Merchandising Royalty Payments. 11.2.1 Owner shall be entitled to the following royalty: Thirty Five Percent (35%) of One Hundred Percent (100%) of "Net Merchandising/Interactive Receipts". "Net Merchandising/Interactive Receipts" shall be defined as gross merchandising receipts (including licensing fees received in connection with theme park rights) and gross receipts from exploitation by Columbia of "Interactive Rights" as defined below actually received by Columbia (net of returns and allowances) from licensing of the applicable rights in the Property throughout the world (including all subsequent productions) after deduction of all actual third party out of pocket costs (not to exceed five percent [5%] of gross merchandising/interactive receipts), unaffiliated third party royalties and participations (other than any participation payable to Escape Artists, LLC or its affiliates or principals), if any, actually paid by Columbia and unaffiliated foreign subagents fees (provided if any affiliate of Columbia is actually exploiting the Interactive Rights (e.g., exploitation by Sony electronics to produce product using the name and logo of the Property or licensing of rights to Sony Interactive for the production of cartridge games or on line games) then only amounts received by Columbia from such affiliate from exploitation of such Interactive Rights shall be included in the definition of Net Merchandising/Interactive Receipts and the terms of any agreement between the Studio and any such affiliate shall be comparable to an arms length transaction with an unaffiliated third party. In the event that there is no comparable transactions on which to determine what arms length terms would be with an unaffiliated third party because there is no verifiable similar prior agreements then in lieu of the percentage of Net Merchandising/Interactive Receipts set forth in this Section above, Owner shall receive a payment equal to Seven and One Half Percent (7.5%)of "Net Sony Interactive Receipts", defined as the gross sales received by Columbia or its interactive affiliate (including Sony Interactive) in respect of such Interactive Rights, less all costs of production and distribution (exclusive of interest and overhead), cash, trade, quantity or freight discounts, and net of returns and uncollectible accounts. Accounting statements, audit rights and payments shall be in accordance with Exhibit A attached hereto as modified by therider attached thereto.
