EXHIBIT 10.18
Contract No. 010006
LICENSING AGREEMENT - DOMESTIC
------------------------------
AGREEMENT made as of July 31, 1996, between The Hearst Corporation, King
Features Syndicate Division ("King"), a Delaware corporation with offices at 000
Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and Brilliant Digital Entertainment,
Inc. ("Licensee"), a Delaware corporation with offices at 0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000.
King and Licensee agree as follows:
BASIC PROVISIONS
1. Property and Trademarks:
-----------------------
POPEYE
2. Products: CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
--------
WITH THE SECURITIES AND EXCHANGE COMMISSION (CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION) interactive story-
based computer CD_ROM products incorporating games,
puzzles, activities, adventures and/or stories designed
for use by children in the three (3) to twelve (12) year
old age group and capable of operating on CD-ROM drives
with IBM or compatible PC hardware using Microsoft
Windows or Macintosh or compatible hardware for use on
personal computers as such computers are presently
configured. No characters other than POPEYE and the
related characters shall be included in the Products. The
license does not include the right to adapt the software
for use on operating platforms other than those
specifically described herein; specifically excluded are
the rights to make software compatible with Sega or
Nintendo formats, or other electronic consumer gaming
formats such as handheld electronic game versions of the
Products. Licensee is granted the right to make only a
single version of each software product.
3. Territory: All countries in which English is the predominantly
---------
spoken language.
The Products may be distributed only to the home and
educational personal computer market and shall be solely
for use by consumers in their homes, schools and
libraries and not for public exhibition or transmission
of any kind. The Products shall be distributed
under license (which may be in the form of a shrink
wrap), which prohibits copying except for archival
purposes and prohibits the creation of print products
based upon the Products, except such print copies of
individual screens from the software that may be made by
the consumer for private use.
4. Language: English
--------
5. Term:
----
(a) Basic Term: The "Basic Term" of this Agreement and the
----------
license granted hereunder shall commence on CONFIDENTIAL
INFORMATION OMITTED AND FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, and continue until CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION, subject to the
provisions hereof.
(b) Term Extensions (if any) and Minimum Earned Royalties: If
-----------------------------------------------------
Licensee earns the specified Minimum Earned Royalties,
Licensee shall have the following options if any, to
extend the Basic Term (such extensions herein called
"term Extension(s)"):
Licensee shall have CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION (CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION)
renewal option for CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION (CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION)
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION, provided
that Royalties earned and paid King for the Basic Term
equal at least $CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION ("Minimum Earned Royalties").
"Term" means the Basic Term and all Term Extensions.
6. Advances, Royalties, Minimum Royalties Guarantee, etc,:
------------------------------------------------------
(a) Advance:
-------
2
(i) Licensee shall pay King a non-refundable advance
("Advance") in the amount of $CONFIDENTIAL INFORMATION
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION payable as follows: $CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION upon the execution of
this Agreement and $CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION on or before CONFIDENTIAL INFORMATION OMITTED
AND FILES SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
(ii) Licensee shall pay King an additional
non-refundable Advance for each Term Extension period as
follows:
$CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION
(iii) Unless specified otherwise herein, Advances shall
be paid on or before the first day of the applicable
period of the Term.
(iv) The Advance shall be recoupable by Licensee out of
Royalties payable to King pursuant to subparagraph (b).
(b) Royalty:
-------
(i) Licensee shall pay King a royalty ("Royalty") of
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION% based upon
the Gross Wholesale Price (as defined in the Standard
Terms and Conditions) of each Product sold, except with
respect to Products sold to hardware manufacturers to be
included for sale with such manufacturers hardware (OEM),
in which cases Licensee shall pay King CONFIDENTIAL
INFORMATION OMITTED AND FILES SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION% based upon Licensee's
Net Revenues (as defined in the Standard Terms and
Conditions), for each Product sold. A Product shall be
deemed "sold" as of the date on which such Product is
shipped, invoiced, billed or paid for, whichever first
occurs.
(ii) Royalties shall be reported separately by country.
3
(c) Payments and Statements:
-----------------------
(i) All payments and statements shall be made quarterly
commencing CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION, and
shall be sent to King at the address specified in the
heading of this Agreement and shall be sent to the attention
of: CONTROLLER. Notwithstanding any provisions to the
contrary in the Standard Terms and Conditions: (A) payments
and statements shall be due within fifteen (15) days after
the end of each calendar quarter and (B) statements shall
conform in all material respects to the form attached as
Exhibit D.
(ii) Notices, Submission. Additionally, a copy of all
-------------------
statements, as well as all other notices and submissions
(unless expressly directed otherwise in this Agreement),
shall be sent to the attention of King's DIRECTOR OF
LICENSING at the same address.
(d) Contract Reference:
------------------
All payments and statements shall reference the Contract No.
set forth at the top of this Agreement.
(e) Currency:
--------
All payments to be made to King hereunder shall be payable
in U.S. currency.
7. Marketing Date: CONFIDENTIAL INFORMATION OMITTED AND FILED
-------------- SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION
8. Advertising, Marketing Requirements: Not Applicable.
-----------------------------------
9. Copyright/Trademark Notice: Until such time as King otherwise
--------------------------
notifies Licensee, the notice shall be in the following form:
(TM) and (C) (year) King Features Syndicate, Inc.
(TM) The Hearst Corporation
Licensee shall also affix to the Producer or Promotional and Packaging
Material the design(s) attached hereto as Exhibit A.
Additionally, Licensee shall execute and return to King the trademark
registration document either attached hereto as Exhibit B or provided
by King hereafter.
4
10. Samples: Licensee shall provide King with the following quantities of
Product samples (pursuant to paragraph 6(g) of the Standard Terms and Conditions
attached hereto):
twelve (12)
11. Standard Terms and Conditions: This Agreement includes all the
-----------------------------
Standard Terms and Conditions annexed hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Brilliant Digital Entertainment, Inc. The Hearst Corporation
King Features Syndicates Division
By: /s/ Xxxxx Xxxxxxx By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------- --------------------------------
Name: Xxxxx Xxxxxxx Xxxxxxxx X. Xxxxx
Title: Secretary Executive Vice President and General
Manager
5
EXHIBIT C
---------
Manufacturer's Agreement
------------------------
Agreement dated as of ____________________ between Brilliant Digital
Entertainment, Inc. ("Contractor") and (NAME OF MANUFACTURER) ("Manufacturer").
Name and Address of Manufacturer: (NAME/ADDRESS)
Property and Trademarks: (PROPERTY AND TRADEMARKS AS DEFINED IN LICENSE
AGREEMENT)
Products: (PRODUCTS AS DEFINED IN LICENSE AGREEMENT)
Territory: (COUNTRY/TERRITORY)
Expiration of Manufacturer's Agreement (unless sooner terminated or extended):
(DATE)
1. Contractor hereby engages Manufacturer to manufacture such quantities of
the Products as Contractor may specify from time to time.
2. Upon the failure of Manufacturer to comply with any of this Agreement,
Contractor may elect to terminate this Agreement forthwith and require that
portion of all copies and molds or other devices used to manufacture the
Products in possession of Manufacturer be immediately delivered to Contractor or
be destroyed.
3. Manufacturer agrees that:
(a) it will not manufacture the Products for or supply the Products to
anyone but Contractor;
(b) it will not deliver the Products in any territory other than the
Territory listed above;
(c) it will not manufacture any merchandise utilizing the Property and
Trademarks other than the Products, nor will it produce any items in excess of
the quantity stipulated by Contractor; and
(d) the Products manufactured by it shall invariably and without
exception bear a copyright notice as stipulated by Contractor, accompanied by
such other information or notice as may be prescribed by the laws applicable to
the Territory, or as Contractor may instruct in writing.
4. Manufacturer hereby acknowledges the proprietary rights of Contractor's
licenses or, King Features Syndicate Division, The Hearts Corporation ("King")
in and to such Property and Trademarks. Manufacturer also acknowledges that it
acquires no proprietary rights whatsoever
6
in the Property and Trademarks, the Products, or any trademarks or copyrights
associated therewith and that all materials it produces or creates, including
any molds, engraving or other devices used to reproduce the Products shall be
the exclusive property of King.
5. Manufacturer further acknowledges that King is the intended third-party
beneficiary of this Agreement and King shall be entitled to initiated
enforcement proceedings as may be appropriate against Manufacturer in the event
of any breach hereof, including but not limited to seeking injunctive relief.
The Manufacturer agrees that its failure to comply with its obligations
hereunder would cause irreparable injury to King not wholly compensable with
monetary damages. In addition, Manufacturer shall be responsible to Contractor
and King for damages, including costs and attorney's fees, caused by any
unauthorized use of such molds, engravings or other devices used to reproduce
the Property and Trademarks.
6. Upon notice from Contractor or King, Manufacturer will immediately cease
manufacturing the Product and at Contractor's or King's election either turn
over to Contractor or King any molds, engravings or other devises used to
reproduce the Property and Trademarks and Products or will give satisfactory
evidence of their destruction so that they can no longer be used to reproduce
said Property and Trademarks.
CONTRACTOR MANUFACTURER
Brilliant Digital Entertainment, Inc. (NAME)
By______________________________ By______________________________
Title___________________________ Title___________________________
7
KING FEATURES LICENSING GROUP
STANDARD TERMS AND CONDITIONS
1. LICENSE GRANTED:
---------------
(a) King hereby grants to Licensee a non-transferable and non-assignable
license, without the right to grant sub-licenses, to use the Property and the
Trademarks solely for the manufacture, sale, advertising and promotion
(collectively "Sale") of the Products solely within the Territory and in the
Language. All rights in and to the Property and the Trademarks not expressly
granted to Licensee hereunder shall remain with King.
(b) Licensee understands that King is not granting any rights with respect to
any music whether associated with the POPEYE characters or otherwise. In the
event that any music is included in the Products, Licensee will obtain and to
the extent required pay for all necessary music synchronization and performing
rights from the copyright owners of such music and such other person, firms or
associations, societies or corporations as may own or control the performing
rights thereto, and King shall have no obligation, financial or otherwise,
relating thereto.
2. TERM EXTENSIONS:
---------------
If Licensee is granted any option(s) to extend the Term, each such option
must be exercised by notifying King in writing at least sixty (60) days prior to
the expiration of the then-current period of the Term. As a precondition to
Licensee's effective exercise of any such option, Licensee must have fully
performed all of its obligations hereunder, and specifically must have paid all
payments then due and must have earned any Minimum Earned Royalties specified in
the Basic Provisions.
3. ROYALTY PROVISION:
-----------------
(a) Royalties shall be paid by Licensee to King on all Products sold by
Licensee, even if not invoiced or billed (such as introductory offers, samples,
promotions and the like in excess of commercially reasonable quantities to
prospective customers, and sales to affiliates, associates or subsidiaries of
Licensee), and shall be based upon Licensee's usual Gross Wholesale Price or Net
Revenues, as applicable, for such Products during the period sold.
(b) Licensee shall pay to King on execution of this Agreement, and on the
commencement of each Term Extension period, if any, a non-refundable Advance
against Royalties ("Advance") specified in the Agreement. For the Basic Term and
each Term Extension period, if any, Licensee shall also pay to King a non-
refundable, "Guaranteed Minimum Royalty" in the amount specified in the
Agreement. If, upon termination or expiration of the Term, the total Royalties
paid by Licensee to King during the period of the Term immediately preceding
expiration or termination, including the Advance, is less than the Guaranteed
Minimum Royalty for such period, Licensee shall immediately pay such difference
to King. Royalty payments made for any period of the Term (e.g., Basic Term or
----
any Term Extension period) shall be credited against the Guaranteed Minimum
Royalty for such period of the Term.
8
(c) "Gross Wholesale Price" shall mean Licensee's invoiced billing price to its
customers or distributors less (i) credits for actual returns not to exceed, in
any quarterly accounting period, CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION% of Licensee's sales of
the Products during such accounting period; (ii) returns for damaged goods; and
(iii) sales taxes included in the purchase price or paid out of receipts from
sales. "Net Revenues" shall mean gross revenues received by Licensee from sales
of the Products to hardware manufacturers to be included for sale with such
manufacturers hardware (OEM) less (i) credits for actual returns not to exceed,
in any quarterly accounting period, CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION% of Licensee's sales of
the Products during such accounting period, CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION% of Licensee's
sales of the Products during such accounting period; (ii) returns for damaged
goods; and (iii) sales taxes included in the purchase price or paid out of
receipts from sales. No other deductions shall be made in computing the Gross
Wholesale Price or Net Revenues whether for cash or other discounts,
commissions, uncollectible accounts, taxes (excluding sales taxes), fees,
assessments, impositions, payments or expenses of any kind.
4. STATEMENTS AND PAYMENTS:
-----------------------
(a) Licensee shall provide King within thirty (30) days after the end of each
calendar quarter (the "Royalty Period"), a complete and accurate statement of
its sales of Products for the Royalty Period. Said statement shall be certified
as accurate by the Licensee and include the number, description and Gross
Wholesale Price of each Product (including each separate type, style and kind of
Product) and, for Products sold on an OEM basis, the Net Revenues for the
Products sold during the Royalty Period, information as to discounts given and
returns actually credit and any other information King may from time to time
request. Statements shall be furnished to King whether or not any Products have
sold and whether or not Royalties have been earned during the Royalty Period.
Statements shall be in the form acceptable to King. The amount due King for the
Royalty Period shall be paid simultaneously with the submission of such
statements. All payments shall be in such currency as is specified in the
Agreement. If no other currency is specified in the Agreement, all payments
shall be in United States currency drawn on a United States bank. In no event
shall the amount credited for returns during any Royalty Period exceed the
Licensee's Royalty obligation for such Royalty Period or be used as a credit
against past or future Royalty obligations of the Licensee.
(b) Licensee shall send all statements and payments to King at its address
listed in the heading of this Agreement unless otherwise specified in the Basic
Provisions hereof. King reserves the right to change its designation of the
recipient of payments and statements including its designation of: (i) agent;
(ii) agent's address; or (iii) King's address by giving written notice thereof
to Licensee.
(c) The receipt or acceptance by King of any statement or payment (or its
cashing of any Royalty checks) shall not preclude King from questioning the
correctness thereof at any time and any inconsistencies or mistakes shall
immediately be rectified.
9
(d) Time is of the essence with respect to all payments to be made hereunder by
Licensee, and interest at a rate of twelve percent (12%) per year, compounded
daily, of, if less, the maximum lawful interest rate, shall accrue from the date
payment is due until the date payment is received. The preceding provision shall
also apply to any amounts found to be unpaid following an examination of
Licensee's books and records.
5. AUDIT:
-----
(a) Licensee shall keep accurate books of account and records at its principal
place of business covering all transactions relating to the License granted
herein. King and its duly authorized representatives shall have the right,
during reasonable business hours, to examine Licensee's said books of account
and records and all other documents and material relating to the subject matter
and the terms of this Agreement and to make copies and extracts thereof. If any
underpayment is greater than four percent (4%) for any Royalty Period, the
Licensee shall reimburse King for the costs and expenses of such audit.
(b) Upon request by King, but not more than once each year, Licensee shall, at
its own cost, furnish to King within thirty (30) days after such request a
detailed statement, prepared by an independent certified public accountant
acceptable to King, setting forth the number of Products manufactured from the
later of the commencement of this Agreement or the date of any previous such
statement up to and including the date of King's request therefore and also
setting forth the pricing information for all Products (including the number and
description of the Products) shipped, distributed or sold by Licensee during the
aforementioned time period.
(c) All books of account and records of Licensee covering all transactions
relating to the License shall be retained by the Licensee until at least two (2)
years after the expiration or termination of the Term for possible inspection by
King.
6. QUALITY, NOTICES, APPROVALS AND SAMPLES:
---------------------------------------
(a) The quality of the Products and all promotional, advertising and packaging
material which includes the Property or the Trademarks (the "Promotional and
Packaging Material") shall be at least as high as the best quality of similar
products and promotional, advertising and packaging material presently shipped,
distributed, sold or used by Licensee in the Territory and shall be in full
conformance with all applicable laws and regulations.
(b) Licensee may not manufacture, use, sell, advertise, promote, ship or
distribute any Product nor Promotional and Packaging Material until it has been
approved in writing by King. Such approval may be granted or withheld as King,
in its sole discretion, may determine. King's failure to approve in writing a
submission by the Licensee within CONFIDENTIAL
10
INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION (CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION) days from the date King receives such
submission shall be deemed disapproved. King agrees to act in a timely manner to
review each submission.
(c) Before commencing or authorizing third parties to commence the design or
development of Products or of Promotional and Packaging Material which have not
been previously approved in writing by King, Licensee shall submit at its own
cost to King for approval the following material in the following sequence: (i)
a description of the concept, including full information on the nature and
function of the proposed item and a general description of how the Property,
Trademarks and other material will be used thereon; (ii) complete layouts and
descriptions of the proposed Products and Promotional and Packaging Material
showing exactly how and where the Property, Trademarks and all other artwork and
wording will be used; (iii) pre-production models or prototype samples of the
proposed Products and Promotional and Packaging Material; and (iv) actual
production samples of the proposed Products and Promotional and Packaging
Material (the "Production Samples"). Licensee shall not proceed beyond any stage
where approval is required without first securing such approval. Licensee shall
use the form annexed hereto as Schedule A in connection with its submission.
Licensee's failure to adhere to the aforesaid approval requirements shall
constitute a material breach of this agreement. No such approval by King shall
act to waive, diminish or negate Licensee's indemnification to King as set forth
below.
(d) All Products and all Promotional and Packaging Materials shall contain
permanently affixed, non-removable appropriate legends, markings and notices as
required from time to time by King, to give appropriate notice to the public of
King's rights therein. Unless otherwise expressly approved in writing by King or
until such time as King advises Licensee otherwise, each usage of the Trademarks
shall be followed by either the TM or the R Trademark Notice symbol or the word
"Trademark," as appropriate, and initially the notices and legends as set forth
in section 9 of the Basic Provisions shall appear at least once on each Product
and on each piece of Promotional and Packaging Material.
(e) Additionally, the following language shall appear on screen at the
beginning of the Product software and on the Product packaging:
This program shall be used for home entertainment and educational purposes
only and not for commercial purposes, public exhibitions, transmissions or
retransmissions of any kind. All rights in any derivative works created by
the use of this program shall vest exclusively in King Features. No
program or program materials may be copied or downloaded in whole or in
part except only in the normal private use of the program.
(f) Where patent protection is either pending or has been granted for any
portion of the Property, the Licensee shall further include the appropriate
patent notice on all Products and on all pieces of Promotional and Packaging
Materials.
11
(g) (i) Licensee shall use no markings, legends or notices on or in
association with the Products or Promotional and Packaging Material other than
the above specified legend and such other markings, legends and notices as may
from time to time be specified by King without first obtaining King's prior
written approval. Licensee hereby represents and undertakes that it will not at
any time without King's prior written consent assign, sub-license, sub-contract
or otherwise deal with all or any part of the rights hereby granted or amend,
revise, develop, or vary all or any part of the Property; (ii) If Licensee shall
with or without the prior written consent of King create or acquire derivative
designs, whether amendments, revisions, developments or variations of all or any
part of the Property (hereinafter called the "Derived Further Designs") (without
prejudice to King's rights against the License in the event of the unauthorized
creation of any Derived Further Design) King or its designee shall automatically
acquire (and Licensee shall execute such assignments or other documents as King
may request) all rights of every kind, nature and description (including without
limitation the entire copyrights throughout the world and all extensions
thereof) in and to all such Derived Further Designs and the Licensee does hereby
agree and undertake:
(1) Prior to the creation or acquisition of any Derived Further Design in
accordance with section 6(g)(i) to obtain from the proposed draftsman, artist,
designer or the creator of the Derived Further Design or the person to whom in
law or in fact the rights in the Derived Further Design shall belong a written
absolute sale and assignment of all of that person's rights whether present or
future in the Derived Further Design in favor of King;
(2) The Derived Further Design shall at all times both before and after
approval by King be King's sole and exclusive property.
(h) Upon commencement of manufacture, shipment and distribution of the Products
or Promotional and Packaging Material after all required approvals have been
given by King, Licensee shall submit, at its own cost, the number of
aforementioned Production Samples of the Products and Promotional and Packaging
Material set forth in the Basic Provisions to King.
(i) King may periodically during the Term, require that Licensee submit to
King, at no cost to King, additional sets of Production Samples of the Products
and Promotional and Packaging Material as reasonably requested by King to enable
King to review continued compliance by Licensee with the requirements of this
Agreement.
(j) Licensee shall not depart from approved Production Samples in any material
respect without the prior written approval of King. Licensee shall make
submissions to King and obtain approvals in the manner required above each time
new or revised concept, layouts, descriptions, artwork, models, prototype
samples or Production Samples are created or developed.
(k) To assure that the provisions of this Agreement are being observed,
Licensee shall allow King or its designees to enter Licensee's premises and, to
the extent within Licensee's power, the premises where the Products are being
manufactured during regular business hours and upon not less than five (5) days'
notice, for the purpose of inspecting the Products and Promotional and Packaging
Material and the facilities in which the Products and Promotional and Packaging
Material are being manufactured and in which the Products are being packaged.
12
(l) If the quality standards or trademark, patent and copyright usage and
notice requirements hereinabove referred to are not met or maintained throughout
the Term then, upon receipt of written notice from King, Licensee shall
immediately discontinue all Sales or other activity or dealing with the non-
conforming Products or Promotional and packaging Material.
7. ARTWORK:
-------
(a) The form and content of all artwork for use in all media shall be submitted
to King for its prior written approval. Licensee shall also submit to King for
approval, samples of the proposed use on each Packaging Material of such
artwork, even if the artwork itself has already been approved.
(b) All artwork and designs involving the Property or Trademarks shall,
notwithstanding their invention or use by Licensee, be and remain the property
of King who shall be entitled to use and license others to use such artwork and
designs, subject to the provisions of this Agreement.
8. OWNERSHIP OF RIGHTS:
-------------------
(a) King owns or has the exclusive right to license the rights in the Property
and the Trademarks herein licensed to Licensee.
(b) As used herein, "Software" means all software tools and utilities and the
search and retrieval software, including the source and object code therefor
used in or in connection with the Products. As used herein, "Licensee's
Software" means all software originated or supplied by Licensee in connection
with the Products, to the extent that such Software is separable from, does not
incorporate any aspect or elements of, and can be used independently of, the
Property and trademarks. As used herein, "King's Software" means all software
that is inseparable from, cannot be used independently of, and incorporates any
aspect or element of, the Property and Trademarks, including but not limited to
user interfaces and screen displays. Licensee shall retain all rights, title and
interest in and to the Licensee's Software, King shall retain all rights, title
and interest in and to the Property and Trademarks, (including, without
limitation, all copyright rights) and King's Software.
Upon the expiration or termination of the Term: (i) King shall have no
right to use the Products or Licensee's Software without Licensee's prior
written consent thereto, provided that, all rights of every nature and kind of
the Property and Trademarks (including the rights and license granted Licensee
hereunder) and King's Software shall revert to King and King shall be entitled
to use and license others the use of the Property and Trademarks and King's
Software without reservation or restriction in all means, formats, media and
technologies, now known or hereafter developed; and (ii) Licensee shall have no
rights to use the Products, the Property and Trademarks or King's Software
without King's prior written consent thereto, provided that, all rights of every
nature and kind to Licensee's Software shall remain with Licensee and Licensee
shall be entitled to use and license others the use of Licensee's Software
without reservation or restriction in all means, formats, media and
technologies, now known or hereafter developed, so long as all uses of the
Property and Trademarks and King's Software are removed from and not included in
any such use.
13
(c) As between King and Licensee, all right, title and interest in the Property
and the Trademarks are reserved by King for use except for the rights
specifically licensed to Licensee hereunder.
(d) No license other than for Sale of the Products in the Territory is being
granted hereunder, and King reserves for use as it may determine all other
rights of any kind. Licensee recognizes that King may already have entered into,
and may in the future enter into, license agreements with respect to the
Property or the Trademarks for products which fall into the same general product
category as one or more of the Products and which may be similar to but not the
same as one or more of the Products in terms of use, function, or otherwise, and
Licensee hereby expressly concedes that the existence of said licenses shall not
constitute a breach of this Agreement by King.
(e) Licensee shall not use King's name, the Property or the Trademarks other
than as permitted hereunder and, in particular, shall not incorporate King's
name, the Property or the Trademarks in Licensee's corporate or business name in
any manner whatsoever. Licensee will in no way represent that it has any right,
title or interest in the Property or the Trademarks other than those expressly
licensed to Licensee hereunder. Licensee will not use or authorize the use,
either during or after the Term, of any configuration, trademark, trade name or
other designation confusingly similar to King's name, the Property or the
Trademarks.
9. GOOD WILL AND PROMOTIONAL VALUE:
-------------------------------
(a) Licensee recognizes the value of the good will associated with the Property
and the trademarks and acknowledges that the Property, Trademarks and all rights
therein and the good will pertaining thereto belong exclusively to King.
Licensee acknowledges that the Property and the Trademarks have acquired
secondary meaning in the mind of the public. Licensee will not attack the title
or any rights of King in the Property or the Trademarks or the validity of the
License being granted herein either during or after the Term.
(b) Licensee's use of the Property and the Trademarks shall insure to the
benefit of King and Licensee shall not, at any time, acquire any rights in the
Property or the Trademarks by virtue of such use.
(c) Licensee acknowledges that: (i) King is entering into this Agreement not
only in consideration of the Royalties to be paid hereunder but also for the
promotional value to be secured by King for the Property and the Trademarks as a
result of the Sale of the Products by Licensee; and (ii) its failure to
manufacture, sell, advertise or promote Products in accordance with the
provisions of this Agreement or to fulfill any of Licensee's other obligations
hereunder will result in immediate and irreparable injury to King, and King will
have no adequate remedy at law. Therefore, King, in addition to all other
remedies it may have, shall be entitled to injunctive relief against any such
breach.
14
10. TRADEMARK, PATENT AND COPYRIGHT PROTECTION:
------------------------------------------
(a) The License granted hereunder is conditioned upon Licensee's compliance
with the applicable provisions of the trademark, patent and copyright laws of
the United States and each foreign country in the Territory. Licensee shall keep
records of and advise King when each of the Products is first sold in each
country in the Territory.
(b) Licensee shall cooperate with King in protecting and defending the Property
and Trademarks including the execution of any documents as requested by King. If
any claim or problem arises with respect to the protection of the Property or
the Trademarks in the Territory, Licensee shall promptly advise King in writing
of the nature and extent of same. King shall have the right but not the
obligation to take any action whatsoever, with counsel of its own choice, if any
claim or problem arises with respect to the protection of the Property or the
Trademarks.
(c) Licensee shall not at any time apply for copyright, trademark or patent
protection nor file any document with any governmental authority nor take any
other action which could affect King's rights int he Property or the Trademarks.
11. INFRINGEMENTS:
-------------
(a) Licensee shall assist King in the enforcement of any rights of King in the
Property of the Trademarks. King 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 King in writing of any infringements or imitations by
third parties of the Property, the Trademarks, the Products or the Promotional
and Packaging Material which may come to the Licensee's attention. King shall
have sole right to determine whether or not any action shall be taken on account
of any such infringement or imitation. Licensee shall not contact the third
party, nor make any demands or claims, nor institute any suit nor take any other
action on account of such infringements or imitations without first obtaining
the prior written permission of King. All costs and expenses, including
attorneys' fees, incurred in connection with any suit instituted by Licensee
without the consent of King shall be borne solely by Licensee.
(b) With respect to all claims and suits, including suits in which Licensee is
joined as a party, King shall have the sole right to employ counsel of its
choice and to control the litigation and any settlement thereof. King shall be
entitled to receive and retain all amounts awarded as damages, profits or
otherwise in connection with such suits.
12. INDEMNIFICATION:
---------------
(a) King shall defend, indemnify and hold Licensee harmless against any claims,
liabilities, judgments, losses, costs and expenses, including reasonable
attorneys' fees, arising solely out of third party assertion of rights in the
Property or Trademarks based solely on the use of the Property or the Trademarks
by the Licensee as authorized in this Agreement, provided that Licensee shall
notify King of any such claim, demand, cause of action or judgment within ten
(10) days after Licensee acquires knowledge hereof, and further provided that
King shall have
15
the right to undertake and conduct the defense of any cause of action so brought
and handle any such claim or demand. In no event shall King have any liability
for loss of profits or consequential damages.
(b) Licensee shall defend, indemnify and hold King and its parent, subsidiary,
related companies and agents harmless against any and all claims (including,
without limitation, claims based upon negligence and strict liability),
liabilities, judgments, losses, costs and expenses, including, without
limitation, reasonable attorneys' fees, arising out of the breach or claimed
breach by Licensee of any of the provision hereof or out of Licensee's design,
manufacture, distribution, shipment, advertising, promotion or sale of the
Products or the Promotional and Packaging Material. King shall have the right to
defend any such action or proceeding with attorneys of its own selection.
13. INSURANCE:
---------
Licensee shall, throughout the Term obtain and maintain at its own cost
from a qualified insurance company licensed to do business in the State of New
York, separate policies for (i) standard Product Liability Insurance; and (ii)
Advertisers' Liability Insurance, the form of which must be acceptable to King,
naming King as an additional named insured. The Product Liability Insurance
policy shall provide protection against all claims, demands and causes of action
arising out of any defects or failure to perform, alleged or otherwise, of
theProducts or any material used in connection therewith or any use thereof. The
amount of coverage under each policy shall be a minimum of One Million Dollars
($1,000,000) combined single limit, with no deductible amount, for each single
occurrence for bodily injury and/or for property damage. Each policy shall
provide for ten (10) days notice to King from the insurer by Registered or
Certified Mail, return receipt requested of any modification, cancellation or
termination. Licensee shall furnish to King a certificate of insurance
evidencing same within thirty (30) days after execution of this Agreement and,
in no event, shall the Licensee manufacture, offer for sale, sell, advertise,
promote, ship or distribute the Products prior to receipt by King of such
evidence of insurance.
14. EXPLOITATION BY LICENSEE:
------------------------
(a) Licensee shall commence the Sale of the Products in commercially reasonable
quantities in each of the countries within the Territory by the Marketing Date
set forth in the Agreement.
(b) During the entire Term, Licensee will use its commercially reasonable
efforts diligently and continuously to distribute, ship, sell, promote and meet
the demand for all of the Products in the Territory.
(c) Products will be sold, shipped and distributed outright, at a competitive
price that does not exceed the price generally and customarily charged the
particular purchaser by the Licensee. Licensee will not discriminate against the
Products by granting commissions/discounts to salesmen, dealers or distributors
in favor of Licensee's other products. Products will only be
16
sold to (i) retail stores and merchants for sale, shipment and distribution
direct to the public; (ii) distributors; and (iii) to hardware manufacturers to
be included for sale with such manufacturers hardware (OEM).
(d) Licensee shall sell to King, if it so requests, additional quantities of
each Product at CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION percent (CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION%) of Licensee's
customary Gross Wholesale Price.
15. PREMIUMS, PROMOTIONS AND SECONDS:
--------------------------------
(a) King reserves the sole and exclusive right to utilize or license third
parties to utilize any Product in connection with any premium, giveaway, mail
order, in theatre sales, promotional arrangement or fan club (collectively
referred to as "Promotional Products"), which retained right may be exercised by
King concurrently with the rights licensed to the Licensee hereunder.
(b) Licensee shall not sell, ship, advertise, promote, distribute or use for
any purpose whatsoever (or permit anyone else to do so) any Products or
Promotional and Packaging Material which are damaged, defective, seconds or
otherwise fail to meet the specifications or quality standards or trademark,
patent and copyright usage and notice requirements of this Agreement.
16. ASSIGNABILITY AND SUBLICENSING:
------------------------------
(a) The License granted hereunder is and shall be personal to Licensee and
shall not be assigned by any act of Licensee or by operation of law. Licensee
shall have no right to grant any sublicenses without King's prior written
approval. Any attempt by Licensee to sublicense or assign to third parties its
rights under this Agreement shall be null and void and shall constitute a
material breach of this Agreement.
(b) King shall have the right to assign its rights and obligations under this
Agreement without Licensee's approval.
(c) Licensee may have the Products manufactured by a third party on condition
that Licensee: (i) obtains King's prior approval of the identity of such third
party manufacturer; (ii) provides King with a list of the names and addresses of
any third party manufacturer; (iii) enters into a written agreement with such
manufacturer (a copy of which shall be made available to King) in substantially
the form annexed hereto as Exhibit C; and (iv) Licensee shall indemnify King
against any loss or damage arising as a result of any breach by any third party
manufacturer of its obligations under the Agreement or otherwise arising out of
acts or omissions by any third party manufacturer, in derogation of King's
rights in and to the Properties and Trademarks.
17
17. TERMINATION:
-----------
In addition to any other rights King may have hereunder, at law or in
equity:
(a) King shall have the right to terminate this entire Agreement by giving
written notice to Licensee, if Licensee: (i) manufactures, sells, advertises,
promotes, ships, distributes or uses in any way any Product or Promotional and
Packaging Material without having the prior written approval of King as provided
for hereunder or after receipt of notice from King disapproving or withdrawing
approval of same; (ii) or any of its controlling shareholders, officers,
directors or employees take any action in connection with the manufacture, sale,
advertising, promotion, shipment or distribution of the Products or the
Promotional and Packaging Material which damages or reflects adversely upon
King, the Property or the Trademarks; (iii) breaches any of the provisions of
this Agreement relating to the unauthorized assertion of rights in the Property
or the Trademarks; (iv) fails to make timely payment of Royalties or any other
payments to King when due; (v) breaches any of the provisions of this Agreement
prohibiting Licensee from assigning, transferring, sublicensing or otherwise
encumbering this Agreement or any of its rights or obligations thereunder; (vi)
fails to obtain or maintain product liability and advertising insurance as
required by the provisions of this Agreement; (vii) or files a petition in
bankruptcy, or a petition is filed against Licensee which is not dismissed
within 30 days, or is adjudicated a bankrupt or insolvent, or makes an
assignment for the benefit of creditors, or an arrangement pursuant to any
bankruptcy law, or if Licensee discontinues its business, or if a receiver is
appointed for the Licensee or for the Licensee's business and such receiver is
not discharged within thirty (30) days.
(b) King shall have the right to terminate upon written notice thereof to
Licensee the portion(s) of this Agreement relating to any Product(s) in which
the Licensee, for any reason, fails to commence sale, shipment and distribution
of any such Product(s) by the Marketing Date in accordance herewith, or if
Licensee, for any reason, after commencement, fails to continue to sell, ship
and distribute such Products in commercially acceptable quantities in such
country or countries for two consecutive Royalty Periods.
(c) King shall have the right to terminate this Agreement upon thirty (30) days
written notice to Licensee in the following events, provided that during the
thirty (30) day period, Licensee fails to cure the breach: (i) if Licensee shall
breach or violate any of its obligations under this Agreement other than those
covered in (a) or (b) above; or (ii) if Licensee becomes subject to any
voluntary or involuntary order of any governmental agency
18
involving the recall of any of the Products and/or Promotional and Packaging
Material because of safety, health or other hazards of risks to the public.
18. POST-TERMINATION AND EXPIRATION RIGHTS AND OBLIGATIONS:
------------------------------------------------------
After expiration or termination of the Term:
(a) Licensee shall have no right to manufacture, offer, sell, ship, advertise,
promote and distribute, use or deal with in any way Products or Promotional and
Packaging Material except as provided in subsection (c) below.
(b) If the Term is terminated prior to its normal expiration date,
notwithstanding anything to the contrary herein, all unpaid Royalties and any
Advance or Guaranteed Minimum Royalty which would be payable if the Term had
continued shall nevertheless be payable in full upon the termination of the
Term.
(c) Except upon expiration or termination of the Term pursuant to section 17
above, Licensee may dispose of all Products which are on hand or in the process
of manufacture at the time notice of termination is received or upon the
expiration of the then in effect Term for a period of sixty (60) days after
notice of termination or such expiration, as the case may be, provided that the
Advances and Royalties with respect to that period are paid and the appropriate
statements are furnished for that period. During such sixty (60) day period,
King may itself use or license the use of the Property and/or the Trademarks in
any manner at any time anywhere in the world as King sees fit.
(d) All rights granted to Licensee shall forthwith revert to King which shall
be free to license others to use the Property and the Trademarks in any manner.
At King's election and in its sole discretion, Licensee shall either (i) turn
over to King all molds and other materials which reproduce the Products or
Promotional and related Packaging Material or (ii) cause the molds and such
other materials to be destroyed and provide King with satisfactory evidence of
their destruction. Licensee shall be responsible to King for any damages caused
by the unauthorized use by the Licensee or by others of such molds or
reproduction materials which are not so turned over to King or destroyed.
(e) Licensee acknowledges that its failure to cease the manufacture, offering
for sale, sale, advertising, promotion, shipment, distribution or use of the
Products or the Promotional and Packaging Material at the termination or
expiration of the Term will result in immediate and
19
irreparable damage to King and to the rights of any subsequent Licensee of King.
Licensee acknowledges that there is no adequate remedy at law for failure to
cease such activities and, in the event of such failure, King shall be entitled
to injunctive or other equitable relief in addition to all other remedies King
may have.
19. FINAL INVENTORY UPON TERMINATION OR EXPIRATION:
----------------------------------------------
Within thirty (30) days after the end of the Term, Licensee shall deliver
to King a statement indicating the number and description of the Products on
hand or in the process of manufacturing at the end of the Term. King shall have
the option of conducting a physical inventory at any time after the end of the
Term in order to ascertain or verify such statement. If Licensee refuses to
permit King to conduct such physical inventory, then, without limiting any of
King's other remedies, Licensee shall forfeit its rights hereunder to dispose of
such inventory.
20. NOTICES:
-------
All notices or other communications to either party shall be in writing and
sent by mail, telex, cable or personal delivery to such party's address listed
in the heading of this Agreement.
Either party may change its address by notice in writing to the other.
21. RELATIONSHIP OF THE PARTIES:
---------------------------
This Agreement does not create a partnership or joint venture between the
parties and Licensee shall have no power to obligate or bind King in any manner
whatsoever.
22. APPLICABLE LAW AND DISPUTES:
---------------------------
This Agreement shall be governed by the laws of the State of New York
applicable to agreements fully executed and performed therein. Any claims
arising hereunder or relating hereto shall be prosecuted only in the appropriate
court of the State of New York or in the United States District Court for the
Southern District of New York and neither party shall make any claim or demand
in any other jurisdiction forum. The parties consent to the personal
jurisdiction of such courts and to the service of process by mail.
23. CAPTIONS:
--------
Section captions are inserted only for convenience. Such captions shall
not be given any substantive or legal effect.
24. WAIVER:
------
(a) No waiver by either party of a breach of a default hereunder shall be
deemed a waiver of any other breach or default.
20
(b) All of King's rights and remedies hereunder or at law or in equity shall be
cumulative and result to one shall not be construed as a waiver of any other.
25. SURVIVAL OF RIGHTS:
------------------
Notwithstanding anything to the contrary herein, any obligations which
remain executory after expiration of the Term of this Agreement shall remain in
full force and effect until discharged by performance and such rights as pertain
thereto shall remain in full force until their expiration.
26. SEVERABILITY:
------------
If any provision of this Agreement shall for any reason be held invalid,
illegal or unenforceable same shall not affect the validity of this Agreement or
any other provision hereof and this Agreement shall be interpreted and construed
as if such provision, to the extent invalid, illegal or unenforceable, had not
been contained herein.
27. INTEGRATION:
-----------
This Agreement: (i) represents the parties' entire understanding and
supersedes all previous representations, understandings or agreements, oral or
written, between them with respect to the subject matter hereof; and (ii) cannot
be modified except by a written instrument signed by the parties hereto.
21
