not limited to, payment of a transfer. The amount of the transfer fee shall be determined by us based upon the circumstances of the particular assignment or transfer, taking into account such factors as the estimated value of the license being assigned or otherwise transferred; the risk of business interruption or loss of quality, production or control we may suffer as a result of the assignment or other transfer; the identity, reputation, creditworthiness, financial condition and business capabilities of the proposed assignee or transferee; and our internal costs related to the assignment or other transfer; provided, however, in no event shall the transfer fee be less than $100,000.00. The foregoing transfer fee shall not apply if this Agreement is assigned to one of your Affiliates as part of a corporate reorganization involving some or all of the entities existing in your corporate structure when this Agreement is signed; provided, whoever, that you must give us written notice of such assignment and a description of the reorganization. If you have more than one merchandise license agreement with us for the Territory, and an event occurs which would trigger the transfer fee provisions of this Paragraph 32, you need only pay to us one transfer fee, determined by us as set forth above. The provisions of this Subparagraph 32.B. shall supersede any conflicting provisions on this subject in any merchandise license agreement previously entered into between you and us. C. Notwithstanding Subparagraphs 32.A. and B., you may, upon written notice to us, unless we have objected within thirty (30) days of receipt of such notice, sublicense your rights hereunder to your Affiliates. You hereby irrevocably and unconditionally guarantee that they will observe and perform all of your obligations hereunder, including, without limitation, the provisions governing approvals, and compliance with approved samples, applicable Laws, and all other provisions hereof and act in accordance with your obligations hereunder. Any involvement of an Affiliate in the activities which are the subject of this Agreement shall be deemed carried on pursuant to such a sublicense and thus covered by such guarantee, but, unless notified to us and not timely objected to, such involvement may be treated by us as a breach of this Agreement. 33. RELATIONSHIP This Agreement does not provide for a joint venture, partnership, agency or employment relationship between us, or any other relationship than that of licensor and licensee. 34. CONSTRUCTION The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning and not strictly for or against any of the parties. Headings of paragraphs herein are for convenience of reference only and are without substantive significance. 35. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT Except as otherwise provided herein, this Agreement can only be extended or modified by a writing signed by both parties. 36. NOTICES All notices which either party is required or may desire to serve upon the other party shall be in writing, addressed to the party to be served at the address set forth on page 1 of this Agreement, and may be served personally or by deposing the same addressed as herein provided (unless and until otherwise notified), postage prepaid, in the United States mail. Such notice shall be deemed served upon personal delivery or upon the date of mailing; provided, however, that we shall be deemed to have been served with a notice of a request for approval of materials under this Agreement only upon our actual receipt of the request and of any required accompanying materials. Any notice sent to us hereunder shall be sent to the attention of "Vice President, Licensing", unless we advise you in writing otherwise. 37. MUSIC Music is not licensed hereunder. Any charges, fees or royalties payable for music rights or any other rights not covered by this Agreement shall be additional to the Royalties and covered by separate agreement. 38. PREVIOUS AGREEMENTS This Agreement, and any confidentiality agreement you may have signed pertaining to any of the Licensed Material, contains the entire agreement between us concerning the subject matter hereof and supersedes any pre- existing or contemporaneous agreement and any oral or written communications between us. 39. CHOICE OF LAW AND FORUM This Agreement shall be deemed to be entered into in California and shall be governed and interpreted according to the laws of the State of California. Any legal actions pertaining to this Agreement shall be commenced within the State of California and within either Los Angeles or Orange Counties. The prevailing party shall be entitled to recover reasonable attorney's fees and costs incurred therein. 40. EQUITABLE RELIEF You acknowledge that we will have no adequate remedy at law if you continue to manufacture, sell, advertise, promote or distribute the Articles upon the expiration or termination of this Agreement. You acknowledge and agree that, in addition to any and all other remedies available to us, we shall have the right to have any such activity by you restrained by equitable relief, including, but not limited to, a temporary restraining order, a preliminary injunction, a permanent injunction, or such other alternative relief as may be appropriate, without the necessity of our posting any bond. 41. GOODWILL You acknowledge that the rights and powers retained by us hereunder are necessary to protect our copyrights and property rights, and, specifically, to conserve the goodwill and good name of our products and company, and the name "Disney", and therefore you agree that you will not allow the same to become involved in matters which will, or could, detract from or impugn the public acceptance and popularity thereof, or impair their legal status. 42. POWER TO SIGN The parties warrant and represent that their respective representatives signing this Agreement have full power and proper authority to sign this Agreement and to bind the parties. 43. SURVIVAL OF OBLIGATIONS The respective obligations of the parties under this Agreement, which by their nature would continue beyond the termination, cancellation or expiration of this Agreement, including but not limited to indemnification, insurance, payment of Royalties, and Paragraph 29, shall survive termination, cancellation or expiration of this Agreement. Please sign below under the word "Agreed". When signed by both parties this shall constitute an agreement between us. DISNEY ENTERPRISES, INC. By: /s/ Steve Cipolla Title: Vice President Date: 5/1/96 AGREED: BROOKFIELD ATHLETIC COMPANY, INC. By: /s/ James A. Buchanan Title: President EX-10 3 "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." L I C E N S E A G R E E M E N T 050896DR03 THIS AGREEMENT is hereby made effective as of January 1, 1997 ("Effective Date") between MATTEL, INC. ("Licensor"), a Delaware corporation, having its principal place of business in El Segundo, California, U.S.A and the party identified as "Licensee" in Paragraph A below (hereinafter the "Agreement"). R E C I T A L S WHEREAS, Licensor represents and acknowledges that it: 1) owns or has acquired the rights to the property identified under Paragraph B below, which rights, to the extent such rights are recognized in the Territory (as defined below) include, copyrights, trademarks and other rights in the design, style, character, likeness, and appearance of the material, packaging, and accessories related thereto (the "Property"), and 2) is willing to grant a license to Licensee in accordance with the terms and conditions set forth herein; WHEREAS, Licensee represents and acknowledges that it: 1) possesses experience and skill in the business of the manufacture, sale and distribution of the product or products identified under Paragraph C below ("Products"), and 2) desires to obtain a license to use the Property of Licensor in connection with the manufacture, sale and distribution of the Products in accordance with the terms and conditions set forth herein. The provisions in this Recitals Section do not reflect the entire agreement between the parties hereto. This section only serves as a summary of the Agreement between the parties and should not be construed as a contract alone but only as a part of this Agreement. References in this Recitals Section to the sections of this Agreement are not intended to be inclusive of all uses of the defined term in this Agreement. A. LICENSEE: BROOKFIELD ATHLETIC COMPANY, INC. A Subsidiary of Hyde Athletic Industries, Inc. Located at: 13 Centennial Drive, Peabody, MA 01961 A corporation of Massachusetts B. PROPERTY: BARBIE. Excluded from the license granted to Licensee are "NOSTALGIC BARBIE" and "CONTEMPORARY/COLLECTIBLE BARBIE", which Licensor reserves and with respect to which Licensor has the full and exclusive right to exploit and license others to exploit, notwithstanding the foregoing. "NOSTALGIC BARBIE" refers to the depictions of the "BARBIE" doll as used originally for the line, i.e., the early versions of the "BARBIE" doll, particularly for the 1959-1975 era and accompanying "KEN", "MIDGE", and "ALAN" dolls. "CONTEMPORARY/COLLECTIBLE BARBIE" refers to high-end collectible, specialty BARBIE dolls, such as BARBIE dolls currently depicted in Licensor's Timeless CreationsR catalog. C. PRODUCTS is defined as: See attached Exhibit C. D. TERRITORY is defined as: United States, its territories and possessions. E. This License is: ( ) exclusive as to all Products (1.2) ( ) non-exclusive as to all Products (X) other as follows: Exclusive as to all Products except as indicated on the Product List in all approved Channels of Distribution, except Direct Mail (Catalog), Warehouse Club and Internet which shall be non-exclusive as to all Products. F. MANUFACTURER'S AGREEMENT Attach Exhibit A (Manufacturer's Agreement) for each manufacturing source (i.e. plant), including each subcontractor. In addition, the form is to be submitted for each new manufacturing source during the term of this Agreement. G. Channels of Distribution are defined as: (X) Mass Market (e.g. Wal-Mart, Target, Kmart) ( ) Gifts (X) Specialty (X) Mid-Tier (e.g. Mervyns, Sears, J.C. Penney) ( ) Direct Mail (All) (X) Direct Mail (Catalog only) ( ) Direct Mail (Excluding Catalog) ( ) Department Store (e.g. Macy's Bloomingdale's) ( ) Supermarket ( ) Book Club ( ) Stationery ( ) Drug Store (X) Warehouse Club (e.g. Costco-Price Club, Sam's Club) ( ) Duty-Free Shops (X) Internet ( ) Interactive Shopping (e.g.: Television Home Shopping) ( ) Other Special Market as follows: N.A. "Confidential material omitted and filed separately with the Securities and Exchange Commission. Asterisk denotes such omission." H. ENDING DATE is defined as: ***** (3.1) MARKETING DATE is defined as: In market, which shall be the date(s) by which the Products shall be available for purchase by the public at retail outlets pursuant to Section 6.2. I. ROYALTY RATE is defined as: ***** (4.1) ACCESSORIES ***** F.O.B. ROYALTY RATE: ***** ACCESSORIES ***** (4.1) J. ADVANCE GUARANTEED ROYALTY is defined as: ***** (4.1, 4.2) K. MINIMUM GUARANTEED ROYALTY is defined as: ***** (4.1, 4.2) L. MANDATORY MINIMUM ADVERTISING EXPENDITURE is defined as actual media expenditures for advertising of the Products by the Licensee in the following media and time periods: Type of Media: (N/A) Print to Consumers (N/A) Trade Print (N/A) Trade Co-Op (N/A) Television (N/A) Direct Mail (N/A) Other as follows: Advertising Time Period: N/A Minimum Amount Expended: N/A M. Periodic Statements are due thirty (30) days after the close of each calendar quarter sent with royalties to: Attn: BARBIE Consumer Products, M1-1005 Mattel, Inc. 333 Continental Boulevard El Segundo, California 90245 N. INSURANCE: Licensee shall maintain comprehensive liability insurance, including product and contractual liability insurance in an amount of not less than Two Million Dollars ($2,000,000.00), naming Licensor as an additional insured, during the term of this Agreement (11). O. ADDITIONAL PROVISIONS: N/A NOW, THEREFORE, based on the foregoing premises and the covenants contained herein, the parties hereto agree as follows: 1. RIGHTS 1.1 In accordance with the terms set forth herein, Licensor consents to use of the Property by Licensee in the Territory for the life of this Agreement solely and only upon and in connection with the manufacture, sale and distribution of Products through the Channels of Distribution. Licensee shall have no right to use of Licensor's corporate name or logo at any time, except as permitted under Section 7.2. 1.2 For Products that are specifically covered by an exclusive license, as identified in Paragraph E of the Recitals Section, Licensor agrees not to expressly grant a license to a third party of the right to use the Property on or in connection with said Products through the Channels of Distribution in the Territory; PROVIDED, HOWEVER that Licensor itself use or may permit the use by third parties of Products that are distributed solely as premium items. All Products not specifically designated as exclusive in Paragraph E of the Recitals Section are considered non-exclusive and, therefore, Licensor is free to license third parties to use the Property on or in connection with the Products through the Channels of Distribution in the Territory. Regardless of exclusivity provisions contained herein, distribution through FAO Schwarz stores and catalogs if applicable hereto remain non-exclusive. Licensor reserves and retains the full right to use the Property on or in connection with any and all Products through the Channels of Distribution in the Territory at all times. In the event of any possible conflict in the definition of Products in this Agreement and with the corresponding definition in any other license agreement to which Licensor is a party, Licensor reserves the right to interpret the language in such a manner as to resolve the conflict, and the Licensor's decision in resolving any such conflict shall be final and binding upon the Licensee. 1.3 Licensee agrees not to enter into any agreement relating to the Property for commercial tie-ins or promotions with any party engaged in whole or in part in the production of motion pictures or television shows, nor to sell the Products for premium use or other use involving promotion of any third party or other products or properties without the prior written consent of Licensor. 1.4 As an exception to the scope of the rights of Licensee under this Section 1, Licensee does not have the right to display or sell the Products at entertainment events and shows, excluding trade shows. Licensor reserves and has the right to grant licenses to third parties to use the Property on and in connection with the manufacture and/or sale of the Products for sale to members of the audience at any show or other entertainment event, including but not limited to stage and arena shows. 1.5 With respect to each vendor or other manufacturing source, Licensee shall have the attached Manufacturer's Agreement executed prior to manufacture of such Products and promptly provide a fully executed copy of any such agreement(s) to Licensor. Licensee agrees to follow the same procedures for any additional manufacturing source used during the term of this Agreement. 1.6 Licensee agrees to meet or exceed the Mandatory Minimum Advertising Expenditure. 1.7 Licensee agrees to sell the Products, exclusive of required free samples specified in Section 2.3 hereof, to Licensor at as low a price as the Licensee sells similar quantities of the same to any third party. 1.8 To the extent that the Territory is included within the European Economic Community ("EEC") and with respect to permitted activities of the Licensee within the EEC, the following provisions shall apply: (a) Notwithstanding anything to the contrary herein contained, Licensor and Licensee agree that the rights granted herein and the restrictions herein contained shall be subject to the laws of the Territory and the Treaty of Rome (if applicable) and all rules, regulations, directives, laws and legislation associated therewith as the same may be in force from time to time. (b) Nothing in this Agreement shall be construed as preventing Licensee from accepting bona fide unsolicited orders for the Product (a) for sale otherwise than through Licensee's permitted Channels of Distribution within the EEC, or (b) from customers or potential customers outside the Territory but within the EEC. (c) However, it is agreed that Licensee shall not establish an office, advertise or otherwise actively seek customers for the Products outside of the Territory or the permitted Channels of Distribution. (d) If this Agreement is exclusive, it will not be an infringement of Licensee's rights for Licensor to permit the sale in the Territory or in the Channels of Distribution of Products made by licensees of other territories in the EEC or other Channels of Distribution in the Territory. 2. CONTROL BY LICENSOR 2.1 Licensor shall have the right to control all uses of the Property on or in connection with the Products, including but not limited to advertising, and also have the right to control the nature and quality of the Products associated with the Property. 2.2 Pursuant to this right of control, Licensor, through such agents or representatives as it may designate, shall have free access to Licensee's facilities, upon reasonable notice, at all times during business hours with the right to full disclosure of all apparatus, methods, and materials used by Licensee in the production of the Products and shall have the right to take reasonable free samples of Licensee's Products and all of the materials used in the manufacture thereof for the purpose of examination or testing. If requested by Licensee, Licensor agrees to sign a non-disclosure agreement as necessary to protect the secrecy of such apparatus, methods, and material. 2.3 At least one (1) representative copy or sample of all proposed material using the Property (including the proposed Products, packaging, advertising and all other material of any character whatsoever) together with a description of the intended use of the material shall be submitted to Licensor without cost for written approval prior to using the same. Licensee agrees not to display or offer for sale to any third party any Products or sample thereof using the Property without Licensor's prior written approval of such Products or sample thereof. Licensor shall make every reasonable attempt to provide written approval/disapproval of any copy or sample, submitted by Licensee for review, by the end of fifteen (15) business days after actual receipt of such copy or sample by Licensor. Failure by Licensor to provide written approval/disapproval within the specified time period shall not be deemed approval of any copy or sample. Failure by the Licensee to comply with the approval process identified in this Section 2.3 is grounds for immediate termination by Licensor. The copies, sample and description may be retained by Licensor at its option. Licensee shall not manufacture, sell or distribute any Products or other materials that depart from Licensor-approved samples in any material respect without a separate submission of samples with respect to such modification and separate written approval from the Licensor. Licensor shall not withdraw its approval of the approved samples without good cause. Licensee shall thereafter submit to Licensor's Licensing Department, without cost to Licensor, ten (10) samples of finished Products, as approved, upon commencement of production and sale, and annually thereafter. Licensor reserves the right to request additional samples of the Products at no cost to the Licensor on a regular basis, but not more frequently than quarterly, to verify compliance of the Products with the provisions of this Agreement. Except where Licensor's request for samples is to monitor compliance after a prior non-conformity, Licensee shall not be obligated to provide more than twenty (20) samples of a Product on an annual basis without charge to the Licensor. 2.4 Licensee agrees that the Products covered by this Agreement shall be of high standard and of such style, appearance, and quality as to be adequate and suited to its exploitation to the best advantage and to the protection and enhancement of the Property and the good will pertaining thereto; that such Products will be manufactured, advertised, sold and distributed in accordance with all applicable laws; and that the policies of sale and distribution by Licensee shall be of high standard and to the best advantage and shall in no manner reflect adversely upon the good will of Licensor or the Property. 2.5 Licensee agrees that the Products shall equal or exceed all industry and government standards established in respect of safety and fitness for use. All applicable government standards of the Territory shall apply, whether federal, state or local. If the Territory is the U.S. or is inclusive of the U.S., such standards shall include, but not be limited to, the Consumer Product Safety Act and all appropriate sections of the Code of Federal Regulations, and to the extent applicable, the Products shall equal or exceed the standards set forth in the Hazardous Substances Act, the Flammable Fabrics Act, the Child Safety Protection Act and the Toy Manufacturers of America Safety Standards as contained in ASTM F963 and comparable industry standards. Prior to commencing shipment of each Products and on a regular basis thereafter but no less frequently than annually, or as otherwise requested by Licensor, Licensee agrees to provide to Licensor at Licensee's expense a certificate of an approved independent testing laboratory certifying that the Products comply with such standards and regulations. Each certificate that is provided must specifically describe the Products that are covered by the certificate, including the manufacturing source of the Products being tested. Products that are shipped into more than one country must be certified separately with respect to the applicable requirements of each such country. Additional certificates shall be supplied with respect to any design or manufacturing change that may affect the Product's compliance with applicable standards. If there is any disagreement between Licensee and Licensor regarding compliance with safety standards, the Licensor's decision shall be final and Licensee agrees to fully comply with such decision. 2.6 Licensee agrees that it shall not contract with a third party distributor for the marketing, distribution or sale of the Products without the prior written consent of the Licensor. 3. TERM 3.1 The term of this Agreement will commence as of the Effective Date and terminate automatically on the Ending Date, unless terminated sooner under the other provisions of this Agreement. 3.2 Unless express renewal rights are granted herein, Licensee shall have no right to renew this Agreement, regardless of its performance during the term hereof. Further, Licensor shall not be required to give any notice to Licensee of Licensor's intention not to extend the term of this Agreement. No promise or expressed intention to renew this Agreement shall be binding upon the Licensor unless stated in a written document, signed by the Licensor. 3.3 Nothing stated in this Agreement shall prevent the Licensor from negotiating or entering into an agreement with any other party on or before the expiration date of this Agreement, provided that no Products which are exclusive under this Agreement shall be marketed or shipped under such other agreement prior to the expiration date of this Agreement. 4. ROYALTIES 4.1 In consideration for the license granted herein, Licensee agrees to pay royalties to Licensor. Royalties will be calculated by applying the Royalty Rate to the "Gross Sales" of all Products sold or otherwise disposed of by Licensee under this Agreement except that, in the event Licensee sells or otherwise disposes of Products on an F.O.B. place of manufacture outside of the Territory basis, the F.O.B. Royalty Rate shall be applied to the "Gross Sales" of such Products. "Gross Sales" herein employed shall mean the gross sales billed by Licensee less credit notes for accepted returns not to exceed five percent (5%) of gross amount invoiced and sales and excise taxes separately stated, but no deduction shall be made for cash or other discounts or uncollectible accounts whether or not stated on invoice. No other costs incurred in the manufacture, sale, distribution, or marketing of the Products shall be deducted from gross sales in determining the royalty payable by Licensee. For purposes of this Agreement, Products shall be considered sold on the date of shipment or the date that the shipment is invoiced by the Licensee, whichever is earlier. 4.2 Licensee agrees to pay to Licensor the non-refundable Advance Guaranteed Royalty at the time of execution of this Agreement. Licensee may offset the Advance Guaranteed Royalty against royalties payable under Section 4.1 as they become due. Payment of the Advance Guaranteed Royalty by Licensee is a condition precedent to Licensee's right to exercise any rights hereunder, and Licensee's failure to promptly tender such payment shall entitle Licensor to unilaterally and immediately rescind this Agreement. 4.3 If the Minimum Guaranteed Royalty is not otherwise paid pursuant to Section 4.1 hereof, the balance of said Minimum Guaranteed Royalty shall be paid to Licensor with Licensee's final quarterly royalty payment for the applicable year or period. Licensee's failure to achieve sales of the Products for the applicable year or period that will cause Licensor to earn royalties equal to or greater than the Minimum Guaranteed Royalty shall give Licensor the right to terminate this Agreement, which right shall be exercisable within sixty (60) days after Licensor's receipt of the final royalty report for such year or period. 4.4 If Licensee does not meet or exceed the Mandatory Minimum Advertising Expenditure, Licensee shall pay to Licensor, within thirty (30) days after the earlier of (a) the Ending Date or (b) the date of termination of this Agreement, the difference between said Minimum Amount required to be expended under Paragraph L of the Recitals Section and the actual amount expended by Licensee. 4.5 Royalties shall be paid to Licensor on any Products conveyed for any purpose whatsoever by Licensee to a third party free of charge or for which only nominal consideration was paid, including samples (other than those samples referred to in Section 2.3 hereof, and other than sales samples, not to exceed five percent (5%) of total production). The royalty on such Products shall be calculated by applying the Royalty Rate or F.O.B. Royalty Rate, whichever is higher, to the customary Gross Sales price of the Products as defined by Section 4.1. 4.6 If Licensee sells the Products to any of its subsidiaries or affiliated organizations or companies for subsequent resale by such subsidiary or affiliated organization or company to customary trade buyers, or sells the Products in any way other than at arm's length, Licensee agrees that the Royalty Rate or F.O.B. Royalty Rate, whichever is higher, will be based on the Gross Sales, as defined above, charged by the subsidiary, affiliated organization or company to such buyers. 4.7 Any payment not paid when due in accordance with the terms of this Agreement, including any deficit disclosed through the audit procedures provided for in Section 5, shall bear interest from the due date until received by Licensor at the maximum interest rate permitted by law. The obligation to pay, and the payment of, such interest will not operate to extend any payment due date, and Licensor waives no rights by accepting late payment with interest. Interest under this Section 4.7 will be due and payable on the date the outstanding balance is paid to Licensor. 4.8 If Licensee requests and Licensor provides finished artwork for Licensee's use, Licensee agrees to remit to Licensor its then normal and customary charge for providing such artwork. 5. RECORDS AND REPORTS 5.1 Licensee agrees to keep such full and accurate records as are necessary to verify Licensee's compliance with its obligations under this Agreement, including without limitation the safety requirements of Section 2.5 and the royalty payment requirements of Section 4.1. Licensee shall maintain all records necessary to determine the royalties payable hereunder including, but not limited to, financial statements; general ledgers; and production, sales, purchases and inventory records; promotional activity reports and other records reflecting the transfer of Products whether or not full price was paid. Licensee also agrees to keep such full and accurate records as are necessary to determine Licensee's compliance with the Mandatory Minimum Advertising Expenditure required hereunder including, but not limited to, receipts or other proof of placement of ads. Licensee agrees to permit Licensor or its authorized representative to have full access to such records required under this Section 5, to examine them, and to make copies of them during normal business hours upon reasonable notice. Licensee agrees to preserve and keep available to Licensor all such records for a period of three (3) years after the termination of this Agreement, including any renewals thereof. If any underpayment is identified as a result of this examination, Licensee shall pay to Licensor within ten (10) days of demand the amount of the underpayment, together with interest as provided under Section 4.7, which shall accrue from the original due date. In addition, if the amount of the underpayment discovered as a result of the examination equals or exceeds five percent (5%) of the royalties reported and paid over the period covered by the examination, Licensee's payment shall include the Licensor's reasonable cost of such examination. Such costs shall include, in the case of Licensor's internal auditors, travel expenses and the full labor costs attributable to the man-hours related to the examination. 5.2 Licensee agrees to provide to the Licensor, at the address specified in Paragraph M of the Recitals Section, within thirty (30) days after the close of each calendar quarter: (1) a true and full report of advertising expenditures during said quarter pursuant to this Agreement and (2) a true and full report in triplicate of royalties accrued during said quarter under this Agreement. Licensee agrees to make payment in the amount of said reported royalties with submission of such royalty report. Such royalty reports shall show the Property licensed, the specific Channel of Distribution, the stock number and descriptions, and, for each country in which sold, the total Gross Sales as calculated, showing the quantity sold and returned, the unit price of the Products sold and all permitted deductions as set forth in Section 4.1. Each such report shall be certified to be accurate by the Licensee. Such royalty reports shall also include a list of sales to subsidiaries and affiliates and all transactions not at arm's length. For this purpose, Licensee shall use the royalty report form or forms attached hereto, additional copies of which may be obtained by Licensee from Licensor. All quarterly reports shall be furnished to Licensor whether or not any of the Products has been sold or advertised during the preceding calendar quarter. 5.3 Receipt or acceptance by Licensor of any of the statements furnished pursuant to this Agreement or of any sums paid hereunder shall not preclude Licensor from questioning the correctness thereof at any time. In the event that any inconsistencies or mistakes are discovered in such statements or payments, Licensee shall immediately notify Licensor, correct such inconsistencies or mistakes, and render the appropriate payments due, if any. 5.4 Upon demand of Licensor, but not more than once in any twelve (12) month period, Licensee shall furnish to Licensor at Licensee's expense a detailed audit statement certified by an independent certified public accountant restating or verifying the accuracy of the reports described in Section 5.2. up to the date of Licensor's demand. 5.5 Licensee agrees to provide to the Licensor, at the address specified in Paragraph M of the Recitals Section and for each country included in the Territory: (1) within thirty (30) days prior to the beginning of each calendar quarter, a forecast of the expected gross sales and royalties for the succeeding quarter; and (2) within ninety (90) days prior to the beginning of each calendar year, a forecast of the expected gross sales and royalties for each calendar quarter of the succeeding year. 6. DILIGENCE AND GOOD WILL 6.1 Licensee agrees to exercise its best efforts in the performance of this Agreement and, especially, in developing a market for the Products in connection with the Property and supplying such market demand. 6.2 If Licensee does not commence in good faith to manufacture and distribute all of the Products in commercially substantial quantities through each of the Channels of Distribution in each country in the Territory by the Marketing Date, or if at any time thereafter in any calendar quarter Licensee fails to manufacture and distribute any of the Products through each of the Channels of Distribution in each country in the Territory, Licensor, in addition to all other remedies available to it, may terminate this Agreement in its entirety, or may terminate Licensee's rights under this Agreement in the particular Products that were not manufactured and/or distributed during such quarter, or may terminate Licensee's rights under this Agreement for the particular Channels of Distribution through which Products were not distributed during such quarter, or may terminate Licensee's rights under this Agreement with respect to the country in which the Products were not manufactured and/or distributed during such quarter by giving written notice of such termination to Licensee. 6.3 Licensee acknowledges the importance and great value of the good will associated with Licensor and the Property. Licensee shall uphold Licensor's good name and protect Licensor's Property rights and associated rights or interests during the term of this Agreement and thereafter. Licensor shall have the right to immediately terminate this Agreement in the event that Licensee engages in any illegal, indecent, immoral, harmful or scandalous behavior or activities that may directly or indirectly damage Licensor's reputation or good will. 7. INTELLECTUAL PROPERTY 7.1 Licensee hereby acknowledges the validity of the Property and of any copyright or trademark pertaining thereto and Licensor's exclusive rights therein. Licensee will not make any representation or do any act which may be taken to indicate that it has any right, title or interest in or to the ownership or use of any of the Property except as licensed under the terms of this Agreement, and acknowledges that nothing contained in this Agreement shall give Licensee any continuing right, title or interest in or to the Property. Licensee agrees not to contest the validity of Licensor's rights or perform any act or omission adverse to the Property or to said exclusive rights, and agrees that any use of the Property by Licensee hereunder shall inure to the benefit of Licensor. 7.2 Licensee agrees to take whatever action is appropriate or necessary to protect Licensor's rights in the Property including, but not limited to: cooperating in any new domestic or foreign applications for intellectual property registration pursued by Licensor, at Licensor's expense (including registration of any of Licensor's trademarks to be used on the Products); registering as a licensee of the Licensor's trademark on the Products upon request by Licensor, at Licensor's expense; and permanently affixing on the Products and all materials used in the advertising, packaging, sale, marketing and distribution thereof, or other materials utilizing the Property, the following language, and any other notice requested by Licensor: [Name of each Property appearing on the Products] and associated trademarks are owned by and used under license from Mattel, Inc. c 19 [year of first publication by Licensee] Mattel, Inc. All Rights Reserved. 7.3 During and after the term of this Agreement, Licensee agrees and warrants that it will not reproduce or use, or cause or enable another to reproduce or use, either within or outside the Territory, any trademarks or other related rights derived from or confusingly similar to the Property. 7.4 Licensee agrees to promptly notify Licensor of conflicting activities by third parties of which Licensee becomes aware. On written notice from Licensee of such activities, Licensor may, but is not required to, take appropriate legal action. Licensee shall take no legal action, however, without Licensor's prior written consent. Licensee agrees to cooperate fully in any action taken by Licensor, at Licensor's expense. Licensor may, but is not required to, control any legal action undertaken pursuant to this provision. If Licensor takes legal action, any settlement proceeds, damage or other recovery shall be for the sole benefit and account of the Licensor. If Licensee takes legal action with written permission from Licensor, any settlement proceeds, damage or other recovery remaining, after attorneys' fees and costs are deducted, shall be for the sole benefit and account of the Licensee. 7.5 Licensee agrees that all artwork and designs, and all copyrights pertaining thereto, involving the Property, or derived from the Property, created or produced by the Licensee shall be and remain the sole property of Licensor. Licensee further agrees that it will provide to Licensor a full assignment in favor of the Licensor of all rights, free of any claim, interest or right, from any third party who shall have created or produced under contract with Licensee any artwork involving the Property or derived from the Property. All costs and expenses for the creation or production of artwork under this Section 7.5 shall be paid by Licensee, and Licensor shall not be liable to Licensee or any third party for any costs or expenses incurred in the creation or production of such artwork. Licensor shall be entitled to use, and license others to use, all artwork created or produced pursuant to this Section 7.5. 7.6 Except with respect to the rights to the Property licensed hereunder, the Licensee shall ensure that all Products as marketed, sold and distributed do not infringe the rights of any third party and are distributed in compliance with all relevant copyright, trademark, design right, registered design and other relevant laws in the Territory. 8. CONFIDENTIALITY During and subsequent to the term of this Agreement, Licensee, its agents and employees shall not make any unauthorized use or disclosure of any knowledge or information of a confidential or proprietary nature concerning the Products, or other private or confidential matters of Licensor, and shall refrain from any acts or omissions that would reduce the value of such confidential matters to Licensor or that would deprive or tend to deprive Licensor of trade secret or other intellectual property protection with respect to such confidential matters. 9. TRANSFERABILITY 9.1 Licensor shall have the right to assign its rights and obligations under this Agreement. 9.2 The rights and obligations of the Licensee under this Agreement are of a personal nature, and Licensee may not assign, sublicense or otherwise transfer any or all of its rights and/or obligations hereunder without prior written consent of Licensor. 10. WARRANTY AND INDEMNIFICATION 10.1 Licensee warrants and represents that: (a) Licensee is free to enter into this Agreement and has the capability to fully perform its obligations under this Agreement; (b) all ideas, creations, materials and intellectual property furnished by Licensee in connection with the Products will be Licensee's own and original creation (except for matters in the public domain or material which Licensee is fully licensed to use); and (c) the Products and the manufacture, advertisement, distribution and sale thereof pursuant to this Agreement will not infringe or violate any rights of any third party of any nature whatsoever. 10.2 Licensee agrees to indemnify Licensor, its officers, agents and employees and to undertake to defend and hold them and each of them harmless from and against any and all claims, demands, causes of action, damages, liabilities, costs and expenses, including reasonable attorneys' fees, arising from the activities of Licensee under this Agreement, or out of any breach by Licensee of any warranty or agreement made by Licensee herein, including but not limited to any product liability claims or actions or to the unauthorized use of any trademark, copyright, design, patent, process, method or device by Licensee. 10.3 Licensor warrants and represents that: (a) Licensor is free to enter into this Agreement and has the capability to fully perform its obligations under this Agreement; and (b) Licensor has acquired such rights to the Property stated in the Recitals Section of this Agreement. 10.4 Licensor agrees to indemnify Licensee, its officers, agents and employees and to undertake to defend and hold them and each of them harmless from and against any and all claims, demands, causes of action, damages, liabilities, costs and expenses, including reasonable attorneys' fees, arising from use of the Property in connection with Products under this Agreement in the manner approved by Licensor, or arising out of any breach by Licensor of any warranty or agreement made by Licensor herein. 11. INSURANCE 11.1 Licensee will obtain and maintain a comprehensive liability insurance policy, including coverage for product and contractual liability, providing, but not limited to, protection for Licensor, its officers, agents and employees against any claims, damages, liabilities, costs and expenses (including counsel fees) arising out of any alleged defects (whether latent or patent) in the Products manufactured, distributed, sold or otherwise disposed of by Licensee. 11.2 Such policy shall have a combined single coverage in the amount of Two Million Dollars ($2,000,000.00), shall be with a qualified insurance company currently rated A - V or better with Best's Key Rating Guide for Property Casualty Insurers, and shall be kept in force for twelve (12) months after final disposal of inventory. 11.3 As proof of such insurance, a fully paid certificate of insurance naming Licensor as an insured party and indicating thereon that the insurance may not be changed, cancelled, or allowed to lapse through non-renewal or failure to pay the premium therefor except upon not less than thirty (30) days written notice to Licensor will be submitted to Licensor by the Licensee within thirty (30) days after the Effective Date of this Agreement. The Licensee's failure to comply with the provisions regarding insurance set forth in this Section will constitute a default giving the Licensor the right to terminate this Agreement in accordance with the terms of Section 13.1. 11.4 If Licensee fails to furnish proof of such insurance as required above, or if at any time during the life of this Agreement Licensor is notified of the change, cancellation or lapse of such insurance, which change, cancellation or lapse Licensee does not rectify within ten (10) days of the insurance status change, Licensor, in addition to all other remedies available to it hereunder, may at its option obtain such insurance coverage and bill the Licensee for the premium cost thereof. Licensee agrees to remit such premium to Licensor within ten (10) days of receipt of notice from Licensor of the amount of such premium cost. Such premium cost is in addition to any other payments due under this Agreement. 12. BANKRUPTCY In the event that Licensee makes any assignment for the benefit of creditors, or files a petition in bankruptcy (whether voluntary or involuntary), or becomes insolvent, or is similarly prevented from or unable to fulfill its duties hereunder, Licensor may terminate this Agreement immediately upon giving notice to Licensee. In the event of actual bankruptcy or receivership of Licensee, this Agreement shall automatically terminate. 13. TERMINATION 13.1 Licensor may terminate this Agreement pursuant to any provision of this Agreement providing for termination or in the event of any default of any provision of this Agreement by Licensee, such as failure to make a report or a payment required hereunder, which default Licensee does not rectify within ten (10) days after notice thereof from Licensor. 13.2 Licensor may terminate this Agreement if there is a transfer of twenty-five percent (25%) or more of the common capital stock of the Licensee, in a single transaction or a series of transactions; or if there is a transfer of the business and/or substantially all of the assets of the Licensee, subject to the following provisions. If the Licensee has reason to believe that such a stock transfer has occurred, or will occur in the reasonably foreseeable future, or if the Licensee proposes to make a transfer of its business and/or substantially all of its assets, it shall give written notice thereof to the Licensor. Within a reasonable time after receiving such notice, the Licensor shall give the Licensee written notice stating whether it approves or disapproves any such transfer or proposed transfer, and, in the case of its disapproval thereof, whether it exercises its right of termination hereunder if the transfer has already occurred or will exercise its right of termination if the proposed transfer is subsequently made. The foregoing shall not limit in any way the right of the Licensor under Section 9.2 to disapprove assignments and other transfers of this Agreement and the rights hereunder. 14. EFFECT OF TERMINATION 14.1 In the event of termination of this Agreement under any of its provisions, Licensee is not relieved of its liabilities accruing up to the time of termination. Any and all patents, trademarks, copyrights or related rights accruing to Licensee by virtue of its activities under this Agreement shall vest automatically at the time of accrual solely and exclusively in Licensor, and Licensor may execute documents on behalf of Licensee to secure or effectuate such rights; Licensee shall assist Licensor in securing and effectuating such rights after termination as well as before termination. 14.2 Licensee agrees that upon termination of this Agreement based on default of Licensee and provided Licensor has given the termination notice in accordance with Section 13 hereof, Licensee shall forthwith cease and desist in the manufacture and sale of Products. 14.3 Licensor agrees that at the termination of this Agreement for any reason other than the default of the Licensee (including, but not limited to, termination by reason of a variance by Licensee from the quality and style approved by Licensor pursuant to Section 2), the Licensee shall have the non- exclusive right for a period of not more than ninety (90) days thereafter to dispose of all of the unsold Products that has been completed by it prior to such termination. It is further provided under this Section 14.3 that Licensee shall, prior to disposing of said unsold Products, give Licensor a true itemized statement of all such unsold Products in inventory and sufficient detailed manufacturing information to substantiate the applicability of this Section 14.3 to said Products. Licensor shall have the option to conduct a physical inventory in order to verify such inventory statement. 14.4 Nothing in Section 14.3 shall be construed as authorizing the Licensee to (a) sell Products not approved by Licensor, or to sell Products in job lots at reduced prices or otherwise than set forth or contemplated in this Agreement or (b) manufacture, sell or dispose of any Products covered by this Agreement after its expiration or its termination based on the failure of Licensee to affix notice of copyright, trademark or service mark registration or any other notice to the Products cartons, containers, packing or wrapping material or advertising, promotional or display material. 14.5 Licensee agrees that upon termination of this Agreement under any of its provisions, Licensee shall deliver to Licensor without cost all plates, molds, preprints, matrices and other devices using the Property. 14.6 Licensee agrees that in the event that it engaged in any unauthorized use of the Property in violation of any of the provisions of this Agreement, Licensor may recover all profits derived by Licensee from such unauthorized use, in addition to any other remedies available to Licensor. 15. REMEDIES 15.1 Licensee acknowledges that its failure (except as otherwise provided herein) to cease the manufacture, sale or distribution of the Products covered by this Agreement at the termination or expiration of this Agreement will result in immediate and irreparable harm to Licensor and to the rights of any subsequent licensee. Licensee agrees that in the event of such failure to cease manufacture, sale, or distribution, Licensor shall be entitled to equitable relief by way of temporary and permanent injunctions and such other further relief as any court with jurisdiction may deem just and proper. 15.2 In the event Licensor is required to take legal action against Licensee to recover royalties or other amounts payable to the Licensor or to enforce the provisions of this Agreement, Licensee agrees to pay Licensor's attorneys' fees, expenses and court costs. 15.3 Licensee agrees not to hold Licensor liable for any indirect, punitive, special, incidental or consequential damages, including lost profits, caused by any breach of this Agreement by Licensor. 16. GENERAL PROVISIONS 16.1 ENTIRE AGREEMENT. This writing represents and expresses the entire agreement of the parties hereto. It replaces and supersedes all prior contracts, representations and understandings (written or oral) between the parties concerning the within subject matter. 16.2 WAIVER. Any waiver, modification, or cancellation of any term or condition of this Agreement must be in writing. Licensee further understands and agrees that any oral representations, which have not been reduced to a formal writing signed by both parties, cannot be construed as a promise or obligation by Licensor to renew or extend this Agreement. No waiver by either party, whether express or implied, of any provisions of this Agreement or of any breach or default of either party shall constitute a continuing waiver of any other provision of this Agreement, and no such waiver by either party shall prevent such party from enforcing any and all provisions of this Agreement or from acting upon the same on any subsequent breach or default of the other party. 16.3 HEADINGS. Captions and headings to sections are included solely for convenience and are not intended to affect interpretation of any provision of this Agreement. 16.4 FORCE MAJEURE. In the event an act of the government, war conditions, fire, flood, or other act of God prevents either party from performing in accordance with the provisions of this Agreement, such nonperformance shall be excused and shall not be considered a breach or default for so long as the said conditions prevail. However, at any time after a six (6) month period of such nonperformance, either party may terminate this Agreement on thirty (30) days written notice thereof to the other party. 16.5 FORM OF NOTICES AND PAYMENTS. All notices and statements shall be in writing and, together with all payments provided for herein, shall be given at the respective addresses of the parties set forth above, or at such changed address as the recipient shall have provided in writing. All notices to Licensee required hereunder shall be deemed given when mailed by certified mail, return receipt requested, by courier or overnight delivery service, or by telex or telecopier and addressed to Licensee at the address specified in Paragraph A of the Recitals Section. 16.6 GOVERNING LAW. This Agreement and the relationship of the parties will be governed by, and interpreted in accordance with, the laws of the State of California, U.S.A., excluding its conflict of laws rules. 16.7 JURISDICTION. With respect to any disputes arising out of this Agreement that pertain to sales within the United States of America, the parties hereby submit exclusively to the personal jurisdiction of the federal and state courts located in Los Angeles County, California, U.S.A. The parties consent and agree that each such court is a convenient forum for and has proper venue over the resolution of all legal actions, proceedings and disputes arising out of or relating to this Agreement. Licensee does by this Agreement appoint the Secretary of the State of California as its agent for service of process, or in the alternative consents to accept service of process during and after the term of this Agreement by regular mail or any other method in accordance with California law. Each party agrees that if so served it will raise no objection to the personal jurisdiction of the court on any matter connected with this Agreement that is within the court's subject matter jurisdiction. Each party hereby waives all rights it has or which may hereafter arise to contest such exclusive jurisdiction or venue. 16.8 SEVERABILITY. If any provision of this Agreement is found to be illegal or unenforceable, then such provision will be deemed severable from the remainder of this Agreement, and the remaining provisions will continue in full force and effect. If any such unenforceability causes or may cause an injustice to a party, then that party may terminate this Agreement upon notice to the other party. IN WITNESS WHEREOF, the parties hereto intending to be bound hereby execute this Agreement by their duly authorized representatives on or about the date indicated below in El Segundo, California. MATTEL, INC. BROOKFIELD ATHLETIC COMPANY By: /s/ Jean McKenzie By: /s/ James A. Buchanan Name: Jean McKenzie Name: James A. Buchanan Title: Senior Vice President Title: President Date: 9/2/95 Date: 5/15/96 EXHIBIT A MANUFACTURER'S AGREEMENT FOR TRADEMARK LICENSE LICENSOR: MATTEL, INC. LICENSEE: BROOKFIELD ATHLETIC COMPANY, INC. TERRITORY OF MANUFACTURE: PRODUCTS: PROPERTY: BARBIE TO: MATTEL, INC. 333 Continental Blvd., El Segundo, California 90245, U.S.A. Attn: Director of Licensing The undersigned understands that MATTEL, INC., ("MATTEL"), has licensed the above-named Licensee to manufacture or have manufactured for it the above-named products (the "Products") utilizing certain designs and names owned by MATTEL identified as BARBIE ("the Property"). In order to induce MATTEL to consent to the manufacture of the Products by the undersigned, the undersigned agrees that it will not manufacture the Products using the Property for anyone but the Licensee; that it will not manufacture the Products in any territory other than the above-named Territory; that it will not (unless MATTEL otherwise consents in writing) manufacture any other merchandise utilizing any of the Property; that it will permit such representative as MATTEL may from time to time (but not more than twice annually for each of the Products) designate to inspect the activities of the undersigned with relation to its manufacture of the Products; and that whenever the Licensee ceases to require the undersigned to manufacture the Products, the undersigned will deliver to MATTEL or the Licensee any molds, plates, engravings or other devices used to reproduce the said designs and Property or will give satisfactory evidence of the destruction thereof. MATTEL shall be entitled to invoke any remedy permitted by law for violation of this Agreement by the undersigned. MANUFACTURER: TRIPLE WIN SPORTS INDUSTRY INC. Address: 8TH FL. NO.310, SEC4, CHUNG HSIAO E.RD TAIPEI, TAIWAN, R.O.C. By: /s/ SUPER HSIEH Name: SUPER HSIEH Title: G. MANAGER Date: MAY 2, 1996 EXHIBIT A MANUFACTURER'S AGREEMENT FOR TRADEMARK LICENSE LICENSOR: MATTEL, INC. LICENSEE: BROOKFIELD ATHLETIC COMPANY, INC. TERRITORY OF MANUFACTURE: PRODUCTS: PROPERTY: BARBIE TO: MATTEL, INC. 333 Continental Blvd., El Segundo, California 90245, U.S.A. Attn: Director of Licensing The undersigned understands that MATTEL, INC., ("MATTEL"), has licensed the above-named Licensee to manufacture or have manufactured for it the above-named products (the "Products") utilizing certain designs and names owned by MATTEL identified as BARBIE ("the Property"). In order to induce MATTEL to consent to the manufacture of the Products by the undersigned, the undersigned agrees that it will not manufacture the Products using the Property for anyone but the Licensee; that it will not manufacture the Products in any territory other than the above-named Territory; that it will not (unless MATTEL otherwise consents in writing) manufacture any other merchandise utilizing any of the Property; that it will permit such representative as MATTEL may from time to time (but not more than twice annually for each of the Products) designate to inspect the activities of the undersigned with relation to its manufacture of the Products; and that whenever the Licensee ceases to require the undersigned to manufacture the Products, the undersigned will deliver to MATTEL or the Licensee any molds, plates, engravings or other devices used to reproduce the said designs and Property or will give satisfactory evidence of the destruction thereof. MATTEL shall be entitled to invoke any remedy permitted by law for violation of this Agreement by the undersigned. MANUFACTURER: AMULA'S ENTERPRISE CORP. Address: 2F. No. 17, Lane 280, Hsueh Fu Rd., Sec. 1, Tu-Cheng City, Taipei Hsien, Taiwan, R.O.C. By: /s/ Yu Chun-Chin Name: Chun-Chin Yiu Title: President Date: May 1, 1996 EXHIBIT C PRODUCT LIST 1. Children's boot style roller skates in shoe sizes 10-4. 2. Molded in-line skates (specifically non-adjustable). 3. Double runner ice skates. 4. Figure skates (single blade). 5. Knee Pads (may be sold individually or in a set with other products). 6. Elbow Pads (may be sold individually or in a set with other products). 7. Wrist Guards (may be sold individually or in a set with other products). 8. *Gloves (may be sold individually or in a set with other products). 9. *Skate Bag (may be sold individually or in a set with other products). *Indicates non-exclusive EX-11 4 HYDE ATHLETIC INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
For the For the Thirteen Weeks Ended Twenty-Six Weeks Ended -------------------- ---------------------- July 5, June 30, July 5, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- PRIMARY Net income applicable to common stock $ 113,693 $ 839,037 $ 853,162 $ 1,467,976 ------------ ------------- ------------- ------------ Weighted average shares: Average shares outstanding 6,217,142 6,232,105 6,217,142 6,232,774 Dilutive stock options based upon application of the treasury stock method using average market price 27,083 13,808 17,951 16,539 ------------ ------------- ------------- ------------ Total shares 6,244,225 6,245,913 6,235,093 6,249,313 ============ ============= ============= ============ Net income per share $ 0.02 $ 0.13 $ 0.14 $ 0.23 ============ ============= ============= ============ FULLY DILUTED Net income applicable to common stock $ 113,693 $ 839,037 $ 853,162 $ 1,467,976 ------------ ------------- ------------- ------------ Weighted average shares: Average shares outstanding 6,217,142 6,232,105 6,217,142 6,232,774 Dilutive stock options based upon application of the treasury stock method using market price at end of period or average market price, if greater 36,070 13,793 36,070 17,313 ------------ ------------- ------------- ------------ Total shares 6,253,212 6,245,898 6,253,212 6,250,087 ============ ============= ============= ============ Net income per share $ 0.02 $ 0.13 $ 0.14 $ 0.23 ============ ============= ============= ============
EX-27 5
5 This schedule contains summary financial information extracted from Hyde Athletic Industries, Inc. Form 10-Q for the period ended July 5, 1996 and is qualified in its entirety by reference to such 10-Q. 6-MOS JAN-03-1997 JUL-05-1996 3,818,715 303,672 28,814,632 645,589 23,125,192 59,271,931 16,120,367 7,061,691 70,442,515 15,132,005 3,468,711 0 0 2,138,514 47,238,564 70,442,515 60,932,883 61,550,130 43,436,453 43,436,453 15,941,466 457,083 502,245 1,669,966 587,927 853,162 0 0 0 853,162 0.14 0.14
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