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[Information below, marked with [**], has been omitted pursuant to a
request for confidential treatment. A complete copy of this document has
been supplied to the Securities and Exchange Commission under separate
cover. Approximately 44 pages (including schedules) have been omitted
pursuant to the request for confidential treatment.]
TOY LICENSE AGREEMENT BETWEEN LUCAS LICENSING LTD. AND HASBRO
DATED AS OF OCTOBER 14, 1997
<PAGE>
TOY LICENSE AGREEMENT
TABLE OF CONTENTS
1. GRANT OF LICENSE ........................................................1
2. TERM AND TERRITORY.......................................................2
3. RESTRICTIONS.............................................................4
4. OBLIGATIONS OF LICENSEE..................................................8
5. LICENSOR APPROVALS.......................................................9
6. [**]....................................................................11
7. ADVANCE.................................................................11
8. ROYALTIES AND OTHER CONSIDERATION.......................................12
9. STATEMENTS AND PAYMENTS.................................................14
10. TAXES...................................................................16
11. RECORDS AND AUDITS......................................................16
12. COPYRIGHT AND TRADEMARK NOTICES.........................................17
13. OWNERSHIP...............................................................18
14. PROMOTIONAL VALUE, TRADEMARK RIGHTS AND GOODWILL........................20
15. APPROVAL OF MANUFACTURERS...............................................21
16. CONFIDENTIALITY.........................................................22
17. PRODUCT SAMPLES.........................................................23
18. INTENTIONALLY DELETED...................................................24
19. REPRESENTATIONS AND WARRANTIES..........................................24
20. INDEMNITIES.............................................................25
21. INSURANCE...............................................................27
22. EXPIRATION AND TERMINATION..............................................28
23. RESERVED RIGHTS.........................................................31
24. DEFINITIONS.............................................................31
25. GENERAL.................................................................39
i
<PAGE>
SCHEDULE I - PERMITTED LICENSEE AFFILIATES
SCHEDULE II - LICENSED PRODUCTS
SCHEDULE III- ADVANCES AND MINIMUM SALES LEVELS
SCHEDULE IV - EXCLUDED DISTRIBUTION CHANNELS
SCHEDULE V - LICENSOR TRADEMARKS
SCHEDULE VI - EXCLUDED COUNTRIES
SCHEDULE VII - [**]
SCHEDULE VIII - MARKET CATEGORIES
SCHEDULE IX - GIFT MARKET DEFINITION
EXHIBIT A - TRADEMARK LICENSE AGREEMENT
EXHIBIT B - APPROVAL OF SUBLICENSEE AGREEMENT
EXHIBIT C - STANDARD APPROVAL FORM
EXHIBIT D - ROYALTY REPORT FORM
EXHIBIT E - THIRD PARTY COPYRIGHT ASSIGNMENT
EXHIBIT F - APPROVAL OF MANUFACTURER AGREEMENT
ii
<PAGE>
TOY LICENSE AGREEMENT
This LICENSE AGREEMENT (the "Agreement") is made and entered into as of October
14, 1997, between Lucas Licensing Ltd., a California corporation ("Licensor"),
on the one hand located at P. O. Box 2009, San Rafael, CA 94912, and Hasbro,
Inc., a Rhode Island corporation, located at 1027 Newport Ave., Pawtucket, R.I.
02862-1059, Hasbro International, Inc. a Delaware Corporation, located at 1027
Newport Ave., Pawtucket, R.I. 02862-1059, and all Permitted Licensee Affiliates
(jointly and severally "Licensee" or "Hasbro") on the other hand.
WHEREAS:
A. Licensor is a California corporation engaged in the licensing of
entertainment intellectual properties related to the "Pictures" (as hereinafter
defined);
B. Licensor owns or controls rights in respect of the Licensed Property
(as hereinafter defined);
C. Licensee is engaged in the manufacture, distribution and sale of
consumer products in the form of toys including, without limitation, toys based
on entertainment intellectual properties licensed from third parties; and
D. Licensee wishes to be licensed to use the Licensed Property for the
manufacture, distribution and sale of Licensed Products in the Territory and
Licensor has agreed to license rights in the Licensed Property to Licensee,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. GRANT OF LICENSE.
Subject to the terms and conditions of this Agreement, and in
consideration for all of Licensee's warranties, representations and
obligations hereunder, including, without limitation, Licensee's agreement
to pay and actual payment to Licensor of the Royalties and Advances,
Licensor grants to Licensee a non-transferable, non-assignable (except as
otherwise specified in Subparagraph 25.1 hereinbelow) license during the
Term and throughout the Territory:
1.1. to develop, design, manufacture, distribute, advertise, publicize,
market and sell the Licensed Products set forth in Schedule II attached
hereto, for sale to retail Customers through all channels of wholesale and
retail distribution permitted hereunder; and
1.2. to reproduce the Licensed Property and to use the Licensor Trademarks
on and in connection with the Licensed Products and containers, packaging,
display and promotional material and in Consumer Marketing for the
Licensed Products as provided in this Agreement. Concurrently with its
execution of this Agreement, Licensee shall execute a Trademark License
Agreement with Licensor on Licensor's then-current form for such
<PAGE>
agreements (the "Trademark License Agreement"), a current copy of which
form is attached hereto and by this reference incorporated herein as
Exhibit A.
Licensor shall in a timely manner make available to Licensee such
materials as may be available for use in exercising Licensee's rights
hereunder, subject to the confidentiality provisions of Subparagraph 16.1
hereinbelow.
2. TERM AND TERRITORY.
2.1. Term.
(a) Unless earlier terminated as provided in this Agreement,
including, without limitation, pursuant to this Subparagraph 2.1,
the term of Licensee's rights pursuant to this Agreement (the
"Term") shall consist of the time period commencing as of the date
hereof (subject to Subparagraph 25.15 hereinbelow) and ending on the
later of: (i) the final day of the third Calendar Year following the
Calendar Year in which the initial general theatrical release in the
United States (the "U.S. Release Date") of Episode III occurs; and
(ii) December 31, 2007 (such later day constituting the "Expiration
Date").
(b) Notwithstanding anything to the contrary contained herein or
otherwise, the Term shall terminate as set forth below:
(i) if the U.S. Release Date of Episode I does not occur on or
before June 30, 2004 (the "Episode I Outside Date"), then the
Term shall terminate as of the Episode I Outside Date;
(ii) if the U.S. Release Date of Episode I occurs on or before
the Episode I Outside Date, but the U.S. Release Date of
Episode II does not occur prior to the date which is five (5)
years following the U.S. Release Date of Episode I (the
"Episode II Outside Date"), then the Term shall terminate as
of the later of the Episode II Outside Date and December 31,
2007; or
(iii) if the U.S. Release Date for Episode I occurs on or
before the Episode I Outside Date and the U.S. Release Date of
Episode II occurs on or before the Episode II Outside Date,
but the U.S. Release Date of Episode III does not occur on or
before the date which is five (5) years after the U.S. Release
Date of Episode II (the "Episode III Outside Date"), then the
Term shall terminate as of the later of the Episode III
Outside Date and December 31, 2007.
2.2. Territory. The territory of Licensee's rights hereunder (the
"Territory") consists of the following applicable locations for the
following applicable Licensed Products:
2
<PAGE>
--------------------------------------------------------------------------------
Licensed Product Territory
--------------------------------------------------------------------------------
Standard Toys (excluding Novelty Candy, Enumerated countries and groupings
Coloring Toys, Mechanical Design Toys of countries set forth in Column A
and Craft Kits); of Schedule III attached hereto
(each such enumerated country or
Non-Standard Board Games; and grouping of countries a
"Sub-Territory" herein) and all
Electronics/Hand-Held ("E/H") other countries that currently
exist or which may hereafter exist
during the Term (other than the
specific excluded countries listed
in Schedule VI);
--------------------------------------------------------------------------------
All Games and Puzzles ("G/P") (other United States and Canada
than Non-Standard Board Games); Novelty
Candy; Coloring Toys; Mechanical Design
Toys; and Craft Kits
--------------------------------------------------------------------------------
Licensee's exercise of the rights granted under this Agreement in any
country in the Territory that is not part of a Sub-Territory hereunder
(each such country a "ROW Country") shall not entail any payment of
Advances under Paragraph 7 of this Agreement, but shall entail payment of
Royalties under Paragraph 8 of this Agreement. Notwithstanding the
foregoing, the sole activity of manufacturing a Licensed Product outside
of the applicable Territory hereunder may take place in a country outside
of the Territory if the terms and conditions of Paragraph 15 hereinbelow
have been first satisfied and so long as no Licensed Product manufactured
in such country is distributed by Licensee (or with Licensee's express or
implied authority) from such country for the "sale" thereof (as defined in
Subparagraph 8.2 hereinbelow) to a Customer outside of the Territory.
Subject to Paragraph 23 hereinbelow, if Licensor elects to license to any
third party the right to manufacture, distribute and sell during the Term
of this Agreement any Licensed Product in any country outside of the
Territory, then Licensor shall notify Licensee of such election in
writing. Licensee shall thereafter have thirty (30) days from the date of
such notice to negotiate and enter into a written agreement regarding such
license which agreement shall incorporate all of the terms and conditions
of this Agreement except for Paragraph 7 (Advance) and Paragraph 4
(Minimum Sales Levels) hereinbelow; provided, however, that neither
Licensee nor Licensor shall be obligated to enter into an agreement with
respect to such license. For purposes of this Agreement, a country shall
be deemed to include all territories and possessions thereof.
3
<PAGE>
3. RESTRICTIONS.
3.1. Distribution.
(a) General. Licensee shall not have the right:
(i) to distribute or sell (or authorize any entity to
distribute or sell) any Licensed Product other than to a "bona
fide and recognized" (as such term is commonly understood in
the U.S. toy industry) third party wholesale entity for
distribution directly to a Retail Entity, or directly to a
bona fide and recognized third party Retail Entity (whether
such third party Retail Entity is a third party "traditional
retail store" (as that term is commonly understood in the U.S.
toy industry), a third party direct-to-consumer paper-printed
catalog company or direct mail company, a third party Internet
Retail Entity or, subject to Subparagraph 3.1(c) hereinbelow,
a third party Electronic Retailer). In particular, but not by
way of limitation, Licensee shall not distribute any Licensed
Product through any channel, method or outlet of distribution
denoted as an Excluded Distribution Channel on Schedule IV
attached hereto;
(ii) to distribute or sell (or authorize any entity to
distribute or sell) any Licensed Product to any party if
Licensee knows, or in the exercise of its reasonable good
faith business judgment should know, that such distribution or
sale will result in the distribution for sale or resale of any
Licensed Product outside of the Territory;
(iii) to conduct or authorize any entity to conduct Consumer
Marketing disseminated outside of the Territory for any
Licensed Product; or
(iv) except with Licensor's prior written approval, to
distribute or sell any Licensed Product to any Closeout Store
in any country prior to the date eighteen (18) months after
the initial "sale" (as such term is defined in Subparagraph
8.2 hereinbelow) of such Licensed Product to a Customer in
such country.
(b) Licensor Channels. Notwithstanding the rights licensed to
Licensee hereunder, Licensor shall also have the right to distribute
and/or sell any Licensed Product purchased from Licensee, any
Licensee Affiliate or Sublicensee through any Licensor Channel and,
in this connection, Licensor shall purchase or require to be
purchased from Licensee, a Licensee Affiliate or a Sublicensee any
Licensed Product for which Licensee has exclusive rights hereunder
and which is to be sold through a Licensor Channel, provided,
Licensee shall manufacture and supply to Licensor or to Licensor's
designee those numbers of such Licensed Product as Licensor shall
request for the applicable Licensor Channel, and Licensee shall sell
such Licensed Product to Licensor or to Licensor's designee at the
lowest price and on the most favorable terms given by Licensee, a
Licensee Affiliate or a
4
<PAGE>
Sublicensee to a Customer for the same or comparable quantities of
such Licensed Product being sold and delivered on comparable terms
and conditions, whether or not such Licensed Product is Account
Specific Merchandise, F.O.B. Product or otherwise. Notwithstanding
the foregoing, in the case of Account Specific Merchandise, the
foregoing obligation shall be subject to Licensee having received
the consent of the person for whom such Account Specific Merchandise
was created.
(c) Internet/Electronic Retailers. Licensee shall not have the right
to manufacture, distribute and/or sell (or authorize any entity to
manufacture, distribute or sell) any Licensed Product:
(i) through the Internet (except for the transmission,
reception, recordation or display of information relating to a
purchase order placed by a person to whom Licensee is
permitted to sell under Subparagraph 3.1(a)(i) and except if
such distribution or sale is through a bona fide and
recognized third party Internet Retail Entity pursuant to
Subparagraph 3.1[a][i] hereinabove, or through a Licensor
Channel as permitted pursuant to Subparagraph 3.1[b]
hereinabove) without Licensor's prior written approval in each
instance; or
(ii) through any Electronic Retailer except that, at
Licensor's request, Licensee is hereby licensed to supply to
Licensor or to Licensor's designee such specific Licensed
Products to such specific Electronic Retailer(s) as Licensor
may approve in advance in writing.
3.2. Exclusivity. The rights licensed to Licensee hereunder shall be
exclusive for Standard Toys (except for the Standard Toys defined as
Plush, Craft Kits and Novelty Candy, for which Licensee's rights hereunder
shall be non-exclusive), for G/P and for E/H, except as otherwise set
forth in Schedule II.
3.3. Sublicenses.
(a) Approval of Sublicensee Agreement. Licensee shall have no right
to sublicense to any entity (including to a distributor or to a
Licensee Affiliate that is not a Permitted Licensee Affiliate) any
right licensed to it hereunder (other than the right to manufacture
any Licensed Product, which shall be subject to Paragraph 15
hereinbelow) or transfer or dispose of any Licensed Property to any
distributor, including to a Licensee Affiliate that is not a
Permitted Licensee Affiliate or to any other third party unless and
until: (i) Licensor has provided Licensee with its prior written
approval of the proposed sublicensee and the terms and conditions of
any and all agreements between Licensee and such proposed
sublicensee (and any modifications thereof, whether oral or written)
for such sublicense (collectively the "Sublicense Agreement"); (ii)
such sublicensee shall have executed an Approval of Sublicensee
Agreement with Licensor in substantially the form of Licensor's
then-current form for such agreement, as such form may be revised by
Licensor in its
5
<PAGE>
reasonable discretion from time to time (any such sublicensee and
all affiliated and related entities of such Sublicensee approved by
Licensor for which an Approval of Sublicensee Agreement is fully
executed, a "Sublicensee" herein); (iii) such Sublicensee shall
agree in the Sublicense Agreement to be fully bound at all times by
the terms and conditions of the following paragraphs and
subparagraphs of this Agreement adjusted as appropriate: 3.1, 3.4,
3.5, 3.7, 3.8, 11.1, 11.2, 12, 13.2-13.8, 14, 16, 17, 19.1(c),
19.1(d) and 19.1(e); (iv) such Sublicensee shall execute a Trademark
License Agreement with Licensor; and (v) such Sublicensee shall
further agree in such Approval of Sublicensee Agreement that
Licensor shall be a third party beneficiary thereof. A copy of
Licensor's current form for Approval of Sublicensee Agreement is
attached hereto as Exhibit B. The sublicense by Licensee of any
rights licensed to Licensee hereunder shall in no manner whatsoever
affect or otherwise diminish or relieve any of Licensee's
obligations hereunder, and Licensee shall execute, and shall ensure
that each prospective Sublicensee executes, the Approval of
Sublicensee Agreement. The failure by a Sublicensee to adhere to the
terms of the Approval of Sublicensee Agreement or the Sublicensee
Agreement shall not be imputed to Licensee unless such Sublicensee
is a controlled affiliate of Licensee or Licensee fails to comply
with its obligations under Subparagraph 3.3(b) hereinbelow.
(b) Enforcement of Sublicense Agreement. Licensee agrees to include
and strictly enforce in each Sublicense Agreement all of the terms
and conditions of this Agreement relevant to the sublicense to
Sublicensee of any right licensed to Licensee hereunder. Licensee
shall advise Licensor of any material breach thereof by a
Sublicensee and of any corrective action taken by Licensee or by
such Sublicensee as well as the results thereof. Licensee shall use
its best efforts to cause such Sublicensee to cure such breach and,
at the written request of Licensor following such breach, Licensee
shall terminate such Sublicense Agreement, subject to the same cure
provisions as are applicable to Licensee in Subparagraph 22.2(a)
hereinbelow. Licensee hereby appoints Licensor its attorney-in-fact
solely for the purpose of sending a notice of termination, subject
to the immediately preceding sentence, in order to terminate such
Sublicense Agreement or any specific rights thereunder, which
appointment is irrevocable and coupled with an interest; provided,
however, that Licensor will indemnify and hold harmless Licensee for
damages resulting from knowingly making a material misstatement in
connection with the exercise of such power of attorney.
3.4. (a) No Rights to Products Other Than Licensed Products. Other than
the products, goods and articles defined in Schedule II as "Licensed
Products," all products, goods, items, devices and articles of any
kind based on or incorporating the Licensed Property are expressly
excluded from the rights licensed to Licensee pursuant to this
Agreement and are expressly reserved to Licensor. For the avoidance
of doubt, Licensee acknowledges and agrees that Micro Toys and
"Model Kits" (as hereinafter defined) do not constitute Licensed
Products and are expressly excluded from this Agreement. The term
"Model Kits," as used in this Agreement, means [**].
6
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(b) No Joint or Cross Distributing, Promoting or Selling. No
Licensed Product shall be jointly or cross distributed, marketed,
promoted or sold with any product or service (other than another
Licensed Product manufactured hereunder) without Licensor's prior
written consent in each instance.
3.5. Other Products. Licensee acknowledges and agrees that the fact that a
Licensed Product is capable (whether or not by means of any electronic
media or through the use of any electronic feature, mechanical feature,
sound effect, light feature, mechanism or otherwise) of interacting with
another product, good, item, device or article that is not a Licensed
Product (the "Other Product") does not render such Other Product a
Licensed Product hereunder or confer to Licensee any rights hereunder with
respect to the use of the Licensed Property in conjunction with such Other
Product.
3.6. Licensor Third Party Obligations. Notwithstanding anything to the
contrary contained in this Agreement or otherwise, but without limitation
of Licensor's other rights and remedies:
(a) Licensee acknowledges that Licensor may have heretofore executed
agreements with third parties which may encompass rights with
respect to some or all of the Licensed Products and/or which may
grant to such third parties the right to dispose of, distribute and
sell Licensed Products during their respective sell-off periods,
which sell-off periods may occur during the Term, and that such
sell-off rights shall not violate the terms of this Agreement; in
this connection, Licensor agrees to disclose the identity of such
third parties, the Licensed Products covered and the dates of their
respective sell-off periods; provided, however, that the inadvertent
failure by Licensor to disclose such information shall not
constitute a breach hereunder, and such disclosure shall be subject
to any applicable confidentiality restrictions; and
(b) Licensor shall have the unrestricted right, prior to the
expiration or termination of the Term to provide for the disposition
of any or all of the rights licensed to Licensee hereunder,
including, without limitation, entering into agreements with any
third party(ies) which provide for the right for such third
party(ies) to design, manufacture and/or distribute Licensed
Products anywhere in the Territory, provided, that such agreement(s)
shall not authorize the shipment of Licensed Products to customers
on a date that would allow such Licensed Products to be sold to end
users at retail prior to the expiration or termination of the Term.
3.7. No Similar Products or Dumping of Licensed Products. Licensee
recognizes and acknowledges that the Licensed Property, and all elements
thereof, and the goodwill associated with the same are material and
substantial business assets of Licensor. In that connection, Licensee
agrees that, during the Term and throughout the Territory, Licensee:
(a) will not Dump any Licensed Product in any country of the
Territory during the Term and during any Sell-Off Period, subject to
applicable law;
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<PAGE>
(b) will not manufacture, distribute or sell any merchandise or
authorize the manufacture, distribution or sale of any merchandise
bearing any artwork or other representation which is confusingly
similar to or which disparages the Licensed Property (or any element
thereof); and
(c) shall use its best efforts to sell Licensed Products at a price
which, in its reasonable, good faith business judgment, represents
the best attainable price from its Customers.
3.8. No Sales Prior to January 1, 1999. Notwithstanding anything to the
contrary contained in this Agreement (other than Subparagraph 25.17):
(a) with respect to all Licensed Products set forth on Schedule II
other than E/H, Licensee shall not sell or distribute, or authorize
the sale or distribution of, any Licensed Product (other than E/H)
manufactured hereunder to a retail or wholesale entity for such
entity's receipt anywhere in the Territory prior to January 1, 1999,
except as the parties may otherwise mutually agree; and
(b) with respect to all Licensed Products set forth on Schedule II
and defined as E/H, Licensee shall not manufacture, distribute,
market, promote or sell or authorize the manufacture, distribution,
marketing, promotion or sale of such Licensed Product prior to
January 1, 1999, except as the parties may otherwise mutually agree.
3.9. Gift Market Other than with respect to a Gift Market Product sold in
the Gift Market, Licensor shall not license to any third party the right
to sell through any Excluded Distribution Channel any Licensed Product
that is exclusively licensed to Licensee hereunder without Licensee's
prior written consent.
4. OBLIGATIONS OF LICENSEE.
4.1. [**].
4.2. Minimum Sales Levels. Licensee shall exercise reasonable commercial
efforts to ensure that Net Sales during each time period for which a
Marketing Plan is due hereunder will be equal to or exceed the Sales
Projections set forth in such Marketing Plan as approved by Licensor for
such time period including the Net Sales outlined in Column D of Schedule
III for Calendar Years 1999 and 2000 (the "Minimum Sales Levels");
provided, however, the parties agree that such Sales Projections are
predicated upon the assumption that Episode I will have a U.S. Release
Date between May 1 and June 30, 1999, and if the U.S. Release Date occurs
after June 30, 1999, then the parties agree to adjust such Sales
Projections in good faith.
4.3. [**].
4.4. [**].
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4.5. [**].
4.6. [**].
4.7. [**].
5. LICENSOR APPROVALS.
5.1. Creative Materials. Licensor will have the right to approve in the
good faith exercise of its discretion the following material, in
accordance with the procedures set forth in Subparagraph 5.2 hereinbelow:
(a) the Licensed Products, including, but not limited to, the
initial concepts, design documents, scripts, copy, alpha version,
beta version, unpainted sculpts, painted sculpts, prototypes and
manufacturing samples;
(b) any (i) Artwork and Film Clips and (ii) all other audio and/or
visual materials (including, without limitation, artwork,
photographs, images and designs) incorporating any part of the
Licensed Property, including, without limitation, initial concepts,
preliminary designs and final artwork intended for any uses
hereunder (the "Designs"); and
(c) any and all cartons, containers, packaging, instructions, tags,
labeling and wrapping material for the Licensed Products and any and
all Consumer Marketing, publicity, promotional and similar materials
for the Licensed Products (including, by way of illustration, but
not limitation, catalogs, trade advertisements, flyers, sales
sheets, labels, package inserts and display materials) which are
used in connection with the Licensed Products and which make use of
any of the Licensed Property, as well as any trade or other Consumer
Marketing or similar announcements intended to advise potential
customers of the rights acquired by Licensee under this Agreement,
whether or not such materials make use of the Licensed Property
(collectively the "Consumer Marketing Materials").
All materials submitted in a language other than English will be accompanied by
a complete and accurate English translation. Licensee shall ensure that all
Licensed Products, in their finished goods form, shall in all material respects
reflect and be accurate representations of the prototypes for the Licensed
Products as approved by Licensor, and Licensee's failure to do so shall be
deemed to be a material breach of this Agreement, provided that Licensee shall
be entitled to cure such breach as provided in Subparagraph 22.2(a) hereinbelow.
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5.2. Approval Procedure.
(a) In General.
(i) [**].
(ii) Creative Materials: Licensee will submit to Licensor,
along with Licensor's Standard Approval Form attached hereto
as Exhibit C, the Licensed Products, the Designs, Consumer
Marketing Materials and Copyright Materials for Licensor's
approval, subject to Subparagraph 25.10 hereinbelow, prior to
manufacture, printing, production, duplication, distribution,
sale or other use by Licensee thereof and each and every
modification thereto. If Licensor requires alterations prior
to an approval, then such alterations shall be made at
Licensee's sole cost and shall be submitted to Licensor for
further written approval in accordance with this Subparagraph
5.2. Licensee agrees to strictly adhere to all of Licensor's
product approval procedures, and to comply with Licensor's
style and legal guides provided to Licensee's representative,
and use best efforts to cause all parties with whom Licensee
contracts relative to the Licensed Products to do so, and,
where necessary, to incorporate changes in compliance
therewith. Any modification of any Licensed Product, Design,
Consumer Marketing Material and/or Copyright Material must be
re-submitted in advance for Licensor's written approval as if
it were a new Licensed Product, Design, Consumer Marketing
Material and/or Copyright Material. Licensee agrees not to
change the Licensed Product, Design, Consumer Marketing
Material or Copyright Material, as the case may be, without
first submitting to Licensor samples showing such proposed
changes and obtaining Licensor's written approval of such
samples.
(b) Licensor's Approvals. Any product, good or article not approved
in writing by Licensor prior to the manufacture thereof [**] shall
not be a Licensed Product and Licensee shall have no right to
manufacture, market, distribute, sell or exercise any other right
licensed to it hereunder with respect to such product, good or
article in such Sub-Territory. Licensor's approval of any Copyright
Materials in accordance with this Subparagraph 5.2 with respect to a
specific Licensed Product shall not be deemed to be approval for the
use of any part of such Copyright Materials with respect to another
Licensed Product.
(c) Third Party Sourcing. Licensee shall not have the right to use
any artwork or other creative material incorporating elements of the
Licensed Property used in connection with the products, goods or
articles of third parties (including, without limitation, books,
comics and trading cards), without first advising Licensor in
writing of the third party which had used such artwork and without
first obtaining Licensor's written approval thereof in accordance
with this Paragraph 5.
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5.3. Pre-Existing Approvals: Licensor hereby acknowledges and affirms the
written approvals given by it pursuant to the Prior Agreement (as
hereinafter defined) in respect of any Copyright Materials prepared by
Licensee and any Licensed Products manufactured pursuant to any of the
"Prior Agreements" (as hereinafter defined) as well as (a) Licensee's
right to use such Copyright Materials hereunder through September 30,
1998, and (b) Licensee's right to manufacture, distribute and sell any
such Licensed Product during the Term and pursuant to the terms and
conditions of this Agreement, including, without limitation, the Marketing
Plans approved hereunder. The "Prior Agreements" means the following
agreements: (i) agreement between Licensor and Hasbro, Inc., dated as of
May 1, 1993, as amended (the "Toy Agreement"); (ii) agreement between
Licensor and Hasbro, Inc., dated as of October 26, 1994, as amended (the
"Games Agreement"); and (iii) agreement between Licensor and Hasbro, Inc.,
dated as of October 26, 1994, as amended (the "Puzzle Agreement").
6. [**].
6.1. [**].
6.2. [**].
6.3. [**].
7. ADVANCE.
7.1. Advance. Licensee agrees to pay to Licensor, an advance of Four
Hundred Fifty Million Dollars ($450,000,000), payable in the following
amounts at the following times:
(a) One Hundred Million Dollars ($100,000,000) thereof, payable on
the initial shipment of any Licensed Product incorporating elements
of Episode I that is sold to a Customer hereunder;
(b) One Hundred Fifty Million Dollars ($150,000,000) thereof,
contingent upon the occurrence of the initial general theatrical
release in the United States of Episode I and payable on the U.S.
Release Date of Episode I;
(c) One Hundred Million Dollars ($100,000,000) thereof, contingent
upon the occurrence of the initial general theatrical release in the
United States of Episode II and payable on the U.S. Release Date of
Episode II; and
(d) One Hundred Million Dollars ($100,000,000) thereof, contingent
upon the occurrence of the initial general theatrical release in the
United States of Episode III and payable on the U.S. Release Date of
Episode III.
In the event that the U.S. Release Date of Episode I does not occur on or
before the Episode I Outside Date, then any portion of the Advance payment
made pursuant to Subparagraph 7.1(a) hereinabove that has not been
recouped by Licensee from Royalties
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earned on or before the Episode I Outside Date shall be refunded to
Licensee within thirty (30) days following the Episode I Outside Date.
[**].
7.2. [**].
8. ROYALTIES AND OTHER CONSIDERATION.
8.1. Royalty Percentage. Licensee will pay to Licensor sums ("Royalties")
equal to the following applicable percentage of Net Sales ("Royalty
Percentage") for Net Sales of each unit of a Licensed Product:
(a) Basic Figures: With respect to Net Sales of each unit of Basic
Figures: [**] of cumulative Net Sales of all Basic Figures
throughout the Territory, subject to the provisions of Subparagraph
8.1(c) hereinbelow.
(b) Other Licensed Products: With respect to Net Sales of each unit
of Other Licensed Products, [**] of cumulative Net Sales of all
Other Licensed Products throughout the Territory, subject to the
provisions of Subparagraph 8.1(c) hereinbelow.
(c) [**]
(iv) Royalty Adjustment. Licensor shall consider any request
made by Licensee to reduce Royalty Percentages set forth in
Subparagraphs 8.1(a)-(c) hereinabove for a specific Licensed
Product solely for the reason that Licensee is required to pay
a royalty to a third party inventor or holder of patent rights
or manufacturing process rights in connection with such
Licensed Product.
8.2. Net Sales. Subject to Subparagraph 8.8 hereinbelow, "Net Sales" shall
be equal to [**].
8.3. Special Circumstances. Notwithstanding anything to the contrary
contained in this Agreement, (i) to the extent that Licensee is prohibited
by reason of a law in any country of the Territory from remitting to
Licensor the full amount of Royalties payable to Licensor with respect to
a Licensed Product, then the parties shall discuss in good faith an
equitable treatment of the situation and the advisability of distributing
such Licensed Product in such country and it shall be in Licensor's
discretion to approve or disapprove such distribution of such Licensed
Product in such country; and (ii) the parties acknowledge that Licensee
may sell Licensed Products on a consignment basis (such as in Taiwan) or
make demonstrator sales of Licensed Products (such as in France), and the
parties agree to consider in good faith the treatment of returns in
connection with such sales. Licensor acknowledges that in situations where
local law or regulations in a particular country prohibit the payment of a
royalty to an affiliated company (such as in Italy and Greece), Licensor
agrees to enter into an agreement directly with such affiliated company in
order to permit Licensor to receive the applicable Royalties due to
Licensor
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hereunder. Such agreement will not otherwise alter or diminish any of
Licensor's rights and entitlements or any of Licensee's obligations in
accordance with this Agreement.
8.4. F.O.B. or Ex Works. Notwithstanding anything to the contrary
contained herein or otherwise, with respect to the "sale" (as defined in
Subparagraph 8.2 hereinabove) of a Licensed Product on a F.O.B., Ex Works
or similar basis, the applicable Royalty for such Licensed Product shall
be as follows:
(a) In those cases where the Licensed Product is specifically
designed as and is intended to be sold as an F.O.B. Product, is sold
directly to retailers on an F.O.B. basis and is not sold by Licensee
other than on an F.O.B. basis then the applicable Royalty for such
Licensed Product shall be [**] (such Royalty hereinafter the "F.O.B.
Royalty").
(b) In those cases where the Licensed Product is offered for sale in
a country on other than an F.O.B. basis and the same Licensed
Product is also offered for sale in the same country on an F.O.B.
basis, then the applicable Royalty for such Licensed Product sold on
an F.O.B. basis shall be [**].
8.5. Episode I Bonus. On the U.S. Release Date of Episode I, Licensee
shall pay to Licensor a non-recoupable bonus equal to Five Million Seven
Hundred Thousand Dollars ($5,700,000).
8.6. Bundling Royalty. Licensee shall not have the right to distribute,
market or sell (or authorize a third party to distribute, market or sell)
any Licensed Product with any other product, good or article (other than
another Licensed Product) in a single package at a single price
("Bundling") without Licensor's prior written approval of: (a) whether or
not such Bundling may occur; (b) the terms and conditions of such
Bundling; and (c) Licensor's Royalty in such instance.
8.7. [**].
8.8. Value-Added Taxes. Calculation of Net Sales shall not include any
sales, use, Value Added Tax ("VAT"), excise, local privilege or any other
tax. Licensee shall not pass along to Licensor and Licensor shall not bear
any VAT or any other tax charges incurred with respect to a Licensed
Product.
8.9. No Waiver. Acceptance of any sums by Licensor by way of Advances,
Royalties or otherwise shall not prevent Licensor at any time from
disputing or demanding particulars with reference to the amounts due nor
shall such acceptance constitute Licensor's waiver of any breach by
Licensee of any terms hereof.
8.10. No Carryover. If the parties agree to an extension of the Term and
if, on the expiration of the Term, any Advance shall not have been
recouped by the applicable Royalties paid to Licensor, then the shortfall
will not be carried forward to any extension of the Term.
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8.11. Warrant. Concurrently with the execution of this Agreement, Licensee
shall grant to Licensor a warrant (the "Warrant") for the purchase of up
to four million three hundred thousand (4,300,000) fully paid and
non-assessable shares of the common stock of Licensee following exercise
of the Warrant at a per share exercise price equal to twenty-eight dollars
($28), subject to adjustment as provided in the Warrant.
9. STATEMENTS AND PAYMENTS.
9.1. Payment Terms. Licensee will wire transfer (as immediately available
funds) to Licensor all sums due to it hereunder for Licensor's receipt
thereof within [**] days following the end of each calendar month based on
the Net Sales by Licensee and any Licensee Affiliates of Licensed Products
in such Calendar Month. Net Sales generated by a Sublicensee which is not
a Licensee Affiliate shall be reported to Licensor in respect of the
calendar month in which such Net Sales are paid or reported to Licensee or
any Licensee Affiliate, whichever first occurs. All payments will be in
United States currency. Late payments will accrue interest charges from
the due date through the date of payment at an interest rate equal to [**]
and shall be payable upon demand.
9.2. Remittance of Funds. All compensation amounts stated in this
Agreement, including without limitation, Advances and Royalties accrued
and/or payable to Licensor pursuant to this Agreement shall be computed,
accrued, paid and remitted to Licensor as follows, and Licensee shall bear
all costs (including, without limitation, all transactional and transfer
costs, points and fees), as follows:
(a) All Royalties due and payable to Licensor hereunder shall be
converted from the local currency of the source country to U.S.
Dollars based upon the exchange rates as follows: (i) with respect
to subsidiaries and affiliates of Licensor, the conversion rate
shall be set by Citibank London as of the 20th day of the month
following the close of each calendar month, subject to local
holidays and week-ends and further subject to Licensee ensuring that
Citibank London will make such conversion rates available to
Licensor upon reasonable request, and (ii) with respect to other
parties, the exchange rate shall be the rate of exchange published
in The Wall Street Journal for such local currency which is in
effect on the date payment is due to Licensor or, if payment to
Licensor is late, then the rate of exchange published in The Wall
Street Journal on the date payment is due or the date of actual
payment, whichever rate yields the higher amount of U.S. Dollars.
(b) Subject to Subparagraphs 8.3 and 9.3, hereinbelow, it shall be
Licensee's sole responsibility and expense to obtain the approval of
any governmental authorities to take whatever steps that may be
required and to comply in all respects with all applicable laws and
regulations in order to remit funds to Licensor.
9.3. Blocked Funds. If the payment of funds in any country is blocked from
export out of such country ("Blocked Funds"), such payment either may be
held by Licensee or a Sublicensee, or, at the election of Licensor,
deposited in an interest-bearing escrow
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banking or other interest-bearing escrow account in Licensee's name on
behalf of Licensor in the blocking country (if permitted by local law) or
may be removed from such country and paid to Licensor, subject to whatever
restrictions, limitations and/or taxes may be imposed by the government of
such country upon such Blocked Funds. In the event of any such blockage,
Licensor and Licensee shall cooperate in seeking an equitable solution. If
no such solution is attained, Licensor may require Licensee to, or
Licensee may voluntarily, suspend marketing and sales of Licensed Products
in such blocked country, and this Agreement shall be deemed amended
accordingly.
9.4. Payment Reports. Within [**] days after the close of each Calendar
Month, Licensee will prepare and deliver to Licensor one or more Royalty
report forms, each in the form attached hereto as Exhibit D, as such form
shall be modified by Licensor from time to time, together with all other
information required by Licensor hereunder (the "Royalty Report Form"). A
Royalty Report Form will be due on a calendar monthly basis whether or not
Royalties are payable to Licensor hereunder.
9.5. Report Information.
(a) Licensee shall furnish to Licensor, concurrently with the
delivery of the Royalty Report Form pursuant to Subparagraph 9.4
hereinabove, a full and complete statement, duly certified by an
officer of Licensee to be true and accurate, providing at least the
following information: [**].
(b) Each and every item of financial information required to be
submitted by Licensee pursuant to Subparagraphs 9.5(a)(i) through
9.5(a)(ix) hereinabove shall be broken down into the following
categories: the Calendar Month to which the statement applies;
cumulative from the inception of the Calendar Year to which such
statement applies; and cumulative from and after the date of this
Agreement to the close of the Calendar Month to which such statement
applies; and such information shall be aggregated as follows: [**].
(c) All amounts to be reported pursuant to Subparagraph 9.5(a) above
shall be first stated in the local currency in which the pertinent
Net Sales occurred. If several currencies are involved in any
reporting category, that category shall be broken down by each such
currency. Next to each local currency amount shall be set forth the
equivalent amount stated in U.S. Dollars, and the rate of exchange
required to be used hereunder in making the conversion calculation.
(d) Each such statement and Royalty Report Form shall be provided by
Licensee, at its sole expense, to Licensor in ASCII format or any
other electronic media format as Licensor may reasonably request.
(e) Upon Licensor's reasonable written request, Licensee shall make
available to Licensor such relevant data and information which
Licensor shall reasonably require to substantiate any Royalty Report
Form submitted to Licensor, the proper exercise of the rights
licensed to Licensee hereunder and/or the operation and
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performance of Licensor's duties and obligations hereunder. Such
data and information shall be included within the definition of
"Licensee's Records" set forth in Subparagraph 11.1 hereinbelow and
shall include, [**].
10. TAXES.
Except as provided in the remainder of this Paragraph 10, no withholding
taxes of any kind may be deducted from any Royalties or gross amounts
derived with respect to the sale of a Licensed Product. If and only to the
extent that Royalties hereunder are remitted directly to Licensor from a
country having a tax withholding requirement, then Licensee is authorized
by Licensor to deduct and to withhold from Royalties generated from such
country any withholding tax imposed by such country at the local statutory
rate or lower income tax convention rate, if applicable; provided,
however, that the Royalties due to Licensor with respect to the "sale" (as
defined in Subparagraph 8.2 hereinabove) of any particular Licensed
Product may not be reduced by withholding taxes from more than one
country, that such tax payments made by Licensee on behalf of Licensor may
not reduce the amounts payable and paid to Licensor under this Agreement
by more than the applicable withholding taxes of the relevant country and,
that Licensee shall promptly provide Licensor with notification of and
official receipts for all tax payments made on Licensor's behalf pursuant
to this Agreement. If, within forty-five (45) days after each payment is
made hereunder Licensor has not received either: (a) an authenticated
withholding tax certificate (stamped by the appropriate tax authority); or
(b) written evidence by Licensee (in form reasonably satisfactory to
Licensor) that Licensee has filed an application to receive a withholding
tax certificate from such tax authority, then Licensee shall immediately
pay to Licensor an amount equal to the amount previously withheld by
Licensee from such payment, divided by 1 minus the applicable withholding
tax rate, (e.g., if the tax withheld was $15, and the withholding tax rate
was 15%, then Licensee shall remit to Licensor $15 divided by 85%, or
$17.65).
11. RECORDS AND AUDITS.
11.1. Licensee's Records. During the Term and for not less than seven (7)
years following the transactions to be recorded, but in the event of a
pending audit conducted by Licensor hereunder of any of Licensee's Records
for a period ending not earlier than the date on which such audit is
finally resolved with respect to the Licensee's Records subject to such
audit, Licensee will maintain complete and accurate records of all
transactions relating to this Agreement and/or Licensee's rights and/or
obligations hereunder including, but not limited to, the data and
information described in Subparagraphs 9.5(a)-(e) hereinabove
(collectively "Licensee Records") and Licensee will contractually obligate
all Sublicensees and Manufacturers to maintain complete and accurate
records of all transactions relating to this Agreement, the Sublicense
Agreement or the Manufacturing Agreement, and/or the rights or obligations
of any Sublicensees and/or Manufacturer, as the case may be, including,
but not limited to, the data and information described in Subparagraph
9.5(e) hereinabove. No information pertinent to Licensee's rights and
obligations under or performance in connection with third party agreements
shall be
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considered Licensee Records, except and to the extent that such third
party agreements relate to Licensed Products and/or Licensee's obligations
hereunder.
11.2. Audits. Licensor or any independent certified public accountant
selected by Licensor may from time to time, but not more frequently than
one time per Calendar Year, upon reasonable notice and during normal
business hours, inspect (a) with respect to audits conducted in the United
States, at Licensee's main headquarters located in the United States any
and all Licensee Records maintained by Licensee in the United States and
such audit samples from other countries as may be reasonably requested by
Licensor and (b) with respect to audits outside of the United States,
wherever such records are kept outside of the United States. If, upon
performing such audit, it is determined that Licensee has underpaid
Licensor, Licensee will immediately make full payment under Paragraph 8
hereinabove. If the amount of underpayment exceeds the greater of [**] of
the payments due Licensor in the period being audited and [**], Licensee
will bear all direct, reasonable out-of-pocket expenses and costs related
to such audit in addition to its obligation to make full payment under
Paragraph 8 hereinabove. All underpayments and late payments will be
subject to interest charges, at the rate specified for late payments in
Subparagraph 9.1 hereinabove, calculated from the due date to the actual
payment date. The obligation to maintain records and to grant Licensor and
Licensor's representatives access to such records shall survive the
expiration or earlier termination of this Agreement. All non-public
information elicited by Licensor pursuant to Subparagraph 9.5(e) and
through audits pursuant to this Subparagraph 11.2 shall be subject to
Paragraph 16.1 hereinbelow as Confidential Information of Licensee.
12. COPYRIGHT AND TRADEMARK NOTICES.
12.1. Copyright and Trademark Notices. Licensee will place the following
notice on each unit of a Licensed Product and on all Consumer Marketing,
promotional material, packaging and any other material using the Licensed
Property:
TM or (R) (if verified in writing by Licensor) & (C) (______) LUCAS.
In English or local language: All Rights Reserved. Used under
Authorization)
( ) First year of Publication.
If this notice cannot be used due to space limitations, Licensor will
supply an alternative notice upon request. Licensee agrees that trademarks
arising from the Licensed Property will only be displayed in a form and
manner approved by Licensor. Licensor reserves the right to require
changes in the required notice if Licensor in its reasonable judgment
deems changes required by applicable law. [**]
12.2. First Use. Licensee agrees to provide Licensor with the date of
first use of each Licensed Product pursuant to this Agreement in each
country of the Territory, together with documentation evidencing the first
sale or shipment of such Licensed Product. In addition, Licensee shall
submit to Licensor at the beginning of each selling season, a
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statement on Licensor's standard form describing the Licensed Products
that are being offered for sale.
13. OWNERSHIP.
13.1. Ownership of Copyright Materials. Licensor represents and warrants
that it has the right to grant the license granted to Licensee in this
Agreement. Licensee acknowledges and agrees that, as between Licensor and
Licensee, the Licensed Property is owned solely and exclusively by
Licensor. Further, Licensee acknowledges and agrees that if and to the
extent that any Licensed Products, Designs, Consumer Marketing Materials,
Production Materials or other works are based on, derived from or
incorporate the Licensed Property or any part thereof (all of the
foregoing to such extent being individually and collectively the
"Copyright Materials"), such Copyright Materials will immediately from the
inception of creation become the property of Licensor and be owned solely
and exclusively by Licensor. Licensor's ownership rights under this
Subparagraph 13.1 will include any and all copyrights and any other
intellectual property rights in the Licensed Property and in any Copyright
Materials. Licensor acknowledges and agrees that, as between Licensor and
Licensee, Licensee is the owner of all tangible rights in and to any
intellectual property created by or on behalf of Licensee that does not
constitute any Copyright Material, any physical inventory of Licensed
Products and, subject to Subparagraph 13.2 hereinbelow, in all Production
Materials.
13.2. Ownership of Production Materials. In addition to Licensor's other
rights and remedies hereunder, if the Agreement, in whole or in part, is
terminated prior to the expiration of the Term then, at Licensor's sole
option exercisable within thirty (30) days following such expiration or
termination by written notice to Licensee, Licensor shall have the right:
(a) to cause Licensee to destroy and to cause any and/or all Licensee
Affiliates and/or Sublicensees to destroy any or all Production Materials,
[**]. "Production Materials" shall be defined as any and all physical
materials incorporating any element of the Licensed Property, tangible
tools, molds and printing plates used in the development or production of
the Licensed Products created pursuant to this Agreement which reproduce
any aspect of the Licensed Property, whether or not developed by or on
behalf of Licensee, a Licensee Affiliate, a Sublicensee, a Manufacturer or
a third party. Subject to the foregoing, Licensee also agrees that upon
Licensor's request, Licensee shall provide to Licensor satisfactory
evidence of the destruction of any or all Production Materials[**], and
that Licensor shall have the right at any time to enter the premises where
the Licensed Products (or their components) are stored or manufactured (to
the extent such premises are owned or controlled by Licensee or Licensee
Affiliate) to take inventory or witness the destruction of [**] any
Production Materials. Licensee shall not have any obligation to destroy or
cause the destruction of [**] any Production Materials that can be used by
Licensee without infringing or otherwise violating any of Licensor's
rights.
13.3. Assignment of Ownership.
(a) Assignment by Licensee. Licensee acknowledges that the
copyrights and all other proprietary rights in and to the Licensed
Property are exclusively owned
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by and reserved to Licensor. Licensee shall neither acquire nor
assert copyright ownership or any other proprietary right in the
Licensed Property or in any derivation, adaptation, variation or
name thereof. Without limiting the foregoing, Licensee hereby
assigns, and shall contractually obligate all entities with whom it
contracts relative to the creation, design or manufacture of a
Licensed Product or Copyright Material to assign to Licensor, all
right, title and interest which Licensee or any such other entity
may have in the Licensed Property or any Copyright Material
heretofore or hereafter created by Licensee, such other entity or by
any employee of Licensee or such other entity including, without
limitation, any copyrights and any other intellectual property
rights therein and the goodwill associated therewith. All such new
materials shall be included in the definition of "Licensed Property"
under this Agreement. Licensee acknowledges that said assignment
includes, without limitation, the right on Licensor's part to
license such materials outside the Territory during the Term and
anywhere thereafter, subject to the terms of this Agreement.
(b) Employment for Hire. Licensee acknowledges that the Licensed
Property is owned solely and exclusively by Licensor. All Copyright
Materials created or developed by any employee of Licensee shall be
prepared by such employee as an employee for hire of Licensee under
Licensee's sole supervision, responsibility and monetary obligation
and shall be on a "work for hire" basis within the meaning of the
U.S. Copyright Act of 1978, as amended. Licensee has caused or shall
cause such Copyright Materials to be "works made for hire" (as that
term is understood in the U.S. Copyright Law) within the scope of
such employee's employment for Licensee, and such Copyright
Materials, and the results and proceeds of such employee's services
are freely assignable by Licensee hereunder.
(c) Assignment of Third Parties. Prior to and as a condition of
retaining any third party who is not an employee of Licensee to
assist with or contribute to the development or creation of any
Copyright Materials, or any part thereof, Licensee, at its sole
expense, will obtain from such third party a complete, executed
written assignment of all right, title and interest in such
Copyright Materials substantially in the form attached hereto as
Exhibit E.
13.4. Further Assurances. During and after the Term, at Licensor's
request, Licensee will assist and cooperate, and will cause all of its
employees and contractors to assist and cooperate, with Licensor in all
reasonable respects, including, without limitation, by executing documents
(including the form attached hereto as Exhibit E), by giving testimony,
executing documents and taking such further acts reasonably requested by
Licensor to acquire, transfer, maintain, perfect and enforce copyright,
trademark, trade secret, contract rights and other legal protection for
the Licensed Property, any Copyright Materials and/or Licensor's interest,
if any, in Production Materials. Further, if Licensee fails to comply with
any of the obligations set forth above within ten (10) business days of
Licensor's request, Licensee hereby appoints the officers of Licensor as
its attorney-in-fact (which appointment is irrevocable and coupled with an
interest) to execute documents on behalf of Licensee and its employees and
contractors for this limited purpose; provided,
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however, that Licensor will indemnify and hold harmless Licensee for
damages resulting from Licensor's knowingly making a material misstatement
in connection with its exercise of such power of attorney. Licensee shall
not make any representations or do any act which may be taken to indicate
that it has any right, title or interest in or to the ownership or use of
the Licensed Property except under the terms of this Agreement. Nothing
contained in this Agreement shall give Licensee any right, title or
interest in or to the Licensed Property except for the rights licensed
hereunder, subject to the terms and conditions hereof.
13.5. Moral Rights. Licensee hereby, on behalf of itself, its employees
and its contractors, irrevocably transfers and assigns to Licensor, and
waives and agrees never to assert, any and all "Moral Rights" (defined
hereinbelow) Licensee or its or their respective employees or its
contractors may have in or with respect to the Licensed Property and/or
any Copyright Materials.
13.6. Quality Assurance. Licensee shall ensure that the form, quality and
standard of all materials used in the connection with the Licensed
Products conforms to that of the samples approved by Licensor pursuant to
this Agreement and complies with all good manufacturing practices relevant
to the Licensed Products including methods of storage and with all laws
and regulations relevant to the Licensed Products including any relevant
regulations concerning the manufacture, sale or promotion or labeling or
marking of such Licensed Products. Any modifications by or on behalf of
Licensee to the Licensed Products previously approved above shall be
submitted to Licensor for written approval as if the same were new and
without approval.
13.7. Right To Inspect. Licensee shall allow Licensor and/or its duly
authorized representative the right to inspect samples of the Licensed
Products at any time and on reasonable notice, and shall afford Licensor
every reasonable assistance and allow or use reasonable efforts to procure
them access to any premises of Licensee or other premises where the
Licensed Products are being created or held on behalf of Licensee, for so
long as any use is made of the Licensed Property.
13.8. [**].
14. PROMOTIONAL VALUE, TRADEMARK RIGHTS AND GOODWILL.
14.1. Promotional Value. Licensee acknowledges that Licensor is entering
into the Agreement not only in consideration of the Royalties to be paid,
but also for the promotional value to be secured by Licensor for the
Pictures as a result of the manufacture, sale and distribution by Licensee
of Licensed Products and the Consumer Marketing and promotion of the
Licensed Products.
14.2. Trademark License Agreement. Licensee will execute the Trademark
License Agreement attached hereto as Exhibit A, and Licensee's use of
Licensor Trademarks will be subject to the terms and conditions of the
Trademark License Agreement.
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14.3. Goodwill. Licensee recognizes the great value of the goodwill
associated with the Licensed Property and acknowledges that such goodwill
exclusively belongs to Licensor and that the Licensed Property has
acquired a secondary meaning in the mind of the public. Further, any and
all goodwill arising from use of the Licensed Property by Licensee, a
Licensee Affiliate, a Sublicensee and/or a Manufacturer pursuant to this
Agreement will inure to Licensor's sole benefit.
14.4. Registrations. Except with the written approval of Licensor,
Licensee will not register or attempt in any country to register
copyrights in, or register as a trademark, service mark, design patent or
industrial design, or business designation, any of the Licensed Property,
Licensor Trademarks or derivations or adaptations thereof, or any word,
symbol or design which is so similar thereto as to suggest association
with or sponsorship by Licensor or by any Licensor-Related Entities.
15. APPROVAL OF MANUFACTURERS.
15.1. Approval of Manufacturer Agreement. Licensee shall have no right to
sublicense the right to manufacture any Licensed Product hereunder to any
entity (including to a Licensee Affiliate that is not a Permitted Licensee
Affiliate or any other third party) unless and until: (a) Licensor has
provided Licensee with its prior written approval of the proposed
manufacturer and the terms and conditions of any and all agreements
between Licensee and any proposed manufacturer (and any modifications
thereof), whether oral or written, for and/or to the extent relating to
the manufacture of Licensed Products (individually and collectively, the
"Manufacturing Agreement"); (b) such manufacturer shall have executed an
Approval of Manufacturer Agreement with Licensor in substantially the form
of Licensor's then-current form for such agreement, as such form may be
revised by Licensor in its reasonable discretion from time to time (any
such manufacturer approved by Licensor for which an Approval of
Manufacturer Agreement is fully executed, a "Manufacturer"); (c) such
Manufacturer shall agree in the Manufacturing Agreement to be fully bound
at all times by the following subparagraphs of this Agreement adjusted as
appropriate: 3.7(b), 3.8, 11.1, 12, 13.2, 13.3, 13.4, 13.5, 13.6, 13.7,
13.8, 14, 15, 16 and 19.1(e); (d) such Manufacturer shall execute a
Trademark License Agreement with Licensor; and (e) such manufacturer shall
further agree in such Manufacturing Agreement that Licensor shall be a
third party beneficiary thereof. A copy of Licensor's current form of
Approval of Manufacturer Agreement is attached hereto as Exhibit F. The
manufacturer of Licensed Products by any third party shall in no manner
whatsoever affect Licensee's obligations hereunder and Licensee shall
execute, and ensure that each prospective Manufacturer executes, the
Approval of Manufacturer Agreement. The failure by a Manufacturer to
adhere to the terms of the Approval of Manufacturer Agreement or the
Manufacturer Agreement shall not be imputed to Licensee unless such
Manufacturer is a controlled affiliate of Licensee or Licensee fails to
comply with its obligations under Subparagraph 15.2 hereinbelow.
15.2. Enforcement of Manufacturing Agreement. Licensee agrees to include
and strictly enforce in each Manufacturing Agreement all of the terms and
conditions of this Agreement relevant to the manufacture of the Licensed
Products. Licensee shall advise
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Licensor of any material breach thereof by a Manufacturer and of any
corrective action taken by Licensee or by such Manufacturer, as well as
the results thereof. Licensee shall use its best efforts to cause such
Licensee to cure such breach and, at the written request of Licensor
following such breach, Licensee shall terminate such Manufacturing
Agreement, subject to the same cure provisions as are applicable to
Licensee in Subparagraph 22.2(a) hereinbelow. Licensee hereby appoints
Licensor its attorney-in-fact solely for the purpose of sending a notice
of termination, subject to the immediately preceding sentence, in order to
terminate such Manufacturing Agreement or any specific rights thereunder,
which appointment is irrevocable and coupled with an interest; provided,
however, that Licensor will indemnify and hold harmless Licensee for
damages resulting from knowingly making a material misstatement in
connection with the exercise of such power of attorney.
16. CONFIDENTIALITY.
16.1. Confidential Information. The parties hereto agree that the material
terms and conditions contained in this Agreement and/or in any other
agreement between Licensor and Licensee related to the Licensed Products
are confidential ("Confidential Information"). In addition to Confidential
Information, the parties agree that any and all information and material
concerning or pertaining to the following are confidential and proprietary
to Licensor (collectively, "Special Confidential Information"): (i) any
script, concept, schedule of Licensor or of any Licensor-Related Entity
(including, without limitation, any pre-production, production or
post-production schedule or release schedule for any Prequel or for any
derivative work thereof) and (ii) any Copyright Material and/or any
Production Material (including without limitation, any artwork, design or
prototype created for any Licensed Product to the extent incorporating any
element of the Licensed Property). The parties hereto acknowledge that all
elements of any Marketing Plan constitute Confidential Information of
Licensee and shall be treated as such hereunder. Notwithstanding the
foregoing, the parties acknowledge that certain elements of any Marketing
Plan may be shared by Licensor with certain persons or categories of
persons but not others and Licensor and Licensee shall mutually agree as
to the elements of such Marketing Plan that may be shared with certain
persons and the identity of such persons.
Without the prior written consent of the party disclosing Confidential
Information or Special Confidential Information (the "Disclosing Party"),
the recipient of any Confidential Information or Special Confidential
Information (the "Recipient") shall not use, copy, or disclose, or
authorize or permit the use, copy or disclosure of, any Confidential
Information or Special Confidential Information; provided, that
Confidential Information may be disclosed to the Recipient's employees,
directors, officers and shareholders, attorneys, financial advisors,
auditors, agents and/or accountants acting in such capacities, and then
only if such disclosure is solely for the purpose of effectuating the
terms and conditions of this Agreement, and such individuals or entities
shall be informed by the Recipient of the confidentiality of such
Confidential Information and shall be directed by the Recipient in writing
to treat such Confidential Information confidentially and to restrict the
use of such Confidential Information to said purpose. In addition to the
foregoing, Licensee will not disclose any Special Confidential Information
to any third party for any
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purpose (including the exercise of its rights or performance of its
obligations hereunder) unless Licensor otherwise agrees and such third
party has executed a written confidentiality agreement in form and
substance acceptable to Licensor, which confidentiality agreement shall
restrict the use of any Special Confidential Information to the minimal
extent necessary to effectuate the terms and conditions of this Agreement
as they apply to such third party and requires such third party to use its
best efforts to maintain all Special Confidential Information in the
strictest confidence.
Licensee further agrees and acknowledges that Licensor's sole purpose in
disclosing Special Confidential Information to Licensee or allowing
Licensee access to Special Confidential Information is for the sole
purpose of aiding Licensee in performing its obligations hereunder.
Licensee shall receive and hold all Special Confidential Information in
the strictest confidence and Licensee acknowledges, represents, warrants
and agrees to use its best efforts to protect the confidentiality of all
Special Confidential Information.
Licensee's obligations pursuant to Subparagraph 16.1 shall not apply to
any Confidential Information or Special Confidential Information which:
(A) is or becomes publicly available or part of public domain through no
fault of the Recipient or of its employees; (B) is authorized in writing
by Licensor to become publicly known; (C) is received from a third party
authorized by Licensor to receive such information without restriction and
without breach of this Agreement; or (D) is the minimum amount required to
be publicly disclosed in order to comply with any applicable law,
regulation, stock exchange rule, subpoena, or valid order of a court of
competent jurisdiction.
16.2. Publicity or Announcements. Subject to subparagraph 16.1(D)
hereinabove, without limitation of the foregoing and notwithstanding
anything to the contrary contained in this Agreement or otherwise, no
announcements, press releases, or publicity about the existence of or any
terms of this agreement, the relationship of the parties or about the
rights relating to the Licensed Products to be exercised hereunder shall
be made or authorized to be made by Licensor, any Licensor-Related Entity,
Licensee or any Licensee Affiliate without the prior written approval of
Licensor and Licensee in each instance.
16.3. Rights of Publicity. Except as expressly set forth herein, Licensee
acquires no right to use and will not use without Licensor's prior written
approval the characters, artwork, designs, trade names, copyrighted
materials, trademarks or service marks of Licensor or any Licensor-Related
Entities in any Consumer Marketing, publicity or promotion, to express or
imply any endorsement by Licensor or any Licensor-Related Entities of
Licensee's services or products, or in any other manner except as
expressly authorized in this Agreement. The foregoing provision shall
survive expiration or termination of this Agreement.
17. PRODUCT SAMPLES.
17.1. General. Upon commercial release of each version of a Licensed
Product SKU (including each language version or modified version) by or
for Licensee, Licensee will furnish to Licensor at no cost the following
items: [**].
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If Licensor requests a reasonable number of additional items, Licensee
will supply to Licensor such samples at Licensee's direct out-of-pocket
cost of manufacture.
18. INTENTIONALLY DELETED.
19. REPRESENTATIONS AND WARRANTIES.
19.1. Licensee. Licensee represents and warrants that:
(a) Hasbro, Inc. has the full power and authority to enter into this
Agreement on behalf of Licensee and all Permitted Licensee
Affiliates and that Licensee including all Permitted Licensee
Affiliates have the full power and authority to perform all of
Licensee's material obligations pursuant to this Agreement;
(b) it is and shall remain throughout the term a corporation in good
standing in the jurisdiction of its incorporation;
(c) it will not harm or misuse the Licensed Property or bring the
Licensed Property into disrepute;
(d) except as specifically provided in this Agreement, it will not
create any expenses chargeable to Licensor without the prior written
approval of Licensor;
(e) it will comply in all material respects with all laws and
regulations relating or pertaining to the manufacture, production,
distribution, sale, Consumer Marketing and use of the Licensed
Property, the Licensed Products and Copyright Materials, and will
maintain the highest quality and standards of Licensee as of the
date of this Agreement;
(f) unless the parties have otherwise agreed pursuant to a mutually
approved Marketing Plan with respect to a particular Sub-Territory,
it will diligently and continuously at all times throughout the Term
market and distribute the Licensed Products in each country
throughout the Territory;
(g) each and every Permitted Licensee Affiliate set forth in
Schedule I meets the definition of a Licensee Affiliate in
Subparagraph 24.69 hereinbelow; and
(h) this Agreement has been duly authorized, executed and delivered
by Licensee and constitutes the legal, valid and binding obligation
of Licensee, enforceable against Licensee in accordance with its
terms, subject to Subparagraph 8.3 hereinabove.
19.2 Licensor. Licensor represents and warrants that:
(a) Licensor has the full power and authority to enter into this
Agreement and to perform all of Licensor's material obligations
pursuant to this Agreement;
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(b) this Agreement has been duly authorized, executed and delivered
by Licensor and constitutes the legal, valid and binding obligation
of Licensor, enforceable against Licensor in accordance with its
terms; and
(c) [**].
20. INDEMNITIES.
20.1. By Licensor. Subject to Subparagraph 20.3 hereinbelow, Licensor
shall indemnify and hold harmless Licensee from any and all loss,
liability, damage, cost or expense (including reasonable counsel fees and
costs, whether or not in connection with litigation) to the extent arising
out of any claims or suits brought or made against Licensee by reason of
any breach or alleged breach by Licensor of any warranty, covenant or
obligation contained in this Agreement. Licensee shall provide Licensor
with prompt written notice, cooperation and assistance relative to any
such claim or suit. Licensor shall have the option to undertake and
conduct the defense of any suit so brought, provided that Licensor
regularly consults with Licensee regarding such defense. Licensor will not
enter into any settlement of any claims or suits without the prior written
consent of Licensee, which consent shall not be unreasonably withheld. If
Licensor undertakes such defense and Licensee nevertheless retains its own
counsel to monitor such defense, Licensee shall be solely responsible for
the fees and any other expenses related to such counsel. Licensee shall
not, however, be entitled to recover for lost profits. This agreement to
indemnify shall survive the expiration or earlier termination of this
Agreement.
20.2. By Licensee. Except for Licensor's obligations under Subparagraph
20.1 above, Licensee shall indemnify and hold harmless Licensor and all
"Licensor-Related Entities" (as hereinafter defined) from any and all
loss, liability, damage, cost or expense (including reasonable counsel
fees and costs, whether or not in connection with litigation) to the
extent arising out of any claims or suits brought or made against Licensor
or any Licensor-Related Entities arising out of or in connection with:
(a) any activities of Licensee related to this Agreement or to any
of the matters herein contained;
(b) any alleged defects or inherent dangers in the Licensed
Products;
(c) any breach or alleged breach by Licensee of any warranty,
covenant or obligation contained in this Agreement;
(d) any infringement or violation of any copyrights, patents,
trademarks, trade secrets or other intellectual property or
proprietary rights of any third party in connection with the
Licensed Products, Copyright Materials or Production Materials
except with respect to the Licensed Property (excluding any material
added or changed by or on behalf of Licensee);
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(e) libel, slander, or other forms of defamation except with respect
to the Licensed Property (excluding any material added or changed by
or on behalf of Licensee);
(f) plagiarism, piracy or unfair competition resulting from the
alleged unauthorized use of titles, formats, ideas, characters,
plots, performers, or other material except with respect to the
Licensed Property (excluding any material added or changed by or on
behalf of Licensee); and/or
(g) breach of contract, implied in fact or in law, resulting from
the alleged submission, acquisition or use of program, musical or
literary material used by Licensee.
Licensor shall provide Licensee with prompt written notice, cooperation
and assistance relative to any such claim or suit. Licensee shall have the
option to undertake and conduct the defense of any suit so brought,
provided, that Licensee regularly consults with Licensor regarding such
defense. Licensee will not enter into any settlement of any claims or
suits without the prior written approval of Licensor, which consent shall
not be unreasonably withheld. If Licensee undertakes such defense and
Licensor nevertheless retains its own counsel to monitor such defense,
Licensor shall be solely responsible for the fees and any other expenses
related to such counsel. This agreement to indemnify shall survive the
expiration or earlier termination of this Agreement.
20.3. [**].
20.4. Notification. Licensee and Licensor agree to give each other prompt
written notice of any claim or suit which may arise under the indemnity
provisions set forth above. Without limiting the foregoing, Licensee
agrees to give Licensor written notice of any product liability claim made
with respect to any Licensed Product within seven (7) days of Licensee's
receipt of notice thereof.
20.5. Intellectual Property Protections. At Licensor's request, Licensee
shall assist Licensor, to the extent reasonably necessary, in protecting
any of Licensor's rights to the Licensed Property. Licensor may commence
or prosecute any claims or suits in its own name or (with the approval of
Licensee, which approval will not be unreasonably withheld) in the name of
Licensee or may join Licensee as a party thereto. With respect to any
apparent infringement of the Licensed Property by any third party,
Licensor and Licensee will discuss the appropriate enforcement steps and
which steps are taken shall be determined by Licensor in its reasonable
discretion. If Licensor and Licensee both agree to participate in pursuing
any protection or enforcement action, then Licensor and Licensee shall
share equally all out-of-pocket costs and expenses related to any such
action (including, without limitation, attorneys' fees and costs).
Reimbursement payments required pursuant to this Subparagraph 20.5 from
one party to the other not paid within thirty (30) days following receipt
of invoices for such payments will accrue interest charges from the due
date through the date of payment at an interest rate equal to three
percent (3%) over the prime lending rate set by the Bank of America
N.T.S.A., or the
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maximum legal rate, if such maximum legal rate is lower, and shall be
payable upon demand. In the event any monies are recovered from any such
action which are in excess of the costs and expenses of such action, then
such monetary recoveries shall be shared equally between Licensor and
Licensee. If Licensor declines to participate in or otherwise pursue any
enforcement, Licensee may take steps to do so, provided that Licensee
first obtains Licensor's prior written approval. Licensee in such
circumstances agrees to provide current reports regarding the status of
any action or negotiations concerning such alleged infringing activity,
and shall proceed in consultation with Licensor and Licensor's counsel.
Licensee's choice of counsel in any such proceeding shall be subject to
Licensor's prior reasonable written approval. Licensee shall not settle or
compromise any claim without Licensor's prior written approval, such
approval not to be unreasonably withheld. Should Licensee recover any sums
from the alleged infringer, it shall be entitled to retain the proceeds of
any such actions to the extent of Licensee's reasonable out-of-pocket
expenses for the proceeding, and the remainder will be shared equally
between Licensee and Licensor.
21. INSURANCE.
21.1. Insurance. Licensee will, throughout the Term and for a period no
less than three (3) years following the expiration or termination of this
Agreement, maintain insurance in the amounts, for the purposes set forth
in and in accordance with this Paragraph 21, covering any and all claims
brought anywhere in the world relating to the Licensed Products, as
follows:
(a) Product Liability and Advertising Injury Liability. Licensee
will carry Product Liability and Advertising Injury Liability
Insurance obtained from a reputable carrier with a Best's rating of
"A" or better, naming Licensor, George W. Lucas, Jr. and all
Licensor-Related Entities as additional insureds, and covering any
and all claims, demands and causes of action for personal injury or
property damage arising out of or purporting to arise out of any
defects in or failure to perform by any Licensed Product or arising
out of or purporting to arise out of any advertising and/or any
physical or intangible material used in connection therewith in a
minimum amount of [**] combined single limit for each occurrence for
personal injury and property damage.
(b) [**]
21.2. Notification. Each policy shall provide for prompt written notice
(not to exceed thirty [30] days) to Licensor from the insurer by
registered mail, return receipt requested, in the event of any material
modification, cancellation or termination of the policy referred to in
Subparagraph 21.1(a) hereinabove. Licensee will furnish to Licensor within
thirty (30) business days after the date of execution of this Agreement a
Certificate of Insurance naming Licensor, George W. Lucas, Jr., and all
Licensor-Related Entities as additional insureds on said policy.
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21.3. Compliance. Licensee's compliance with this Paragraph 21 in no way
affects Licensee's indemnity obligations, except to the extent that
Licensee's insurance company actually pays Licensor amounts which Licensee
would otherwise be obligated to pay Licensor.
22. EXPIRATION AND TERMINATION.
22.1. Term. This Agreement will continue in full force and effect during
the Term, unless terminated earlier in accordance with the provisions of
this Agreement, except with respect to those matters which by the terms of
this Agreement or by their nature survive termination or expiration.
22.2. Events of Termination. Without prejudice to any other right or
remedy available to Licensor, Licensor will have the right to terminate
this Agreement immediately upon written notice to Licensee:
(a) if Licensee breaches any of the material terms of this Agreement
and, if such breach is curable, and is not corrected within
twenty-five (25) days after Licensor sends Licensee written notice
thereof (or, in the event of a curable breach which cannot be
corrected within twenty-five [25] days, if Licensee fails to
commence such correction within twenty-five [25] days and thereafter
diligently prosecutes it to completion);
(b) if Licensee becomes insolvent or generally fails to pay, or
admits in writing its inability to pay its debts as they become due,
or makes any assignment for the benefit of creditors, or files a
petition in bankruptcy, or is adjudged bankrupt, or is placed in the
hands of a receiver, or if the equivalent of any such proceedings or
acts occurs, though known by some other name or term;
(c) if Licensee becomes the subject of a voluntary or involuntary
petition in bankruptcy or any involuntary proceeding relating to
insolvency, receivership, liquidation or composition for the benefit
of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing; or
(d) if Licensee attacks the title of Licensor in and to any Licensed
Property (including, without limitation, any copyright or trademark
pertaining thereto) or Licensee attacks the validity of any license
granted hereunder.
22.3. Effect of Expiration or Termination.
(a) Cessation and Delivery. Upon the expiration or earlier
termination of this Agreement, subject to Subparagraph 22.3(c)
hereinbelow:
(i) Licensee shall:
(A) immediately cease and cause the cessation of all of
its activities hereunder respecting the Licensed
Property including,
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without limitation, the design, development,
manufacture, sale, Consumer Marketing, and distribution
of Licensed Products and, within thirty (30) days after
such expiration or termination, send Licensor a complete
inventory report of Licensed Products; and
(B) subject to the provisions of Subparagraph 13.2
hereinabove, at Licensor's election, [**]:
(1) [**]
(2) furnish Licensor with a sworn certificate of
destruction, signed by an officer of Licensee.
Without limitation of its rights and remedies,
Licensor shall have the right to enter the
premises where the Licensed Products are located
(to the extent such premises are controlled by
Licensee or a Licensee Affiliate) to verify
inventory of Production Materials, [**].
Licensee shall have no further right to exercise any of the
rights licensed hereunder or otherwise acquired in relation to
this Agreement. Licensee agrees that its failure to stop in
all respects the manufacture, sale and/or distribution upon
the termination of this Agreement will result in immediate
irreparable damage to Licensor for which there is not adequate
remedy at law, and in the event of such failure by Licensee,
Licensor shall be entitled to seek injunctive relief in
addition to its other rights and remedies in such event.
Licensor shall be entitled to recover from Licensee, in
addition to any other remedies in the event of material
default, reasonable attorneys' fees, costs and expenses,
including collection agency fees incurred by Licensor in the
enforcement of any provision hereof. Licensor's exercise of
any of the foregoing remedies shall not operate as a waiver of
any other rights or remedies which Licensor may have.
(ii) Licensee shall immediately cancel or terminate all
contracts, orders and requests for the manufacture, sale,
distribution or supply of any goods or services which involve
or may lead to any use, application or exploitation of the any
Licensed Product or the rights herein licensed or any part
thereof.
(b) Reversion of Rights. Upon the expiration or earlier termination
of this Agreement, subject to Subparagraph 22.3(c) hereinbelow, all
rights licensed to Licensee hereunder will immediately revert to
Licensor, Licensor may exploit such license rights itself or grant
such rights to any third party.
(c) Limited Sell-Off Rights. Licensee shall have the non-exclusive
right, for a period of ninety (90) days after expiration or earlier
termination of this Agreement (the "Sell-Off Period") to dispose of
its inventory of Licensed Products "in hand"
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or "in process" (as such terms are commonly understood in the U.S.
toy industry), which Licensed Products are manufactured during the
Term pursuant to orders actually received by Licensee from its
retail Customers prior to the close of the Sell-Off Period (the
"Final Orders"); provided, however, that:
(i) this Agreement has not been terminated for breach or any
other reason set forth in Subparagraph 22.2 hereinabove;
(ii) Licensee shall not manufacture (or authorize or permit
the manufacture of) Licensed Products after the expiration of
the Term;
(iii) Licensee shall not distribute or sell (or authorize or
permit the distribution or sale of) Licensed Products after
the expiration of the Sell-Off Period;
(iv) Licensee shall only distribute and sell Licensed Products
in amounts necessary to fulfill such Final Orders;
[**]
(d) Return of Confidential Information. Upon termination or
expiration of this Agreement, the Recipient of Confidential
Information will immediately return all Confidential Information
within such Recipient's possession or control and Licensee will
immediately return all Special Confidential Information received
from Licensor that is in Licensee's possession or control, and an
officer of Licensee or Licensor, as the appropriate party may be,
will certify to the other party in writing that such Recipient has
done so.
(e) Payments. Upon termination of this Agreement or upon expiration
of the Sell-Off Period, all monies owed Licensor will become
immediately due and payable by Licensee to Licensor.
22.4. No Damages for Termination. Licensor will not be liable to Licensee
for damages of any kind, including incidental or consequential damages, on
account of the expiration or termination of this Agreement in accordance
with the terms and conditions of this Agreement. Licensee waives any right
it may have to receive any compensation or reparations on account of
expiration or termination of this Agreement by Licensor in accordance with
the terms and conditions of this Agreement, other than as expressly
provided in this Agreement. Without limiting the generality of this
Subparagraph 22.4, Licensor will not be liable to Licensee, on account of
such termination or expiration, for reimbursement or damages for the loss
of goodwill, prospective profits or anticipated income, or on account of
any expenditures, investments, leases or commitments made by either party
or for any other reason whatsoever based upon or growing out of such
termination or expiration.
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23. RESERVED RIGHTS.
23.1. Licensor's Retained Rights. Notwithstanding anything to the contrary
contained in this Agreement or otherwise, Licensor retains all rights not
expressly licensed to Licensee pursuant to this Agreement, including,
without limitation, the right to manufacture, distribute and sell Gift
Market Product through the Gift Market [**].
23.2. Reversion of Rights. Notwithstanding anything to the contrary
contained in this Agreement or otherwise, the parties understand and agree
that
(a) if Licensee fails to manufacture, distribute and sell any of the
following applicable Licensed Products in any Sub-Territory on or before
December 31 of the Calendar Year in which the initial theatrical release
of Episode I within such Sub-Territory occurs, then all rights licensed to
Licensee hereunder with respect to such applicable Standard Toys in such
Sub-Territories shall terminate and shall immediately revert to Licensor:
Molding Compound Toys, Coloring Toys, Mechanical Design Toys, Craft Kits
or Novelty Candy; and
(b) if Licensee fails to manufacture, distribute and sell the following
Licensed Products in any Sub-Territory on or before the later of December
31, 2001 and the end of the second Calendar Year following the initial
theatrical release of Episode I in such Sub-Territory, then all rights
licensed to Licensee hereunder with respect to such applicable Licensed
Products pursuant to this Agreement for such Sub-Territory shall terminate
and shall immediately revert to Licensor: electronic organizers, personal
digital assistants and electronic diaries.
24. DEFINITIONS.
24.1. [**].
24.2. [**].
24.3. "Advance" has the meaning set forth in Subaragraph 7.1 hereinabove.
24.4. [**].
24.5. [**].
24.6. [**].
24.7. [**].
24.8. "Basic Figures" means [**].
24.9. "Audio Board Games" has the meaning set forth in Schedule II
hereinbelow.
24.10. "Blocked Funds" has the meaning set forth in Subparagraph 9.3
hereinabove.
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24.11. "Board Games" has the meaning set forth in Schedule II hereinbelow.
24.12. "Bundling" has the meaning set forth in Subparagraph 8.6
hereinabove.
24.13. "Calendar Month" means Licensee's fiscal month. Licensee's fiscal
month alternates between four (4) and five (5) week periods,
beginning on a Monday and ending on a Sunday, within Licensee's
fifty-two (52) or fifty-three (53) week Calendar Year.
24.14. "Calendar Quarter" means any of the following applicable
consecutive successive three (3) month period during a Calendar
Year: January 1 through and including March 31, April 1 through and
including June 30; July 1 through and including September 30; and
October 1 through and including December 31.
24.15. "Calendar Year" means the time period from the first Monday
following the last Sunday of the previous Calendar Year and
including the last Sunday of the Calendar Year, except with respect
to 1998 for which "Calendar Year" means the time period from
September 28, 1998 through and including December 27, 1998.
24.16. "Card Games" has the meaning set forth in Schedule II hereinbelow.
24.17. "Carrying Cases" has the meaning set forth in Schedule II
hereinbelow.
24.18. "Chain" means a group of twenty (20) or more retail store outlets.
24.19. "Classic Trilogy" has the meaning set forth in Subparagraph
24.68(a)(i) hereinbelow.
24.20. "Closeout Stores" means retailers that offer for sale a majority of
their inventory initially on a so-called "closeout" basis (as such
term is customarily understood in the U.S. toy industry).
24.21. [**].
24.22. "Confidential Information" has the meaning set forth in
Subparagraph 16.1 hereinabove.
24.23. "Consumer Marketing" means the solicitation and/or commercial
enticement for the sale of any product, good or article by means of
television, radio, print, outdoor, Internet, sweepstakes,
free-goods offers, cross-promotions with third parties (e.g.
PepsiCo) or other promotions directed to consumers, retailer
in-store display materials, point-of-purchase signage, roto print
advertisements, public relations efforts, or by any other means,
whether now or hereafter known, devised, invented or developed.
24.24. "Consumer Marketing Materials" has the meaning set forth in
Subparagraph 5.1(c) hereinabove.
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24.25. [**].
24.26. "Copyright Materials" has the meaning set forth in Subparagraph
13.1 hereinabove.
24.27. [**].
24.28. "Creative Play Toys" has the meaning set forth in Schedule II
hereinbelow.
24.29. [**].
24.30. "Customer" means an entity that is not a Licensee, a Licensee
Affiliate (including any Permitted Licensee Affiliate) or a
Sublicensee.
24.31. [**].
24.32. "Designs" has the meaning set forth in Subparagraph 5.1(b)
hereinabove.
24.33. "Disclosing Party" has the meaning set forth in Subparagraph 16.1
hereinabove.
24.34. "Dolls" has the meaning set forth in Schedule II hereinbelow.
24.35. "Dump" means to distribute a Licensed Product in a manner which
disparages the Licensed Property, materially diminishes the value of
Licensor's goodwill, trademark or tradename rights pursuant to any
applicable laws in the relevant country of the Territory [**].
24.36. "Electronic Retailers," means retailers that market and sell
products to consumers primarily through electronic media, including,
without limitation, by means of television (such as, without
limitation, QVC, HSN) or Internet.
24.37. [**].
24.38. [**].
24.39. [**].
24.40. "Electronic Target Games" has the meaning set forth in Schedule II
hereinbelow.
24.41. "Electronic Novelty Toys" has the meaning set forth in Schedule II
hereinbelow.
24.42. "Electronics/Hand-Held" or "E/H" has the meaning set forth in
Schedule II hereinbelow.
24.43. "Episode I" has the meaning set forth in Subparagraph 24.68(a)(ii)
hereinbelow.
24.44. "Episode II" has the meaning set forth in Subparagraph 24.68(a)(ii)
hereinbelow.
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24.45. "Episode III" has the meaning set forth in Subparagraph
24.68(a)(ii) hereinbelow.
24.46. "Episode I Outside Date" has the meaning set forth in Subparagraph
2.1(b)(i) hereinabove.
24.47. "Episode II Outside Date" has the meaning set forth in Subparagraph
2.1(b)(ii) hereinabove.
24.48. "Episode III Outside Date" has the meaning set forth in
Subparagraph 2.1(b)(iii) hereinabove.
24.49. [**].
24.50. "Event Window" means a minimum four (4) week period associated with
the theatrical release of a Picture, the video release of a Picture,
the Christmas Holiday, or other key promotional event.
24.51. "Excluded Distribution Channels" has the meaning set forth in
Schedule IV hereinbelow.
24.52. "Final Orders" has the meaning set forth in Subparagraph 22.3(c)
hereinabove.
24.53. [**].
24.54. "F.O.B. Royalty" has the meaning set forth in Subparagraph 8.4(a)
hereinabove.
24.55. "Games and Puzzles" or "G/P" has the meaning set forth in Schedule
II hereinbelow.
24.56. "Games Agreement" has the meaning set forth in Subparagraph 5.3
hereinabove.
24.57. "Gift Market" has the meaning set forth in Schedule IX hereinbelow.
24.58. "Gift Market Product" means the following: [**]
24.59. [**].
24.60. "Hand-Held Games" has the meaning set forth in Schedule II
hereinbelow.
24.61. [**].
24.62. [**].
24.63. [**].
24.64. [**].
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24.65. "Internet" means the computer-generated, computer-mediated or
computer-assisted transmission, reception, recordation or display
arising from any network or other connection of instruments or
devices now or hereafter known, devised, invented or developed
capable of transmission, reception, recordation and/or display (such
instruments or devices to include, without limitation, computers,
laptops, cellular or PCS telephones, pagers, PDAs, wireless
transmitters or receivers, modems, radios, televisions, satellite
receivers, cable networks, smart cards and set-top boxes).
24.66. [**].
24.67. "Licensed Products" means those products, goods and articles,
within the enumerated categories set forth in Schedule II attached
hereto, and which are based on or incorporating elements of the
Licensed Property.
24.68. "Licensed Property" means, subject to the terms, conditions and
restrictions contained in Licensor's or any Licensor Related
Entity's agreements with persons, firms or entities rendering
services or granting rights,
(a) the original titles, designs, character names and likenesses,
dialogue, music and sound effects, words, symbols, logographics and
the footage, photographs, artwork, visual representations of the
props, costumes, sets, special effects and any other original
creative elements which appear in, have become directly associated
with, and as are depicted in, the following motion pictures:
(i) those certain previously released theatrical motion
pictures (and the special editions thereof released
theatrically in 1997) entitled "STAR WARS: EPISODE IV - A NEW
HOPE," "STAR WARS: EPISODE V - THE EMPIRE STRIKES BACK" and
"STAR WARS: EPISODE VI - RETURN OF THE JEDI" (the "Classic
Trilogy"); and/or
(ii) each of the first three succeeding prequel theatrical
motion pictures to the Classic Trilogy tentatively entitled
"Episode I," "Episode II" and "Episode III," respectively
(each such prequel theatrical motion picture a "Prequel"
herein).
(Classic Trilogy and the Prequels are jointly, severally and
collectively referred to as the "Picture[s]");
(b) such original titles, designs, character names and likenesses,
dialogue, music and sound effects, words, symbols, logographics,
photographs, artwork, visual representation of the props, costumes,
sets, special effects, and any other original creative elements
which do not exist in the Pictures but which are embodied in games,
novels, comics, videogames, television programs or series (whether
live action or animated) based on and derived from the Pictures, to
the
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extent of Licensor's right to grant the rights licensed to Licensee
pursuant to Paragraph 1 hereinabove (collectively "Spin-Off
Properties"); and
(c) such original trademarks, tradenames, servicemarks and
servicenames owned by Licensor and arising out of and which have
become directly associated with the Pictures or Spin-Off Properties,
to the extent of Licensor's rights in each applicable country of the
Territory under such country's applicable trademark laws, including,
but not limited to, those specified in Schedule V (the "Licensor
Trademarks").
24.69. "Licensee Affiliate" means any entity that is directly or
indirectly controlled by, under common control with or that
controls Licensee (including, without limitation, any Permitted
Licensee Affiliate). For purposes of this definition of "Licensee
Affiliate," an entity will control another entity, or be deemed to
control another entity, if such entity: (a) has the ability to
elect a majority of the directors, trustees (or other managers) of
such other entity; (b) is a general partner or joint venturer of
such other entity; (c) directly or indirectly holds (or has power to
vote) twenty percent (20%) or more of the economic interests of such
other entity; or (d) directly or indirectly holds (or has power to
vote) five percent (5%) or more of the voting equity interests of
such other entity.
24.70. "Licensee's Records" has the meaning set forth in Subparagraphs
9.5(e) and 11.1 hereinabove.
24.71. "Licensor Channel" means [**].
24.72. INTENTIONALLY OMITTED.
24.73. "Licensor Trademarks" has the meaning set forth in Subparagraph
24.63(c) hereinabove.
24.74. "Licensor-Related Entities" means George W. Lucas, Jr. and all of
Licensor's present and future affiliated, related and/or subsidiary
entities, including, without limitation, Lucasfilm Ltd., LucasArts
Entertainment Company, Lucas Digital Ltd. and/or Lucas Learning Ltd.
and their respective divisions, subsidiaries, directors, employees,
officers, successors, assigns, agents and joint venturers.
24.75. "Manufacturer" has the meaning set forth in Subparagraph 15.1
hereinabove.
24.76. "Manufacturing Agreement" has the meaning set forth in Subparagraph
15.1 hereinabove.
24.77. [**].
24.78. [**].
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24.79. "Micro Toys" means the following: "Intermediate Vehicles," "Micro
Vehicles," "Micro Playsets," and "Micro Figures" (as such terms are
defined hereinbelow) [**].
24.80. [**].
24.81. "Minimum Sales Levels" has the meaning set forth in Subparagraph
4.2 hereinabove.
24.82. "Model Kits" has the meaning set forth in Subparagraph 3.4(a)
hereinabove.
24.83. [**].
24.84. "Moral Rights" means any rights to claim authorship of a work, to
object to or prevent the modification of a work, or to withdraw from
circulation or control the publication or distribution of a work,
and any similar right, existing under the law of any country in the
world or under any treaty.
24.85. "Net Sales" has the meaning set forth in Subparagraph 8.2
hereinabove.
24.86. "Non-Standard Board Games" means "Board Games," "Video Board Games"
and "Audio Board Games" (as such terms are defined in Schedule II
hereinbelow) [**].
24.87. "Novelty Candy" has the meaning set forth in Schedule II
hereinbelow.
24.88. "Other Licensed Products" means all Licensed Products other than
Basic Figures.
24.89. "Other Product" has the meaning set forth in Subparagraph 3.5
hereinabove.
24.90. "Permitted Licensee Affiliates" means those Licensee Affiliates set
forth in Schedule I and such additional Licensee Affiliates as
Licensor shall approve, if at all, in writing.
24.91. "Pictures" has the meaning set forth in Subparagraph 24.68(a)
hereinabove.
24.92. [**].
24.93. "Plush" has the meaning set forth in Schedule II hereinbelow.
24.94. [**].
24.95. [**].
24.96. "Prequel" has the meaning set forth in Subparagraph 24.68(a)(ii)
hereinabove.
24.97. "Prior Agreements" has the meaning set forth in Subparagraph 5.3
hereinabove.
24.98. [**].
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24.99. "Production Materials" has the meaning set forth in Subparagraph
13.2 hereinabove.
24.100. "Puzzles" has the meaning set forth in Schedule II hereinbelow.
24.101. "Puzzle Agreement" has the meaning set forth in Subparagraph 5.3
hereinabove.
24.102. [**].
24.103. "Recipient" has the meaning set forth in Subparagraph 16.1
hereinabove.
24.104. "Retail Entity" means a Customer which is ordinarily in the
business of selling goods and products directly to a public
(non-business) consumer.
24.105. "Role-Playing Toys" has the meaning set forth in Schedule II
hereinbelow.
24.106. "Royalties" means the applicable "Royalty Percentage" of "Net
Sales," as such terms are defined and set forth in Subparagraphs 8.1
and 8.2 hereinabove.
24.107. "Royalty Percentage" has the meaning set forth in Subparagraph 8.1
hereinabove.
24.108. "Royalty Report Form" has the meaning set forth in Subparagraph
9.4 hereinabove.
24.109. [**].
24.110. "Sell-Off Period" has the meaning set forth in Subparagraph
22.3(c) hereinabove.
24.111. [**].
24.112. [**].
24.113. [**].
24.114. "Special Confidential Information" has the meaning set forth in
Subparagraph 16.1 hereinabove.
24.115. "Spin-Off Properties" has the meaning set forth in Subparagraph
24.68(b) hereinabove.
24.116. [**].
24.117. "Standard Playsets" has the meaning set forth in Schedule II
hereinbelow.
24.118. "Standard Vehicles" has the meaning set forth in Schedule II
hereinbelow.
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24.119. "Standard Figures" has the meaning set forth in Schedule II
hereinbelow.
24.120. "Standard Toys" has the meaning set forth in Schedule II
hereinbelow.
24.121. "Sublicense Agreement" has the meaning set forth in Subparagraph
3.3 hereinabove.
24.122. "Sublicensee" has the meaning set forth in Subparagraph 3.3
hereinabove.
24.123. [**].
24.124. "Sub-Territory" has the meaning set forth Subparagraph 2.2
hereinabove.
24.125. [**].
24.126. [**].
24.127. "Term" has the meaning set forth in Subparagraph 2.1 hereinabove.
24.128. "Territory" has the meaning set forth in Subparagraph 2.2
hereinabove.
24.129. "Toy Agreement" has the meaning set forth in Subparagraph 5.3
hereinabove.
24.130. "Trademark License Agreement" has the meaning set forth in
Subparagraph 1.2 hereinabove.
24.131. [**].