Anyway, aside from our problems with over-sized four-legged animals, you had a question (or questions). Okay, here goes: (1) Generally, if you own the copyright (or trademark) on the merchandise, you control who can reproduce it. So, the woman who works for you wouldn't have any rights to reproduce the horse art. If you're still concerned, you can prevent the worker from competing against you by having her sign a written agreement that states she can't sell your designs. If your designs are not protectable under either copyright or trademark law (see below), that agreement may be hard to enforce. (2) We're not sure that #2, above, is a question so we can't help you with the company or explain how they do business. You should ask them about their terms and then compare them with competitors. We assume you're aware of online merchandising sources like Zazzle and Cafe Press. (3) A license is a form of permission -- in which you allow somebody to exploit property you own in return for a payment, usually in the form of a royalty. It can be a great way to do business because the company doing the licensing (the "licensee") will often police and protect your work as well. You can read more about it in this handy Nolo form kit on the subject.
Short phrase thing. You will have a hard time stopping others from using your short phrases (by themselves) since they're not protected under copyright law. We've talked about this a few times in the past and we're paranoid about boring our readers with more on the subject. You can always protect those phrases when used in association with a graphic -- that is you can stop others from copying the combination. You may be able to register each phrase as a trademark for use with T-shirts and similar merchandise. However, that's a little bit of a financial investment as each phrase will require a separate registration for each class of goods. Tally ho!