License Agreement - AJM Marketing Enterprises Inc./Prema Toy Co. Inc. and Legacy Brands Inc.
LICENSE AGREEMENT made September 1, 1996 by and between AJM Marketing
Enterprise, Inc,/Prema Toy Co., Inc. (hereinafter referred to as "Licensor") and
Legacy Brands, Inc.,(hereinafter referred to as "Licensee").
WITNESSETH:
The parties hereto hereby agree as follows
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
following respective Meanings:
(a) "NAME AND CHARACTER":
Gumby; Pokey; and other characters and names derived from the
Television Series "Adventures of Gumby" produced by Clokey
Productions, Inc., prior to 1973.
(b) "LICENSED PRODUCT(S)":
Freezer Pops, Coolers, Fruit Forms.
For purposes of interpretation throughout this Agreement, every
application and utilization of each Name and Character listed above as
to any given item covered by this Agreement shall be considered as a
separate Licensed Product.
(c) "TERRITORY":
United States, its territories and possessions.
(d) "MARKETING DATE": For the purposes of subdivision 16(a)(vii), the
Marketing Date for the Licensed Products shall be: Freezer Pops,
February 1997; Coolers and Fruit Forms, February 1997
2. GRANT OF LICENSE. Upon the terms and conditions hereinafter set forth,
Licensor hereby grants to Licensee and Licensee hereby accepts for the term
of this Agreement, a license to utilize the Name and Character solely upon
or in connection with the manufacture, distribution, advertisement,
promotion, and sale of the Licensed Product(s) throughout the Territory on
a non-exclusive basis. No television commercials may be utilized under this
License without the specific prior approval of Licensor.
3. TERM.
(a) TERM: The term of this Agreement shall be the period commencing the
1st day of September, 1996 and terminating the 31st day of
August,1998.
(b) OPTION TO RENEW: In the event Licensee has faithfully performed each
and every obligation of this Agreement during the term referred to in
subparagraph 3(a) above, Licensee shall have the option to renew this
Agreement for a two-year period, provided Licensee shall have earned
and paid to Licensor, no less than $250,000.00 during the term
referred to in subparagraph 3(a) above and provided, further, that
Licensee gives written notice thereof to Licensor no later than SIXTY
(60) days preceding the effective date of such renewal period (time
being of the essence).
(c) RENEWAL NEGOTIATIONS: In the event Licensee has faithfully performed
each and every obligation of this Agreement during the term referred
to in subparagraph 3(a) and the renewal period referred to in
subparagraph 3(b). Licensor agrees to negotiate in good faith with
Licensee in respect to an additional renewal period for such period of
time and upon such terms and conditions as the parties may mutually
agree.
4. CONSIDERATION. In full consideration for the rights, licenses, and
privileges herein granted to Licensee, Licensee shall pay to Licensor, in
United States dollars, the following:
(a) GUARANTEED CONSIDERATION: For the term as provided in subparagraph
3(a) hereof, the sum of $125,000.00 payable as follows:
$12,500.00 Upon Execution of Contract
$112,500.00 by August 31,1998
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All guaranteed Consideration paid by Licensee pursuant to subparagraph
4(a) above shall be applied against such royalties as are or have
become due Licensor for such period(s). No part of such Guaranteed
Consideration shall be repayable to Licensee, except as is expressly
provided for herein.
(b) ROYALTY PAYMENTS: Licensee shall pay to Licensor a sum equal to 5
Percent of all net sales by Licensee or any of its affiliated,
associated, or subsidiary companies of the Licensed Product(s) covered
by this Agreement (as such term "net sales" is defined herein) wherein
the sales price is FOB any shipping point within the territory as
provided in subparagraph 1(c) herein.
Royalties shall be payable concurrently with the periodic statements
required in paragraph 7 hereof, except to the extent offset by
Guaranteed Consideration therefore remitted. The term "net sales"
shall mean the gross invoice price billed customers, less quantity
discounts, and returns, but no deduction shall be made for
uncollectible accounts. No costs incurred in the manufacture, sale,
distribution, or exploitation of the Licensed Product(s) shall be
deducted from any royalties payable by Licensee.
(c) ADVERTISING SPACE: For the purpose of Licensor's promotion of The
Gumby Fan Club, Licensee shall provide reasonable space, where
available, on or in either: 1. all packaging containing licensed
products; or 2. hang tags connected to licensed products. Licensor
will provide Licensee with appropriate art work for said advertising
space at no cost to Licensee.
5. RESERVATION RIGHTS; EXCLUSIVITY. Licensor retains all rights not expressly
and exclusively conveyed to Licensee hereunder, and Licensor may grant
licenses to others to use the Name and Character, art work, and textual
matter in connection with identical products. Nothing in this agreement
shall be construed to prevent licensor from granting any other licenses for
the use of the Licensed Product(s) or from using the Licensed Product(s) in
any manner whatsoever. Further, Licensor reserves the right to use, or
license others to use and/or manufacture, identical products as premiums.
It is understood that all rights relating thereto are reserved by Licensor
except for the license granted hereunder and then only as specifically and
expressly provided in this Agreement.
6. PREMIUMS. Licensee agrees that it will not use, or knowingly permit the use
of, and will exercise the due care that as customers likewise will refrain
from the use of, the Licensed Product(s) as a premium, except with the
prior written consent of Licensor. For purposes of this agreement the term
"premium" shall be defined as including, but not necessarily limited to,
combination sales, free or self-liquidating items offered to the public in
conjunction with the sale or promotion of a product or service, including
traffic building or community visits by the consumer/customer, or any
similar scheme or device, the prime intent of which is to use the Licensed
Products in such a way as to promote, publicize and or sell the products,
services, or business [Illegible] of the user of such item.
7. PERIODIC STATEMENTS. Within THIRTY (30) days after the initial shipment of
the Licensed Product(s) and promptly on the last day of the month following
every calendar quarter thereafter, Licensee shall furnish to Licensor
complete and accurate statements certified to be accurate by Licensee, or
if a corporation, by an officer of Licensee, showing the number, country in
which manufactured, country in which sold or to which shipped, description
and gross sales price, itemized deductions from gross sales price, and net
sales price of the Licensed Product(s) distributed and/or sold by Licensee
during the preceding calendar quarter. Such statements shall be furnished
to Licensor whether or not any of the Licensed Products(s) have been sold
during the calendar quarters to which such statements refer. Receipt or
acceptance by Licensor of any of the statements furnished pursuant to this
Agreement or of any sums paid hereunder shall not preclude Licensor from
questioning the correctness thereof at any time, and in the event that any
inconsistencies or mistakes are discovered in such statements or payments,
they shall immediately be rectified and the appropriate payments made by
Licensee. Upon demand of Licensor, Licensee shall at its own expense, but
not more that once in any twelve (12) month period, furnish to Licensor a
detailed statement by an independent certified public accountant showing
the number, country in which manufactured, country in which sold or to
which shipped, description, gross sales price, itemized deductions from
gross sales price and net sales price of the Licensed Product(s) covered by
this Agreement distributed and/or sold by Licensee to the date of Licensors
demand.
8. BOOKS AND RECORDS. Licensee shall keep, maintain and preserve (in
Licensee's principal place of business) for at least two (2) years
following termination or expiration of the term of this Agreement or any
renewal(s) hereof, complete and accurate records of accounts including,
without limitation, invoices, correspondence, banking and financial and
other
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records pertaining to the various items required to be submitted by
Licensee. Such records and accounts shall be available for inspection and
audit at any time or times during or after the term of this Agreement or
any renewal hereof during reasonable business hours and upon reasonable
notice by Licensor or its nominees. Licensee agrees not to cause or permit
any interference with Licensor or nominees of Licensor in the performance
of their duties of inspection and audit.
The exercise by Licensor in whole or in part, or at any time or times of
the right to audit records and accounts or any other right herein granted,
the acceptance by Licensor of any statement or statements or the receipt
and deposit by Licensor of any payment tendered by or on behalf of the
Licensee shall be without prejudice to any rights or remedies of Licensor
and shall not stop or prevent Licensor from thereafter disputing the
accuracy of any such statement or payment.
9. INDEMNIFICATIONS.
(a) Licensor hereby indemnifies Licensee and shall hold it harmless from
any loss, liability, damage, cost or expense (including reasonable
counsel fees), arising out of any claims or suits which may be brought
or made against Licensee by reason of the breach by Licensor of the
warranties or representations as set forth in paragraph 14 hereof,
provided that Licensee shall give prompt written notice, cooperation
and assistance to Licensor relative to any such claim or suit, and
provided, further, that Licensor shall have the option to undertake
and conduct the defense of any suit so brought.
(b) Licensee hereby indemnifies and agrees to hold Licensor harmless from
any loss, liability, damage, cost, or expense (including reasonable
counsel fees), arising out of any claims or suits which may be brought
or made against Licensor by reason of any unauthorized use by Licensee
in connection with the Licensed Product(s) or the Name and Character
covered by this Agreement as well as any alleged defects or inherent
damages in said Licensed Product(s) or the use thereof. Upon receipt
of notice of a third party claim alleging the breach by Licensee of
any warranty, undertaking, representation or agreement entered herein
or hereunder. Licensor shall give prompt written notice of such claim
to Licensee. Licensee shall have the right to assume the defense of
such claim at Licensee's sole cost and expense by furnishing Licensor
with written notice of same. Licensee shall be liable for all losses,
costs, expenses, damages or recoveries (including without limitation
amounts paid in settlement), suffered, made or incurred by either
Licensor or Licensee with connection with such third party claim. In
the event Licensee chooses not to assume such defense, Licensee shall
indemnify and save harmless Licensor and its officers, directors and
employees against any and all claims, demands, lawsuits, costs,
expenses (including, without limitation, reasonable attorney's fees
and disbursements), damages or recoveries (including without
limitation, amounts paid in settlement) suffered, made, incurred or
assumed by Licensor by reason of the breach by Licensee of any
warranty, undertaking, representation or agreement made or entered
into herein or hereunder and resulting from a final adjudication of
each such action, claim or suit, or a settlement thereof entered into
with Licensee's prior written consent. Licensee agrees to obtain, at
its own expense, product liability and personal liability insurance
with a minimum combined single limit of liability of not less than one
million U.S. dollars ($1,000,000.00) for each occurrence. Within
thirty (30) days from the date hereof, Licensee shall provide Licensor
with a policy endorsement in the form of Vendor's Broad Form Policy
Endorsement to Licensee's Product Liability insurance coverage naming
Licensor as additional insured. Licensee will submit to Licensor a
fully paid policy or certificate of insurance naming Licensor as an
insured party, requiring that the insurer shall not terminate or
materially modify such without written notice to Licensor at least
thirty (30) days in advance thereof.
10. COPYRIGHT AND TRADEMARK NOTICES.
(a) The Licensee shall cause to be imprinted irrevocably and legibly on
each Licensed Product manufactured distributed or sold under this
Agreement, including, but not limited to, advertising, promotional,
packaging and wrapping material and any other such material wherein
the Name and Character appear, either (i) the appropriate copyright
notice, including year date, following an encircled "c" [illegible],
and /or (ii) the initials "TM" [illegible] of an encircled "R"
[illegible], as directed in subparagraph (b) hereof, as may be amended
from time to time by Licensor. Licensee agrees to deliver to Licensor
free of cost twelve (12) of each of the Licensed Product(s) together
with their packaging and wrapping material for trademark registration
purposes in compliance with applicable laws. Any copyrights or
trademarks with respect to the Licensed Product(s) shall be procured
by and for the benefit of Licensor and at Licensor's expense. Licensee
further agrees to provide Licensor with the date of the first use of
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the Licensed product(s) in interstate and intrastate commerce. It is
expressly understood, however, that notwithstanding any other
provision of this Agreement including, without limitation, the above
provisions, Licensor is not acquiring, and will not acquire, any
right, title and interest to any of Licensee's trademarks, copyrights
or other proprietary rights pursuant to this Agreement or the
activities contemplated by this Agreement.
(b) The appropriate copyright notice reads as follows: Gumby and Gumby
characters are registered trademarks of Prema Toy Co., Inc. All Rights
Reserved. [illegible] 1996 Prema Toy Co., Inc.
(c) Licensee shall assist Licensor, to the extent necessary, in the
procurement of any protection or to protect any of Licensor's rights
to the Name and Character, and Licensor if it so desires may commence
or prosecute any claims or suits in its own name or in the name of
Licensee or join Licensee as a party thereto. Licensee shall notify
Licensor in writing of any infringements or imitations by others of
the Name and Character on articles similar to the Licensed Product(s)
if and when such become known to Licensee. Licensor shall have the
sole right to determine whether or not any action shall be taken on
account of such infringements or imitations. Licensee shall not
institute any suit or take any action on account of any such
infringements or imitations except with the prior written consent of
Licensor to do so. Notwithstanding any other provision of this
Agreement, including, without limitation, the above provisions,
Licensee may take any action necessary or desirable to protect
Licensee's copyrights, trademarks, or other proprietary rights that
are incorporated into the Licensed Product(s).
11. APPROVALS. The Licensee agrees to furnish Licensor free of costs for its
written approval as to quality and style, samples of each of the Licensed
Product(s), together with their packaging, hangtags, and wrapping material,
before [ILLEGIBLE] manufacture, sale, or distribution, whichever first
occurs, and no Licensed Product shall be manufactured, sold, or distributed
by the Licensee without such written approval. Subject, in each instance,
to the prior written approval of Licensor, the Licensee or its agents may
use textual and/or pictorial matter pertaining the Name and Character on
such promotional display and advertising material as may, in its judgment,
promote the sale of the Licensed Product(s). Subsequent to final approval,
a reasonable number of production samples will periodically be sent to
Licensor to insure quality control, and should Licensor require additional
samples for any reasonable reason, Licensor may purchase such at Licensee's
Cost.
12. DISTRIBUTION: SUB-LICENSE MANUFACTURE.
(a) The Licensee shall sell the Licensed Product(s) either to jobbers,
wholesalers, distributors, or retailers for sale or resale and
distribution directly to the public. If Licensee sells or distributes
the Licensed Product(s) at a special price, directly or indirectly, to
itself, including without limitation, any subsidiary of any Licensee
or to any other person, firm, or corporation affiliated with the
Licensee or its officers, directors, or major stockholders, for
ultimate sale to unrelated third parties, the Licensee shall pay
royalties with respect to such sales or distribution, based upon the
price generally charged the trade by Licensee.
(b) Licensee shall not be entitled to sub-license any of its rights under
this Agreement except, in the event [illegible] is not the
manufacturer of the Licensed Product(s). Licensee shall be, subject to
the prior written approval of Licensor (which approval shall not be
unreasonably withheld), entitled to utilized a third party
manufacturer in connection with the manufacture and production of the
Licensed Product(s) provided that such manufacturer shall execute a
letter in the form of Exhibit 1 attached hereto and by this reference
made a part hereof. In such event, Licensee shall remain primarily
obligated under all of the provisions of this Agreement. In no event
shall any such sublicense agreement include the right to grant any
further sublicenses.
13. GOOD WILL. The licensee recognizes the great value of the publicity and
good will associated with the Name and Character and, in such connection,
acknowledges, that such good will exclusively belongs to Licensor and its
Grantors and that the Name and Character have acquired a secondary meaning
in the mind of the purchasing public. Licensee further recognizes and
acknowledges that a breach by Licensee of any of its covenants, agreements
or undertakings hereunder related to the protection of such goodwill will
cause Licensor irreparable damage, which cannot be readily remedied in
damages in an action at law, and may, in addition thereto, constitute an
infringement of Licensor's copyrights in the licensed characters, thereby
entitling Licensor to equitable remedies, costs, and reasonable attorney's
fees.
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14. LICENSOR'S WARRANTIES AND REPRESENTATIONS. Licensor represents and warrants
to Licensee that:
(a) It has, and will have throughout the term of this Agreement, the right
to license the Name and Character to Licensee in accordance with the
terms and provisions of this Agreement; and,
(b) The making of this Agreement by Licensor does not violate any
agreements, rights, or obligations existing between Licensor and any
other person, firm or corporation.
15. SPECIFIC UNDERTAKINGS OF LICENSEE. During the term and any renewal period
herein provided for, Licensee agrees that:
(a) It will not attack the title of Licensor or its Grantors in and to the
Name and Character of any copyright or trademark pertaining thereto,
nor will it attack the validity of the License granted hereunder;
(b) It will not harm, misuse or bring into dispute the Name and Character;
(c) It will manufacture, sell, and distribute the Licensed Product(s) in
an ethical manner and in accordance with the terms and intent of this
Agreement;
(d) It will not create any expenses chargeable to Licensor without the
prior written approval of Licensor;
(e) It will protect to the best of its ability its right to manufacture,
sell, and distribute the Licensed Product(s) hereunder;
(f) It will comply with all laws and regulations relating or pertaining to
the manufacture, sale, advertising or use of the Licensed Product(s)
and shall maintain the highest quality and standards, and shall comply
with any regulatory agencies which shall have jurisdiction over the
Licensed Product(s); and,
(g) It will provide Licensor with the date(s) of first use of the Licensed
Product(s) in interstate and intrastate commerce.
16. TERMINATION BY LICENSOR.
(a) Licensor shall have the right to terminate its Agreement without
prejudice to any rights which it may have in the premises, whether
under the provisions of the Agreement, in law, or in equity, or
otherwise, upon the occurrence of any one or more of the following
events (herein called "defaults"):
(i) If Licensee defaults in the performance of any of its
obligations provided for in this Agreement; or
(ii) The Licensee shall have failed to deliver to Licensor or to
maintain in full force and effect the insurance referred to in
subparagraph 9(b)hereof; or
(iii) If the Licensee shall fail to make any payment due hereunder
on the date due; or
(iv) If the Licensee shall fail to deliver any of the statements
hereinabove referred to or to give access to the premises
and/or license records pursuant to the provisions hereof to
Licensor's authorized representatives for the purposes
permitted hereunder; or
(v) If any governmental agency finds that the Licensed Product(s)
are defective in any way, manner, or form; or
(vi) If the Licensee shall be unable to pay its debts when due, or
shall make any assignment for the benefit of creditors, or
shall file any petition under the bankruptcy or insolvency laws
of any jurisdiction, county, or place, or shall have or suffer
a receiver or trustee to be appointed for its business or
property, or be adjudicated a bankrupt or an insolvent; or
(vii) In the event that the Licensee does not commence in good
faith to manufacture, distribute, and sell each Licensed
Product throughout the Territory and on or before the date
specified in subparagraph
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1(d) (but such default and Licensor's resultant right of termination
shall only apply to the specific Licensed Product(s) and/or the
specific nation(s) which or wherein Licensee fails to meet said
marketing date requirements); or
(viii) If Licensee shall manufacture, sell, or distribute, whichever
first occurs, any of the Licensed Product(s) without the prior
written approval of Licensor as provided in paragraph 11 hereof;
or
(ix) If a manufacturer approved pursuant to subparagraph 12(b) shall
engage in conduct, which conduct if engaged in by Licensee would
entitle Licensor to terminate this Agreement; or
(x) If Licensee shall breach any other agreement in effect between
Licensee on the one hand and Licensor or any other client of
Licensor on the other.
(b) In the event any of these defaults occur, Licensor shall give notice
of termination in writing to Licensee by certified mail. The Licensee
shall have ten (10) days in which to correct any of these defaults
(except subdivisions (vii) and (viii) above), and failing such, this
Agreement shall terminate, and any and all payments then or later due
from Licensee hereunder (including Guaranteed Consideration) shall
then be promptly due and payable and no portion of prior payments
shall be repayable to Licensee.
17. FINAL STATEMENT UPON TERMINATION OR EXPIRATION. Licensee shall deliver, as
soon as practicable to Licensor following expiration or termination, a
statement indicating the number and description of Licensed Product(s) on
hand. Following expiration or termination, Licensee may manufacture no more
Licensed Product(s), but may continue to distribute and sell its remaining
inventory for a period not to exceed SIXTY (60) days following such
termination or expiration, subject to payment of applicable royalties
thereto. Licensor shall have the right to conduct a physical inventory in
order to ascertain or verify such inventory and/or statement. In the event
Licensee refuses to permit Licensor to conduct such physical inventory, the
Licensee shall forfeit its right hereunder to dispose of such inventory. In
addition to such forfeiture, Licensor shall have recourse to all other
legal remedies available to it.
18. PAYMENTS AND NOTICES. All notices which either party hereto is required or
may desire to give to the other shall be given by addressing the same to
the other at the address hereinafter in this paragraph set forth, or at
such other address as may be designated in writing by any such party in a
notice to the other given in the manner prescribed in the paragraph. All
such notices shall be sufficiently given when the same shall be deposited
so addressed, postage prepaid, in the United States mail and/or when the
same shall have been delivered, so addressed, to a telegraph or cable
company toll prepaid and the date of said mailing or telegraphing shall be
the date of giving of such notice. The address to which any such notices,
accountings, payments, or statements shall be given are the following;
TO LICENSOR: TO LICENSEE:
AJM Marketing Enterprises, Inc. Legacy Brands, Inc.
1515 Woodfield Rd., Suite 360 2200 B. Douglas Boulevard, Suite 100
Schaumburg, IL 60173 Roseville, CA 95661
19. NO PARTNERSHIP, ETC. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between Licensor
and Licensee. Neither party shall have any right to obligate or bind the
other party in any manner whatsoever, and nothing herein contained shall
give, or is intended to give, any rights of any kind to any third persons.
20. NON ASSIGNABILITY. This Agreement shall bind and innure to the benefit of
Licensor, its successors and assigns. This Agreement is personal to
Licensee, and Licensee shall not sublicense nor franchise (except as set
forth in such paragraph 12(b) hereof), and neither this Agreement nor any
of the rights of Licensee hereunder shall be sold, transferred or assigned
by Licensee and no rights hereunder shall devolve by operation of law
or otherwise upon any receiver, liquidator, trustee, or other party.
21. CONSTRUCTION. This Agreement shall be construed in accordance with the laws
of the State of Illinois of the United States of America.
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22. WAIVER, MODIFICATION, ETC. No waiver, modification or cancellation of any
term or condition of this Agreement shall be effective unless executed in
writing by the party charged therewith. No written waiver shall excuse the
performance of any act other than those specifically referred to therein,
Licensor makes no warranties to the Licensee except those specifically
expressed herein.
23. ACCEPTANCE BY LICENSOR. This instrument, when signed by Licensee, shall be
deemed an application for a license and not a binding agreement unless and
until accepted by AJM Marketing Enterprises, Inc. by signature of a duly
authorized officer and the delivery of such a signed copy to Licensee. The
receipt and/or deposit by AJM Marketing Enterprises, Inc. of any check or
other consideration given by Licensee and/or the delivery of any material
by AJM Marketing Enterprises, Inc. to Licensee shall not be deemed an
acceptance by AJM Marketing Enterprises, Inc. of this application. The
foregoing shall apply to any documents relating to renewals or
modifications hereof.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the day and year first above written.
LICENSOR: LICENSEE:
AJM Marketing Enterprises, Inc./Prema Legacy Brands, Inc.
Toy Co., Inc.
By: /s/ A Marsigler By: /s/ Thomas E. Kees
---------------------- ------------------------
Title: President/CEO Title: President/CEO
Date: 8-26-96 Date: 9/6/96
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Exhibit 1
Dated ________, 19__
Gentlemen:
This letter will serve as notice to you that pursuant to subparagraph 12(b) of
the License Agreement dated __________, 19__, between AJM Marketing Enterprises,
Inc./Prema Toy Co., Inc. And Legacy Brands, Inc., we have been engaged as the
manufacturer for Legacy Brands, Inc., in connection with the manufacture of
Licensed Product(s) as defined in the aforesaid License Agreement. We hereby
acknowledge that we have received a copy and are cognizant of the terms and
conditions set forth in said License Agreement and hereby agree to observe those
provisions of said License Agreement which are applicable to our function as
Manufacturer of the Licensed Product(s). It is understood that this engagement
is on a royalty free basis.
We understand that our engagement as the manufacturer for Legacy Brands, Inc.,
is subject to your written approval. We request, therefore, that you sign in the
space below, thereby showing your acceptance of our engagements as aforesaid.
Very truly yours,
(NAME OF MANUFACTURER)
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
AGREED TO AND ACCEPTED:
AJM Marketing Enterprises, Inc./Prema Toy Co., Inc.
By:
---------------------------------
Title: President/CEO
------------------------------
Date:
-------------------------------
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