Certain portions of this agreement have been omitted pursuant to a request for
confidential treatment and are replaced herein by ***. The omitted material has
been filed separately with the Securities and Exchange Commission.
MARVEL
DEAL CONCEPTS
I. PROJECT DESCRIPTION
MCA is developing a complete destination resort on approximately 800 acres
owned by it and a partner in Orlando, Florida, on which Universal Studios
Florida is located and attracted approximately 7 million visitors in 1992.
When completed, as presently planned the resort will consist of the
existing theme park and HARD ROCK CAFE, plus a second gated theme park
("THE SECOND GATE"), four highly themed hotels totalling 4,000 rooms, a
themed entertainment and shopping complex, as well as a golf course, tennis
club and spa. It is contemplated that the total cost of building out these
facilities over the next decade will be approximately $3 billion. The total
complex is hereafter referred to as "Universal City Florida".
THE SECOND GATE will be similar in size, quality and originality to
Universal Studios Florida and is expected to generate even greater
attendance, stay time and visitor expenditures given the unique appeal of
the park and the synergies which will arise from the total destination
resort
concept. A theme park with anticipated initial attendance of five million
visitors per year which is essentially comparable in size, quality and per
capita expenditure to the present Universal Studios Florida is hereafter
referred to as a "Universal Theme Park". As with Universal Studios Florida,
Xxxxxx Xxxxxxxxx will play a major role as creative consultant in the
development of THE SECOND GATE at the Universal Theme Park (Orlando).
A. DEVELOPMENT OF THE MARVEL UNIVERSE
As part of THE SECOND GATE, within a separate environment designated
under the banner of THE MARVEL UNIVERSE (or similar designation
approved by Marvel) MCA will construct a complex of attractions,
stores and food venues heavily themed around the Marvel properties.
Marvel hereby grants MCA a license to use Marvel's characters for the
purposes, on the terms and to the extent set forth herein.
In developing and implementing THE MARVEL UNIVERSE, MCA will follow
and be consistent with The Official Handbook of The Marvel Universe,
Marvel's Style Guide and such other descriptive design/style materials
as may be provided by Marvel. This Marvel-themed complex would be
designed in coordination with Marvel, and all major elements and
themes would be subject to Marvel's reasonable approval. As set forth
in Section IV(A)(1)
2
any use of non-Marvel characters within THE MARVEL UNIVERSE (whether
or not as a major element) will be subject to Marvel's approval. The
completed cost of this Marvel-oriented complex (design and
construction, including reasonably allocated infrastructure) would be
approximately $***.
B. MARKETING OF THE MARVEL UNIVERSE
In marketing THE SECOND GATE, MCA will see to it that Marvel is a
significant focus of its marketing efforts, and that Marvel elements
are included in at least $100 million of fair value of advertising,
publicity, brochures, joint promotions, or other marketing exposure
relating to THE SECOND GATE (which may include other elements of
Universal City Florida) during the initial two years of operation
(plus the pre-opening period). During the subsequent five year period,
Marvel elements will be included in at least 20% of the value of the
marketing exposure of the Universal Theme Park (Orlando) and
thereafter in at least $*** per year relating to THE SECOND GATE at
the Universal Theme Park (Orlando) (which may include other elements
of Universal City Florida).
Marvel shall have a reasonable right of advance approval relating to
the use of its trademarks in connection with any such advertising,
publicity, brochures, promotions or
3
other marketing efforts by MCA. Once particular artwork has been
approved by Marvel, MCA may continue to use such artwork unless
notified to the contrary by Marvel.
Permitted marketing efforts shall include joint promotions and
corporate sponsorships, so long as it is clear that what is being
marketed is THE SECOND GATE or THE MARVEL UNIVERSE, or specific
elements of THE MARVEL UNIVERSE, as opposed to the Marvel name or
characters themselves apart from the theme park, and in no event will
the Marvel elements, in the aggregate, be more than ***% of an overall
MCA third party promotion.
Any Corporate Sponsorship shall require Marvel's approval, as will any
joint promotion in which MCA receives cash or other consideration
(including items of value) other than free media inclusion. As to MCA
joint promotions in which MCA does not receive cash or other
consideration, Marvel shall have the right to notify MCA from time to
time of significant promotional arrangements it has made or are in
serious negotiations with third parties which might conflict with
unannounced MCA joint promotions. Thereafter any MCA proposed joint
promotion (in which MCA receives no consideration) involving a
competing product or entity in the territory covered by a Marvel
promotion contained in such notice(s) shall require Marvel's approval.
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II. PROCEEDING TO COMPLETION OF THE MARVEL UNIVERSE
A. Upon execution of this agreement, MCA will pay Marvel $*** in
consideration of entering into this exclusive relationship.
Concurrently, MCA will commence designing THE MARVEL UNIVERSE, and
will work diligently (including meeting the requirements set forth in
subsection II(B) below) to complete its design and construction as
part of its overall plans for the initial opening content of THE
SECOND GATE. At the end of each year prior to the opening of any THE
MARVEL UNIVERSE the President of MCA shall deliver a letter to Marvel
affirming the intention of MCA to complete construction and open THE
MARVEL UNIVERSE by the required deadline stated herein, and informing
Marvel in general terms of the progress to date, including a statement
of the expenditures in such year discussed in the next paragraph.
To further this goal, MCA will expend at least $***/year on a
cumulative basis (allowing carry forward) on design and construction
of THE MARVEL UNIVERSE over the next three years.
5
MCA's rights under this agreement will terminate if THE MARVEL
UNIVERSE does not open within six months of the opening of THE SECOND
GATE (with further extensions of up to one year for clear-cut force
majeure events such as major fires or other destructive events), with
an outside date for opening THE MARVEL UNIVERSE of 2001 (with similar
extensions of up to one year for clear-cut force majeure events). In
no event shall MCA have any rights under this Agreement if both the
Second Gate and The Marvel Universe at Universal City Florida have not
opened by December 31, 2002.
B. Further, MCA's right to proceed to open THE MARVEL UNIVERSE at THE
SECOND GATE shall lapse under the following circumstances:
1. MCA shall fail to accomplish any of the following benchmarks:
(a) Securing all significant governmental approvals to utilize
the site of THE SECOND GATE by December 31, 1998.
(b) Commence construction of THE SECOND GATE by December 31,
1999.
6
(c) Commence construction of THE MARVEL UNIVERSE by December 31,
2000.
2. In the event THE MARVEL UNIVERSE as part of THE SECOND GATE has
not opened by December 31, 1998 and MCA shall fail to pay to
Marvel an additional option fee in the amount of $*** on each
subsequent January 1st that THE MARVEL UNIVERSE is not open to
the public.
III. TERM
Once THE MARVEL UNIVERSE opens within the above time period, the term of
this agreement shall continue for so long as a THE MARVEL UNIVERSE shall
remain open (and operated consistent with the standards of the next
paragraph below) at any Universal Theme Park (allowing for temporary
closures for force majeure events or refurbishment/maintenance provided
they are being diligently pursued), except for termination for material
breach (with written notice and a reasonable opportunity to cure).
Each THE MARVEL UNIVERSE shall be operated and maintained in a first class
manner consistent with the highest standards of the theme park industry and
shall be deemed "open" only when operated in such manner (subject to
temporary closures for force majeure events as described in the prior
paragraph).
7
At such time as any THE MARVEL UNIVERSE is no longer open at a particular
Universal Theme Park, all exclusivity and marketing rights acquired by MCA
as a result of the opening of such THE MARVEL UNIVERSE at such Universal
Theme Park, as set forth in Section IV below, shall terminate and this
Agreement shall thereafter be construed as if the notice of intent to open
THE MARVEL UNIVERSE had not been given by MCA.
IV. EXCLUSIVITY
A. Exclusivity of Marvel Characters Within THE MARVEL UNIVERSE:
1. Within THE SECOND GATE, the Marvel Characters will be primarily
utilized as part of THE MARVEL UNIVERSE, although they may also
be used throughout THE SECOND GATE as strollers or featured
elements in stores, restaurants, and the like (subject to
Marvel's reasonable approval). Within THE MARVEL UNIVERSE, the
use of any non-Marvel characters will be subject to Marvel's
approval.
B. Other Theme Parks
1. MCA (or an MCA "Corporately Related Company" (defined below)),
shall have an option to utilize the Marvel characters in THE
SECOND GATE of the
8
Universal Theme Park (Orlando) and an exclusive world-wide option
to utilize the Marvel characters in additional THE MARVEL
UNIVERSES in any other Universal Theme Parks, which initial
option must be exercised during the two year period beginning on
the date of the opening of THE MARVEL UNIVERSE in the Universal
Theme Park (Orlando). The present inventory of the Marvel
characters is set forth in the schedule to be attached or
provided by Marvel promptly after execution hereof, plus any
characters developed or acquired or licensed in the future by
Marvel which (x) are marketed under the Marvel "Banner" or (y)
were previously marketed under the Marvel "Banner" during the
term hereof and are subsequently marketed under the "Banner" of a
Marvel Related Company (defined below). Any characters which are
licensed to Marvel by third parties subject to terms which
require Marvel to pay a license fee based on revenues or which do
not permit sublicensing may be excluded, at Marvel's option, in
the foregoing grant.
a. After such 2 year period, MCA's exclusive rights will be
subject to "shrinkage" or "expansion" as follows:
9
1. If no action is taken by MCA, such exclusivity shall be
limited as follows:
i. East of The Mississippi - any other theme park is
limited to using characters not currently being
used by MCA at the time such other license is
granted. [For purpose of this subsection and
subsection iv, a character is "being used by MCA"
if (x) it or another character of the same
"family" (e.g., any member of THE FANTASTIC FOUR,
THE AVENGERS or villains associated with a hero
being used) is more than an incidental element of
an attraction, is presented as a costumed
character, or is more than an incidental element
of the theming of a retail store or food facility;
and, (y) in addition, if such character or another
character from the same "family" is an element in
any MCA marketing during the previous year. Any
character who is only used as a costume character
will not be considered to be "being
10
used by MCA" unless it appears as more than an
incidental element in MCA's marketing.]
ii. West of The Mississippi - any other theme park may
use any Marvel characters whether or not used by
MCA.
iii. East or West of The Mississippi - permitted uses
shall be limited to the use of specific Marvel
characters and Marvel may not permit a licensee to
use the name "Marvel" as part of the attraction
name or marketing.
iv. East or West of The Mississippi - The foregoing
permitted uses will be subject to the following
marketing restrictions:
(a) If the particular character is used by MCA
(as defined above), such character will not
be advertised or promoted East of The
Mississippi, except by means of national
Network buys
11
of television, within printed materials such
as brochures, or by print advertisements in
periodicals directed to readers more than 300
miles from Orlando; and with regard to any of
the foregoing permitted marketing, if the
marketing is for a group of theme parks
located both East and West of The
Mississippi, the marketing shall make
abundantly clear that the character only
appears in the parks West of The Mississippi
and shall not be subject to confusion on such
point (such as would occur by visual
inclusion of the character in a generic,
multipark advertisement subject to a small
print explanation of the parks where the
character is present).
(b) If the particular character is not used by
MCA, such character will not be advertised or
12
promoted by means of (x) spot television
buys, billboards, personal appearances, or
print advertisements which are (y) viewed,
located or primarily directed to persons
within 300 miles of Orlando. In other words,
regional (i.e. covering a multi-state
geographic region) or national television or
print media buys, or brochures would not be
prohibited within such 300 mile radius.
2. Within 2 years after opening of THE MARVEL UNIVERSE in
Orlando, MCA may retain its worldwide exclusivity for
up to 5 additional years by designating another
location where it intends to develop THE MARVEL
UNIVERSE as part of a theme park, and by paying an
option fee of $*** per year. Provided such second theme
park opens within such 5 year period, MCA shall
maintain worldwide exclusivity for an additional two
year period after such opening, and thereafter
13
its rights will be subject to the "shrinkage" or
"expansion" concept described above (in the manner
described below).
As used throughout this agreement, any subsequent THE
MARVEL UNIVERSE must cost at least $*** (calculated in
the manner described previously), must appear in a
Universal Theme Park, and Marvel's representation
therein will be of at least comparable proportion and
like quality to its representation (including as to the
retail exposure and promotional efforts of MCA) within
THE SECOND GATE at Universal City Florida.
i. With regard to the second and subsequent Universal
Theme Parks in the areas specified below, MCA's
exclusivity shall be as follows:
a. Second U.S. Park - all of U.S.
b. Any of Japan, Hong Kong, the Philippines,
Singapore, Malaysia, Indonesia, Mainland
14
China, Taiwan, North or South Korea, Vietnam,
or Thailand, exclusivity will apply to all
others.
c. Europe Park - all Europe, including Turkey,
but excluding any areas that were part of the
former USSR.
ii. With regard to subsequent Universal Theme Parks in
areas other than as described in (i) above, the
parties will in good faith agree upon comparable
geographic provisions to the "East of the
Mississippi" provisions applicable to the Orlando
Universal Theme Park. Thereafter, the above
"shrinkage" or "expansion" provisions shall
continue to apply to all such future Universal
Theme Parks described in this subsection (ii). If
after opening any subsequent Universal Theme Park
MCA does not institute the option payments within
2 years, continue the option payments, and open
such
15
newly designated subsequent Universal Theme Park
within 5 years thereafter, its rights shall be
permanently "shrunk", and it will have no further
right to build any new THE MARVEL UNIVERSE.
3. Any THE MARVEL UNIVERSE constructed hereunder after THE
MARVEL UNIVERSE (Orlando) shall be subject to the
payment and other relevant terms of this agreement
applicable to THE MARVEL UNIVERSE (Orlando), except as
to CPI increases as set forth herein.
4. To the extent and in the territories that MCA has
exclusive theme park rights, such shall not prohibit
(except for the limitations described below) Marvel
from itself developing or licensing its planned Retail
concept which may include interactive elements as a
major or minor element (presently intended to be called
"The Marvel Action Universe" and referred to as such
herein, but which may also be called "The Marvel
Universe" or another name chosen by Marvel). The Marvel
Action Universe will consist, inter alia, of the sale
of comic books, trading cards, software, licensed or
Marvel produced merchandise, the use of electronic
games and/or pinballs or other coin operated games, and
may include one or more virtual reality and/or
simulator ride using
16
Marvel characters or other themes. The following
restrictions shall apply to The Marvel Action Universe
(or elements thereof whether owned or licensed by
Marvel).
a. Restrictions as to the geographic location of The
Marvel Action Universe in areas where MCA has
exclusive rights hereunder.
i. The Marvel Action Universe will not be
within 60 miles of any Universal Theme
Park with a THE MARVEL UNIVERSE
ii. Mini-theme parks, recreation centers,
game centers and the like designated
with the Marvel name or the name of any
Marvel characters or any major
entertainment component of a Marvel
Action Universe such as a motion based
film ride shall not be within 60 miles
of any Universal Theme Park with a THE
MARVEL UNIVERSE.
iii. Within the ADI market of the city
containing a Universal Theme Park (even
to the extent such ADI exceeds a 60 mile
radius) there shall not be a Marvel
themed simulator ride.
17
b. Restrictions as to elements of The Marvel Action
Universe in areas where MCA has exclusive rights
hereunder.
i. Within 300 miles of any Universal Theme
Park with a THE MARVEL UNIVERSE, no The
Marvel Action Universe shall contain
more than one simulator, nor shall such
simulator hold more than 20 people.
Motion based or virtual reality
attractions which are coin operated and
hold no more than 4 people shall not be
deemed a "simulator" subject to the
above restriction. Any such rides which
are interconnected so as to create a
simultaneous experience among multiple
units exceeding an aggregate of 4 people
shall be deemed simulator rides and the
number of people in such interconnected
rides shall be counted toward the 20
person limit above.
c. Restrictions as to affiliations or marketing of
The Marvel Action Universe or elements thereof, in
areas where MCA has exclusive rights hereunder.
i. The Marvel Action Universe will not be
within any theme park, nor marketed in
conjunction with any theme park. For
purposes of these
18
restrictions, an area of 10 acres or
less will not be deemed a theme park. An
area in excess of 10 acres may or may
not be deemed a theme park based on its
overall characteristics.
ii. No The Marvel Action Universe will be
marketed so as to infer or imply that
such THE MARVEL ACTION UNIVERSE or one
of its components (x) constitutes a
theme park or (y) is a component of a
theme park.
iii. No The Marvel Action Universe shall be
in or marketed in conjunction with any
themed entertainment areas owned,
operated or marketed by Disney,
Time-Warner, Six Flags, Sony, Paramount
or Xxxxx. As used herein, "theme park"
and "themed entertainment areas" shall
not include, inter alia, facilities or
complexes where at least 70% of the
revenues generated on the premises are
derived from retail sales or whose
primary source of revenue is lodging
(which may include food, beverage and
gaming revenues).
d. Pre-Existing Conditions in areas where MCA has
exclusive rights hereunder.
19
The restrictions set forth in subparagraphs a and
b above shall not apply to any The Marvel Action
Universe or elements thereof which already
"Exists" on the "Trigger Date" (both defined
below) and would be thereafter impacted by
subparagraphs a and b above due to the creation of
a new THE MARVEL UNIVERSE in a Universal Theme
Park. However, no such Marvel Action Universe
shall be materially enhanced in relation to any
otherwise prohibited element (except as to matters
of governmental compliance and general
refurbishment and updating) after the opening of
such new THE MARVEL UNIVERSE in a Universal Theme
Park. For purposes of this subsection the
following definitions shall apply:
(x) A Marvel Action Universe (or
otherwise prohibited element) shall
be deemed to "Exist" if it is (a)
open for business or (b) a lease
has been executed or a contract for
purchase of land has been executed
(in either case for a site for a
The Marvel Action Universe) and
Marvel is diligently proceeding to
develop and open such The Marvel
Action Universe.
20
(y) The "Trigger Date" for any THE
MARVEL UNIVERSE is the date hereof
as to Orlando
21
and,as to any subsequent THE MARVEL
UNIVERSE in a Universal Theme Park,
the later of the date on which (i)
THE MARVEL UNIVERSE at the
Universal Theme Park (Orlando)
opens for business or (ii) MCA has
announced development and paid the
$*** (as adjusted by CPI) option
fee relating to such new THE MARVEL
UNIVERSE as set forth in Section
IV(B)(1)(a)(2).
If Marvel is actively operating and/or developing
The Marvel Action Universes in the 60 mile radius
or ADI of any such newly announced THE MARVEL
UNIVERSE at a Universal Theme Park, at the time of
such announcement by MCA, Marvel may request MCA
to consider, in good faith, modifying those terms
of this subsection which limit Marvel's
enhancement and/or development of The Marvel
Action Universes in such 60 mile area or ADI,
although MCA shall be under no obligation to
change the restrictions herein.
V. OTHER ASPECTS OF RELATIONSHIP
As to each THE MARVEL UNIVERSE at a Universal Theme Park (subject to CPI
adjustments as set forth herein), the following shall apply:
22
A. Annual Fee
Upon the opening of THE SECOND GATE, and on an annual basis
thereafter, MCA will pay a fee of $***.
B. Merchandise Opportunities/Specialty Stores
Throughout THE SECOND GATE, stores will carry a wide range of Marvel
produced or licensed products and artwork, Marvel comic books, Fleer
trading cards (or cards of such other licensee as may be designated by
Marvel), and toys (primarily action figures) manufactured by Toy Biz,
Inc. (or such other Marvel licensee as may be designated by Marvel).
Additionally, within or adjacent to THE MARVEL UNIVERSE there would be
significant retail space dedicated to Marvel publications, software,
products, and cards produced or licensed by Marvel. It is anticipated
that this exposure to a highly motivated public who have experienced
THE MARVEL UNIVERSE, combined with the underlying popularity of the
Marvel properties, will result in a level of sale of Marvel
manufactured and licensed products, such as would make THE SECOND GATE
an extremely lucrative outlet for its properties.
Within THE SECOND GATE, a minimum of 10,000 square feet of retail
space will be devoted to items licensed or manufactured by Marvel or
its related companies
23
including a minimum of 5,000 square feet of retail space in stores
themed around MARVEL properties and devoted virtually exclusively
(allowing for minor exceptions such as film, etc., but not competing
characters) to the sale of MARVEL items.
MCA will give serious consideration to placing such Marvel-oriented
stores at or adjacent to the exit of the major attractions within THE
MARVEL UNIVERSE, consistent with its reasonable judgment as to traffic
flow, planning considerations and customer acceptance.
The various Marvel properties and merchandise will also be used
throughout the destination resort including within the hotels (if
operated by MCA or an MCA Corporately Related Company; or if operated
by a third party MCA will encourage such use), and Marvel theming and
merchandise will be featured in any airport stores operated by MCA in
Los Angeles or Orlando. Uses of Marvel theming in MCA operated stores
other than within the resort property or within the aforesaid MCA
operated airport stores will require specific Marvel approval.
The merchandise within such retail facilities will either be (i)
purchased from Marvel's licensees; (ii) purchased directly from Marvel
or its designated distributors; or
24
(iii) manufactured by or to MCA's specifications as a direct licensee
of Marvel.
a. Sale of food or beverage, at non-premium prices, from Marvel
themed facilities will not be subject to royalties, unless
the items sold carry Marvel logos or proprietary elements.
In the event such item(s) carry Marvel logos or proprietary
elements, Marvel shall receive a license fee of *** percent
on the wholesale price of such item (i.e. combined food and
packaging).
b. Food or beverage items sold at a premium price, either from
Marvel themed facilities or which carry Marvel logos or
proprietary elements, shall bear a licensee fee to Marvel
equal to the greater of (x) *** percent on the wholesale
price or (y) *** percent of the retail price of such item
(i.e. combined food and packaging).
C. Merchandise Royalty Guarantee
MCA will pay an annual guaranteed merchandise advance of $*** which
will be applied against merchandise royalties from any of its retail
outlets calculated at a
25
rate of ***% of wholesale cost. After the annual guaranteed advance is
fully earned, the royalty on additional sales will decrease to ***%
and will be paid quarterly. Such royalty will be applied to the
wholesale cost of merchandise manufactured for and purchased by MCA as
a direct licensee of Marvel, and to the cost of items purchased from
Marvel's licensees. (While Marvel will not require its licensees to
sell items to MCA without a royalty built into the price, Marvel will
not in any way prohibit or restrict MCA from being a direct licensee
of Marvel or a Marvel Related Company for the purpose of producing
products to be sold by MCA at Universal Theme Parks, surrounding
complexes and certain airport stores as provided herein, including by
means of exclusive licenses granted to parties other than Marvel
Related Companies). In the event Marvel is unable to give MCA a direct
license because of a conflicting license, MCA shall receive a credit
for the license fees payable to Marvel by MCA hereunder, and Marvel
agrees that the royalty rate paid by its Licensee in connection with
each item as to which Marvel cannot grant a license to MCA will be set
consistent with Marvel's normal business practices.
1. Marvel will have reasonable audit and review rights to assure
that proper payments are made and that the cost attributed to
merchandise manufactured for
26
MCA's order is being fairly stated and, inter alia, is not being
"adjusted" so as to reduce the royalties due Marvel in favor of
other merchandise not covered by this agreement.
2. The parties will develop reasonable audit rights and procedures
which will be consistent with industry standards. MCA will
reimburse Marvel for the reasonable cost of any audit resulting
in Marvel being due additional sums exceeding ***% of the sums
paid by MCA.
3. Marvel will have reasonable approval of all licensed merchandise,
artwork, merchandise packaging, logos, and the like utilizing the
Marvel properties, which approval will be granted or withheld in
a timely and reasonable manner and will not be used in a way
which would frustrate the intent of this Agreement.
4. Where items of merchandise feature both the Marvel properties and
other characters or elements proprietary to third parties (such
as posters, T-shirts, coffee mugs and the like portraying the
wide range of characters present in THE SECOND GATE) a procedure
to arrive at a reasonable allocation of the royalty will be
worked out.
27
D. Product Purchase Guarantee
In addition to the Royalty Guarantee set forth in C above, if MCA's
wholesale cost of the comic books, art work, trading cards, toys,
videos, games, and related items purchased from Marvel (or a Marvel
Related Company) or their distributor (as to such Marvel produced
items) do not exceed at least $*** in a given year, MCA will promptly
pay to Marvel any such short fall, or purchase items covering such
short fall. Such items purchased by MCA from Marvel or a Marvel
Related Company (whether directly or through a distributor) shall not
be subject to a Marvel royalty, and any royalty built into the
wholesale cost shall be deducted. In the event that the product line
produced by Marvel and Marvel Related Companies is substantially
reduced after the date hereof, limiting the product available to MCA
for sale at Universal Theme Parks, the parties shall negotiate in
"good faith" an adjustment to the above $*** guarantee.
E. Comic Book Advertising
MCA intends to advertise THE SECOND GATE (in a manner that features
the Marvel properties) on the back page of various Marvel Comics.
Marvel will work with MCA toward this end and provide information
concerning
28
demographically appropriate magazines and their availability. Such
advertising buys will be at the best rates available from Marvel to
unrelated third parties for such publications for purchases of
comparable volume. Subject to the availability of the specific
publications MCA reasonably believes appropriate for its needs, MCA
will expend at least the following amounts on advertisements appearing
on Marvel comics:
1. During the initial two years of operations (plus the pre-opening
period) - $***.
2. Per year thereafter - $***.
F. Marvel Compensation Alternative
MCA agrees that if, as to any Universal Theme Park containing a THE
MARVEL UNIVERSE, MCA utilizes "characters" not owned by MCA or an MCA
Related Company and the financial arrangement between MCA and the
owner or licensor of such "characters" (the "third party") involves
the "payment by MCA of sums based on revenues of the Theme Park or a
significant portion thereof" (defined below), MCA shall offer to
Marvel, the opportunity at Marvel's option to elect to be compensated
for the use of the Marvel license granted herein as it relates to such
specific THE MARVEL UNIVERSE, on the same basis as such
29
"third party". If Marvel so elects then MCA shall receive credit for
payments previously made to Marvel to the extent comparable or similar
payments were not part of such "third party" deal. In the event such
"third party" is required by MCA to invest in the Universal Theme Park
where its characters are being utilized, Marvel shall have a
comparable obligation if Marvel exercises the option to be compensated
based on the Compensation Alternative set forth in this paragraph F.
The "payment by MCA of sums based on revenues of the Theme Park or a
significant portion thereof" is intended to encompass "royalty"
arrangements or similar arrangements which compensate the "third
party" based on net revenues, gross revenues, attendance, or any other
standard measuring the economic performance of a particular Universal
Theme Park or a significant portion thereof.
VI. MISCELLANEOUS LEGAL
A. All sums to be paid or expended by MCA hereunder pursuant to Sections
I(B), II(B), IV(B)(1)(a)(2), IV(B)(2), V(A), V(C), V(D) and V(E) shall
be increased for each year after 1998 using the U.S. national CPI as
of December 31, 1998 as the base.
30
B. Marvel will reasonably cooperate in making information, artwork,
archive material, key personnel, etc. available to MCA in order that
MCA can creatively develop THE MARVEL UNIVERSE and exploit its rights
hereunder. MCA will reimburse Marvel for its reasonable costs in this
regard, including time of non-executive personnel and their reasonable
travel expense.
C. Whenever Marvel has "reasonable" rights for rejection of approval
hereunder, the basic criteria to be used by Marvel may include
inconsistency with (i) basic story line, (ii) the powers, (iii) basic
personality traits, (iv) physical appearance (including clothing or
costume), and/or (v) living habitat or environment relating to such
character as portrayed in Marvel's exploitation of such character in
comic books or other products for the particular time period being
depicted by MCA.
D. MCA shall take appropriate action, as directed by Marvel to protect
all copyrights and trademarks in connection with the uses granted
hereunder, including in-park uses, merchandise and packaging.
E. Marvel represents and warrants that it is the proper party to grant
the rights contained in this Agreement and that such grant is
effective and binding.
31
F. MCA agrees to defend, indemnify and hold harmless Marvel against any
claims arising out of MCA's exploitation of the rights granted
hereunder (including, without limitation, the operation of a Universal
Theme Park) or use of the Marvel properties (except for those related
to breaches in Marvel's warranties); and Marvel agrees to defend,
indemnify and hold harmless MCA against any claim arising from
Marvel's breach of its representations and warranties contained
herein. Any indemnification obligation hereunder shall apply to the
party specified, its parent or subsidiary companies, affiliates,
officers, directors, shareholders, agents and employees (and, in the
case of MCA, the actual MCA Corporately Related Company exploiting the
rights granted hereunder), and shall cover any and all loss,
liability, claims, damage and expense, including reasonable attorney's
fees of the protected party hereunder.
G. Either party may terminate this agreement upon a material breach of
the other party, subject to written notice and a reasonable
opportunity to cure.
H. As used herein, an MCA "Corporately Related Company" shall mean any
entity in which MCA has a majority interest in the voting equity
(directly or indirectly) which operates or manages a particular
Universal Theme
32
Park in which THE MARVEL UNIVERSE is or will be located.
I. As used herein, a "Marvel Related Company" shall mean any entity that
is owned in whole by Marvel or (i) in which Marvel (or a company in
(iii), (iv) or (v) below) has at least a 25% equity interest, (ii)
Marvel (or a company in (iii), (iv) or (v) below) has a significant
board representation, (iii) is a parent of Marvel, (iv) is controlled
by an entity which (directly or indirectly) controls Marvel, or (v) is
an "affiliate" of Marvel as defined in the 1933 Securities Act.
J. In the event any dispute, claim or difference arises out of this
Agreement as to the rights and liabilities of the parties hereunder,
the breach or invalidity of any covenants hereunder or in connection
with the construction of this Agreement (each such event, a
"Dispute"), the parties shall settle the Dispute by binding
arbitration. Except as otherwise specifically provided in this Section
J, the arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
in effect as of the date of commencement of the arbitration. The
arbitration shall be held in New York, New York, unless the parties
mutually agree to have the arbitration held elsewhere. The arbitration
panel shall have the
33
authority to order travel, as part of a proceeding, to the site of any
Universal Theme Park or other physical location, the viewing of which
the panel believes is useful in determining facts relevant to
resolution of the dispute. Judgment upon the award made in any
arbitration proceeding hereunder may be entered by any court having
jurisdiction thereof; provided, however, that nothing contained in
this paragraph shall be construed to limit or preclude a party from
bringing any action in any court of competent jurisdiction in the
United States for injunctive or other provisional relief to compel
another party hereto to comply with its obligations under this
Agreement during the pendency of the arbitration proceedings.
A party may commence arbitration by giving written notice to the other
party, which shall include the contention of the party requesting
arbitration, the factual circumstances giving rise to the dispute, the
provisions of the Agreement which are alleged to have been breached or
violated and the name and address of the arbitrator the party has
appointed from a list of arbitrators who have been pre-approved by the
parties. The parties shall in good faith appoint arbitrators to the
list with experience in the entertainment business and intellectual
property rights. Within ten (10) days following receipt of such
notice, the other party shall appoint a second
34
arbitrator from the same list and provide the name and address to the
other party. In the event both parties appoint the same arbitrator, he
shall be the only arbitrator to decide the Dispute. In the event each
party appoints a different arbitrator, the parties shall appoint a
third arbitrator from the list. If within five (5) days the parties
cannot agree upon a third arbitrator, they shall so notify the two
appointed arbitrators within 24 hours. Within ten (10) days of
appointment of the second arbitrator, the two arbitrators appointed
shall choose a third arbitrator from the list and shall notify the
parties as to their choice. The arbitrators shall be empowered to
grant such injunctive relief as they deem appropriate. In the event a
party believes that expedited arbitration proceedings are necessary,
such party may request an expedited arbitration proceeding. In such
event, the arbitrators shall have the power to order all discovery to
proceed on an expedited basis, the arbitration shall proceed on an
expedited basis and the arbitrators shall render their decision within
five (5) business days after concluding all evidentiary proceedings.
Either party may request the arbitration panel to assess the costs of
the arbitration and/or the prevailing party's legal fees against the
party which loses the arbitration. The arbitrators shall exercise
their discretion in deciding if, upon receiving such request and
rendering their
35
decision, one party properly should be assessed the costs of the
arbitration and/or the legal fees incurred by the prevailing party.
K. This Agreement shall be governed by the laws of the State of New York.
L. Although the parties may ultimately enter into a more formal agreement
containing the above terms, until such occurs, the terms of this
Agreement shall be binding on the parties.
[NEXT PAGE IS THE SIGNATURE PAGE]
36
MCA Inc. Marvel Entertainment Group
By: /s/ Xxx Xxxxxxx By: /s/ Xxxxxxx Xxxxxx
--------------------------------- ---------------------------------
Xxx Xxxxxxx Xxxxxxx Xxxxxx
Chairman Chief Executive Officer
MCA Recreation Services
This agreement dated March 22, 1994 .
--------------------------------
37
FIRST AMENDMENT TO AGREEMENT BETWEEN MCA INC. ("MCA") AND MARVEL CHARACTERS,
INC. ("MARVEL") dated this 29th day of September, 1995.
THE BACKGROUND OF THIS AGREEMENT IS AS FOLLOWS:
A. As of March 22, 1994 MCA and Marvel Entertainment Group, Inc. ("MEG")
entered into an agreement pursuant to which Marvel granted specified rights to
MCA for use of Marvel's Characters in MCA theme parks (the "Agreement").
B. As of September, 1995, MEG assigned all of its right, title and interest
in and to Marvel's characters, including its interest in the Agreement, to
Marvel.
C. The parties have agreed to amend the Agreement as set forth herein.
Now therefore, for good and valuable consideration paid by each to the
other, the parties hereto agree as follows:
1. MCA hereby guarantees to Marvel the payment of the annual license fee
described in Section V(A) for a period of ten (10) years beginning January 1,
1999. Such sums shall be paid to Marvel as and when due under Section V(A) of
the Agreement.
2. MCA hereby guarantees to Marvel that the $*** annual merchandise minimum
royalty described in Section V(C) of the Agreement will be paid for a minimum of
10 years beginning at the earlier of (i) the date that the second gate is open
or (ii) July 1, 2000. On or before December 31, 1995 MCA shall pay to Marvel the
sum of $*** in payment of the guaranteed payments described in this paragraph 2.
No CPI increase shall be applicable to the base royalty payment of $*** per year
during the first 10 years of such payments, but starting with the 11th year the
base of $*** shall be adjusted using the CPI for December 31, 1998 as the base,
so that the minimum for the 11th year shall be $*** multiplied by a fraction of
the numerator of which is the CPI in effect for the immediately preceding year
and the denominator shall be the 1998 CPI. Each year during the first 10 years
when payments are due under Section V(C) of the Agreement, MCA will pay excess
royalties, if any, due to Marvel based on a $*** base.
3. All defined terms used herein shall have the meaning ascribed to them in
the Agreement unless otherwise noted herein. Except as set forth above, the
Agreement shall remain in full force and effect unmodified except by the terms
of this First Amendment.
4. This document may be signed in counterparts.
In witness whereof the parties have executed this First Amendment to Agreement,
as of the day and year first above written.
MCA, INC.
BY: /s/ Xxxxxx Xxxxxxx
-----------------------------------
MARVEL CHARACTERS, INC.
BY: /s/
------------------------------------
Marvel Entertainment Group, Inc. hereby joins in this First Amendment to
Agreement for the purpose of acknowledging the assignment of its rights under
the Agreement to Marvel Characters, Inc.; and Marvel Entertainment Group, Inc.
hereby authorizes and directs MCA, Inc. to make all payments due hereunder, as
well as future payments due under the Agreement, to Marvel Characters, Inc.
MARVEL ENTERTAINMENT GROUP, INC.
BY: /s/ Xxxx X. Xxxxxxx
------------------------------------
Executive Vice-President
2
