EX-10.1 3 b44497a3exv10w1.txt EX-10.1 CONSUMER PRODUCT LICENSE Exhibit 10.1 CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. LICENSE AGREEMENT Date: June 4, 2002 Re: CONSUMER PRODUCTS LICENSE -- DISNEY PROPERTIES This license agreement, including one or more schedules ("Schedule") attached hereto (such agreement and each such Schedule, individually and collectively, depending on context, referred to herein as "Agreement"), is entered into by and between Disney Enterprises, Inc. ("Disney"), with a principal place of business at 500 South Buena Vista Street, Burbank, California 91521, and The First Years Inc. ("Licensee"), with its principal place of business at 1 Kiddie Drive, Avon, MA 02322. Disney and Licensee agree as follows: 1. MEANING OF TERMS For purposes of this Agreement, the following terms shall have the meaning ascribed to them below: A. "ADVANCE" means the non-refundable sum(s), not reduced by any applicable goods and services tax or other value added tax (collectively, "VAT"), stated in each Schedule, payable by the date(s) indicated therein, as an advance on Royalties to accrue in the period(s) stated in the applicable Schedule (as defined below. B. "AFFILIATE" means, with regard to either party, any corporation or other entity which directly or indirectly controls, is controlled by, or is under common control with the party. "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. C. "ARTICLES" means the items on or in connection with which the Licensed Material, the Trademarks, or both, are permitted to be reproduced or used, and includes each and every stock keeping unit ("SKU") of each Article as is specified on each Schedule attached hereto. D. "ETAILER" means internet-based retailers that sell products to consumers and which have few or no physical store locations. E. "GUARANTEE" means the sum(s), not reduced by any VAT, if applicable, which Licensee guarantees to pay as minimum Royalties on Licensee's cumulative sales of Articles, as stated in the applicable Schedule attached hereto, in the increments stated in the subject Schedule. Any shortfall shall be payable with the Royalty statement due at the end of the applicable Guarantee period. The Guarantee may be broken down into separate Guarantees for each of the Properties or individual product lines licensed thereunder, or as otherwise stated on the applicable Schedule. F. "INTELLECTUAL PROPERTY" means: (1) "LICENSED MATERIAL", consisting of the graphic representations of the following: CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Such characters and depictions of such characters, and such still scenes and accompanying design elements, as may be designated by Disney, from those Disney properties as are licensed hereunder (the "Properties") and are the subject of a written Schedule(s) attached hereto and incorporated herein by this reference, pursuant to such specifications as are set forth in the applicable Schedule(s) for the Properties licensed hereunder. At the time of execution of this Agreement, there is one (1) Schedule attached hereto; and (2) "TRADEMARKS" (which is deemed to read "Trade marks" if applicable) consisting of "WALT DISNEY", "DISNEY", the brand name(s) (if any) and logo(s) (if any) of the Properties in which Licensed Material included in Paragraph 1.F.(1) above appears, and such other marks as are licensed hereunder, pursuant to the specifications stated in the applicable Schedule. Licensee acknowledges and agrees that the "Disney" name may only be used as expressly approved by Disney under this Agreement. G. "LAWS" means any and all applicable laws, rules, and regulations, including but not limited to, local and national laws, rules and regulations, treaties, voluntary industry standards, association laws, codes or other obligations pertaining to the grant and exercise of the license granted herein and to any of Licensee's activities under this Agreement, including but not limited to, those applicable to any tax, and to the manufacture, pricing, sale, or distribution of the Articles. H. "MANUFACTURER" means any of Licensee's third-party manufacturers, factories, suppliers and facilities (and their sub-manufacturers, factories, suppliers and facilities), which reproduce or use the Licensed Material, the Trademarks, or both, on Articles, components of Articles, labels, hang-tags, packaging, or any other item related to the Articles, or which assemble the Articles, or which assemble a final product which includes one or more Articles. I. "MARKETING DATE" means the date(s) specified on the applicable Schedule by which the specified Article(s) shall be available for purchase in commercial quantities by the public at the retail outlets authorized pursuant to Paragraph 2.A. J. "NET INVOICED BILLINGS" constitute the basis upon which Royalties (as defined below) are calculated under this Agreement. Net Invoiced Billings do not include invoiced charges for transportation of Articles within the Territory which are separately identified on the sales invoice, or sales taxes, or any applicable VAT. Net Invoiced Billings is defined as actual invoiced billings (i.e., sales quantity multiplied by Licensee's selling price) for Articles sold, less Allowable Deductions. "Allowable Deductions" means: (1) volume discounts, defined as a lower initial selling price given solely in exchange for the purchase of Articles over a specified volume level; and (2) other discounts from the invoice price (or post-invoice credits) unilaterally imposed in the regular course of business by Licensee's customers, so long as Licensee documents such discounts (or credits) to Disney's satisfaction. In the event a documented unilateral discount (or credit) is taken with respect to combined CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. sales of Articles and other products not licensed by Disney, and Licensee cannot document the portion of the discount (or credit) applicable to the Articles, Licensee may apply only a pro rata portion of the discount (or credit) to the Articles. Unilateral discounts or credits are never deductible if they represent items referenced below in Paragraph 1.J.(3). Returns are not covered under this Paragraph 1.J. (see Paragraph 1.N.(6)). (3) No other discounts or allowances are permitted under this Agreement. The following list illustrates the types of discounts and allowances that are not Allowable Deductions, whether granted on sales invoices or unilaterally imposed as discounts or as post-invoice credits: cash discounts granted as terms of payment; early payment discounts; allowances or discounts relating to advertising; mark down allowances; new store allowances; defective goods allowances or allowances taken by customers in lieu of returning goods; shrinkage allowances, costs and expenses incurred, and allowances or discounts voluntarily given, in connection with manufacturing, importing, selling or advertising Articles; listing/slotting fees or allowances; retailer partnership agreements; promotion allowances; freight costs incorporated in the selling price; and uncollectible accounts. The foregoing is not an exhaustive list of disallowed deductions, and other allowances or discounts that are in the nature of, or similar to, the foregoing examples likewise shall not qualify as Allowable Deductions. The only Allowable Deductions are those set forth in Paragraphs 1.J.(1) and (2). If Licensee wishes to take a deduction not identified above, it is Licensee's obligation to obtain Disney's prior written approval of such item before taking it as a deduction under Paragraph 1.J. K. "PROMOTION COMMITMENT" means the following sum(s) which Licensee agrees to spend in the following way(s), in accordance with the provisions of Paragraph 18.A.: [ ] L. "RENEWAL OPTION" means the option to extend this Agreement for a consecutive [ ] period, in accordance with Paragraph 2.F. M. "RETAILER" means independent and chain retail outlets which have storefronts and business licenses, and which customers walk into, not up to. The following do not qualify as authorized sales outlets for Articles under this Agreement under any circumstances: swap meets, flea markets, street peddlers, unauthorized kiosks, and the like. N. "ROYALTIES" means a copyright royalty (no royalty is chargeable for use of the Trademarks) in the amounts set forth below in Paragraphs 1.N.(l)(a) and (b), and Royalties shall be further governed by the provisions contained in Paragraphs 1.N.(2)-(8): (1) (a) Licensee agrees to pay Royalties at the rate set forth on the applicable Schedule based on Net Invoiced Billings for "Landed Sales" of Articles. Landed Sales occur when Licensee bears the cost of transportation and, if applicable, importation, of the Articles to and within the country of sale; and CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. (b) Licensee agrees to pay Royalties at the rate set forth on the applicable Schedule based on Net Invoiced Billings for "F.O.B. Sales" of Articles. F.O.B. Sales occur when Licensee's customer bears the cost of transportation and, if applicable, importation, of the Articles to and within the country of sale (e.g., the customer buys the Articles "F.O.B. Hong Kong", or "F.O.B. Manufacturer"); F.O.B. Sales also occur when the customer bears most of such cost, and Licensee bears a portion of such cost. (2) The sums paid to Disney as Royalties on any sales to Licensee's Affiliates shall be no less than the sums paid on sales to customers not affiliated with Licensee; however, if the Affiliate is authorized to sell and is selling the Article to consumers, or for resale to consumers, Disney's Royalties shall be calculated on the Affiliate's Net Invoiced Billings to customers. (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. Sales. However, sales of Articles to Disney's Affiliates outside the Territory shall bear a Royalty at the rate for Landed Sales. (4) No Royalties are payable on the mere manufacture of Articles. (5) The full Royalty percentage shall be payable on close-out or other deep discount sales of Articles, including sales to employees. (6) Royalties reported on sales of Articles which have been returned to Licensee for credit or refund and on which a refund has been made or credit memo issued may be credited against Royalties due. The credit shall be taken in the Royalty Payment Period in which the refund is given or credit memo issued. Unused credits may be carried forward, but in no event shall Licensee be entitled to a refund of Royalties. (7) "ROYALTY PAYMENT PERIOD" means each calendar quarterly period during the Term and during the sell-off period, if granted. (8) Licensee shall report sales of Articles to Disney's licensees or Disney's Affiliates' licensees on Licensee's statement but Licensee will not be required to pay Disney Royalties on such sales, so long as the purchasing licensees are licensed to sell the Articles and are paying Disney royalties on the resales on such Articles. Double royalties are not owed to Disney on these sales. O. "SAMPLES" means the number of samples stated in the applicable Schedule from the first production run of each supplier of each SKU of each Article. P. "SCHEDULE" means each separate "Schedule to License Agreement" entered into between Disney and Licensee, the terms of each of which are hereby incorporated herein by reference and made a part hereof as though fully set forth. Each Schedule attached hereto shall state any and all contract terms as are specific to the Property(ies), Articles, Territory, or other matter set forth on each such Schedule. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Q. "TERM" of this Agreement means the period commencing as of January 1, 2003, and ending upon the expiration of the latest Schedule entered into hereunder. The term applicable for each specific Schedule attached hereto shall be the period commencing as of the Effective Date and ending on the Termination Date stated on the applicable Schedule. R. "TERRITORY" means the countries, regions or other geographic designations specified on each applicable Schedule. S. "WHOLESALER" means a seller of products to retailers, not consumers, and includes the term "distributor". 2. RIGHTS GRANTED A. (1) In consideration for Licensee's promise to pay and Licensee's payment of all monetary obligations required hereunder, and Licensee's performance of all obligations required of Licensee hereunder for each Schedule entered into between Disney and Licensee, Disney grants Licensee the non-exclusive rights during the term of the relevant Schedule, and only within the Territory to: (a) reproduce the subject Licensed Material only on or in connection with the Articles; (b) use the specified Trademarks in such manner as may be approved when each SKU of the Articles is approved hereunder, and only on or in connection with the Articles; (c) manufacture, distribute for sale and sell the Articles as authorized by this Paragraph 2; and (d) reproduce and use the approved Intellectual Property on containers, packaging and display material for the Articles, and in advertising for the Articles. (2) Licensee is authorized to sell the Articles only to authorized customers in the Territory as specified herein or in the relevant Schedule, as applicable. (a) Licensee also may sell the Articles to authorized customers for resale through the pre-approved mail order catalogs listed on the Catalog List(s) attached to this Agreement, and Licensee shall pay Royalties on such sales at the rate specified for Retailers in the applicable Schedule. If Licensee wishes to sell the Articles to customers for resale through mail order catalogs other than those listed on the Catalog List attached hereto, Licensee must obtain Disney's prior written consent in each instance. However, Licensee may sell to Retailers which sell predominantly at retail, but which include the Articles in their mail order catalogs. (b) Licensee also may sell the Articles to authorized Etailers for resale to consumers by computer online selling, and Licensee shall pay Royalties on such sales at the rate specified for Retailers in the applicable Schedule. From time to time, Licensee may request from Disney the then current list of pre-approved Etailers, CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. which are the only Etailers to which Licensee is automatically authorized to sell Articles. Authorized Etailers may display, promote and sell Articles on their online venues, subject to Disney's "eCommerce Guidelines", attached hereto and incorporated herein by this reference. Sales may only be made to consumers physically located in the Territory. Any Etailer which violates Disney's eCommerce Guidelines shall be deleted from the list of approved Etailers, and Licensee may not sell Articles to such Etailer after notice from Disney. (c) In addition to the online selling permitted by authorized Etailers, Articles approved by Disney may be displayed and promoted on Disney-controlled online venues, only within the Territory. Articles approved by Disney also may be displayed and promoted on Licensee's own online venue, and may be displayed, promoted and sold on authorized Retailers' online venues, subject to Disney's eCommerce Guidelines. (d) Licensee is expressly prohibited from selling, using or providing the Articles as follows: (i) Licensee shall not sell the Articles by direct marketing methods, which includes but is not limited to, direct mail and door-to-door solicitation. Licensee shall not sell the Articles to Retailers selling merchandise on a duty-free basis, or to Wholesalers for resale to such Retailers, unless such Retailer or Wholesaler has a then current license agreement with Disney or any of Disney's Affiliates permitting it to make such duty-free sales. (ii) Licensee shall not sell or otherwise provide Articles for use as premiums (including those in purchase-with-purchase promotions), promotions, giveaways, fund-raisers, or entries in sweepstakes, or through unapproved direct marketing methods, including but not limited to, home shopping television programs, or to customers for inclusion in another product. (iii) Licensee shall not sell Articles to any customer which Licensee knows or reasonably should know engages in illegal business practices or ethically questionable distribution methods. (iv) Licensee shall not give away or donate Articles to Licensee's accounts or other persons for the purpose of promoting sales of Articles, except for minor quantities or samples which are not for onward distribution, and in any case never exceed one-tenth of a percent (0.1%) of all Articles sold on an annual basis. B. All rights not expressly granted to Licensee herein are reserved to Disney. Without limitation of the generality of the foregoing reservation of rights, and by way of example for the avoidance of doubt, nothing in this Agreement shall be deemed to restrict in any way (i) Disney's or its Affiliates' right to enter into promotional license agreements with third-party promotion partners for the manufacture, sale or distribution of premium items of merchandise that promote the Properties, and (ii) the rights of Disney's or its Affiliates' owned, operated or licensed retail stores and theme CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. parks to source and sell items of merchandise which may be similar or identical to the Articles licensed under this Agreement. C. Nothing contained herein shall preclude Licensee from selling Articles to Disney or to any of Disney's Affiliates, or to Licensee's or Disney's employees, subject to the payment to Disney of Royalties on such sales. D. Nothing contained in this Agreement shall be deemed to imply any restriction on Licensee's freedom and that of Licensee's customers to sell the Articles at such prices as Licensee or they shall determine. E. Licensee recognizes and acknowledges the vital importance to Disney of the characters and other proprietary material Disney owns and creates, and the association of the Disney name with them. In order to prevent the denigration of Disney's products and the value of their association with the Disney name, and in order to ensure the dedication of Licensee's efforts to preserve and maintain that value, Licensee agrees that, during the Term and any extension hereof, Licensee will not manufacture or distribute any merchandise embodying or bearing any artwork or other representation which Disney determines, in Disney's reasonable discretion, is confusingly similar to Disney's characters or other proprietary material. F. Provided that Royalties earned and paid to Disney during the period commencing January 1, 2003 through [ ], meet or exceed $[ ], and further provided that Licensee has complied with all terms and conditions of the Agreement, this Agreement shall be extended for [ ] commencing [ ] and ending [ ] (the "Renewal Period"), unless Licensee notifies Disney in writing by [ ] that it declines the Renewal Period. Certain of the terms and conditions for the Renewal Period are already set forth in this Paragraph 2.F. and sections 8 and 9 of Schedule 1; any new terms and conditions mutually agreed upon will be negotiated in a commercially reasonable manner and specified by amendment to the Agreement. 3. ADVANCE A. Licensee agrees to pay the Advance, which shall be on account of Royalties to accrue during the term for the relevant Schedule only, and only with respect to sales in the Territory; provided, however, that if any part of the Advance is specified as applying to any period less than the entire term of the subject Schedule, such part shall be on account of Royalties to accrue during such lesser period only. If said Royalties should be less than the Advance, no part of the Advance shall be repayable. B. Royalties accruing during any sell-off period or extension of the Term or any term of any relevant Schedule shall not be offset against the Advance unless otherwise agreed in writing. Royalties accruing during any extension of the Term or any other term shall be offset only against an advance paid with respect to such extended term. C. In no event shall Royalties accruing by reason of any sales to Disney or any of Disney's Affiliates or by reason of sales outside the Territory pursuant to a distribution permission be offset against the Advance for any given Schedule or any subsequent advance. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. 4. GUARANTEE A. Licensee shall, with Licensee's statement for each Royalty Payment Period ending on a date indicated in Paragraph 1.E, hereof defining "Guarantee" and in each relevant Schedule, or upon termination if the Agreement or the relevant Schedule specifying a Guarantee is terminated prior to the end of the Term or the stated term of such Schedule, as applicable, pay Disney the amount, if any, by which cumulative Royalties paid with respect to sales in the Territory during any period or periods covered by the subject Guarantee provision, or any Guarantee provision contained in any agreement extending the Term hereof, fall short of the amount of the Guarantee for such period. B. On each Schedule, Advances applicable to Royalties due on sales in the period to which the Guarantee relates shall apply towards meeting the Guarantee for that Schedule. C. In no event shall Royalties paid with respect to sales to Disney or to any of Disney's Affiliates, or with respect to sales outside the Territory pursuant to a distribution permission, apply towards the meeting of any Guarantee or any subsequent guarantee. If any sell-off period is granted under this Agreement, Royalties generated from sales during such period may not be applied towards the meeting of any Guarantee. 5. PRE-PRODUCTION APPROVALS A. As early as possible, and in any case before commercial production of any Article, Licensee shall submit to Disney for Disney's review and written approval (to utilize such materials in preparing a pre-production sample) all concepts, all preliminary and proposed final artwork of the Intellectual Property, and all three-dimensional models which are to appear on or in any and all SKUs of the Article. Thereafter, Licensee shall submit to Disney for Disney's written approval a pre-production sample of each SKU of each Article. Disney shall endeavor to respond to such requests within a reasonable time, but such approvals should be sought as early as possible in case of delays. In addition to the foregoing, as early as possible, and in any case no later than sixty (60) days following written conceptual approval, Licensee shall supply to Disney for Disney's use for internal purposes, a mock-up, prototype or pre-production sample of each SKU of each Article on or in connection with which the Intellectual Property is used. Licensee acknowledges that Disney may not approve concepts or artwork submitted near the end of the term of the relevant Schedule, or concepts or artwork perceived to be for selling periods beyond the applicable Termination Date. Any pre-production approval Disney may give will not constitute or imply a representation or belief by Disney that such materials comply with any applicable Laws. B. Approval or disapproval shall lie solely in Disney's discretion, and any SKU of any Article not so approved in writing shall be deemed unlicensed and shall not be manufactured or sold. If any unapproved SKU of any Article is being sold, Disney may, together with other remedies available to Disney, including but not limited to, immediate termination of this Agreement, by written notice require such SKU of such CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Article to be immediately withdrawn from the market. Any modification of any approved SKU of an Article, including, but not limited to, change of materials, color, design or size of the representation of the Intellectual Property must be submitted in advance for Disney's written approval as if it were a new SKU of an Article. Approval of any SKU of an Article which uses particular artwork does not imply approval of such artwork for use with a different Article. The fact that artwork has been taken from a Disney publication or from a previously approved Article does not mean that its use will necessarily be approved in connection with an Article licensed hereunder. C. If Licensee submits for approval artwork from an article or book manufactured or published by another licensee of Disney's or of any of Disney's Affiliates, Licensee must advise Disney in writing of the source of such artwork. If Licensee fails to do so, any approval which Disney may give for use by Licensee of such artwork may be withdrawn by giving Licensee written notice thereof, and Licensee may be required by Disney not to sell Articles using such artwork. D. If Disney has supplied Licensee with forms for use in applying for approval of artwork, models, pre-production and production samples of Articles, Licensee shall use such forms when submitting anything for Disney's approval. E. If and as applicable, the likenesses and product application of the characters used on or in connection with the Articles are subject to any third party approvals Disney deems necessary to obtain, Disney will act as the liaison with such third parties during the approval process. 6. APPROVAL OF PRODUCTION SAMPLES A. Before shipping an Article to any customer, Licensee agrees to furnish to Disney, from the first production run of each supplier of each of the Articles, for Disney's approval of all aspects of the Article in question, the number of Samples with packaging which is set forth on the Schedule(s) attached hereto, which shall conform to the approved artwork, three-dimensional models and pre-production sample. Approval or disapproval of the artwork as it appears on any SKU of the Article, as well as of the quality of the Article, shall lie in Disney's sole discretion and may, among other things, be based on unacceptable quality of the artwork or of the Article as manufactured. Any SKU of any Article not so approved shall be deemed unlicensed, shall not be sold and, unless otherwise agreed by Disney in writing, shall be destroyed. One of Licensee's officers shall attest to such destruction in a certificate, and shall provide Disney with a copy of each such certificate. Production samples of Articles for which Disney has approved a pre-production sample shall be deemed approved, unless within twenty (20) days of Disney's receipt of such production sample Disney notifies Licensee to the contrary. Any approval of a production sample by Disney will not constitute or imply a representation or belief by Disney that such production sample complies with any applicable Laws. B. Licensee agrees to make available at no charge such additional samples of any or all SKUs of each Article as Disney may from time to time reasonably request for CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. the purpose of comparison with earlier samples, or for Disney's anti-piracy efforts, or to test for compliance with applicable Laws. C. Licensee acknowledges that Disney may disapprove any SKU of an Article or a production run of any SKU of an Article because the quality is unacceptable to Disney, and accordingly, Disney recommends that Licensee submit production samples to Disney for approval before committing to a large original production run or committing to purchase a large shipment from a new supplier. D. No modification of an approved production sample shall be made without Disney's further prior written approval. All SKUs of Articles being sold must conform in all respects to the approved production sample. It is understood that if in Disney's reasonable judgment the quality of any SKU of an Article originally approved has deteriorated in later production runs, or if the SKU has otherwise been altered, Disney may, in addition to other remedies available to Disney, by written notice require such SKU of the Article to be immediately withdrawn from the market. E. The rights granted hereunder do not permit the sale of "seconds" or "irregulars". All Articles not meeting the standard of approved samples shall be destroyed or all Intellectual Property shall be removed or obliterated therefrom. F. Licensee is responsible for the consistent quality and safety of the Articles and their compliance with applicable Laws. Disney will not unreasonably object to any change in the design of an Article or in the materials used in the manufacture of the Article or in the process of manufacturing the Articles which Licensee advises Disney in writing is intended to make the Article safer or more durable. G. Disney shall have the right, by written notice to Licensee, to require modification of any SKU of any Article approved by Disney under this or any previous agreement between the parties pertaining to the Intellectual Property. Likewise, if the Term of this Agreement is extended by mutual agreement, Disney shall have the right, by written notice to Licensee, to require modification of any SKU of any Article approved by Disney under this Agreement. It is understood that there is no obligation upon either party to extend the Agreement. H. If Disney notifies Licensee of a required modification under Paragraph 6.G. with respect to any SKU of a particular Article, such notification shall advise Licensee of the nature of the changes required, and Licensee shall not accept any order for any such Article until the subject SKU has been resubmitted to Disney with such changes and Licensee has received Disney's written approval of the Article as modified. However, Licensee may continue to distribute Licensee's inventory of the previously approved Articles until such inventory is exhausted (unless such Articles are dangerously defective or are alleged to be violative of any third party rights, as determined by Disney). I. Upon Disney's request, Licensee agrees to give Disney written notice of the first ship date for each Article. J. If Disney has inadvertently approved a concept, pre-production sample, or production sample of a product which is not included in the Articles under this CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Agreement, or if Disney has inadvertently approved an Article using artwork or trademarks not included in the Agreement, such approval may be revoked at any time without any obligation whatsoever on Disney's part to Licensee. Any such product as to which Disney's approval is revoked shall be deemed unauthorized and shall not be further distributed or sold by or for Licensee. 7. APPROVAL OF PACKAGING, PROMOTIONAL MATERIAL, AND ADVERTISING A. All containers, packaging, display material, promotional material, catalogs, and press releases relating to the Articles, and all advertising relating to the Articles, including but not limited to, television, radio, or internet advertising, must be submitted to Disney and receive Disney's written approval before use. To avoid unnecessary expense if changes are required, Disney's approval thereof should be procured when such is still in rough or storyboard format. Disney shall endeavor to respond to requests for approval within a reasonable time. Approval or disapproval shall lie in Disney's sole discretion, and the use of unapproved containers, packaging, display material, promotional material, catalogs, advertising or press releases is prohibited. Disney's approval of any containers, packaging, display material, promotional material, catalogs, advertising or press releases under this Agreement will not constitute or imply a representation or belief by Disney that such materials comply with any applicable Laws, which compliance shall be solely Licensee's responsibility. Whenever Licensee prepares catalog sheets or other printed matter containing illustrations of Articles, Licensee will furnish to Disney five (5) copies thereof when they are published. B. If Disney has supplied Licensee with forms for use in applying for approval of materials referenced in this Paragraph 7, Licensee shall use such forms when submitting materials for Disney's approval. C. Disney has designed character artwork or a brand name logo(s), or both, to be used by all licensees in connection with the packaging of all merchandise using the Intellectual Property, and, if applicable, on hang tags and garment labels for such merchandise. Disney will supply Licensee with reproduction artwork thereof, and Licensee agrees to use such artwork or logo(s) on the packaging of the Articles, and, if applicable, on hang tags and garment labels, which Licensee will have printed and attached to each Article at Licensee's cost. Disney recommends that Licensee source the hang tags and garment labels from Disney's authorized manufacturer (if any) of preapproved hang tags and garment labels, the name of which will be provided to Licensee upon request. However, Licensee may use another manufacturer for the required hang tags and garment labels if the hang tags and garment labels manufactured are of equivalent quality and are approved by Disney in accordance with Disney's usual approval process. The packaging may be different for different distribution channels, and Licensee agrees to use the packaging designated by Disney for the applicable distribution channel. 8. ARTWORK CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Licensee shall pay Disney, within thirty (30) days of receiving an invoice therefor, for Style Guides and for artwork done at Licensee's request by Disney or third parties under contract to Disney in the development and creation of Articles, display, packaging or promotional material (including any artwork which in Disney's opinion is necessary to modify artwork initially prepared by Licensee and submitted to Disney for approval, subject to Licensee's prior written approval for the modification to be done by Disney) at Disney's then prevailing commercial art rates, not reduced by any VAT, if applicable. Estimates of artwork charges are available upon request. While Licensee is not obligated to utilize the services of Disney's Art Department, Licensee is encouraged to do so in order to maximize the attractiveness of the Articles and to minimize delays which may occur if outside artists do renditions of which Disney cannot approve. Artwork will be returned to Licensee by overnight courier, at Licensee's cost (unless other arrangements are made). 9. PRINT, RADIO, INTERNET OR TV ADVERTISING Licensee will obtain all approvals necessary in connection with print, radio, internet or television advertising, if any, which Disney may authorize. Licensee represents and warrants that all advertising and promotional materials shall comply with all applicable Laws. Disney's approval of copy or storyboards for such advertising will not constitute or imply a representation or belief by Disney that such copy or storyboards comply with any applicable Laws; ensuring their compliance with all applicable Laws shall be solely Licensee's responsibility. This Agreement does not grant Licensee any rights to use the Intellectual Property in animation. Licensee may not use any animation or live action footage from the Property from which the Intellectual Property comes without Disney's prior written approval in each instance. In the event Disney approves the use of film clips of the Property from which the Intellectual Property comes, for use in a television commercial, Licensee shall be responsible for any re-use fees which may be applicable, including SAG payments for talent. No reproduction of the film clip footage shall be made except for inclusion, as approved by Disney, in such commercial and there shall be no modifications of the film clip footage. All film clip footage shall be returned to Disney immediately after its inclusion in such commercial. Disney shall have the right to prohibit Licensee from advertising the Articles by means of television, billboards, or both. Such right shall be exercised within Disney's absolute discretion, including without limitation for reasons of overexposure of the Licensed Material. 10. LICENSEE NAME AND ADDRESS ON ARTICLES A. Licensee's name, trade name (or Licensee's trademark which Licensee has advised Disney in writing that Licensee is using) and Licensee's address (at least city and state or province) will appear on permanently affixed labeling on each Article and, if the Article is sold to the public in packaging or a container, printed on such packaging or a container so that the public can identify the supplier of the Article. On soft goods "permanently affixed" shall mean sewn on. RN or CA numbers do not constitute a sufficient label under this paragraph. Licensee also must ensure that the Articles comply with any labeling required by any applicable Customs Agency (e.g., country of origin). CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. B. Licensee shall advise Disney in writing of all trade names or trademarks Licensee wishes to use on Articles being sold under this license. Licensee may sell the Articles only under mutually agreed upon trade names or trademarks. 11. COMPLIANCE WITH APPROVED SAMPLES AND APPLICABLE LAWS AND STANDARDS A. Licensee covenants that each Article and component thereof distributed hereunder shall be of good quality and free of defects in design, materials and workmanship, and shall comply with all applicable Laws, and such specifications, if any, as may have been specified in connection with this Agreement (e.g., Disney's Apparel Performance Specification Manual, if the Articles are items of apparel), and shall conform to the Sample thereof approved by Disney. Licensee covenants that it will comply with all applicable Laws in performing this Agreement, including but not limited to, those pertaining to the manufacture, pricing, sale and distribution of the Articles. (1) Both before and after Licensee puts Articles on the market, Licensee shall follow reasonable and proper procedures for testing that Articles comply with all applicable product safety Laws, and shall permit Disney's designees to inspect testing and quality control records and procedures, and to test the Articles for compliance with product safety and other applicable Laws; however, Disney shall not be required to conduct any such testing. Licensee agrees to promptly reimburse Disney for the actual costs of such testing. Licensee shall also give due consideration to any recommendations by Disney that Articles exceed the requirements of applicable Laws. Articles not manufactured, packaged or distributed in accordance with applicable Laws shall be deemed unapproved, even if previously approved by Disney, and shall not be shipped unless and until they have been brought into full compliance therewith. B. Without limiting the foregoing, Licensee covenants on behalf of Licensee's own manufacturing facilities to comply with the Code of Conduct for Manufacturers, attached hereto and incorporated herein by this reference, in the manufacturing, packaging and distribution of the Articles. Licensee further agrees to require all Manufacturers to covenant to comply with the Code of Conduct for Manufacturers in the manufacturing, packaging and distribution of the Articles, by signing the Manufacturer's Agreement (referenced in Paragraph 12). (1) The Code of Conduct for Manufacturers shall not be interpreted to require Licensee or its Manufacturers to violate any applicable Law. (2) As provided in the Code of Conduct for Manufacturers, Licensee and the Manufacturers agree that Disney and its designated agents (including third parties) may engage in monitoring activities to confirm compliance with this Paragraph 11. Licensee agrees to promptly reimburse Disney for the reasonable cost of inspections performed pursuant to this Paragraph 11 when any of Licensee's manufacturing facilities or any Manufacturer does not pass the inspection(s). The amount reimbursed will not be prorated in the event the Manufacturer is also used by other licensees or vendors. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. (3) Licensee agrees to be bound by the Code of Conduct for Licensees, attached hereto and incorporated herein by this reference. This includes, but is not limited to, taking appropriate steps, in consultation with Disney, and as required by Disney's Compliance Program for licensees, to develop, implement and maintain procedures to evaluate and monitor the Manufacturers it uses to manufacture the Articles or components thereof, and to ensure compliance with Paragraph 11. B., including but not limited to, unannounced on-site inspections of manufacturing, packaging and distribution facilities and employer-provided housing, reviews of books and records relating to employment matters and private interviews with employees. Licensee acknowledges that Disney may require a pre-approval compliance inspection of any Manufacturers Licensee wishes to use to produce the Articles, components, or related items. 12. MANUFACTURE OF ARTICLES BY THIRD PARTY MANUFACTURERS A. Licensee agrees to supply Disney with the names and addresses of all of its own manufacturing facilities for the Articles. If Licensee at any time desires to use a third-party Manufacturer to produce the Articles, components of Articles, or related items bearing Licensed Material, Trademarks, or both, whether the third party is located within or outside the Territory, Licensee must, as a condition to the continuation of this Agreement, notify Disney of the accurate name and complete address of such Manufacturer and the Articles, components, or related items, and obtain Disney's prior written permission to do so. If Disney is prepared to grant permission, Disney will do so if each of Licensee's Manufacturers signs a Manufacturer's Agreement in a form which Disney will furnish to Licensee, and Disney receives all such agreements properly signed. Disney also may require a pre-approval compliance inspection of a Manufacturer prior to the production of any Articles, components, or other items involved. Licensee must immediately notify Disney if Licensee is no longer using a Manufacturer to manufacture the Articles, components, or related items. B. If any such Manufacturer utilizes Licensed Material or Trademarks for any unauthorized purpose, Licensee shall cooperate fully in bringing such utilization to an immediate halt. If, by reason of Licensee's not having supplied the above mentioned agreements to Disney or not having given Disney the name of any Manufacturer, Disney makes any representation or takes any action and is thereby subjected to any penalty or expense, Licensee will fully compensate Disney for any cost or loss Disney sustains (in addition to any other legal or equitable remedies available to Disney). C. If any Manufacturer fails to pass a compliance inspection as referenced in Paragraph 11, and thereafter fails to remedy the cited failure(s) within the time designated by Disney, or if the Manufacturer otherwise breaches the Manufacturer's Agreement, the Manufacturer's Agreement for such Manufacturer may be terminated immediately by Disney, and Licensee shall not thereafter use such Manufacturer to manufacture Articles, components, or related items. In the case of a pre-approval compliance inspection, if a Manufacturer fails to pass the compliance inspection, and thereafter fails to remedy the cited failure(s) within the time designated by Disney, Licensee shall not use such Manufacturer to produce Articles, components or related items. If Licensee fails to notify Disney that it has ceased using a particular CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Manufacturer, and Disney or its designated agent conducts a compliance inspection of such Manufacturer, Licensee remains obligated to work with the Manufacturer to remedy any cited failure(s), or, in the alternative, the Manufacturer's Agreement shall be deemed terminated for purposes of Paragraph 28.B. (11), and Licensee shall promptly reimburse Disney for the reasonable cost of the compliance inspection. 13. DISNEY OWNERSHIP OF ALL RIGHTS IN LICENSED MATERIAL Licensee acknowledges that the copyrights and all other proprietary rights in and to Licensed Material are exclusively owned by and reserved to Disney or its licensors, if applicable to any Property. Licensee shall neither acquire nor assert copyright ownership or any other proprietary rights in the Licensed Material or in any derivation, adaptation, or variation thereof. Without limiting the foregoing, Licensee hereby assigns to Disney all of Licensee's worldwide right, title and interest in the Licensed Material and in any material objects containing, consisting of, or to the extent that they incorporate Licensed Material, or other adaptations, compilations, collective works, derivative works, or variations of Licensed Material, heretofore or hereafter created by or for Licensee or any of Licensee's Affiliates. All such new materials shall be included in the definition of "Licensed Material" under this Agreement. The foregoing assignment to Disney of material objects shall not include that portion of Licensee's displays, catalogs, or promotional material not containing Licensed Material, or the physical items constituting the Articles, unless such items are in the shape of the Licensed Material. 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 13, Licensee agrees to obtain from such party a full assignment of rights so that the foregoing assignment by Licensee shall vest full rights to such new materials in Disney. Licensee further covenants that any such new materials created by Licensee or by any third party Licensee has engaged are original to Licensee or such third party and do not violate the rights of any other person or entity; this covenant regarding originality shall not extend to any materials Disney supplies to Licensee, but does apply to all materials Licensee or Licensee's third party contractors may add thereto. With regard to any molds, plates and other items used to reproduce the Intellectual Property, Licensee agrees that it will never sell or transfer such molds, plates, or other items to any third party without Disney's prior written consent. 14. COPYRIGHT NOTICE As a condition to the grant of rights hereunder, each Article and any other matter containing Licensed Material shall bear a properly located permanently affixed copyright notice in Disney's name (e.g., "(C) Disney"), or such other notice as Disney specifies to Licensee in writing. Licensee will comply with such instructions as to form, location and content of the notice as Disney may give from time to time. Licensee will not, without Disney's prior written consent, affix to any Article or any other matter containing Licensed Material a copyright notice in any other name. If through inadvertence or otherwise a copyright notice on any Article or other such matter should appear in Licensee's name or the name of a third party, Licensee hereby agrees to assign to Disney the copyright represented by any such copyright notice in Licensee's name and, upon request, cause the execution and delivery to Disney of CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. whatever documents are necessary to convey to Disney that copyright represented by any such improper copyright notice. If by inadvertence or otherwise, an improper copyright notice appears on, or if a proper copyright notice is omitted from, any Article or other matter containing Licensed Material, Licensee agrees at Licensee's expense to use all reasonable efforts to correct the error on all such Articles or other matter in process of manufacture or in distribution. Licensee agrees to advise Disney promptly and in writing of the steps being taken to correct any such error and to make the corrections on existing Articles which can be located. 15. TRADEMARK RIGHTS AND OBLIGATIONS A. All uses of the Trademarks by Licensee hereunder shall inure to Disney's benefit. Licensee acknowledges that Disney (or its licensors, if applicable) is the exclusive owner of all the Trademarks, and of any trademark incorporating a Trademark or any Licensed Material, and the trademark rights created by such uses. Without limiting the foregoing, Licensee hereby assigns to Disney all the Trademarks, and any trademark incorporating a Trademark or any Licensed Material, and the trademark rights created by such uses, together with the goodwill attaching to that part of the business in connection with which such Trademarks or trademarks are used. Licensee agrees to follow Disney's instructions for proper use of the Trademarks and trademarks, and to execute and deliver to Disney such documents as Disney requires to protect and register the Trademarks and trademarks. B. Licensee agrees not to use any Licensed Material or Trademarks, or any trademark incorporating a Trademark or of any Licensed Material, on any business sign, business cards, stationery or forms (except as licensed herein), or to use any Licensed Material or Trademark as the name of Licensee's business or any division thereof, unless otherwise agreed by Disney in writing. C. Nothing contained herein shall prohibit Licensee from using Licensee's own trademarks (as mutually agreed with Disney) on the Articles, or Licensee's copyright notice on the Articles when the Articles contain independent material which is Licensee's property. Nothing contained herein is intended to give Disney any rights to, and Disney shall not use, any trademark, copyright or patent owned by Licensee or used by Licensee under license in connection with the Articles which is not derived or adapted from Licensed Material, Trademarks, or other materials owned by Disney (or its licensors, if applicable). 16. NON-ASSOCIATION OF OTHER MATERIAL WITH LICENSED MATERIAL To preserve Disney's identification with Disney's Licensed Material and to avoid confusion of the public, Licensee agrees not to associate other characters or licensed properties with the Licensed Material or the Trademarks either on the Articles or in their packaging, or, without Disney's written permission, on advertising, promotional or display materials. If Licensee wishes to use a character which constitutes Licensee's trademark on the Articles or their packaging, or otherwise in connection with the Articles, Licensee agrees to obtain Disney's prior written permission. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. 17. ACTIVE MARKETING OF ARTICLES Licensee agrees to manufacture (or have manufactured for Licensee) and actively offer for sale all the Articles and to actively exercise the rights granted herein. Licensee agrees that by the Marketing Date applicable to a particular Article or, if such a date is not specified in Paragraph 1.I., by six (6) months from the commencement of the term of the applicable Schedule or the date of any applicable amendment, shipments to customers of such Article will have taken place in sufficient time that such Article shall be available for purchase in commercial quantities by the public at the retail outlets in all distribution channels authorized pursuant to Paragraph 2.A. In any case in which such sales have not taken place or when the Article is not then and thereafter available for purchase in commercial quantities by the public, Disney may either invoke Disney's remedies under Paragraph 28, or withdraw such Article from the list of Articles licensed in this Agreement, or withdraw the applicable distribution channel, or withdraw such Article from the applicable Schedule, without obligation to Licensee other than to give Licensee written notice thereof. 18. PROMOTION COMMITMENT A. Licensee agrees to carry out the Promotion Commitment, as defined in Paragraph 1.K. The advertising and promotion activities required thereunder to promote the sale of the Articles shall include one or more of the following activities: - point of purchase displays (not including packaging or other individual product costs) - media advertising - measurable public relations programs - sampling - contests and games approved in advance in writing by Disney - trade shows, catalog or trade activities, fashion shows - participation in group promotions organized by Disney - other activities as agreed in advance in writing with Disney All promotional material is subject to the approval provisions of Paragraph 7 hereof. B. For purposes of determining Licensee's satisfaction of the Promotion Commitment, all consumer advertising and merchandising costs associated with the above-listed activities for the Articles, but not including packaging or other individual product costs, will be counted toward the requirement; provided, however, that any advertising discounts given in connection with cooperative advertising may not be included in the calculation. C. One time during each twelve (12) month period during the Term, Licensee also shall provide Disney with a statement describing the funds theretofore spent and consumer exposure provided as required in this Paragraph, together with a description of the manner in which such funds were spent, all of which information shall be broken down by country within the Territory, and provided in such detail as Disney may specify from time to time. Amounts spent in excess of the Promotion CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Commitment during any Royalty Payment Period may be credited against the Promotion Commitment for any other Royalty Payment Period occurring in the same twelve month period during the Term. If in any Royalty Payment Period Licensee has not satisfied the Promotion Commitment, Licensee (i) may carry forward such shortfall into the next succeeding Royalty Payment Period (other than in the case of a shortfall in the final Royalty Payment Period hereunder, in which case no carry forwards shall be permitted), or (ii) shall pay Disney the amount of such shortfall as liquidated damages; provided, however, no shortfall (or fraction thereof) may be carried forward more than twelve months. Licensee acknowledges that its expenditure of the Promotion Commitment as provided for herein increases the value of the business from which Disney benefits as licensor. Licensee and Disney agree that it is impracticable and extremely difficult to fix the actual damages which may proximately result from Licensee's failure to fulfill its obligation as provided for herein, and Licensee's liability for failure to do so shall, for each Royalty Payment Period, be limited to and fixed at the sum of an amount equal to the shortfall between the amount Licensee actually spends on the Promotion Commitment during such Royalty Payment Period as theretofore reported to Disney and the amount required to be expended hereunder. Such cumulative amount shall be considered liquidated damages and not a penalty. 19. REGISTRATIONS Except with Disney's written consent, neither Licensee nor any of Licensee's Affiliates will register or attempt in any country to register copyrights in, or to register as a trademark, service mark, design patent or industrial design, or business designation, any of the Intellectual Property or derivations or adaptations thereof, or any word, symbol or design which is so similar thereto as to suggest association with or sponsorship by Disney or any of Disney's Affiliates. In the event of breach of the foregoing, Licensee agrees, at Licensee's expense and at Disney's request, immediately to terminate the unauthorized registration activity and promptly to execute and deliver, or cause to be delivered, to Disney such assignments and other documents as Disney may require to transfer to Disney all rights to the registrations, patents or applications involved. 20. UNLICENSED USE OF LICENSED MATERIALS A. Licensee agrees that Licensee will not use the Licensed Material, or the Trademarks, or any other material the copyright to which is owned by Disney in any way other than as herein authorized (or as is authorized in any other written contract in effect between the parties). In addition to any other remedy Disney may have, Licensee agrees that all revenues from any unauthorized use thereof, and all revenues from the use of any other copyrighted material of Disney's (or its licensors, if applicable), without written authorization from Disney, shall be immediately payable to Disney. B. Licensee agrees that it will give Disney prompt written notice of any unlicensed use by third parties of the Intellectual Property, and that Licensee will not, without Disney's written consent, bring or cause to be brought any criminal prosecution, lawsuit or administrative action for infringement, interference with or CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. violation of any rights to the Intellectual Property. Because of the need for and the high costs of an effective anti-piracy enforcement program, Licensee agrees to cooperate with Disney, and, if necessary, to be named by Disney as a sole complainant or co-complainant in any action against an infringer of the Intellectual Property and, notwithstanding any right of Licensee to recover same, legal or otherwise, Licensee agrees to pay to Disney, and hereby waives all claims to, all damages or other monetary relief recovered in such action by reason of a judgment or settlement whether or not such damages or other monetary relief, or any part thereof, represent or are intended to represent injury sustained by Licensee as a licensee hereunder. In any such action against an infringer, Disney agrees to reimburse Licensee for reasonable expenses incurred at Disney's request, including reasonable attorney's fees if Disney has requested Licensee to retain separate counsel. 21. STATEMENTS AND PAYMENTS OF ROYALTIES A. Licensee agrees to furnish to Disney by the 25th day after each Royalty Payment Period full and accurate statements on statement forms Disney designates for Licensee's use, showing all information requested by such forms separately for each Property licensed hereunder, including but not limited to, the name of the subject Property, the quantities, Net Invoiced Billings (reported in U.S. Dollars and, if the Territory includes any country other than the U.S., Net Invoiced Billings also should be reported in the currency invoiced to customers) and applicable Royalty rate(s) of Articles using Intellectual Property from such Property invoiced during the preceding Royalty Payment Period, and the quantities and invoice value of Articles returned for credit or refund in such period, as well as sales forecasts (if requested), and the country of sale. At the same time Licensee will pay Disney all Royalties not reduced by any VAT (if applicable) due on billings shown by such statements. All monies owed to Disney shall be sent to the address identified in Paragraph 21.D., or, if requested by Disney, by electronic transfer to such account as Disney may designate. To the extent that any monies owed to Disney under this Agreement are not paid, Licensee authorizes Disney to offset any amount(s) which is due at any time against any sums which Disney or any of Disney's Affiliates may owe to Licensee or any of Licensee's Affiliates. No deduction or withholding from Royalties payable to Disney shall be made by reason of any tax. Any applicable tax on the manufacture, distribution and sale of the Articles shall be borne by Licensee. All payments are to be made in U.S. Dollars. In the event that an exchange rate is necessary, Licensee shall use the official buying rate of exchange as published in the Wall Street Journal, New York Edition, on the last business day of the applicable Royalty Payment Period, and Licensee shall identify such exchange rate on the Royalty reporting forms. B. The statement forms Disney designates for Licensee's use may be changed from time to time, and Licensee agrees to use the most current form designated by Disney (including, for example, forms to be sent by electronic transmission). If it is necessary for Licensee to adapt its system to be able to report statements by electronic transmission, or to make payments by electronic transfer, all costs of such adaptation shall be borne entirely by Licensee. Licensee agrees to fully comply with all instructions supplied by Disney for completing any reporting forms, or adhering to any required format. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. C. Sales of items licensed under contracts with Disney other than this Agreement shall not be reported on the same statement as sales of Articles under this Agreement. D. Licensee's payments, including all Royalties, shall be wire transferred to [ ]; or delivered to such address as Disney designates; currently, Disney designates the following address: Disney Enterprises, Inc., [ ] Los Angeles, California 90074-5988. If Licensee wire transfers payments, including Royalties, Licensee shall send the corresponding statement to the foregoing address. If Licensee wishes to send statements and payments by overnight courier, the current address is: Bank of America Lockbox Services, [ ], Ground Level, 1000 W. Temple Street, Los Angeles, California 90012. However, Advances should be mailed directly to Disney at 500 South Buena Vista Street, Burbank, California 91521-6835, to the attention of the Contract Administrator or Legal Department, Consumer Products Division. Acceptance of any payment from Licensee, whether by wire transfer or otherwise, is not a waiver of any rights on the part of Disney. E. From time to time, upon request by Disney, Licensee shall furnish to Disney's Credit Department, no later than seven days after such request, such financial reports, including balance sheets, statements of income and cash flows, as Disney deems necessary to evaluate Licensee's ongoing creditworthiness and ability to perform this Agreement. 22. INTEREST Royalties or any other payments due to Disney hereunder which are received after the due date shall bear interest at the rate of 18% per annum from the due date (or the maximum permissible by law if less than 18%). 23. CONFIDENTIALITY Licensee represents and warrants that Licensee did not disclose to any third party the prospect of a license from Disney, and that Licensee did not trade on the prospect of a license from Disney, prior to full execution of this Agreement. Licensee agrees not to issue any press release regarding this Agreement or Disney without obtaining Disney's prior written consent. Licensee agrees to keep the terms and conditions of this Agreement confidential, and Licensee shall not disclose such terms and conditions to any third party without obtaining Disney's prior written consent; provided, however, that this Agreement may be disclosed on a need-to-know basis to Licensee's attorneys and accountants who agree to be bound by this confidentiality provision. In addition, Licensee may have access to information concerning Disney's or its Affiliates' business and operations, or information concerning works in progress, artwork, plots, characters or other matters relating to Disney's or its Affiliates' artistic creations, which information may not be accessible or known to the general public. Licensee agrees not to use or disclose such information to any third party without obtaining Disney's prior written consent. In the event Licensee is required to disclose this Agreement, or any part thereof, pursuant to any law, court order or process, the rules and regulations of any governmental department, agency or authority (including, but not limited to, the Securities and Exchange Commission) or any generally accepted accounting rules mandating disclosure in Licensee's financial CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. statements, Licensee agrees to give Disney prior written notice and to use its best efforts to obtain confidential treatment of this Agreement. Upon Disney's request, Licensee agrees to incorporate Disney's comments into Licensee's request for confidential treatment, provided such request and comments are received in writing by Licensee within five (5) business days after Disney's receipt of the notice referred to in the preceding sentence. 24. AUDITS AND MAINTAINING RECORDS A. Licensee agrees to keep accurate records of all transactions relating to this Agreement and any prior agreement with Disney regarding the Licensed Material, including, without limitation, shipments to Licensee of Articles and components thereof, inventory records, records of sales and shipments by Licensee, and records of returns, and to preserve such records for the lesser of two (2) years after the expiration or termination of this Agreement or a period of seven (7) years. B. Disney, or Disney's representatives, shall have the right from time to time, during Licensee's normal business hours, but only for the purpose of confirming Licensee's performance hereunder, to examine and make extracts and photocopies from all such records, including the general ledger, invoices and any other records which Disney reasonably deems appropriate to verify the accuracy of Licensee's statements or Licensee's performance hereunder, including records of Licensee's Affiliates and unaffiliated sublicensees or other subcontractors if they are involved in activities which are the subject of this Agreement. In particular, Licensee's invoices shall identify the Articles separately from goods which are not licensed hereunder. Licensee acknowledges that Disney may furnish Licensee with an audit questionnaire, and Licensee agrees to fully and accurately complete such questionnaire, and return it to Disney within the designated time. Disney's use of an audit questionnaire shall not limit Disney's ability to conduct any on-site audit(s) as provided above. Licensee acknowledges that an audit conducted by Disney or its representatives, may involve one or more license agreements at a time. C. If in an audit of Licensee's records it is determined that there is a short fall of five percent (5%) or more in Royalties reported for any Royalty Payment Period, Licensee shall upon request from Disney reimburse Disney for the full out-of-pocket costs of the audit, including the costs of employee auditors calculated at U.S. $100 per hour per person for travel time during normal working hours and actual working time. D. If Licensee has failed to keep adequate records for one or more Royalty Payment Periods, Disney will assume that the Royalties owed to Disney for such Royalty Payment Period(s) are equal to a reasonable amount, determined in Disney's absolute discretion, which may be up to but will not exceed the highest Royalties owed to Disney in a Royalty Payment Period for which Licensee has kept adequate records; if Licensee has failed to keep adequate records for any Royalty Payment Period, Disney will assume a reasonable amount of Royalties which Licensee will owe to Disney, based on the records Licensee has kept and other reasonable assumptions Disney deems appropriate. 25. INDEMNITY CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. A. Licensee shall indemnify Disney during and after the term hereof against all claims, demands, suits, judgments, losses, liabilities and expenses of any nature (including reasonable attorneys' fees) arising out of Licensee's activities under this Agreement, including but not limited to, any actual or alleged: (1) negligent acts or omissions on Licensee's part, (2) defect (whether obvious or hidden and whether or not present in any Sample approved by Disney) in an Article, (3) personal injury, (4) infringement of any rights of any other person by the manufacture, sale, possession or use of Articles, (5) breach on Licensee's part of any covenant, representation or warranty contained in this Agreement, or (6) failure of the Articles or by Licensee to comply with applicable Laws. The parties indemnified hereunder shall include Disney Enterprises, Inc., its licensors, if applicable, and its and their Affiliates and successors, and its and their officers, directors, employees and agents. The indemnity shall not apply to any claim or liability relating to any infringement of the copyright of a third party caused by Licensee's utilization of the Licensed Material and Trademarks in accordance with the provisions hereof, unless such claim or liability arises out of Licensee's failure to obtain the full assignment of rights referenced in Paragraph 13. B. Disney shall indemnify Licensee during and after the term hereof against all claims, demands, suits, judgments, losses, liabilities and expenses of any nature (including reasonable attorneys' fees) arising out of any claim that Licensee's use of any representation of the Licensed Material and Trademarks approved in accordance with the provisions of this Agreement infringes the copyright of any third party or infringes any right granted by Disney to such third party, except for claims arising out of Licensee's failure to obtain the full assignment of rights referenced in Paragraph 13. Licensee shall not, in any case, be entitled to recover for lost profits. C. Additionally, if by reason of any claims referred to in Paragraph 25.B., Licensee is precluded from selling any stock of Articles or utilizing any materials in Licensee's possession or which come into Licensee's possession by reason of any required recall, Disney shall be obligated to purchase such Articles and materials from Licensee at their out-of-pocket cost to Licensee, excluding overheads, but Disney shall have no other responsibility or liability with respect to such Articles or materials. D. Disney gives no warranty or indemnity with respect to any liability or expense arising from any claim that use of the Intellectual Property on or in connection with the Articles hereunder or any packaging, advertising or promotional material infringes on any trademark right of any third party or otherwise constitutes unfair competition by reason of any prior rights acquired by such third party, other than rights acquired from Disney. It is expressly agreed that it is Licensee's responsibility to carry out such investigations as Licensee may deem appropriate to establish that Articles, packaging, and promotional and advertising material which are manufactured or created hereunder, including any use made of the Intellectual Property therewith, do not infringe such right of any third party, and Disney shall not be liable to Licensee if such infringement occurs. E. With regard to any indemnified claims under this Paragraph 25, the party entitled to indemnification shall give written notice to the other party of the claim. The indemnifying party shall select mutually agreeable counsel, and shall consult in a CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. meaningful fashion with the indemnified party in the conduct of the defense of the claim. Promptly upon request, the indemnified party shall provide reasonable assistance in the defense of such claims at the expense of the indemnifying party. If the indemnified party desires to be represented by separate counsel, it shall be responsible for all fees and costs associated therewith. Alternatively, the indemnified party may choose to be represented by the indemnifying party's counsel, in which case the indemnifying party shall be entirely and solely responsible for all fees and costs associated therewith. The indemnifying party and the indemnified party may enter into good faith settlement(s) of the claim, with the consent of the other party, not to be unreasonably withheld. F. Without limiting the foregoing, Licensee agrees to give Disney written notice of any product liability claim made or suit filed with respect to any Article, any investigations or directives regarding the Articles issued by the U.S. Consumer Product Safety Commission ("CPSC") or other federal, state, provincial, or local consumer safety agency, and any notices sent by Licensee to, or received by Licensee from, the CPSC or other consumer safety agency regarding the Articles within fourteen (14) days of Licensee's receipt or promulgation of the claim, suit, investigation, directive, or notice. 26. INSURANCE Licensee shall maintain in full force and effect at all times while this Agreement and any Schedule(s) entered into hereunder are in effect and for three years thereafter commercial general liability insurance on a per occurrence form, including broad form coverage for contractual liability, property damage, products liability and personal injury liability (including bodily injury and death), waiving subrogation, with minimum limits of no less than two million dollars (US $2,000,000.00) per occurrence, and naming as an additional "insured" each party indemnified in Paragraph 25 hereof. Licensee also agrees to maintain in full force and effect at all times while this Agreement and any Schedule(s) entered into hereunder are in effect such Worker's Compensation Insurance as is required by applicable provincial or state law and, if Licensee is a U.S.-based licensee, Employer's Liability Insurance with minimum limits of one million dollars (US $1,000,000.00) per occurrence. All insurance shall be primary and not contributory. Licensee shall deliver to Disney a certificate or certificates of insurance evidencing satisfactory coverage and indicating that Disney shall receive thirty (30) days unrestricted prior written notice of cancellation, non-renewal or of any material change in coverage. Licensee's insurance shall be carried by an insurer with a BEST Guide rating of B + VII or better. Compliance herewith in no way limits Licensee's indemnity obligations, except to the extent that Licensee's insurance company actually pays Disney amounts which Licensee would otherwise pay Disney. 27. WITHDRAWAL OF LICENSED MATERIAL Licensee agrees that Disney may, without obligation to Licensee other than to give Licensee written notice thereof, withdraw from the scope of this Agreement any Licensed Material which by the Marketing Date or, if such a date is not specified in Paragraph 1.I., by six (6) months from the commencement of the term of the CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. applicable Schedule or the date of any applicable amendment, is not being used on or in connection with the Articles. Disney may also withdraw any Licensed Material or Articles the use or sale of which under this Agreement would infringe or reasonably be claimed to infringe the rights of a third party, other than rights granted by Disney, in which case Disney's obligations to Licensee shall be limited to the purchase at cost of Articles and other materials utilizing such withdrawn Licensed Material which cannot be sold or used. In the case of any withdrawal under the preceding sentence, the Advances and Guarantees shall be adjusted to correspond to the time remaining in the term of the affected Schedule(s), or the number of Articles remaining under such Schedule(s), at the date of withdrawal. 28. TERMINATION Without prejudice to any other right or remedy available to Disney: A. Disney shall have the right at any time to terminate this Agreement (or any Schedule(s) entered into hereunder) by giving Licensee written notice thereof, if Licensee (i) fails to manufacture, sell or distribute the Articles in accordance with this Agreement, (ii) fails to timely furnish statements and timely pay Royalties or any other amounts due to Disney hereunder, (iii) fails to notify Disney of the accurate name and complete address of Licensee's manufacturing facilities or any Manufacturer of the Articles, (iv) fails to have any such Manufacturer execute the Manufacturer's Agreement, or (v) otherwise fails to comply with or perform any other obligation or covenant hereunder or breaches any other term of this Agreement (other than those set forth in Paragraph 28.B. below); provided that Licensee shall have thirty (30) days (or, in the case of non-payment of any monetary obligations due Disney under the Agreement within fifteen (15) days) after Disney sends Licensee written notice of termination to correct any such failure or breach capable of being corrected and avoid termination. B. Disney shall have the right at any time to terminate this Agreement immediately upon giving Licensee written notice thereof if one or more of the following events occur (provided, however, that with respect to clause (6) below such termination shall occur automatically and immediately without the need for any notice): (1) if Licensee delivers to any customer without Disney's written authorization merchandise containing representations of Intellectual Property or other material the copyright or other proprietary rights to which are owned by Disney other than Articles licensed herein and approved in accordance with the provisions hereof; (2) if Licensee delivers Articles outside the Territory or knowingly sells Articles to a third party when Licensee knows or should know in the exercise of prudent business judgment that such sales ultimately will result in delivery outside the Territory, unless pursuant to a written distribution permission or separate written license agreement with Disney or any of Disney's Affiliates; CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. (3) if a breach occurs which is of the same nature, and which violates the same provision of this Agreement, as a breach of which Disney has previously given Licensee written notice; (4) if Licensee breaches any material term of any other license agreement between the parties, and Disney terminates such agreement for cause; (5) if Licensee breaches any surviving obligation under any other license agreement between the parties, even if such agreement has expired; (6) if Licensee shall generally not pay its debts as such debts become due, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Licensee seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order for relief or the appointment of a receiver, trustee or other similar official for all or for any substantial part of its property or assets; (7) if Licensee is not permitted or is unable to operate Licensee's business in the usual manner, or is not permitted or is unable to provide Disney with assurance satisfactory to Disney that Licensee will so operate Licensee's business, as debtor in possession or its equivalent; (8) if any event shall occur or condition shall exist under any agreement or instrument relating to institutional indebtedness or financial obligations owed by Licensee, including the failure to pay principal or interest thereon, and such event or condition shall continue after any applicable grace period specified in such agreement or instrument, and the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such indebtedness or obligations or otherwise cause, or to permit the holder thereof to cause, such indebtedness or obligations to mature; (9) if Licensee, due to material changes in its financial position, or for other reasons, is unable to meet Licensee's obligations under this Agreement, or is unable to provide Disney with assurance satisfactory to Disney that Licensee will be able to meet such obligations; (10) if Licensee breaches any covenant set forth in Paragraph 11 of this Agreement; or (11) if more than three Manufacturer's Agreements are terminated in any twelve-month period by Disney for the Manufacturers' failure to pass compliance inspections as referenced in Paragraphs 11 and 12; or (12) if Licensee breaches any material term of this Agreement and the breach is not reasonably capable of being cured or otherwise corrected to Disney's satisfaction. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. C. If Disney terminates this Agreement pursuant to this Paragraph 28, Licensee shall not be permitted to seek injunctive relief to contest Disney's determination that a termination event has occurred or to otherwise affect Disney's full and absolute control of the Licensed Material and the Trademarks; provided however, Licensee may bring an action for damages, but prior to and during any such action, Disney shall have full and absolute control over the Licensed Material and the Trademarks. 29. RIGHTS AND OBLIGATIONS UPON EXPIRATION OR TERMINATION A. Upon the expiration or termination of this Agreement, all rights herein granted to Licensee shall revert to Disney, any unpaid portion of the Guarantee for the entire Term shall be immediately due and payable (together with the Royalty statement due at such time), and Disney shall be entitled to retain all Royalties and other things of value paid or delivered to Disney. Notwithstanding the foregoing, if this Agreement expires or terminates prior to the renewal period, no portion of the Guarantee applicable to the Renewal Period shall be payable to Disney. Licensee agrees that the Articles shall be manufactured during the term of each applicable Schedule in quantities consistent with anticipated demand therefor so as not to result in an excessive inventory build-up immediately prior to the end of the term thereof. Licensee agrees that from the expiration or termination of this Agreement Licensee shall neither manufacture nor have manufactured for Licensee any Articles, that Licensee will deliver to Disney any and all artwork (including Style Guides, animation cells and drawings) which may have been used or created by Licensee in connection with this Agreement, that Licensee will at Disney's option either sell to Disney at cost or destroy or efface any molds, plates and other items used to reproduce the Intellectual Property, and that, except as hereinafter provided, Licensee will cease selling Articles. Any unauthorized distribution of Articles after the expiration or termination of this Agreement or any applicable Schedule shall constitute copyright infringement. B. If Licensee has any unsold Articles in inventory on the expiration or termination date of the applicable Schedule, Licensee shall provide Disney with a full statement of the kinds and numbers of such unsold Articles. If such statement has been provided to Disney and if Licensee has fully complied with the terms of this Agreement, including the payment of all Royalties due and the Guarantee, upon notice from Disney, Licensee shall have the right for a limited period of two (2) calendar months from such expiration or earlier termination date to sell off and deliver such Articles as authorized under Paragraph 2.A. Licensee shall furnish Disney statements covering such sales and pay Disney Royalties in respect of such sales. Such Royalties shall not be applied against the applicable Advance or towards meeting the applicable Guarantee. If the sell-off period is extended by Disney to a date which is not the last day of the Royalty Payment Period, Licensee's statement and Royalties for such sell-off period shall be due twenty-five (25) days after the last day of the sell-off period. All rights and remedies available to Disney during the Term shall be equally available to Disney during the sell-off period. C. In recognition of Disney's interest in maintaining a stable and viable market for the Articles during and after the Term and any sell-off period, Licensee agrees to refrain from "dumping" the Articles in the market during the Term and any sell-off CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. period granted to Licensee. "Dumping" shall mean the distribution of product at volume levels significantly above Licensee's prior sales practices with respect to the Articles, and at price levels so far below Licensee's prior sales practices with respect to the Articles as to disparage the Articles; provided, however, that nothing contained herein shall be deemed to restrict Licensee's ability to set product prices at Licensee's discretion. D. Except as otherwise agreed by Disney in writing, any inventory of Articles in Licensee's possession or control after the expiration or termination of the term of the applicable Schedule hereof and of any sell-off period granted hereunder shall be destroyed, or all Licensed Material and Trademarks removed or obliterated therefrom. E. If Disney supplies Licensee with forms regarding compliance with this Paragraph 29, Licensee agrees to complete, execute and return such forms to Disney expeditiously. Licensee acknowledges that this will be necessary at the end of the term of each Schedule entered into under this Agreement. F. Notwithstanding any provision to the contrary, in the case of termination under Paragraph 28.B. (6) or (7), in order to protect the value of the Articles and to avoid any disparagement of the Articles which could occur as a result of the circumstances of termination, Disney shall have the option, in Disney's absolute discretion, to purchase any or all unsold Articles in Licensee's inventory on the termination date at 20% over Licensee's cost of goods for such Articles (not including overhead). 30. WAIVERS A waiver by either party at any time of a breach of any provision of this Agreement shall not apply to any breach of any other provision of this Agreement, or imply that a breach of the same provision at any other time has been or will be waived, or that this Agreement has been in any way amended, nor shall any failure by either party to object to conduct of the other be deemed to waive such party's right to claim that a repetition of such conduct is a breach hereof. 31. PURCHASE OF ARTICLES BY DISNEY If Disney wishes to purchase Articles, Licensee agrees to sell such Articles to Disney or any of Disney's Affiliates at as low a price as Licensee charges for similar quantities sold to Licensee's regular customers and to pay Disney Royalties on any such sales. 32. NON-ASSIGNABILITY A. This Agreement, and the rights granted hereunder to Licensee, are personal to Licensee, who was specifically chosen by Disney to be licensed hereunder because of Licensee's and certain employees' particular expertise and ability to design, produce and sell the Articles in ways which maximize the value of the Articles, and to otherwise perform the Agreement. Licensee shall not voluntarily or by operation of law assign, sub-license, transfer, encumber or otherwise dispose of all or any part of CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Licensee's interest in this Agreement (including, but not limited to, any encumbrance of the Articles) without Disney's prior written consent, to be granted or withheld in Disney's absolute discretion. Any attempted assignment, sub-license, transfer, encumbrance or other disposal without such consent shall be void and shall constitute a material default and breach of this Agreement. "Transfer" within the meaning of this Paragraph 32 shall include any merger or consolidation involving Licensee or any directly or indirectly controlling Affiliate(s) of Licensee ("Controlling Affiliate"); any sale or transfer of all or substantially all of Licensee's or its Controlling Affiliate(s)' assets; any transfer of Licensee's rights, obligations, or both, under this Agreement, to a division, business segment or other entity different from the one specifically referenced on page 1 hereof (or any sale or attempted sale of Articles under a trademark or trade name of such division, business segment or other entity); any public offering, or series of public offerings, whereby a cumulative total of thirty-three and one-third percent (33 1/3%) or more of the voting stock of Licensee or its Controlling Affiliate(s) is offered for purchase; and any acquisition, or series of acquisitions, by any person or entity, or group of related persons or entities, of a cumulative total of thirty-three and one-third percent (33-1/3%) or more of the voting stock of Licensee or its Controlling Affiliate(s), or the right to vote such percentage (or, if Licensee is a partnership, resulting in the transfer of thirty-three and one-third percent (33-1/3%) or more of the profit and loss participation in Licensee, or the occurrence of any of the foregoing with respect to any general partner of Licensee; or, if Licensee is a legal entity other than a corporation or partnership, resulting in the transfer of thirty-three and one-third percent (33-1/3%) or more of the control of Licensee, or the occurrence of any of the foregoing with respect to any manager or administrator of the legal entity). B. Licensee agrees to provide Disney with at least thirty (30) days prior written notice of any desired assignment of this Agreement or other transfer as defined in Paragraph 32.A. At the time Licensee gives such notice, Licensee shall provide Disney with the information and documentation necessary to evaluate the contemplated transaction. Disney's consent (if given) to any assignment of this Agreement or other transfer as defined in Paragraph 32.A. shall be subject to such terms and conditions as Disney deems appropriate, including but not limited to, payment of a transfer fee. The amount of the transfer fee shall be determined by Disney based upon the circumstances of the particular assignment or transfer, taking into account such factors as the estimated value of the license being assigned or otherwise transferred; the risk of business interruption or loss of quality, production or control Disney may suffer as a result of the assignment or other transfer; the identity, reputation, creditworthiness, financial condition and business capabilities of the proposed assignee or other entity involved in the transfer; and Disney's internal costs related to the assignment or other transfer; provided, however, in no event shall the transfer fee be in an amount less than U.S. $[ ] for each Disney license (or Schedule), brands and/or Property(ies) (as applicable) involved in an assignment or other transfer, up to a maximum total fee of U.S. $[ ] per transfer for all affected Disney licenses (or Schedules), brands and/or Properties (as applicable) within the Territory and Canada at the time of the subject transfer. The foregoing transfer fee shall not apply if this Agreement is assigned to one of Licensee's Affiliates as part of a corporate reorganization exclusively among some or all of the entities existing in Licensee's corporate structure when this Agreement is signed; provided, however, CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. that Licensee must give Disney written notice of such assignment and a description of the reorganization. Notwithstanding the foregoing, a transfer fee will not be triggered by any of the following transfers of voting stock or other beneficial interest in Licensee, unless occurring as part of or in conjunction with a transaction that would trigger a transfer fee: (1) distribution(s) in the ordinary course of Licensee's business on employee or director stock option plans; or (2) transfers for estate planning purposes among the current shareholders of Licensee who are members of the Sidman family (including their spouses and children) as their interests appear when this Agreement is signed; or (3) repurchases of its own stock by Licensee as part of a corporate stock repurchase program but not including any issuer tender offer which exceeds thirty-three and one-third percent (33-1/3%) of the then outstanding stock or exchange offer; provided, however, that Licensee shall maintain substantially the same management and continue to operate in substantially the same fashion as prior to any of the transfers described above, and provided further, that in any event, any of the transfers described above shall remain subject to Disney's consent as set forth in Paragraph 32.A. The provisions of this Paragraph 32 shall supersede any conflicting provisions on this subject in any merchandise license agreement previously entered into between the parties for this Territory. C. Licensee acknowledges that it has read and understands the Transfer Fee Policy attached hereto, which governs transfer fee procedures under this Agreement. The Transfer Fee Policy is incorporated herein by this reference. D. Licensee may, upon Disney's prior written consent, sublicense Licensee's rights, obligations, or both, under this Agreement, to any of Licensee's Affiliates, provided that each such Affiliate agrees to be bound by all of the terms and conditions of this Agreement, and further provided that Licensee and each such Affiliate agree to provide Disney with satisfactory documentation of such agreement(s), guarantee(s), and indemnification upon Disney's request therefor, and in a form satisfactory to Disney. Licensee hereby represents and irrevocably and unconditionally guarantees that any and all Affiliates sublicensed hereunder will observe and perform all of Licensee's obligations under this Agreement, including, but not limited to, the provisions governing approvals, and compliance with approved samples, applicable Laws, indemnification and all other provisions hereof, and that they will otherwise adhere strictly to all of the terms hereof and act in accordance with Licensee's obligations hereunder. Any involvement of an Affiliate in the activities which are the subject of this Agreement shall be deemed carried on pursuant to such a sublicense and thus covered by such guarantee; however, unless Licensee has obtained Disney's consent to sublicense an Affiliate in each instance, such Affiliate shall be deemed to be included in the term "Licensee" for all purposes under this Agreement, and Disney may treat such unapproved involvement of the Affiliate as a breach of the Agreement. 33. RELATIONSHIP This Agreement does not provide for a joint venture, partnership, agency or employment relationship between the parties, or any other relationship than that of licensor and licensee. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. 34. CONSTRUCTION The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning and not strictly for or against any of the parties. Headings of paragraphs herein are for convenience of reference only and are without substantive significance. 35. MODIFICATIONS OR EXTENSIONS OF THIS AGREEMENT Except as otherwise provided herein, this Agreement can only be extended or modified by a writing signed by authorized representatives of both parties; provided, however, that certain modifications shall be effective if signed by the party to be charged and communicated to the other party. 36. NOTICES All notices which either party is required or may desire to serve upon the other party shall be in writing, addressed to the party to be served at the address set forth on page 1 of this Agreement, and may be served personally or by depositing the same addressed as herein provided (unless and until otherwise notified), postage prepaid, in the United States mail. Such notice shall be deemed served upon personal delivery or upon the date of mailing; provided, however, that Disney shall be deemed to have been served with a notice of a request for approval of materials under this Agreement only upon Disney's actual receipt of the request and of any required accompanying materials. Any notice sent to Disney hereunder shall be sent to the attention of "President, Consumer Products Licensing", with a copy to "Corporate Legal, Consumer Products," unless Disney advises Licensee in writing otherwise. 37. MUSIC Music is not licensed hereunder. Any charges, fees or royalties payable for music rights or any other rights not covered by this Agreement shall be additional to the Royalties and covered by separate agreement. 38. PREVIOUS AGREEMENTS This Agreement, and any confidentiality agreement Licensee may have signed pertaining to any of the Intellectual Property, contains the entire agreement between the parties concerning the subject matter hereof and supersedes any pre-existing or contemporaneous agreement and any oral or written communications between the parties. 39. CHOICE OF LAW AND FORUM This Agreement shall be deemed to be an executory agreement entered into in California and shall be governed and interpreted according to the laws of the State of California applicable to contracts made and to be fully performed in California. Any legal actions pertaining to this Agreement shall be commenced within the State of CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. California and within either Los Angeles or Orange Counties, and Licensee consents to the jurisdiction of the courts located in Los Angeles or Orange Counties. 40. EQUITABLE RELIEF Licensee acknowledges that Disney will have no adequate remedy at law if Licensee continues to manufacture, sell, advertise, promote or distribute the Articles upon the expiration or termination of the term of any applicable Schedule under this Agreement. Licensee acknowledges and agrees that, in addition to any and all other remedies available to Disney, Disney shall have the right to have any such activity by Licensee restrained by equitable relief, including, but not limited to, a temporary restraining order, a preliminary injunction, a permanent injunction, or such other alternative relief as may be appropriate, without the necessity of Disney posting any bond. 41. GOODWILL Licensee acknowledges that the rights and powers retained by Disney hereunder are necessary to protect Disney's (or its licensors', if applicable) copyrights and property rights, and, specifically, to conserve Disney's (and its licensors', if applicable) goodwill and good name, and the name "Disney", and therefore Licensee agrees that Licensee will not allow the same to become involved in matters which will, or could, detract from or impugn the public acceptance and popularity thereof, or impair their legal status. 42. POWER TO SIGN The parties warrant and represent that their respective representatives signing this Agreement have full power and proper authority to sign this Agreement and to bind the parties. 43. SURVIVAL OF OBLIGATIONS The respective obligations of the parties under this Agreement, which by their nature would continue beyond the termination, cancellation or expiration of this Agreement, including but not limited to indemnification, insurance, payment of Royalties, audits, and Paragraph 29, shall survive termination, cancellation or expiration of this Agreement. 44. SEVERABILITY OF PROVISIONS The terms of this Agreement are severable and the invalidity of any term of this Agreement shall not affect the validity of any other term. Please sign below under the word "Agreed". When signed by both parties, when any required security (e.g., a letter of credit) has been posted, and when the fully executed contract has been delivered to Licensee, this shall constitute an agreement between Disney and Licensee. AGREED: CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. DISNEY ENTERPRISES, INC. By: /s/ J.D. Edwards --------------------------- Title: Vice President Date: 9/18/02 THE FIRST YEARS, INC. By: /s/ Ronald J. Sidman --------------------------- Title: President CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Schedule #1 to License Agreement 1. Schedule #1 to License Agreement Dated June 4, 2002 between Disney Enterprises, Inc. and THE FIRST YEARS, INC. ("Agreement"). 2. Effective date of this Schedule: January 1, 2003. 3. Termination date of this Schedule: [ ] of the Agreement. 4. Properties: A. Disney Standard Characters (i.e., MICKEY MOUSE, MINNIE MOUSE, DONALD DUCK, DAISY DUCK, PLUTO and GOOFY), but only depictions of such characters, and accompanying design elements, as may be designated by Disney. B. Winnie the Pooh characters (i.e., WINNIE THE POOH, CHRISTOPHER ROBIN, PIGLET, RABBIT, EEYORE, TIGGER, OWL, GOPHER, KANGA AND ROO), all in the style as designed by Disney, but only depictions of such characters, and accompanying design elements, as may be designated by Disney. C. DISNEY CLASSICS, comprised of the following individual Properties (collectively, the "Disney Classics Properties"): (1) WALT DISNEY'S BAMBI characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (2) WALT DISNEY'S SLEEPING BEAUTY characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (3) WALT DISNEY'S SNOW WHITE AND THE SEVEN DWARFS characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (4) WALT DISNEY'S THE JUNGLE BOOK characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (5) WALT DISNEY'S CINDERELLA characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (6) WALT DISNEY'S DUMBO characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (7) WALT DISNEY'S LADY AND THE TRAMP characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. (8) WALT DISNEY'S PINOCCHIO characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (9) WALT DISNEY'S ALICE IN WONDERLAND characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (10) WALT DISNEY'S PETER PAN characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (11) WALT DISNEY'S THE ARISTOCATS characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (12) DISNEY'S ALADDIN characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney; (13) DISNEY'S BEAUTY AND THE BEAST characters, but only such characters and depictions of such characters, and accompanying design elements, as may be designated by Disney. 5. Articles: A. FEEDING AND SOOTHING: (1) Bottles (2) Bibs (vinyl only) (3) Cups (4) Pacifiers and attachers (5) Bowls (6) Dishes (7) Feeding utensils (8) Placemats (9) Floor mats (10) Toddler sports bottles B. CARE AND SAFETY: (1) Carriers (front and back) CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. (2) Handheld showers (3) Spout guards (4) Shampoo visors (5) Non-activity crib lights (6) Combs and brushes (7) Night lights (8) Car shades (9) Tub thermometers (10) Tub organizers (11) Infant bath tubs (12) Baby bathers (fits in sink or tub to cradle newborns) (13) Step stools (14) Bed rails (15) Booster seats (16) Monitors (17) Scratch mitts (18) Hampers (19) Hot and cold packs (20) Infant support cushions (21) Plush with soothing womb sounds (22) Infant toothbrushes and toothcare organizers (23) Sleep positioners (24) Changing pads C. PLAYTHINGS: (1) Hand-held rattles (2) Teethers CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. (3) Suction toys (4) Linking toys (5) Electronic hand-held toys (with rattles or squeaker functions) (6) Bath toys (7) Crib toys (8) Foot rattles and wrist rattles (9) Squeeze toys (10) Infant rings (11) Chime balls (12) Jumpster harness No graphic design may be kept in the product line for longer than two years without prior written consent by Disney. All three dimensional SKUs of the Articles shall be refreshed or renewed based on a two-year cycle as mutually agreed upon by Disney and Licensee during their mutually designated planning meetings, to be held on a quarterly basis during the term of this Schedule. 6. Territory: The United States, United States PX's wherever located, and United States territories and possessions, excluding Puerto Rico. However, if sales are made to chain stores in the United States which have stores in Puerto Rico, such chain stores also may supply Articles to such stores in Puerto Rico. 7. Royalty rate: LANDED SALES: A. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles B.11, B.13 through B.16, B.18, B.20, B.21 and C.12; B. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles B.23; C. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles A.1 through A.10, B.l through B.4, B.9, B.10, B.l2, B.17, B.l9, B.24, C.l, and C.3 through C.l 1; D. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles B.5 through B.8, B.22, and C.2. FOB SALES: CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. A. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles B.11, B.13 through B.16, B.18, B.20, B.21 and C.12; B. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles B.23; C. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles A.l through A.l0, B.1 through B.4, B.9, B.10, B.l2, B.l7, B.l9, B. 24, C.1, and C.3 through C.l1; D. [ ] percent ([ ]%) of Licensee's Net Invoiced Billings to authorized customers for sales of Articles B.5 through B.8, B.22, and C.2. 8. Advance payment(s) and due date(s): A. [ ] B. [ ] C. [ ] 9. Guarantee increments during the term of this Schedule: A. [ ] B. [ ] C. [ ] 10. Samples: Six (6) of each SKU of each Article. 11. Marketing Date(s): By January 1, 2003 for all Articles except A.8, B.2, B.5, B.9, B.13, B.15, B.18, B.19, B.20, B.23, C.3, C4, C.5, C.9, C.10 and C.12; by March 31, 2003, for Articles Numbers B.19, B23, and C.12; by June 1, 2003 for Articles Number B.18; and by December 31, 2003 for Articles Numbers A.8, B.2., B.5, B.9., B.13, B.15, B.20, C.3, C.4, C.5, C.9 and C.10. 12. Distribution Channels: A. Licensee will sell the Articles only to the following Retailers in the Territory for resale to the public in the Territory, or to Wholesalers in the Territory for resale to such Retailers: (1) mass market Retailers (including such Retailers as Target, Toys R Us, WalMart and Kmart), (2) value-oriented department stores (including such Retailers as Sears and Mervyn's), (3) value-oriented specialty stores, (4) drug store chains, (5) supermarkets and food chains, and (6) warehouse clubs. Articles Numbers A.1 through A.4, A.10, B.l, B.3, B.10, B.22, C.1, C.2, C.5 through C.8 and C.l1 also may be sold to the following Retailers in the Territory for resale to the public in the Territory, or to Wholesalers in the Territory for resale to such Retailers: (1) upscale Retailers (including such Retailers as Robinsons-May, Nordstrom's and Bloomingdale's), (2) better specialty stores, and (3) mid-tier department stores (including such Retailers as J.C. Penney and Kohl's). Licensee will not sell the CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Articles to unauthorized Retailers or Wholesalers, or to convenience stores or gas stations. If there is a question as to whether a particular customer falls within any of the categories specified herein, Disney's determination shall be binding. Licensee may sell the Articles utilizing the Property set forth in section 4 above to customers for resale through the mass catalogs listed on the Mass Catalog List to the Agreement, subject to Paragraph 2.A.(2)(a) of the Agreement and this Schedule 1. In addition, Articles Numbers A.l through A.4, A.10, B.1, B.3, B.10, B.22, C.l, C.2, C.5 through C.8 and C.11 may be sold to customers for resale through the upscale catalogs listed on the Upscale Catalog List to the Agreement, subject to Paragraph 2.A.(2)(a) of the Agreement and this Schedule 1. 13. Special provisions: Without limiting the provisions of Paragraph 14 of the Agreement, for Articles utilizing the Winnie the Pooh Property, Licensee agrees to include on such Articles, or the packaging for such Articles, or the hang tag for such Articles (if applicable), the following language: Based on the "Winnie the Pooh" works by A.A. Milne and E.H. Shepard. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. CATALOG SCHEDULE (LIST OF PRE-APPROVED CATALOGS) HOME FURNISHINGS/HOUSEWARES UPSCALE Ballard Design Casual Living Celebration Fantastic Chambers Charles Keath Chef's Catalog Faith Mountain Garnett Hill Hand-in-Hand Horchow Kitchen & Home Kitchen Kaboodle Linda Anderson Metropolitan Museum of Art Museum of Fine Arts, Boston Norm Thompson Nursery Works One Step Ahead Potpourri Reader's Digest Home Life Ross-Simons Seasons Sensational Beginnings Signals This Catalog Schedule is subject to change. Disney reserves the right to add catalogs to or delete catalogs from the Catalog Schedule without prior notice to Licensee. Licensee agrees to cease selling Articles to a deleted catalog within sixty (60) days after written notice of the deletion. Disney will consider new catalogs requested by Licensee on a case-by-case basis. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. CATALOG SCHEDULE (LIST OF PRE-APPROVED CATALOGS) HOME FURNISHINGS/HOUSEWARES UPSCALE (CONTINUED) Smithsonian Spiegel Sugar Hill The Cotton Gin The Linen Source The Paragon The Right Start The Wish List Touch of Class Touchstone Trifles Wireless This Catalog Schedule is subject to change. Disney reserves the right to add catalogs to or delete catalogs from the Catalog Schedule without prior notice to Licensee. Licensee agrees to cease selling Articles to a deleted catalog within sixty (60) days after written notice of the deletion. Disney will consider new catalogs requested by Licensee on a case-by-case basis. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. CATALOG SCHEDULE (LIST OF PRE-APPROVED CATALOGS) HOME FURNISHINGS/HOUSEWARES MASS Apple Creek Armchair Shopper Avon (EXCL. PERSONAL CARE) Domestications Fingerhut Lillian Vernon Miles Kimball Popular Club This Catalog Schedule is subject to change. Disney reserves the right to add catalogs to or delete catalogs from the Catalog Schedule without prior notice to Licensee. Licensee agrees to cease selling Articles to a deleted catalog within sixty (60) days after written notice of the deletion. Disney will consider new catalogs requested by Licensee on a case-by-case basis. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. DISNEY LICENSING E COMMERCE GUIDELINES GENERAL POLICIES: ---------------- - Disney licensed product ("Articles") may not be sold on a Licensee's Website. (Articles being sold by Licensee may, however, be sold through a Retailer's or Etailer's Website.) - Licensee Websites may be used for promotion of Articles only, and not to promote any Disney characters or any film property. - When initially developing Website pages containing the use of any Disney Articles, marketing, or promotional material, review and written approval must be obtained from Disney Licensing prior to publication on the Website. (Please refer to your approval process guidelines.) - Websites cannot feature or advertise any Disney Articles, brands, properties, characters or logos as the sole means to drive visitors to the Website. The Website should contain content balance so that the consumer knows it is the Licensees' Website and not a Disney Website. However, creating a Disney section within the Website is encouraged. - A Retailer's or Etailer's Website cannot position Disney Articles for sale on a "limited availability" or "last time available" basis, of by other similar descriptions that may imply collectibility, deep discounting or closeouts. - Disney Articles, brands or logos should not be featured on your "Home Page" without prior written consent from Disney. - You must adhere to all Disney copyright and trademark notice requirements (i.e., (C) Disney, or as otherwise designated). Please note: when showing any Disney Articles, Disney logos, art, or other Disney design elements, you must always include (C) Disney on each Web page (or such other copyright or trademark as Disney designates). - Disney character art, likeness, animation, or music may not be used. - Any content or pages related to Disney should "hot-link" to www.Disney.com. Please utilize the Disney.com icon provided for this link. - Disney Articles cannot be distributed or re-purposed for sale or resale outside of the territory set forth in the license agreement. COPY AND LAYOUT: - All copy and layout must be approved in accordance with the approval process guidelines. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. - When using any Disney brand or property, correct titles and logo identification must be used. - When referring to any Disney film property, always use "Disney's" in reference to each film. For example, "Disney's The Little Mermaid." - The character's name or the film title should not be used in the possessive form when referring to a product. For example, do not use, "Lilo's Shoes" or "Shoes from Disney's Lilo & Stitch." When referring to product, always use, "Inspired by Disney's Lilo & Stitch" or "Featuring characters from Disney's Lilo & Stitch." CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. LICENSEE APPROVAL PROCESS FOR RETAILER OR ETAILER WEBSITES To gain initial approval for Disney content on a Retailer's or Etailer's Website, submit the below information on a `Standard Disney Approval Form' to your Product Development Coordinator. Retailers and Etailers should provide Disney with: - Directory of Website content - Site map or flow chart where the Disney pages/section will be featured within the Website. Creating a separate Disney section within the Website is encouraged. Each Licensee will be responsible for ensuring adherence to the following simple guidelines: 1. The eCommerce Guidelines must be observed when developing Website pages with a Retailer or Etailer. 2. Each Disney Licensee will be responsible for providing the Retailer or Etailer with the following: - Disney approved product samples/photography and product descriptions/copy. - Disney brand logos and property identification. These may be obtained through your Product Development Coordinator. - Utilize the Disney Online icon to hot-link all pages related to Disney to Disney.com. 3. Retailer or Etailer should work with their designated contact in developing and approving marketing and promotional related events and information. Disney promoted marketing events/information cannot be used without prior written consent. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. LICENSEE APPROVAL PROCESS FOR LICENSEE'S WEBSITE Licensees are not permitted to sell Disney Articles on their Websites. The main focus is to promote Disney Articles on the Website of a Retailer or Etailer, or on Disney.com. To gain initial approval for any Disney content on a Licensee's Website, the Licensee must strictly adhere to the eCommerce Guidelines in developing Website pages containing Disney product, and submit the following information on a standard Disney approval form to the Product Development Coordinator: 1. A synopsis/overview of Website content and pages. 2. A site map or flow chart to show where the Disney Articles will be featured within the Website and include proposed launch date. A separate Disney section within the Website is encouraged. 3. A list of each Article that will be featured. 4. Proposed page layout. 5. Headlines. 6. Product samples or photography of product to be featured. (All Articles must be approved through the product approval process). 7. Product descriptions and copy to be featured. 8. Brand and property logos or any property related icons/artwork that will be featured. The correct brand logos and proper property identification may be obtained through your Product Development Coordinator. All pages related to Disney should hot-link to Disney.com. Utilize the Disney Online icon provided for this link. Disney promoted marketing events/information cannot be used without prior written consent. Please contact your Category Manager to discuss proposed marketing and promotional content. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. TRANSFER FEE POLICY As provided in Paragraph 32.B. of the License Agreement, it is Disney's policy to charge a transfer fee in connection with any permitted assignment of the license or other "transfer," as that term is defined in Paragraph 32.A. The amount of the transfer fee is based on the circumstances of the particular assignment or transfer, taking into account such factors as: - the estimated value of the license being assigned or involved in the transfer - the risk of business interruption - the risk of loss of quality, production or control - the identity, reputation, creditworthiness, financial condition and business capabilities of the proposed assignee or entity involved in the transfer - Disney's internal costs related to the assignment or transfer At a minimum, the transfer fee will be U.S. $[ ] for each license or Schedule (or Property, where a given Schedule includes more than one Property), and it could be as high as [ ] depending on the circumstances of the particular case. No Licensee or any company involved with a Licensee in an assignment or transfer situation should rely upon any express or implied verbal representations that are purported to be made on Disney `s behalf as to the amount of any given fee to be assessed. Disney Licensing's Finance Department will communicate the actual amount of the fee calculated in each approved transaction. In any prospective assignment or transfer situations, Licensees must inform the persons and companies with which they are dealing that no assignment or transfer may occur without Disney `s prior written consent, to be granted or withheld in Disney's absolute discretion, and that any approved transaction will also entail a transfer fee. Licensees must give Disney at least 30 days prior written notice of any desired assignment or other transfer, together with any information and documentation necessary to evaluate the contemplated transaction. Licensees should not endanger the closing of their desired transactions by failing to comply with these provisions of the License Agreement. If Disney grants consent to a proposed transaction subject to the payment of a transfer fee, and the transaction is concluded but the transfer fee is not paid within the designated time, the subject License Agreement(s) shall automatically terminate and any Guarantee shortfall(s) shall be immediately due and payable to Disney. If Disney does not grant consent to a proposed assignment or transfer and the Licensee nevertheless closes the transaction, the subject License Agreement(s) shall automatically terminate and any Guarantee shortfall(s) shall be immediately due and payable to Disney. Disney `s consent to any assignment or other transfer should in no way be understood to be a guarantee or promise by Disney of a grant of any future license(s), as those determinations will continue to be made on a contract by contract basis. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. Licensees must keep confidential all of the terms and conditions of Disney `s determinations regarding any transfer, including but not limited to, the amount of any transfer fee required. CODE OF CONDUCT FOR MANUFACTURERS At The Walt Disney Company, we are committed to: - a standard of excellence in every aspect of our business and in every corner of the world; - ethical and responsible conduct in all of our operations; - respect for the rights of all individuals; and - respect for the environment. We expect these same commitments to be shared by all manufacturers of Disney merchandise. At a minimum, we require that all manufacturers of Disney merchandise meet the following standards: CHILD LABOR Manufacturers will not use child labor. The term "child" refers to a person younger than 15 (or 14 where local law allows) or, if higher, the local legal minimum age for employment or the age for completing compulsory education. Manufacturers employing young persons who do not fall within the definition of "children" will also comply with any laws and regulations applicable to such persons. INVOLUNTARY LABOR Manufacturers will not use any forced or involuntary labor, whether prison, bonded, indentured or otherwise. COERCION AND Manufacturers will treat each employee with dignity HARASSMENT and respect, and will not use corporal punishment, threats of violence or other forms of physical, sexual, psychological or verbal harassment or abuse. NONDISCRIMINATION Manufacturers will not discriminate in hiring and employment practices, including salary, benefits, advancement, discipline, termination or retirement, on the basis of race, religion, age, nationality, social or ethnic origin, sexual orientation, gender, political opinion or disability. ASSOCIATION Manufacturers will respect the rights of employees to associate, organize and bargain collectively in a lawful and peaceful manner, without penalty or interference. HEALTH AND SAFETY Manufacturers will provide employees with a safe and healthy workplace in compliance with all applicable laws and CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. regulations, ensuring at a minimum, reasonable access to potable water and sanitary facilities, fire safety, and adequate lighting and ventilation. Manufacturers will also ensure that the same standards of health and safety are applied in any housing that they provide for employees. COMPENSATION We expect manufacturers to recognize that wages are essential to meeting employees' basic needs. Manufacturers will, at a minimum, comply with all applicable wage and hour laws and regulations, including those relating to minimum wages, overtime, maximum hours, piece rates and other elements of compensation, and provide legally mandated benefits. If local laws do not provide for overtime pay, manufacturers will pay at least regular wages for overtime work. Except in extraordinary business circumstances, manufacturers will not require employees to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by local law or, where local law does not limit the hours of work, the regular work week in such country plus 12 hours overtime. In addition, except in extraordinary business circumstances, employees will be entitled to at least one day off in every seven-day period. Where local industry standards are higher than applicable legal requirements, we expect manufacturers to meet the higher standards. PROTECTION OF THE Manufacturers will comply with all applicable ENVIRONMENT environmental laws and regulations. OTHER LAWS Manufacturers will comply with all applicable laws and regulations, including those pertaining to the manufacture, pricing, sale and distribution of merchandise. All references to "applicable laws and regulations" in this Code of Conduct include local and national codes, rules and regulations as well as applicable treaties and voluntary industry standards. SUBCONTRACTING Manufacturers will not use subcontractors for the manufacture of Disney merchandise or components thereof without Disney's express written consent, and only after the subcontractor has entered into a written commitment with Disney to comply with this Code of Conduct. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. MONITORING AND Manufacturers will authorize Disney and its COMPLIANCE designated agents (including third parties) to engage in monitoring activities to confirm compliance with this Code of Conduct, including unannounced on-site inspections of manufacturing facilities and employer-provided housing; reviews of books and records relating to employment matters; and private interviews with employees. Manufacturers will maintain on site all documentation that may be needed to demonstrate compliance with this Code of Conduct. PUBLICATION Manufacturers will take appropriate steps to ensure that the provisions of this Code of Conduct are communicated to employees, including the prominent posting of a copy of this Code of Conduct, in the local language and in a place readily accessible to employees, at all times. CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS. CODE OF CONDUCT FOR LICENSEES At The Walt Disney Company, we are committed to: - a standard of excellence in every aspect of our business and in every corner of the world; - ethical and responsible conduct in all of our operations; - respect for the rights of all individuals; and - respect for the environment. We expect these same commitments to be shared by all Disney licensees and the manufacturers with which they work in the production of Disney merchandise. At a minimum, we require that all Disney licensees meet the following standards: CONDUCT OF Licensees that engage directly in the manufacturing MANUFACTURING of Disney merchandise will comply with all of the standards set forth in Disney's Code of Conduct for Manufacturers, a copy of which is attached. Licensees will ensure that each manufacturer other than the licensee also enters into a written commitment with Disney to comply with the standards set forth in Disney's Code of Conduct for Manufacturers. Licensees will prohibit manufacturers from subcontracting the manufacture of Disney merchandise or components thereof without Disney's express written consent, and only after the subcontractor has entered into a written commitment with Disney to comply with Disney's Code of Conduct for Manufacturers. MONITORING AND Licensees will take appropriate steps, in COMPLIANCE consultation with Disney, to develop, implement and maintain procedures to evaluate and monitor manufacturers of Disney merchandise and ensure compliance with Disney's Code of Conduct for Manufacturers, including unannounced on-site inspections of manufacturing facilities and employer-provided housing; review of books and records relating to employment matters; and private interviews with employees. Licensees will authorize Disney and its designated agents (including third parties) to engage in similar monitoring activities to confirm Licensees' compliance with this Code of Conduct. Licensees will maintain on site all documentation that may be needed to demonstrate such compliance.