LICENSE AGREEMENT
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THIS EXCLUSIVE LICENSE AGREEMENT ("AGREEMENT") dated as of December 8,
2000, is by and between GENIUS PRODUCTS, INC., a California Corporation
("LICENSOR"), c/o of its licensing agent Global Icons, LLC ("GLOBAL"), JAKKS
PACIFIC, INC., a Delaware corporation ("LICENSEE").
WHEREAS, LICENSOR owns or otherwise has the rights to license the
copyrights and trademarks listed in SCHEDULE A (the "PROPERTY"); and
WHEREAS, LICENSEE is a manufacturer, marketer and distributor of
products which would benefit from use of the Property; and
WHEREAS, LICENSEE recognizes the value of the goodwill associated with
the Property, and recognizes that the Property and associate goodwill are of
value to LICENSOR; and
WHEREAS, LICENSOR has appointed GLOBAL as its master licensing agent to
represent LICENSOR in its licensing program and under this Agreement; and
WHEREAS, LICENSOR desires to grant and LICENSEE desires to acquire a
license to manufacture, distribute and/or sell various products (as specified
below) utilizing the Property under the terms and conditions as set forth below;
NOW THEREFORE, in consideration of the mutual covenants set forth
herein and for other consideration the sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. GRANT OF LICENSE; TERM; LIMITATIONS
(a) LICENSE. Subject to the terms and conditions of this
Agreement, including but not limited to the rights reserved in
Paragraph 1(b), 1(c), 1(d) and 1(e), LICENSOR grants to
LICENSEE an exclusive, non-transferable right and license to
use the Property in the manufacture, distribution and sale of
the Licensed Product (as defined in Paragraph 1(c)) in the
Territory (as defined in Paragraph 1(d)) and in the Channels
of Distribution (as defined in Paragraph 1(d)) (the
"LICENSE"). Other than as set forth herein, LICENSEE agrees
not to use the Property, directly or indirectly in any
Excludable Territory (as defined in Paragraph 1(d)) or on any
goods other than the Licensed Products, and agrees not to sell
any Licensed Products with the actual knowledge of LICENSEE's
senior officers that the purchaser intends to re-sell the
Licensed Product in any Excludable Territory. Upon LICENSEE's
senior officers' actual knowledge of such intended or actual
unauthorized sale, LICENSEE shall immediately advise LICENSOR
of all details of such sales and shall immediately cease all
sales to such third party.
(b) LIMITATIONS ON LICENSE: No license is granted hereunder for
the use of the Property for any purpose other than on or in
connection with the Licensed Products. No license is granted
hereunder for the manufacture, sale or distribution of
Licensed Products to be used for the purpose of increasing the
sale of another item; promoting or publicizing any product or
service; fund-raising or as giveaways; or to motivate a sales
force, merchant, consumer, or any other person to perform a
specific act. LICENSEE's right to manufacture, sell or
distribute any Licensed Products for the purpose of increasing
sale of another item; promoting or publicizing any product or
service; fund-raising or as giveaways; or to motivate a sales
force, merchant, consumer, or any other person to perform a
specific act, shall be conditional on obtaining the prior
written consent of LICENSOR which shall not be unreasonably
withheld. Consent shall be deemed given if LICENSOR fails to
respond within 10 days of receiving a request for consent from
LICENSEE.
(c) LICENSED PRODUCTS. The "LICENSED PRODUCTS" are defined as
delineated and categorized in SCHEDULE 1(C) attached hereto
and incorporated herein, manufactured by LICENSEE, approved as
to quality by LICENSOR prior to public exposure as provided by
Paragraph 5, and that bear the LICENSOR's trademarks on the
said products and any labels, in accordance with the
provisions of Paragraph 1(f). With respect to any Licensed
Product not sold in the United States through a Channel of
Distribution on or prior to December 31, 2002, the License to
such Licensed Product shall terminate with immediate effect
without further action required on the part of LICENSOR.
(d) TERRITORY; CHANNELS OF DISTRIBUTION. The License granted in
Paragraph 1(a) above is for all countries world-wide (the
"Territory"), except for those countries in which LICENSEE has
not sold any Licensed Product through a Channel of
Distribution by June 30, 2003 (any such country, an
"Excludable Territory"), provided however, that if any
Excludable Territory is a country other than Australia,
Canada, Japan or one in the European Union, LICENSEE shall
have a right of first refusal with respect to the grant of a
license for any Licensed Product to any new licensee. LICENSEE
shall make sales of Licensed Products through the Channels of
Distribution defined in Schedule 1(d) attached hereto.
(e) OWNERSHIP AND RESERVED RIGHTS. LICENSOR reserves and retains
the right, title and interest in the Property, and reserves
and retains the right to:
(i) license, design, manufacture, distribute and sell at
wholesale, retail or otherwise (1) any products other
than the Licensed Products, in the Territory and (2)
any Licensed Products in any Excludable Territory, in
each case, including home furnishing products that
include gift packs containing rack toys usually sold
in the juvenile aisle in retail outlets; and
(ii) design and manufacture within the Territory, Licensed
Products for distribution and sale in any Excludable
Territory.
LICENSEE may not use the Property in any manner other than as
expressly licensed under this Agreement. LICENSEE shall not
claim any right, title or interest in the Property or goodwill
associated therewith other than pursuant to the limited
license granted in this Agreement and hereby waives any right
it otherwise might acquire as a licensee, distributor or
holder of a business opportunity.
(f) PROPERTY USE AND MARKING. LICENSEE shall use the Property in a
manner that does not derogate LICENSOR's rights therein or in
any manner detract from or damage the goodwill associated
therewith. When the Property is used in text, it shall be
distinguished from the surrounding text. When LICENSEE uses
the any trademark on Licensed Products, labels, hang tags,
packaging, or in advertisements or other promotional material,
the trademark shall be designated as such by use of the "TM"
notation or the "(R)" symbol, as directed by LICENSOR, as a
superscript to the xxxx. LICENSEE agrees that the trademark
will appear on each Licensed Product and its packaging, if
any. LICENSEE shall use only those tags, labels and packaging
materials which have been previously approved in writing by
LICENSOR. On all Licensed Products, LICENSEE shall affix such
legends, markings and notices as reasonably required by
LICENSOR and the law. LICENSEE shall not cause any Licensed
Product to be out of production for a period of more than six
(6) consecutive months except with LICENSOR's prior written
consent.
(g) LICENSE TERM. Subject to earlier termination as otherwise
provided in this Agreement, the term of the License hereunder
shall commence on the date hereof, and will continue until
June 30, 2004 (the "LICENSE TERM").
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(h) NO SUBLICENSE OR ASSIGNMENT.
(i) LICENSEE has no right to, and shall not, transfer or
assign, or grant any sublicense, concession, right or
privilege relating to, the Property or the Licensed
Products either directly, indirectly or by operation
of law. A change of ownership, as defined in
Paragraph 9(c)(1) shall constitute an assignment.
(ii) LICENSEE shall contract for the manufacture of the
Licensed Products by a third party only pursuant to a
written agreement with such third party approved in
writing by LICENSOR.
2. MANUFACTURING, MARKETING AND PROMOTION
(a) MANUFACTURE. LICENSEE agrees that the Licensed Product shall
equal or exceed all industry and government standards
established in respect of safety and fitness for use. All
applicable government standards of the Territory shall be
followed, whether federal, state or local. If the Territory is
the U.S. or is inclusive of the U.S., such standards shall
include, but not be limited to, the Consumer Product Safety
Act and all appropriate sections of the Code of Federal
Regulations, and to the extent applicable, the Products shall
equal or exceed the standards set forth in the Hazardous
Substances Act, the Flammable Fabrics Act, the Child Safety
Protection Act and the Toy Manufacturers of America Safety
Standards as contained in ASTM F963 and comparable industry
standards. Prior to commencing shipment of each Licensed
Product and on a regular basis thereafter but no less
frequently than annually, or as otherwise requested by
LICENSOR, LICENSEE agrees to provide to LICENSOR at LICENSEE's
expense a certificate of an approved independent testing
laboratory certifying that the Products comply with such
standards and regulations. Each certificate that is provided
must specifically describe the Products that are covered by
the certificate, including the manufacturing source of the
Products being tested.
(b) MARKETING AND PROMOTION. LICENSEE shall use its best efforts
to exploit the License throughout the Territory, including but
not limited to, selling commercial quantities of a
representative sampling of the Licensed Products of the
various styles as approved by LICENSOR; offering for sale the
Licensed Products so that they may be sold to the consumer on
a timely basis; and maintaining a sales force sufficient to
provide effective distribution throughout the Territory; and
cooperating at LICENSEE's expense with LICENSOR's and any of
its other licensees' marketing, merchandising, sales and
anti-counterfeiting programs. Failure of LICENSEE to commence
marketing the Licensed Products within twelve (12) months of
the date of this Agreement shall be a material breach of this
Agreement.
(c) ADVERTISING AND PROMOTION; APPROVAL. All advertising and
promotion of the Licensed Products must be consistent with the
high quality, image and standards of LICENSOR and shall be
subject to the prior express written approval of LICENSOR. No
advertising or promotional material shall refer to LICENSOR's
name without LICENSOR's prior written approval.
(d) THIRD PARTIES. No manufacturer engaged by LICENSEE may sell or
ship Licensed Products to any party except LICENSEE, and
LICENSEE shall not contract for the manufacture and/or sale of
the Licensed Products by a third party without the prior
express written approval of LICENSOR which will not be
unreasonably withheld and then only pursuant to a written
agreement with such third party approved by LICENSOR, unless
LICENSOR expressly waives such requirement. The written
agreement shall obligate the third party to the applicable
obligations of the LICENSEE under this Agreement such as, for
example, the quality standards, protection and use of the
Property, Confidential Information, right of inspection of
premises, books and records, and prevention of resale of
seconds.
(e) STYLE GUIDE. LICENSEE, at LICENSOR's request, will contribute
to the development and production of the art and materials for
a style guide for the Property, to be made available to all
other licensees of the Property. LICENSEE acknowledges that
LICENSOR has already engaged other parties to develop a style
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guide for the Property and that LICENSEE's involvement in
developing such guide will be collaborative and in
co-operation with such parties. All out-of-pocket expenses
incurred by LICENSOR in the development and production thereof
will be for the account of LICENSOR and may be recouped by
LICENSEE from Royalties otherwise payable hereunder. Any
report rendered under Paragraph 4(a) shall set forth in
reasonable detail such out-of-pocket expenses.
3. ROYALTIES.
(a) GUARANTEE AND ADVANCE. LICENSEE hereby guarantees Royalties
(as defined in Paragraph 3(c)) of not less than $75,000 (the
"GUARANTEE"). Upon execution of this Agreement, LICENSEE shall
pay a non-refundable sum of $37,500 (the "ADVANCE"), to GLOBAL
on behalf of LICENSOR. The Advance shall serve as an advance
against the Royalties payable by LICENSEE hereunder. Once
Royalties owed to LICENSOR surpass the amount of the Advance,
LICENSEE shall make quarterly Royalty payments as set forth
herein. The balance of Guarantee, less the Advance, shall be
paid in full not later than December 31, 2002. Furthermore, if
LICENSEE fails to feature five (5) Licensed Products at the
New York Toy Fair within the first year of the Term of this
Agreement, LICENSEE shall be required to pay an additional
Fifty Thousand Dollars ($50,000) recoupable additional advance
fee within thirty (30) days upon the expiration of the first
year of the Term of this Agreement.
(b) NET SALES. For purposes of calculating any Royalty (as defined
in Paragraph 3(c)), "NET SALES" shall mean the full wholesale
prices in U.S. dollars of Licensed Products, billed, invoiced
or shipped per each calendar quarter, whichever is first to
occur, by LICENSEE to its customers within the Territory
during the "ROYALTY PERIOD" (defined in Paragraph 3(c)), less
actual discounts and defective allowances and less defective
merchandise returns actually received by LICENSEE. Returns on
account of defective merchandise shall not exceed an aggregate
of five percent (5%) of Net Sales. If such returns do exceed
the five percent (5%) threshold, it shall be considered a
material breach of this Agreement by LICENSEE.
(c) PERCENTAGES FOR SALES TO U.S. BASED CUSTOMERS. LICENSEE agrees
to pay a royalty to GLOBAL on behalf of LICENSOR at rates
equal to the percentages of LICENSEE's Net Sales, as set forth
below (the "ROYALTY"), in each calendar quarter within thirty
(30) days after the end of each calendar quarter for the sales
of the Licensed Products sold during such calendar quarter.
For the duration of the License Term. Each such quarterly
period is referred to as a "ROYALTY PERIOD":
ROYALTY RATE NET SALES
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7% US$0 to US$10,000,000
8% US$10,000,000 to US$15,000,000
10% US$15,000,000 and over
Notwithstanding the foregoing, the above-defined Royalty Rates
shall decrease by 2% in the event that a Licensed Product is
(i) advertised on television with a minimum of $1,000,000
advertising expenditure by LICENSEE and that (ii) such
Licensed Product is invented by a third party other than
LICENSEE.
(d) Percentages for International Sales: LICENSEE agrees to pay
the following Royalty Rates based on LICEENSEE's international
Net Sales in each Royalty Period:
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ROYALTY RATE NET SALES
------------ ---------
3.5% $0-$10,000,000 during the year 2001
5% US$10,000,000 during the year 2001
5% Of Net Sales during the year 2002
6% Of Net Sales during the year 2003
(e) TIME OF PAYMENTS OF ROYALTY. Within thirty (30) days after the
end of each Royalty Period during the Term, LICENSEE shall pay
GLOBAL on behalf of LICENSOR, in U.S. Dollars by check or in
any other manner designated by LICENSOR in writing, the
Royalty (applicable for the prior Royalty Period) less the
non-refundable Advance not otherwise credited.
(f) LIQUIDATED DAMAGES, LATE PAYMENTS. LICENSEE acknowledges that
late payment of any sums due to LICENSOR will cause LICENSOR
to incur costs not contemplated by this Agreement and that the
exact amount of such costs are extremely difficult and
impractical to fix. If any payment is not received by LICENSOR
within ten (10) days of the due date, LICENSEE shall pay to
GLOBAL on behalf of LICENSOR a late charge on all overdue
payments calculated at an annualized rate of fourteen percent
(14%) of such overdue sum. This late charge represents a fair
and reasonable estimate of the costs that LICENSOR will incur
by reason of late payment by LICENSEE.
(g) INDEPENDENT COVENANT. The obligation of LICENSEE to pay
royalties is absolute notwithstanding any claim which LICENSEE
may assert against LICENSOR, and LICENSEE shall not have the
right to set-off, compensate against or make any deduction
from Royalties for any reason whatsoever. Notwithstanding the
foregoing, LICENSEE may set-off or make deductions from
Royalties amounts due LICENSEE with respect to (i)
overpayments of Royalties and (ii) out-of-pocket expenses
incurred with LICENSOR's prior written consent.
4. DEPOSITS; BOOKS AND RECORDS
(a) REPORT. At the time each Royalty payment is due, LICENSEE
agrees to deliver to LICENSOR and GLOBAL a report setting
forth: Net Sales and Royalty payable for the Royalty Period
covered by the report, as well as any out-of-pocket expenses
under Paragraph 2(e) or Advance credited against such Royalty,
the form of which first shall be approved by LICENSOR and
amended as requested by LICENSOR.
(b) SEPARATE BOOKS AND RECORDS. LICENSEE shall maintain separate
and appropriate books of account and records sufficient to
reconcile the number of units manufactured that are Licensed
Products with the number of units sold, separated by the
appropriate Channels of Distribution, all in accordance with
generally accepted accounting principles.
(c) RIGHT TO EXAMINE. LICENSOR and GLOBAL, at all times during and
after termination or expiration of this Agreement, shall have
the right, through any authorized representative of its
choice, on five (5) business days advance notice to LICENSEE,
to examine and copy all of LICENSEE's books and records
relating to the manufacture and sale of the Licensed Products
not more then once during a twelve (12) month period, unless
in such period an audit discloses an underpayment of Net Sales
or an underpayment of Royalties in either case exceeding four
(4%) or $25,000 for the calendar year being audited. LICENSOR
and GLOBAL shall have the right to examine the books and
records of all companies with common ownership which transact
business with LICENSEE. "COMMON OWNERSHIP" shall mean that one
or more of the principals, partners or shareholders is a
principal, partner or shareholder of LICENSEE. All such
examinations shall be at LICENSEE's principal place of
business and during normal business hours. LICENSEE shall keep
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all books of account and records available for at least three
(3) years after the close of each fiscal year to which they
relate. LICENSEE shall maintain its books and records
available for inspection in the place where they are
maintained in the ordinary course of business. If an
examination discloses that LICENSEE has understated Net Sales
or underpaid any Royalty for any report period, without
prejudice to any of LICENSOR's rights, LICENSEE shall pay
GLOBAL on behalf of LICENSOR the amount, if any, by which the
actual Royalties exceed Royalties paid within ten (10) days of
receipt of notice by LICENSOR and GLOBAL to such effect,
together with the applicable late charge as provided. Further,
if LICENSEE underpays Royalties by more than four (4%) or
$U.S. 25,000 (whichever is less) for any calendar year,
LICENSEE shall pay all costs, fees and expenses incurred by
LICENSOR and GLOBAL in conducting such examination, in
addition to any late charges and interest provided fir in this
Agreement and reasonable attorneys' fees.
5. QUALITY STANDARDS
(a) STANDARDS. LICENSEE agrees to cause the Licensed Products to
be:
(i) of quality, material, workmanship, condition,
appearance, and image at least equivalent to the
quality, material, workmanship, condition,
appearance, and image of other similar products of
LICENSOR;
(ii) in accordance with this Agreement and all applicable
laws and rules, and within the definition of Licensed
Products, and
(iii) in conformity with designs and samples supplied by
LICENSEE and approved by LICENSOR as provided in this
Paragraph 5.
(b) RIGHT TO APPROVE OR REJECT. Subject to the terms hereof,
LICENSOR shall have sole and absolute discretion with respect
to the approval of all concepts, pre-production prototypes,
and production samples of all Licensed Products to be
manufactured, marketed, distributed, used or sold by LICENSEE
hereunder
(i) LICENSEE shall seek LICENSOR's approval with respect
to any concept of a Licensed Product, and LICENSOR
shall be deemed to have granted approval unless
LICENSOR disapproves of such concept in writing
within ten (10) business days of receiving written
notice from LICENSEE requesting approval. LICENSEE
shall submit to LICENSOR all final designs,
specifications and color details of the concept of
the Licensed Product as part of the approval process.
(ii) LICENSEE shall seek LICENSOR's approval with respect
to any pre-production prototype of a Licensed
Product, and LICENSOR shall be deemed to have granted
approval unless LICENSOR disapproves of such
prototype in writing within ten (10) business days of
receiving written notice from LICENSEE requesting
approval. LICENSEE agrees to supply LICENSOR with one
(1) prototype (including the proposed packaging,
advertising, display, labeling, trade dress,
merchandising, and all other material of any
character whatsoever related thereto) together with a
description of the intended use of the material of
each Licensed Product for its inspection and
approval. LICENSEE shall be responsible for any and
all costs of shipping and handling incurred in
providing the prototype.
(iii) LICENSEE shall seek LICENSOR's approval with respect
to any production sample of a Licensed Product, and
LICENSOR shall be deemed to have granted approval
unless LICENSOR disapproves of such production sample
in writing within five (5) business days of receiving
written notice from LICENSEE requesting approval. If
LICENSEE disapproves of such sample, LICENSOR shall
make changes to the sample prior to commencing
production. LICENSEE agrees to supply LICENSOR with
ten (10) production samples (including the final
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packaging, advertising, display, labeling, trade
dress, merchandising, and all other material of any
character whatsoever related thereto). LICENSEE shall
be responsible for any and all costs of shipping and
handling incurred in providing the production
samples. LICENSOR and GLOBAL shall have the right to
purchase additional production samples for their own
personal use at the lowest wholesale price of the
Licensed Products at LICENSEE's wholesale cost (less
Royalties).
(iv) If a Licensed Product in production fails to conform
to the production sample, whether approved or deemed
approved, LICENSOR shall immediately cease the
production of such non-conforming Licensed Product,
and shall immediately make changes to the production
model during the manufacturing process to cause the
Licensed Product to conform in all respects to the
approved production sample.
(v) No approval of any concept, pre-production prototype,
production sample or production model shall be deemed
or construed as a determination by LICENSOR that any
Licensed Product complies with the applicable laws,
rules or regulations of any Territory governing any
such Licensed Product, including, without limitation,
any implied warranties of merchantability or fitness
for a particular purpose.
(vi) LICENSEE shall not manufacture, distribute, market,
use, give away or sell any concept, pre-production
prototype, production sample or production model of
any Licensed Product that has been disapproved by
LICENSOR or in respect of which the approval process
has not been complied with by LICENSEE, or which, in
the case of a production model, fails to conform to
the approved production sample, and any breach hereof
shall be deemed a material breach.
(vii) LICENSEE shall supply LICENSOR and GLOBAL with 24
samples of each of the completed Licensed Products,
promptly upon completion. LICENSEE shall be
responsible for any and all costs of shipping and
handling incurred in providing said samples under
this Agreement. LICENSOR and/or Global shall have the
right to purchase additional samples for their own
personal use at the lowest wholesale cost of the
Licensed Products.
(c) APPROVAL OF FACILITIES. LICENSEE shall provide the addresses
of all facilities, including third party manufacturers, at
which the Licensed Products are manufactured. LICENSOR and
GLOBAL shall have the right to inspect and approve all such
facilities of LICENSEE. LICENSEE's agreements with third party
manufacturers shall provide for the right of LICENSOR and
GLOBAL to inspect such third party's facilities. All
inspections shall be during regular business hours upon
twenty-four (24) hours notice to LICENSEE or LICENSEE's third
party manufacturers. Inspections may include any reasonable
actions necessary to assure LICENSOR that the Licensed
Products are made and displayed in accordance with this
Agreement, including but not limited to laboratory testing.
6. CONFIDENTIALITY For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" shall mean all non-public information concerning the
parties' business and operations, unpublished copyrighted materials,
release dates, marketing and promotional strategies, information about
new products, properties and characters, and the terms and conditions
of this Agreement. Each party agrees to keep all Confidential
Information of each other's strictly confidential and to use such
knowledge only to the exercise and performance of its respective rights
and obligations under this Agreement; except that Licensed Products may
be displayed and any detail evident from examination of a Licensed
Product may be disclosed only at and after the line-break applicable to
that Licensed Product and season. Upon expiration or termination of
this Agreement, whichever first occurs, LICENSEE shall return all
designs, patterns, samples and other embodiments of Confidential
Information not yet disclosed as provided in the preceding sentence.
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7. INTELLECTUAL PROPERTIES
(a) PROPERTY VALUE. LICENSEE acknowledges that the Property has
great value and associated goodwill because the public and the
industry associate the Property with goods having consistently
high quality that are sold primarily by retailers of high
repute who sell primarily high quality goods and who maintain
high merchandising standards. LICENSEE shall use its
commercially reasonable efforts to preserve the value and
goodwill of the Property and to cooperate with LICENSOR's
efforts to preserve their value and goodwill as contemplated
by this Agreement.
(b) PROPERTY OWNERSHIP. LICENSEE acknowledges LICENSOR's ownership
of the Property, and acknowledges that all use of such
Property inures to the exclusive benefit of LICENSOR. LICENSEE
shall not at any time either during or after the Term of this
Agreement:
(i) claim ownership of or attempt to register the
Property;
(ii) do or commit any act which would adversely affect the
validity of the Property;
(iii) infringe LICENSOR's rights in the Property;
(iv) use any business name with the Property in it;
(v) seek to cancel the Property rights; or
(vi) engage in any activity which may contest, dispute,
dilute or otherwise impair the right, title, interest
or goodwill of LICENSOR in the Property. For the
purpose of protection of rights in the Property only,
all uses of the Property made by or on behalf of the
LICENSEE are deemed to have been made by LICENSOR.
(c) REGISTRATIONS:
(i) LICENSEE shall cooperate with LICENSOR and GLOBAL in
the execution, filing and prosecution of trademark,
copyright or patent applications; LICENSEE shall
supply LICENSOR and GLOBAL with samples for
applications. LICENSEE shall cooperate with LICENSOR
and GLOBAL in making and terminating registered user
entries. LICENSOR shall pay all costs and fees in
connection with filing and prosecution of trademarks,
copyrights and patents. These obligations shall
survive termination.
(ii) LICENSOR and LICENSEE shall file applications and
documents with the appropriate government office, as
required by law or as deemed prudent by LICENSOR, at
LICENSOR's sole cost.
(d) INFRINGEMENTS. LICENSEE shall immediately give notice to
LICENSOR and GLOBAL, by telephone and in writing, of any
infringement or misuse of any Property by any third party of
which LICENSEE's senior officers become aware. LICENSOR shall
have the right, but not the requirement, to commence legal
action regarding any misuse at its expense. LICENSEE shall
cooperate fully and promptly in any infringement action
commenced by LICENSOR or GLOBAL as LICENSOR shall require;
PROVIDED, HOWEVER, that any and all costs incurred by LICENSEE
in connection with such litigation shall be borne by LICENSOR,
except nominal or sample costs shall be borne by LICENSEE.
8. INDEMNITY; INSURANCE ; REPRESENTATIONS
(a) LICENSEE'S INDEMNITY. LICENSEE agrees to indemnify, defend and
hold harmless LICENSOR and GLOBAL, and each of their
respective shareholders, members, directors, officers,
employees and agents from and against any and all obligations,
liabilities, claims, demands, suits, actions, causes of
action, damages and expenses (including but not limited to
reasonable attorney's fees) caused by or arising from
LICENSEE's manufacture, labeling, marketing, use, sale or
distribution of Licensed Products or any other goods, or from
product liabilities arising from the manufacture, labeling,
marketing, use or sale of any of the Licensed Products or
other goods by LICENSEE, or from any alleged defect in a
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Licensed Product regardless of whether the action is based
upon negligence or strict liability, and regardless of whether
the alleged negligence of LICENSEE is characterized as
"passive" or "active"; or from unauthorized use by LICENSEE of
LICENSOR's rights in the Property, or from any casualty or
other risk of loss, damage or destruction of the Licensed
Products or any materials, supplies or inventory therefor, or
for any violation of any warranty, representation or agreement
made by LICENSEE pertaining to a Licensed Product.
(b) LICENSOR'S INDEMNITY. LICENSOR agrees to indemnify and hold
harmless LICENSEE, its officers, directors, employees and
agents from and against all third party claims, damages,
losses, liabilities, suits and expenses (including reasonable
attorneys' fees) arising out of or by any reason of any breach
by LICENSOR of any of the representations, warranties or
covenants made by it hereunder.
(c) INSURANCE. LICENSEE shall maintain in full force and effect at
all times while this Agreement is in effect, product liability
insurance with minimum limits of $2,000,000 per occurrence
(excluding the costs of providing a defense), and naming
LICENSOR and GLOBAL as additional named insureds. Such policy
shall be primary and not contributory. LICENSEE shall deliver
to LICENSOR a certificate of insurance evidencing satisfactory
coverage and indicating that LICENSOR shall have thirty (30)
days prior notice of cancellation, non-renewal or of any
material change in coverage. LICENSEE's insurance shall be
covered by a BEST Guide or B+ VII or better. This insurance
may be obtained for LICENSOR by LICENSEE in conjunction with a
policy which covers products other than the Licensed Products.
LICENSEE shall furnish certificates and endorsements of the
required insurance policies. Upon request, LICENSEE shall
provide copies of policies. The insurance set forth in this
section must cover the entire Territory.
(d) If either party learns of a claim related to this Agreement or
the Licensed Products, it shall immediately notify the other
party by telephone, and in writing transmitted by overnight
courier, of the subject matter, the parties and the nature of
the claim. If the claim pertains to any of LICENSEE's
obligations under this Agreement or the Licensed Products,
LICENSEE shall promptly inform LICENSOR of what steps it is
taking to correct the claim or complaint whether by consumer
or a government body. LICENSOR and LICENSEE shall cooperate in
the resolution of all such claims.
(e) LICENSOR'S REPRESENTATIONS AND COVENANTS.
(i) LICENSOR represents and warrants that (1) it has all
necessary intellectual property rights to license the
Property to LICENSEE for use in the United States as
authorized hereunder and (2) LICENSEE's use of the
Property in the United States as authorized hereunder
will not infringe on the intellectual property rights
of any third party.
(ii) LICENSOR covenants (1) upon execution of this
Agreement, to take reasonable commercial efforts to
register all necessary intellectual property rights
relating to the Property in Australia, Canada and
Japan, and in such countries of the European Union as
reasonably requested by LICENSEE and (2) to take
reasonable commercial efforts to register all
necessary intellectual property rights relating to
the Property in such other countries and at such
other times as reasonably requested in writing by
LICENSEE. LICENSOR shall notify LICENSEE of
commencing such applications and provide LICENSEE
with copies of final registration(s), if any. Once a
registration process has been finalized in a
particular country, LICENSOR's representation and
covenants contained herein shall extend to such
finalized registration.
(iii) There are no implied warranties for merchantability
or fitness for any particular purpose.
(f) NO LEGAL IMPEDIMENTS. The parties represent and warrant that:
(i) they have the full right, power and authority to
enter into this Agreement and to perform all
obligations;
9
(ii) they are financially capable of performing their
obligations.
(g) LICENSEE REPRESENTATIONS. LICENSEE warrants and represents
that it is a Delaware corporation, validly existing and in
good standing under the laws of Delaware. LICENSEE further
represents and warrants that it will use its best efforts to
market the Licensed Products. LICENSEE further represents that
entering into this Agreement will not result in the violation
of: (i) the organizational documents or bylaws of LICENSEE,
(ii) any agreement, contract, lease, license, document or
other commitment, written or oral, to which LICENSEE is a
party or may become bound, or (iii) any applicable law, rule,
license or regulation.
(h) COMPLIANCE WITH LAW. LICENSEE shall take all actions required
by any local, provincial, national or regional agency,
government or commission to carry out the purposes of this
Agreement in compliance with applicable law. LICENSEE shall
immediately provide LICENSOR and GLOBAL with copies of any
communications to or from any such agency, government or
commission which relates to or affects this Agreement or the
Licensed Products.
9. TERMINATION
(a) OTHER RIGHTS UNAFFECTED. Termination on any ground shall be
without prejudice to any other rights or remedies.
(b) TERMINATION FOR BREACH OR MATERIAL BREACH.
(i) Subject to the terms hereof, if LICENSEE or LICENSOR
breaches any of its obligations, the other may
terminate this Agreement by transmitting to the
breaching party a notice of termination (the "NOTICE
OF TERMINATION").
(ii) Termination will become effective automatically
unless the breaching party completely cures the
breach within five (5) business days of giving the
Notice of Termination if the breach is either a
failure to pay money or is a breach designated herein
to be a "material breach", and within twenty (20)
non-business days ("Cure Period") of the giving of
such Notice of Termination if the breach is any other
breach except as otherwise herein provided.
Notwithstanding anything to the contrary contained
herein, LICENSEE may, on a case-by-case basis, submit
in writing a request for an extension of the Cure
Period giving specific reasons for such request, and
LICENSOR shall, in its own discretion, determine
whether to approve such an extension, provided that
such approval shall not be unreasonably withheld.
(iii) If the LICENSEE is the breaching party, LICENSEE may
continue to ship Licensed Product PROVIDED the breach
is being cured in good faith.
(c) GROUNDS FOR IMMEDIATE TERMINATION.
(i) INSOLVENCY: LICENSOR may terminate if: a petition for
relief under the Bankruptcy Code is filed by or
against the LICENSEE; LICENSEE makes any assignment
for the benefit of its creditors; LICENSEE becomes
the subject of proceedings under any insolvency,
reorganization or receivership law; LICENSEE defaults
on any obligation which is secured by a security
interest, in whole or in part, in the Licensed
Products; or, a receiver is appointed for LICENSEE or
a substantial part of its business interests.
Termination will become effective automatically sixty
(60) days after LICENSOR gives notice if LICENSEE:
fails to discharge the bankruptcy or terminate the
assignment for the benefit of creditors. The license
and rights granted are personal to LICENSEE. No
10
assignee for the benefit of creditors, receiver,
debtor in possession, trustee in bankruptcy, sheriff
or any other officer or court charged with taking
over custody of LICENSEE's assets or business, shall
have any right to continue performance of this
Agreement or to exploit or in any way use the
Property if this Agreement is terminated pursuant to
the preceding subparagraph, except as may be required
by law.
(ii) LICENSEE underpays Royalties by more than five
percent (5%) or US $75,000 (whichever is less) for
any calendar year and such underpayment is not cured
within five (5) business days of final determination
of such underpayment.
(iii) LICENSEE ceases to do business.
(iv) LICENSEE manufactures, markets, distributes, uses or
sells a Licensed Product for which LICENSEE failed to
obtain approval as provided in Section 5(b) and
LICENSOR notifies LICENSEE of such breach and
declines to grant approval with respect to such
manufacture, distribution, marketing or sale of
Licensed Products.
10. OBLIGATIONS AT EXPIRATION OR TERMINATION
(a) TERMINATION OF RIGHTS. Upon expiration or termination of this
Agreement for any reason, all rights in the Property granted
to LICENSEE shall automatically terminate and LICENSEE shall
cease and desist from any and all manufacture, sale,
distribution or disposal of the Licensed Products, or any use
of the Property or of any Licensed Products or Property which
are substantially or confusingly similar to the Property,
except as specifically provided in this Paragraph.
(b) INVENTORY. Upon LICENSOR's request, within ten (10) days after
the expiration of this Agreement or, in the event of its
termination or non-renewal, within ten (10) days after the
receipt of a Notice of Termination or a notice of non-renewal
or the happening of an event which terminates this Agreement
where no notice is required, LICENSEE shall give LICENSOR and
GLOBAL a written statement showing: i) the Licensed Products
in its possession or under its control; ii) location of the
inventory; iii) work in process; iv) Licensed Products in
transit; and v) the name, address and telephone number of each
contractor and/or shipper and sales representative. LICENSEE
shall dispose of these goods only pursuant to the specific
written instructions of, and under the terms imposed by,
LICENSOR.
(c) OTHER ITEMS BEARING THE PROPERTY. All items other than the
Licensed Products, bearing the Property, such as stationary,
business cards, etc., shall be destroyed or delivered to
LICENSOR immediately upon termination or expiration.
(d) SELL-OFF PERIOD.
(i) Following the expiration or termination of this
Agreement, LICENSEE shall deliver within thirty (30)
days to the LICENSOR a statement indicating the
number and description of the Licensed Products in
the LICENSEE's inventory.
(ii) Upon the expiration or termination of this Agreement,
LICENSEE shall immediately cease manufacturing the
Licensed Products and discontinue its use of the
Property; provided, however, that LICENSEE shall have
a period of one hundred twenty (120) days after such
expiration or termination to sell the Licensed
products remaining in its inventory (the "SELL-OFF
PERIOD"). The LICENSOR shall be entitled to receive
Royalties in connection with all sales made by the
LICENSEE during the Sell-off Period.
(iii) Upon the expiration of the Sell-off Period the
LICENSEE shall cease to sell the Licensed Products
and shall supply to the LICENSOR a description of its
remaining inventory of the Licensed Products at such
date.
11
(e) RIGHT TO PURCHASE. LICENSOR or LICENSOR's designee shall have
the option (but not the obligation) to purchase all or any
part of LICENSEE's inventory of Licensed Products upon the
following terms:
(i) LICENSOR shall notify LICENSEE of the intention to
exercise this option within thirty (30) days of
delivery of the inventory and shall specify the
Licensed Products to be purchased;
(ii) If Agreement terminates because of LICENSEE's breach,
then LICENSOR should have the right to purchase
inventory at 70% of the LICENSEE's lowest wholesale
cost. If Agreement terminates by its terms or because
of LICENSOR's breach, then LICENSOR should have the
right to purchase inventory at lowest wholesale price
The price for all other Licensed Products which are
not manufactured by LICENSEE shall be LICENSEE's
landed costs. "LANDED COSTS" means the F.O.B. price
of Licensed Products together with customs, duties,
and brokerage, freight and insurance;
(iii) LICENSEE shall deliver the Licensed Products
purchased within fifteen (15) days of receipt of the
notice to purchase. The purchase price shall be
payable upon delivery; provided that LICENSOR shall
be entitled to deduct any amounts owed it by
LICENSEE.
(f) WAIVER OF GOODWILL. LICENSEE waives any claim which it may
have arising from any alleged goodwill created by LICENSEE
from the alleged creation or increase of a market for Licensed
Products.
(g) RIGHT TO MANUFACTURE AND OFFER FOR SALE. At least three (3)
months prior to expiration of this Agreement, LICENSEE shall
notify LICENSOR of its intention to renew the Agreement.
Without limiting LICENSOR's other rights in this Agreement, at
any time during the three (3) months preceding expiration or
termination, LICENSOR or any new licensee shall have the right
to start manufacturing the Licensed Products.
(h) DISPOSAL OF INVENTORY. Upon expiration or termination, all
inventory not disposed of in accordance with this Paragraph
shall be destroyed; however, such inventory may be sold
provided that 1) all Property (and all markings of any kind
associated with LICENSOR) are removed subject to inspection
and approval of LICENSOR; and 2) the public is not advised of
any association of the inventory with the Property or
LICENSOR.
(i) SUPPLIES BEARING THE PROPERTY. Upon the sooner of termination
or thirty (30) days prior to expiration, at the reasonable
request of LICENSOR, which request shall solely be made to the
extent necessary to reassume, preserve goodwill in the
Property that LICENSOR otherwise believes may otherwise be at
risk, LICENSEE shall provide an inventory of all supplies of
any type bearing the Property, which shall specify the
location of such items.
(j) LICENSEE shall purchase all items bearing the Property held by
any supplier and shall have all such items delivered to
LICENSOR.
11. NOTICE AND APPROVALS Any notice, approval, consent or agreement
required or permitted under this Agreement shall be effective only if
in writing, signed by an officer of the party giving notice, and
delivered in person, or mailed by certified or registered mail return
receipt requested, or transmitted by facsimile transmission with
electronic confirmation of receipt to the addressee's address or
facsimile number set forth below (or such other address or facsimile
number as the party changing its address specifies in a notice to the
other party specifically referring to this Paragraph):
12
If to LICENSOR:
Genius Products, Inc.
Attention: President
00000 Xx Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Tel (000) 000-0000
Fax (000) 000-0000
With a copy to:
Global Icons, LLC
Attention: Xxx Xxxxxx
0000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Tel (000) 000-0000
Fax (000) 000-0000
With a copy to:
Silver & Xxxxxxxx
Attention: Xxxxx X. Silver
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Tel (000) 000-0000
Fax (000) 000-0000
If to LICENSEE:
Jakks Pacific, Inc.
Attention: President
00000 Xxxxxxx Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Tel (000) 000-0000
Fax (000) 000-0000
With a copy to:
-------------------------
-------------------------
-------------------------
-------------------------
Notice shall be deemed given as of the date actually received by the last of the
addressee party and that party's copy recipient to receive the notice as
evidenced by acknowledgment of receipt, delivery in person, the date on the
postal return, or electronic confirmation in the case of facsimile
transmissions.
12. TIME Time is of the essence in performing the obligations of this
Agreement.
13. INTERPRETATION The License Agreement shall be interpreted to give
LICENSOR maximum control of its Property and the usage of the Property.
Any uncertainty or ambiguity shall not be construed for or against the
party based on attribution of drafting to either party. The caption
headings of the sections are for convenience only and shall not be used
for interpretation.
13
14. GOVERNING LAW/ JURISDICTION/ VENUE All questions concerning this
Agreement, the rights and obligations of the parties, its enforcement,
and its validity, effect, interpretation and construction which are
governed by state law shall be determined under the laws of the State
of California. All national law questions shall be governed by the laws
of the United States of America; except that if LICENSOR seeks
provisional relief, the law of the place where the provisional relief
is sought shall apply. LICENSOR and LICENSEE agree to be subject to
jurisdiction in Los Angeles County, California and agree to exclusive
venue in the courts in Los Angeles County, California.
15. ASSIGNABILITY. Neither this Agreement nor any rights, duties or
obligations in this Agreement may be assigned or delegated by LICENSEE,
without the prior written consent of LICENSOR. A change of control of
LICENSEE or the sale of all or substantially all of the assets of
LICENSEE shall constitute an assignment of this Agreement requiring
LICENSOR's written consent. A "change of control" shall be deemed to
have occurred if any of the following events shall have occurred if (1)
any corporation, other person or "Group" (as defined below) becomes the
"Beneficial Owner" (as defined below) of more than 50% of LICENSEE's
outstanding Common Stock or (2) if both Xxxxx Xxxxxx and Xxxx Xxxxxxxx
have to resign their respective offices. For purposes of this
definition of change in control, the following terms shall have the
following meanings: "Beneficial Owner" shall have the meaning which
that term is given in Rule 13d-3 under the Securities Exchange Act of
1934 as amended (the "Act"). "Group" shall mean persons who act in
concert as described in Section 14(d)(2) of the Act.
16. RELATIONSHIP OF THE PARTIES Nothing in this Agreement shall be
construed to place the parties in the relationship of legal
representatives, partners, joint venturers or agents. LICENSEE shall
have no power to oblige or bind LICENSOR or GLOBAL in any manner except
as provided.
17. WAIVER AND INTEGRATION; AMENDMENTS The failure of a party to insist
upon strict adherence to any term of this Agreement, or to object to
any failure to comply with any provision of this Agreement, shall not
be a waiver of that term or provision, estop that party from enforcing
that term or provision, or preclude that party from enforcing that term
or provision by estoppel or by laches. The receipt by a party of any
benefit from this Agreement (e.g., Royalty) shall not be construed as a
waiver or estoppel of the right of that party to enforce any section.
None of the terms of this Agreement shall be deemed to be waived or
modified, including all provisions of this Paragraph, except by an
express agreement in writing, signed by an authorized officer of the
party against whom enforcement of the waiver or modification is sought,
supported by a new consideration. This Agreement, including all
attachments, constitutes the entire agreement between the parties, and
supersedes all prior negotiations and agreements between the parties
concerning its subject matter. This writing is intended as the final,
complete and exclusive statement of the terms of the Agreement between
the parties and cannot be changed or terminated orally.
18. INTEGRATION. This Agreement, and all Schedules referenced herein,
constitutes the entire, final and exclusive agreement between the
parties with respect to the matters set forth herein; any and all prior
agreements, whether written or oral, with respect to the matters set
forth herein, are superseded by this Agreement.
19. ATTORNEYS' FEES AND PROFESSIONAL EXPENSES If any legal action or
dispute arises under this Agreement, arises by reason of any asserted
breach of it, or arises between the parties and is related in any way
to the subject matter of the Agreement, the prevailing party shall be
entitled to recover all costs and expenses including reasonable
attorneys' fees, investigative costs, accounting fees and charges for
experts. The "PREVAILING PARTY" shall be the party who is entitled to
recover its costs of suit, whether or not the suit proceeds to final
judgment; if there is no court action, the prevailing party shall be
the party who wins any dispute. A party need not be awarded money
damages or all relief sought in order to be considered the "prevailing
party" by a court.
20. SURVIVAL All obligations of the parties of a continuing nature shall
survive the termination or expiration of this Agreement.
14
21. SEVERABILITY If any provision of this Agreement is held by a court of
competent jurisdiction or an arbitrator to be invalid or unenforceable,
the remaining provisions of this Agreement shall remain in full force
and effect.
22. BINDING AGREEMENT This Agreement shall be binding on and inure to
the benefit of the parties and their respective successors, agents,
affiliates, representatives and permitted assigns.
23. EXHIBITS/SCHEDULES All Exhibits or Schedules are incorporated into this
Agreement.
24. REMEDIES All specific remedies provided for in this Agreement shall be
cumulative and shall not be exclusive of one another or of any other
remedies available in law or equity.
25. COUNTERPARTS This Agreement may be executed in two (2) or more
counterparts, each of which together will constitute the same
agreement, whether or not all parties execute each counterpart.
IN WITNESS WHEREOF the parties hereto have executed this License Agreement
as of the day and year first above written.
LICENSOR:
By: /S/ XXXXX XXXXXXX
-------------------------------------------
Its: CEO
LICENSEE:
By:
-------------------------------------------
Its: Executive Vice President & Chief Financial Officer
15
SCHEDULE A
----------
PROPERTY
1. Licensor (1) has certain trademarks registered or pending in its name
(as set forth in Schedule B attached hereto, which may be amended and
restated from time to time), and (2) is the exclusive owner of certain
rights in and to the names, characterizations, designs, artwork,
symbols, concepts, ideas, themes, plots, stories and spin-offs relating
to and associated with the characters and elements contained in the
Genius Products, Inc. works.
16
SCHEDULE 1(c)
DEFINITION OF LICENSED PRODUCTS
1. Action Figures
2. Board Games
3. ELA Toys
4. Lunch Boxes
5. Playsets
6. Plush
7. Pre-School and Infant Toys
8. Puzzles
9. Stationery
10. Stickers
11. Vehicles
Other toys that the parties agree in writing are within the scope of an
exclusive master toy license.
"Licensed Products" do not include the following :
1. Small Furniture - Bouncers, Travel Bassinets
2. Nursery Accessories - Musical Mobiles (for infant care aisle), Lamps
3. Picture Frames
4. Pacifier Attachers
5. Plastic Water Teether
6. Plastic "Key" Teether
7. Musical Rattle Teether
8. Infant utensils
9. Bath Accessories:
a. Infant Bath Aid - a die cut sponge cut at the bottom of the
bathtub used in securing child in tub
b. Spout Covers
c. Tub Toy Bag
d. Bath Visor
e. No Skids
f. Accessories
11. ACCESSORIES (FOR INFANT CARE ISLE)
a. Stroller Activity Bar
b. Stroller Attach-a-Toy
c. Infant Carrier Attach-a-Toy
17
SCHEDULE 1(d)
-------------
CHANNELS OF DISTRIBUTION
The following Channels of Distribution apply to this License Agreement only if
initialed by the authorized signatory of Licensor:
______ CONSUMER SALES: sales of Licensed Products directly or through Licensee's
authorized wholesalers, representatives or distributors to retail establishments
for eventual resale to the consumer;
______ MAIL ORDER SALES: sales of Licensed Products directly to the consumer
through direct mail solicitation or catalogues;
______ SHOPPING NETWORK SALES: sales of Licensed Products directly or through
Licensee's authorized representatives, wholesalers and distributors through
media such as infomercials, local, cable, wireless or fiber optic television
shopping channels, on-line shopping, or otherwise;
______ INTERNET SALES: sales of Licensed Products through the world wide web.
18
SCHEDULE 9(c)
LIST OF LICENSEE OWNERS AND KEY MANAGEMENT
KEY MANAGEMENT
TITLE NAME
----- ----
Chairman and CEO Xxxx Xxxxxxxx
President and COO Xxxxxxx X. Xxxxxx
19
