DISCOVERY LICENSING, INC.
ONE DISCOVERY PLACE
SILVER SPRING, MARYLAND 20910
RETAIL LICENSE AGREEMENT
LICENSEE:
Name: Conspiracy Entertainment Corp.
Address: 612 Santa Monica Boulevard
Santa Monica, California 90401
Contact Person: Sims Ahmadi
Tel. No.: (310) 260-6150
Fax No.: (310) 260-1450
E-Mail: sirus@conspiracygames.com
Home page: http://www.conspiracygames.com
DISCOVERY LICENSING, INC. ("DISCOVERY")
Contact Person: Janice Honig
Senior Manager, Licensing
Address: One Discovery Place
Silver Spring, MD 20910
Tel. No.: (240) 662-4429
Fax No.: (240) 662-1981
E-Mail: Janicehonig@discovery.com
THIS RETAIL LICENSE AGREEMENT is entered into as of this 1st day of July, 2003
(the "Effective Date") by and between
(1) DISCOVERY LICENSING, INC., One Discovery Place, Silver Spring,
Maryland 20910 (hereinafter "DISCOVERY"); and
(2) CONSPIRACY ENTERTAINMENT CORPORATION, 604 Santa Monica Boulevard,
Santa Monica, California 90401 (hereinafter "Licensee").
WHEREAS, DISCOVERY and/or its parent Discovery Communications, Inc. own or
control certain trademarks, titles, logos, names, phrases, style elements,
symbols, designs, artwork, photography and visual representations and all
intellectual property and proprietary rights therein (collectively, the
"Licensed Materials") deriving from or related to the networks and channels
owned by DISCOVERY, Discovery Communications, Inc. or their respective
affiliates; and
WHEREAS, Licensee desires to obtain from DISCOVERY and DISCOVERY is
willing to grant to Licensee the non-exclusive right to use the Licensed
Materials in connection with the manufacture, distribution, sale, advertising
and promotion of the Licensed Products, upon the terms and conditions set forth
herein; and
WHEREAS, this agreement consists of two parts, namely Part I, the Special
Terms with Schedules, and Part II, the Standard Clauses, which together form a
single integrated contract (the "Agreement").
NOW THEREFORE, in consideration of the mutual promises, covenants and
undertakings contained in this Agreement, the parties agree as follows:
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PART I
SPECIAL TERMS WITH SCHEDULES
The following Special Terms and Schedules are made a part of and are
subject to the Standard Clauses of Part IT, and together form a single
integrated Agreement.
1. The Licensed Materials: The Licensed Materials shall be comprised of (i)
Licensed Marks; (ii) Licensed Characters; and (iii) Licensed Content, as
follows:
(i) The Licensed Marks shall be: MONSTER GARAGE.
Those certain other Trademarks, Names, Titles, Logos and Symbols
deriving from and related to the television series, MONSTER GARAGE
(the "Series"), as authorized by DISCOVERY from time to time.
(ii) The Licensed Characters shall be:
The Likeness, Image, Persona and Voice of Jesse James.
The Likeness, Image, Persona and Voice of other individuals
appearing in the Series, as authorized by DISCOVERY from time to
time.
(iii) The Licensed Content shall be:
Certain photography, artwork, images, designs and style elements
deriving from and related to the Series, as authorized and provided
by DISCOVERY from time to time.
For the avoidance of doubt, Licensee's use of the Licensed
Characters shall only take place within the context of the Series.
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2. The Licensed Products: The Licensed Products shall be:
o Computer and video games for the following platforms:
o Nintendo Game Boy Advance
o Sony PlayStation 1
o Sony PlayStation 2
It is understood by and between the parties that Licensee intends to
represent the Licensed Characters as action heroes (but within their
Series personas) in the Licensed Products.
3. The Territory: The Territory shall be: the United States and Canada.
4. Distribution Channels: Licensee shall distribute the Licensed Products
only within the following channels of trade:
o Retail (sales of Licensed Products to stores for resale to
consumers), limited to:
o Mass Market Stores
o Club Stores
o Specialty Stores
o Electronic Superstores
o Software Retailers
o Direct Response (sales whereby Licensed Products are sold directly
to consumers by direct mail or direct radio or television
advertising, but in no event does it include sale of Licensed
Products by telephone solicitation or delivery of Licensed Products
by downloading from online computer, Internet or other such
services)
o E-Commerce (sales whereby Licensed Products are sold directly to
consumers via Internet Web sites as tangible goods or as software
downloaded from said sites)
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o OEM (sales of Licensed Products to consumers in connection with a
third-party original equipment manufacturer's sales of computer
hardware or software to the same consumers)
o Fee Web Sites (with DISCOVERY'S prior written approval only)
Licensee shall not distribute the Licensed Products within the
following channels of trade:
o Street Vendors
o Hawkers
o Telephone Sales
5. The Term: The Term shall commence on the Effective Date and shall expire
two (2) years later, unless this Agreement is earlier terminated pursuant
to the provisions hereof.
6. Royalty Payment: 10% of Net Revenue for the Retail Distribution Channel
and 20% of Net Revenue for the Direct Response, E-Commerce and OEM
Distribution Channels; provided, however, that should DISCOVERY assist
Licensee with establishing any Distribution Channels in a particular
country, then the Royalty Payment shall be 35% of any Net Revenue for that
country.
7. Advance Royalty $50,000 (U.S. dollars). Licensee shall pay the Advance
Payments: Royalty Payments, in U.S. dollars, according to the payment
schedule set forth below:
Total Amount Due
(in U.S. Dollars) Payment Schedule
$25,000 Upon Licensee's first release of Licensed Products,
but in no event later than the Distribution Date
(i.e., May 1, 2004).
$12,500 June 30, 2004.
$12,500 December 31, 2004.
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Licensee shall report earnings each Quarter pursuant to the provisions
herein.
Licensee shall have no right to cross-collateralize between this Agreement
and the Retail License Agreement between the parties of even date
(relating to the Jeff Corwin Experience property). 8. Distribution Date:
Licensee shall distribute at least one of the Licensed Products for sale
in the Distribution Channels in reasonable commercial quantities
sufficient to meet the reasonably anticipated demand no later than the
Distribution Date set forth below:
May 1, 2004.
If Licensee (a) fails to distribute at least one Licensed Product by the
Distribution Date and/or (b) is not making regular sales of more than a
nominal amount of a particular Licensed Product for any 120-day period or
more after the Distribution Date and does not have plans to make regular
sales of more than a nominal amount of such Licensed Products within the
next 120 days, then DISCOVERY shall have the right, upon giving 30 days'
written notice to Licensee, to terminate Licensee's rights for such
particular Licensed Product for the Term. In addition, DISCOVERY shall
have the right to purchase from Licensee any such particular Licensed
Product remaining in Licensee's inventory, or any portion thereof, at
Licensee's landed cost plus shipping and handling costs related to
delivery to DISCOVERY. Notwithstanding the foregoing, should Licensee's
rights as to a particular Licensed Product be terminated hereunder,
Licensee shall remain obligated to pay and shall pay all Advance Royalty
Payments as specified in paragraph 9 of Part I. In the event that only one
type of Licensed Product is licensed hereunder, and DISCOVERY terminates
Licensee's rights thereto, DISCOVERY shall have the right to terminate
this Agreement in its entirety immediately upon Notice.
9. Advertising and During each License Year of the Term, Licensee shall
Promotional Expenditures: expend such sums sufficient to support the
advertising, promotion and sale of the Licensed Products within the
Distribution Channels. Upon DISCOVERY's request, Licensee shall furnish
DISCOVERY with documentation to substantiate such expenditures.
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10. Key Person: The Key Person of Licensee shall be: Sims Ahmadi
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PART II STANDARD CLAUSES
1. DEFINITIONS. For purposes of this Agreement, the following definitions
shall be operative:
A. Licensed Marks: The trademarks, names, titles, logos, symbols and
designs specified in paragraph 1 of Part I.
B. Licensed Characters: The characters, images, likenesses, personas
and voices specified in paragraph 1 of Part I.
C. Licensed Content: Certain photography, artwork, images, designs,
style elements, information and visuals specified in paragraph 1 of
Part I.
D. Licensed Materials: The Licensed Characters, Licensed Marks and
Licensed Content specified in paragraph 1 of Part I.
E. Licensed Products: The products specified in paragraph 2 of Part
F. Territory: The geographic location specified in paragraph 3 of Part
I.
G. Distribution Channels: The channels of trade specified in paragraph
4 of Part I.
H. Term: The period of time specified in paragraph 5 of Part I. Royalty
Payment: The percentage amounts specified in paragraph 6 of Part I.
J. Advance Royalty Payments: The non-refundable minimum Royalty
Payments to be paid by Licensee according to the payment schedule
set forth in paragraph 7 of Part I.
K. License Year: For the first License Year, a period of time during
the Term from the Effective Date of this Agreement until the date
one year after the Effective Date. Thereafter, the License Year
shall be the period of time from the anniversary of the Effective
Date to the date of the next anniversary of the Effective Date
unless this Agreement expires or shall be earlier terminated in
accordance with the provisions of this Agreement.
Quarter: A calendar quarter ending March 31, June 30, September 30
and December 31 of each License Year.
M. Net Revenue: The wholesale price of the Licensed Products, less the
cost of goods and shipping, and less any platform fees actually paid
by Licensee to third parties such as Nintendo, Sony and Microsoft
for development of a product intended for use on such third parties'
proprietary platforms. In computing Net Revenue, Licensee shall take
no other deductions from the wholesale price.
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N. Effective Date: The date first written on page 1 of this Agreement.
0. Premium: Any products bearing Licensed Materials given free or sold
at substantially less than its usual selling price for the purpose
of increasing the sale of, or publicizing, any product or service,
or for any other promotional purpose, including, but not limited to,
sales incentive programs, traffic builders, joint merchandising
programs, giveaways, etc.
P. Distribution Date: The date specified in paragraph 8 of Part I with
respect to a Licensed Product for a particular platform.
Key Person: The person identified in paragraph 10 of Part I.
Business Day: Each of the following five (5) days of the United States calendar
week: Monday, Tuesday, Wednesday, Thursday and Friday, but specifically
excluding any day on which a United States holiday falls during the applicable
United States calendar year.
2. REPRESENTATIONS OF DISCOVERY. DISCOVERY represents and warrants that it
has the right to enter into this Agreement and to convey to Licensee the
rights granted herein, subject to the conditions and limitations set forth
herein.
3. REPRESENTATIONS OF LICENSEE. Licensee represents that it has the right to
enter into this Agreement and has the capacity, finances and other
qualifications to perform its obligations for the manufacture, sale,
distribution, advertising and promotion of Licensed Products utilizing the
Licensed Materials and to remit all amounts due DISCOVERY hereunder.
4. GRANT. DISCOVERY hereby grants to Licensee a non-exclusive license to use
the Licensed Materials solely for the manufacture, sale, distribution,
advertising and promotion of the Licensed Products in the Distribution
Channels and in the Territory during the Term strictly subject to the
terms, limitations and conditions of this Agreement. With the prior
written consent of DISCOVERY, Licensee shall have the right to sub-license
the use of the Licensed Materials to manufacturers and distributors upon
terms to be provided by DISCOVERY.
5. ACKNOWLEDGMENT AND UNDERTAKING.
Licensee acknowledges and agrees that: (i) all rights not specifically and
expressly granted to Licensee in this Agreement are reserved to DISCOVERY;
(ii) as between Licensee and DISCOVERY, all usages of the Licensed
Materials pursuant to this Agreement shall inure to the benefit of
DISCOVERY; (iii) Licensee shall not have proprietary rights of any nature
in and to the Licensed Materials and may use them only during the Term in
the Territory on or in connection with Licensed Products and the R.
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packaging, advertising and promotion of the Licensed Products strictly in
accordance with the provisions of this Agreement; and (iv) Licensee shall
not claim any proprietary rights in and to the Licensed Materials and will
not contest by legal proceedings or otherwise the validity of the Licensed
Materials or the rights of DISCOVERY therein or the validity of this
Agreement or any part thereof. Licensee shall not during the Term of this
Agreement or at any time thereafter offer for sale or distribution any
version of the Licensed Products except as strictly authorized under the
terms of this Agreement.
6. LIMITATIONS ON GRANT. Licensee shall not utilize the Licensed Materials on
or in connection with goods or services other than the Licensed Products.
Licensee shall not use, sell or give away Licensed Products for use as
Premiums unless: (i) DISCOVERY gives prior written consent thereto; and
(ii) any party which desires to use the Licensed Products as a Premium
shall have received a license from DISCOVERY for such purposes unless
otherwise specified in writing by DISCOVERY. Licensee shall not export,
and shall use best efforts to restrict any independent retailers,
wholesalers, sales agents or distributors from exporting, Licensed
Products outside the Territory. If Licensee discovers that any independent
retailers, wholesalers, sales agents or distributors are exporting
Licensed Products outside the Territory, Licensee shall immediately cease
to sell to those accounts. All third-party manufacturers and distributors
of Licensee with respect to Licensed Products must receive prior written
approval by DISCOVERY, which approval maybe withheld in DISCOVERY's sole
discretion, and further such entities must enter into a written agreement
to be provided by DISCOVERY at Licensee's request.
7. REPORTS AND RECORDS.
(a) Preparation of Reports. Licensee shall prepare a report ("Report"),
duly certified by an officer of Licensee to be true and accurate,
for each Quarter and for each License Year during the Term, whether
or not Licensed Products have been sold by Licensee during such
period. Each such Report shall be delivered to DISCOVERY, or to
DISCOVERY's agent if so instructed, within 30 days of the end of
each Quarter or License Year, as applicable.
(b) Content of Reports. The Quarterly Reports and Annual Reports shall
contain the following information for the relevant period in a
format reasonably acceptable to DISCOVERY, with all monetary amounts
stated in the currency in which the sales were actually made
followed by the equivalent amount stated in U.S. Dollars, the rate
of exchange used in making the required conversion calculation, and
the source of the currency exchange rate used. The rate of exchange
used by Licensee shall be that rate published by a reputable bank of
Licensee's choosing (subject to DISCOVERY's reasonable approval) as
of the last day of the applicable period:
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A breakdown by country of Net Sales of Licensed Products in the Territory during
the relevant period and during the entire Term through the end of the relevant
period;
The total number of units of each sku of Licensed Product sold or distributed by
Licensee during the relevant period and during the entire Term through the end
of the relevant period, as an aggregate number and by individual account;
(ii) The gross sales of each sku of Licensed Product sold, during
the relevant period and during the entire Term through the end
of the relevant period, as an aggregate number and by
individual account;
(iii) The Net Sales of each sku of Licensed Product sold, during the
relevant period and during the entire Term through the end of
the relevant period, as an aggregate number and by individual
account;
(iv) A computation of the Royalty due DISCOVERY;
(v) The Net Sales of all Licensed Products, in aggregate, sold or
distributed by Licensee to each account, by individual
account;
(vii) The total number of units in Licensee's inventory of each sku
of Licensed Products at the end of the relevant period and the
value thereof;
(viii) An itemization of all allowable deductions, if any;
(ix) The total number of units of Licensed Products returned to
Licensee during the relevant period by sku, stock number or
specific description and the value thereof as of the date of
the original sale thereof, as an aggregate number and by
individual account;
(x) Advertising and promotion expenditures, detailed by ad buy,
promotion, in-store event/display, etc., as an aggregate
number and by individual account;
(xi) Such other information concerning the manufacture, sale,
distribution or use of Licensed Products requested by
DISCOVERY.
Records. Licensee shall keep its books of account and business
records in a manner sufficient to establish for each Quarter and for
each License Year: (i) an inventory by units of the Licensed
Products; (ii) gross sales to all accounts by units and value on the
last day of the respective periods; (iii) the Net Sales to all
accounts by units and value on the last day of the respective
periods; (iv) the Net Sales in units and value of each account, by
individual account, of Licensee for Licensed Products; (v) the
computation of the Royalty Payments for each Quarter
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and for each License Year; and (vi) such further information as may
be referred to in order to complete Reports required by this
Agreement.
(d) Audits. Licensee's books of account and business records relating to
the verification of the transactions covered by this Agreement shall
be open for audit or inspection by DISCOVERY's authorized
representatives during Licensee's regular business hours upon three
(3) days notice and shall remain available for a period of three (3)
years after delivery of the last Quarterly Report due hereunder. All
information revealed to DISCOVERY or its representatives and
auditors and identified as confidential shall be so treated. If
DISCOVERY should conduct an audit, and the Net Sales or computation
of Royalty Payments due as shown by Licensee's quarterly or annual
Reports should be found to be understated, then within 10 days of
written notice of such understatement: (i) Licensee shall pay the
amount of such understatement plus interest thereon for each day the
correct payment was due DISCOVERY computed at the rate of 1.5% per
month (18% per annum) on the day such payment is made to DISCOVERY;
and (ii) if the amount of such understatement shall be more than
five percent (5%) of the amount previously reported to DISCOVERY,
Licensee shall pay to DISCOVERY the cost of such audit. The receipt
or acceptance by DISCOVERY of any quarterly or annual Reports
furnished pursuant to this Agreement, or the receipt or acceptance
of any Royalty Payments made, shall not preclude DISCOVERY from
questioning their accuracy at any time.
8. TERMS OF PAYMENT.
(a) Royalty Payments. Licensee shall pay to DISCOVERY, or to DISCOVERY'S
agent if so instructed, the Royalty Payment for all Net Sales made
during a Quarter within 30 days of the end of such Quarter. Payment
shall be made in United States dollars and, if applicable, at the
exchange rate published by a reputable bank of Licensee's choosing
(subject to DISCOVERY's reasonable approval) as of the last day of
such Quarter.
(b) Advance Royalty Payments. Regardless of whether or not there have
been any Net Sales during any License Year, Licensee shall pay
DISCOVERY the applicable Advance Royalty Payments. The Advance
Royalty Payments due shall be paid by Licensee according to the
payment schedule set forth in paragraph 7 of Part I above. The
Royalty Payments made to DISCOVERY for each License Year shall be
credited against the Advance Royalty Payments due for the
corresponding License Year only. Licensee may not credit Royalty
Payments made during a License Year against the Advance Royalty
Payments due during any other License Year. The Advance Royalty
Payments made to DISCOVERY are not refundable and shall be made to
DISCOVERY or to DISCOVERY's agent if so instructed. If paid directly
to DISCOVERY, payments shall be sent by wire transfer pursuant to
written instructions from DISCOVERY.
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Payment of Taxes. If any country in the Territory imposes a
withholding tax against DISCOVERY, as licensor, with respect to
Royalty Payments payable to DISCOVERY by Licensee on sales of the
Licensed Products in such country, Licensee, subject to Licensee's
timely provision to DISCOVERY of official tax receipts or other
documentation and proof of payment as specified in the following
sentence, shall withhold from the Royalty Payments and pay on behalf
of DISCOVERY any amount of such taxes required to be withheld by
operation of law. Licensee shall timely provide DISCOVERY the
official tax receipts issued by the appropriate tax authorities or
such other documentation and proof of payment of such taxes as
DISCOVERY requires for such tax payments due and made on behalf of
DISCOVERY so that DISCOVERY may credit such withholding tax against
DISCOVERY's federal income tax liabilities in the United States.
(d) Late Payments. All late payments to DISCOVERY shall incur interest
at a rate of 1.5% per month (18% per annum) on the balance unpaid as
of the last day of the applicable month. Any interest on late
payments which Licensee is required to pay DISCOVERY hereunder shall
not be credited against the Advance Royalty Payments due DISCOVERY.
(e) Blocked Revenues. If Licensee receives revenues in currencies which
are not freely convertible to United States dollars or remittable to
the United States because of applicable laws and restrictions in the
Territory ("Blocked Revenues"), such amounts shall be nevertheless
reported to DISCOVERY pursuant to clause 7 of Part II. If, under
applicable law in the Territory, it would be permissible to transfer
all or a portion of such Blocked Revenues within the country in
which such funds are held, then upon request of DISCOVERY, such
funds shall be transferred to the account(s) designated by DISCOVERY
and shall be included in the calculation of Net Sales. If it shall
be unlawful to make such transfer within the country in which such
Blocked Revenues are held, such amounts shall not be included in the
calculation of Net Sales until such time as such Blocked Revenues
become freely convertible or remittable, or are capable of being so
transferred within the country in which such Blocked Revenues are
being held and DISCOVERY requests such transfer pursuant to this
clause 8(e) of Part II. If remittance restrictions shall remain in
effect for three (3) months or more, DISCOVERY shall have the right
to terminate this Agreement immediately by giving written notice to
Licensee. Licensee will use its best efforts at all times to obtain
governmental approval for remittance of all sums due to DISCOVERY on
the earliest possible date.
9. MARKETING PLAN. Ninety (90) days after the Effective Date for the first
License Year and, thereafter, at least ninety (90) days prior to the
commencement of each additional License Year, Licensee shall submit a
detailed marketing plan for such License Year in the format set forth in
Schedule A hereto. Licensee's failure to timely submit a marketing plan as
provided for herein shall be considered a material breach of this
Agreement and DISCOVERY may terminate this Agreement in accordance with
clause 13(b) of Part IL
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10. DISTRIBUTION DATE. Licensee shall distribute the Licensed Products for
sale in the Distribution Channels in reasonable commercial quantities
sufficient to meet the reasonably anticipated demand no later than the
applicable Distribution Date. If Licensee fails to distribute a particular
Licensed Product on the applicable Distribution Date and/or is not making
regular sales throughout the Territory of more than 1,000 units of a
particular Licensed Product within any six (6)-month period after such
Distribution Date, then DISCOVERY shall have the right, upon giving twenty
(20) days prior written notice to Licensee, to terminate Licensee's rights
for such particular Licensed Product and such particular Licensed Product
shall be automatically deleted from the definition of Licensed Products
under paragraph 2 of Part I. In addition, DISCOVERY shall have the right
to purchase from Licensee any such particular Licensed Product remaining
in Licensee's inventory, or any portion thereof, at Licensee's cost. If
DISCOVERY opts not to purchase said remaining inventory, Licensee shall
destroy said remaining inventory of particular Licensed Product at
Licensee's expense and provide DISCOVERY with an affidavit signed by an
officer of Licensee attesting to such destruction. Notwithstanding the
foregoing, should Licensee's rights as to a particular Licensed Product be
terminated hereunder, Licensee shall remain obligated to pay and shall pay
all Advance Royalty Payments as specified in paragraph 7 of Part I. In the
event that only one type of Licensed Product is licensed hereunder and
Licensee fails to distribute that Licensed Product on the Distribution
Date and/or is not making regular sales throughout the Territory of more
than 5,000 units of that Licensed Product within any six (6) month period
after the Distribution Date, then DISCOVERY shall have the right to
terminate this Agreement in its entirety immediately upon written notice.
11. QUALITY OF LICENSED PRODUCTS. Licensee warrants that the Licensed Products
will be of good quality in design, material and workmanship and suitable
for their intended purpose; that no injurious, deleterious or toxic
substances will be used in or on the Licensed Products; that the Licensed
Products will not cause harm when used as instructed and with ordinary
care for their intended purpose; and that the Licensed Products will be
manufactured, sold, distributed advertised and promoted in strict
compliance with all applicable laws and regulations. In addition, Licensee
shall (i) maintain a high quality and standard of each Licensed Product
manufactured under this Agreement as approved by DISCOVERY; (ii) maintain
a vigorous quality control and safety assurance program with respect to
the Licensed Products; and (iii) guarantee that all Licensed Products
distributed and sold hereunder are free of defects and in conformity with
the samples approved by DISCOVERY. Licensee shall upon reasonable notice
permit DISCOVERY access to Licensee's facilities during regular business
hours for the purpose of ascertaining Licensee's compliance with
DISCOVERY's quality assurance requirements.
12. APPROVALS. Licensee shall follow any branding or style guidelines provided
by DISCOVERY in Licensee's creation of the Licensed Products, Product
Materials and Advertising Materials (as such terms are defined below).
Licensee recognizes that the manner in which Licensee uses the Licensed
Materials on or in connection with Licensed Products or with respect to
packaging, hangtags, labels, advertising and promotional material or
literature used in connection with the Licensed Products, will have a
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significant effect on DISCOVERY's image and customer goodwill and business
reputation. Therefore, Licensee shall submit to DISCOVERY, at Licensee's
expense, for DISCOVERY's written approval as to quality and style, samples
of all Licensed Products, as well as all packaging, hangtags, labels and
wrapping ("Product Materials") and all advertising, publicity and
promotional material ("Advertising Materials") strictly according to the
schedule set forth below.
(a) Submission of Licensed Products. Licensee shall submit to DISCOVERY
the number of samples specified below of each of the Licensed
Products to be manufactured, created, sold, distributed or otherwise
used under this Agreement, together with all Product Materials, in
each of the following successive stages of development:
(1) Concept. Four (4) copies of the rough sketches, layout
concepts or outlines that provides a description of the
nature, function, design, artwork, text (if applicable), how
the Licensed Materials will be used therein, and a description
of the materials, product sizes, colors, method of production,
packaging and marketing to be used. (Samples of prior products
may be requested).
(2) Character Models. copies of character models (in color) for
each Licensed Product prior to animation.
(3) Alpha Prototypes. copies of the "alpha version" (as such term
is customarily understood in the interactive game industry) of
each Licensed Product plus the actual software on CD-ROM
("Alpha Prototypes"), provided that if DISCOVERY is not able
to use such software provided by Licensee for the purposes
herein then Licensee shall forward to DISCOVERY a videotape
representative of the alpha version for its review and
approval. Licensee shall make any changes to the Alpha
Prototypes requested by DISCOVERY.
(4) Beta Prototypes. copies of the "beta version" (as such term is
customarily understood in the interactive game industry) of
each Licensed Product plus the actual software on CD-ROM
("Beta Prototypes"), provided that if DISCOVERY is not able to
use such software provided by Licensee for the purposes herein
then Licensee shall forward to DISCOVERY a videotape
representative of the beta version for its review and
approval. Approval of the Beta Prototypes shall authorize the
commencement of commercial production. The Licensed Products
shall not differ in any respect from the approved Beta
Prototype (except for (i) de minimis departures beyond
Licensee's control which customarily occur in the production
of mass-produced items and (ii) "bugs" that do not involve the
Licensed Materials which must be corrected before shipping).
DISCOVERY shall not disapprove any element of the applicable
Beta Prototype where the same, identical element has already
been approved in the applicable Alpha Prototype.
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(b) Submission of Packaging. Licensee shall submit to DISCOVERY the
number of samples specified below of the packaging for each of the
Licensed Products to be manufactured, created, sold, distributed or
otherwise used under this Agreement, together with all Product
Materials, in each of the following successive stages of
development:
(1) Concept. Four (4) copies of the rough sketches, layout
concepts or outlines that provides a description of the
nature, function, design, artwork, text (if applicable), how
the Licensed Materials will be used therein, and a description
of the materials, product sizes, colors, method of production,
packaging and marketing to be used. (Samples of prior products
may be requested).
(2) Tight Comprehensives. Four (4) copies of the final copy before
typesetting, final and complete layouts or prototypes, tight
pencils before line work is inked or color is added, and a
complete description of how and where Licensed Materials will
be used.
(3) Pre-production Prototypes and Strike-Offs. Two (2) copies of
press proofs, chromalins or other pre-production models,
prototype samples or strike-offs prior to production run
(decorated), blueprints, mechanicals and progressive proofs.
(4) Production Sample and Yearly Quality Control. Two (2) samples
of the finished Licensed Products and packaging from the first
production run and subsequently from the latest production run
on each anniversary date of commencement of Term.
(c) Submission of Advertising Materials. Licensee shall provide to
DISCOVERY four (4) copies of all Advertising Materials in each of
the following successive stages of development: (1) initial copy and
concept review and approval; (2) revised copy and concept review and
approval; and (3) final sample review and approval.
(d) Approval By DISCOVERY. Licensee shall not proceed beyond any stage
identified in clauses 12(a), (b) and (c) without first securing the
express prior written approval of DISCOVERY of that stage; failure
to obtain DISCOVERY's prior approval shall, at DISCOVERY's option,
result in the immediate termination of this Agreement. Licensee
shall submit ten (10) samples from the first production run of each
manufacturer of the Licensed Products ("Production Samples") well in
advance of the date on which Licensee desires to commence shipment,
distribution and/or use of said Licensed Product so that DISCOVERY
shall have adequate time to independently evaluate and comment upon
the same. Should DISCOVERY require more than ten (10) Production
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Samples these additional Production Samples will be sold to
DISCOVERY at cost. Licensee agrees that DISCOVERY shall have the
right to request, or have its representative take, further samples
at random from production runs from time to time as DISCOVERY may
reasonably determine in order to assure that proper quality control
has been established by Licensee. In the event that any Production
Sample differs from the approved Beta Prototype, beyond de minimis
changes, then at any time and at DISCOVERY's sole discretion, during
the commercial production period, Licensee shall suspend commercial
production of the applicable Product until such time as DISCOVERY
has approved a revised Production Sample. DISCOVERY shall endeavor
to approve or reject all samples submitted to DISCOVERY within
fifteen (15) Business Days of receipt. If DISCOVERY does not notify
Licensee of its approval or disapproval within said fifteen (15)
Business Days, such Licensed Products, Product Materials and/or
Advertising Materials shall be deemed to have been disapproved by
DISCOVERY. Licensee shall comply with DISCOVERY's directions and
instructions concerning revisions to any of the Licensed Products,
Product Materials and/or Advertising Materials. Licensee shall not
manufacture, promote, advertise, sell, ship, distribute and/or use
any Licensed Product, Product Materials or Advertising Materials
prior to obtaining DISCOVERY's written approval of the sample
thereof. Licensee shall bear the responsibility for and expense of
compliance with the approval requirements hereunder. All concepts,
designs, prototypes, Production Samples Product Materials and
Advertising Materials requiring approval hereunder shall be
delivered to DISCOVERY on an expedited and insured basis.
(e) Departure From Approved Samples. Licensee shall not make any
modification to any Licensed Products, Product Materials or
Advertising Materials which have been approved by DISCOVERY or
depart from any applicable quality standards and specifications for
any of the foregoing (except for (i) de minimis departures beyond
Licensee's control that customarily occur in the production of
mass-produced items and (ii) "bugs" that do not involve the Licensed
Materials which must be corrected before shipping) unless DISCOVERY
approves such modification or departure in a prior writing. Licensee
acknowledges that manufacture, use, sale, distribution, advertising
or promotion of such modified and/or departing Licensed Products,
Product Materials or Advertising Materials shall constitute a
material breach of this Agreement, and upon such breach, DISCOVERY
may terminate this Agreement immediately. In addition, DISCOVERY
shall have the right to require Licensee to deliver said modified or
departing Licensed Products, Product Materials or Advertising
Materials in Licensee's inventory, possession or control to
DISCOVERY for destruction at Licensee's expense.
(f) Final Production Samples. Licensee shall provide DISCOVERY, free of
charge, thirty (30) samples of each Licensed Product, together with
the Licensed Product's packaging, labels, tags and wrapping for the
permanent use of DISCOVERY in connection with its quality control
measures and historical inventories.
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(g) Reimbursement for Artwork. If Licensee requests DISCOVERY to furnish
Licensee with any photographs, artwork, transparencies,
reproductions or other such similar materials (collectively,
"Artwork") of the Licensed Materials, Licensee agrees to reimburse
DISCOVERY for its costs in supplying said Artwork. All Artwork
furnished to Licensee by DISCOVERY for this purpose shall remain the
property of DISCOVERY, and, as specified in clause 14(f) of Part II,
all Artwork delivered to Licensee shall be promptly returned to
DISCOVERY within thirty (30) days after the expiration or
termination of this Agreement, or as sooner requested. Licensee
agrees to reimburse DISCOVERY for the full amount of each such
Artwork expense within thirty (30) days of receipt of DISCOVERY's
invoice stating the cost and nature of the expenditure. Any Artwork
not supplied by DISCOVERY that is used in conjunction with the
Licensed Products, Product Materials or Advertising Materials shall
require the prior written approval of DISCOVERY. If Artwork provided
by Licensee is licensed from third parties, the license for such
Artwork shall be paid for by, and taken out in the name of,
Licensee, and Licensee shall provide a copy of the license to
DISCOVERY.
13. TERMINATION.
(a) Immediate Termination. In addition to the termination rights stated
elsewhere in this Agreement, DISCOVERY shall have the right to
terminate this Agreement immediately, by giving written notice to
Licensee, in any of the following situations:
(i) Default in Payments. If Licensee fails to timely make any
Advance Royalty Payment, Royalty Payment or any other payment
due DISCOVERY and Licensee fails to cure such non-payment
within thirty (30) days of receipt of notice, DISCOVERY may
terminate this Agreement immediately.
(ii) Approvals. If Licensee manufactures, distributes, offers for
sale, sells, or uses any Licensed Products, Product Materials
or Advertising Materials without having the prior written
approval of DISCOVERY, as required under clauses 12(a)-(d) of
Part II, or makes any use of the Licensed Materials not
authorized under this Agreement, DISCOVERY may terminate this
Agreement immediately.
(iii) Modifications or Departures. If Licensee makes any
unauthorized modification or departure to any approved
Licensed Products, Product Materials or Advertising Materials
as more fully set forth in clause 12(e) of Part II, DISCOVERY
may terminate this Agreement immediately.
(iv) Insurance Coverage. If Licensee fails to comply with the terms
of clause 18(c) of Part II, DISCOVERY may terminate this
Agreement immediately.
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(v) Recall of Licensed Products. If Licensee becomes subject to
any voluntary or involuntary order of any governmental agency
involving the recall of any of the Licensed Products because
of safety, health or other hazards or risks to the public,
DISCOVERY may terminate this Agreement immediately.
(vi) Insolvency. In the event of Licensee's voluntary or
involuntary insolvency, commission of an action of bankruptcy,
adjudication of bankruptcy, the filing of a petition for
voluntary or involuntary bankruptcy or similar proceeding, or
an agreement between Licensee and its creditors generally is
entered into providing for extension or composition of debt,
or a receiver is appointed to administer the assets of
Licensee, or the assets of Licensee are liquidated, or any
distress, execution or attachment is levied on such of its
manufacturing or other equipment as is used in the production
and distribution of the Licensed Products, DISCOVERY may
terminate this Agreement immediately.
(vii) Change in Control or Ownership/Loss of Key Person. If Licensee
fails to comply with the terms of clause 20 of Part II,
DISCOVERY may terminate this Agreement immediately. Without in
any way limiting the foregoing, DISCOVERY may indicate in
paragraph 10 of Part I the name of one or more person(s) whose
ongoing and active role as a principal or an employee of
Licensee (a "Key Person") is deemed material to DISCOVERY and
was relied upon by DISCOVERY in entering in this Agreement.
The cessation of the ongoing and active role of the Key Person
with Licensee may, at DISCOVERY's sole discretion, create a
right of termination for DISCOVERY upon thirty (30) days
written notice to Licensee.
(b) Termination Upon Thirty Days Notice. Should Licensee commit a
material breach of any of the terms, conditions or obligations of
this Agreement that is not otherwise listed in clause 13(a) of Part
II or otherwise stated elsewhere in this Agreement, DISCOVERY may
terminate this Agreement upon thirty (30) days' written notice. At
the expiration of said 30 days, the Agreement shall terminate
unless: (i) prior to the expiration of said 30 days the breach has
been cured by Licensee to the reasonable satisfaction of DISCOVERY;
or (ii) Licensee obtains an extension of the 30-day cure period in
writing from DISCOVERY because the breach cannot be cured in 30 days
and Licensee has commenced all reasonable efforts to cure said
breach.
14. RIGHTS AFTER TERM.
(a) Reversion of Rights. Upon expiration or termination of this
Agreement for whatever reason, all rights granted to Licensee
hereunder shall revert to DISCOVERY and Licensee hereby agrees to
refrain from further use of the Licensed Materials or any simulation
thereof or from any further reference to them directly or
indirectly.
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Notice to Third-Party Manufacturers and Third-Party Distributors.
Within five (5) days of receipt of notice of expiration or
termination from DISCOVERY, Licensee shall notify, in writing, each
and every third-party manufacturer and third-party distributor of
Licensee that this Agreement has expired or been terminated and
further instruct each said third-party manufacturer and/or
third-party distributor to immediately cease the manufacture and/or
the distribution of Licensed Products.
DISCOVERY Purchase and Sell-Off Period. Licensee shall not
manufacture Licensed Products during the last two months of the Term
in excess of the amount Licensee reasonably anticipates will be sold
prior to the expiration of the Term. Fifteen (15) Business Days
prior to the expiration of the Term, Licensee shall provide
DISCOVERY with a written report, duly certified by an officer of
Licensee to be true and accurate, detailing the type and quantity of
Licensed Products remaining in Licensee's inventory. Within twenty
(20) Business Days of receipt of said report, DISCOVERY shall have
the right, in the exercise of its sole discretion, to purchase from
Licensee said remaining inventory, or any portion thereof, at
Licensee's cost for the Licensed Product. Alternatively, should
DISCOVERY opt not to purchase said remaining inventory from Licensee
and further on the conditions that Licensee is current in all
payments due DISCOVERY and in compliance with all other terms of
this Agreement, Licensee shall have the non-exclusive right to sell
and distribute in the Territory its inventory of the Licensed
Products on hand at the date of expiration of the Agreement for a
period of 180 days thereafter (the "Sell-Off Period"), subject to
all the terms and conditions of this Agreement and at a price which
is no less than seventy-five percent (75%) of the list price charged
for such Licensed Products immediately prior to the Sell-Off Period
unless otherwise authorized in writing by DISCOVERY. The Royalty
Payments due DISCOVERY on Net Sales of Licensed Products sold during
the Sell-Off Period shall not be applied to or credited against the
Advance Royalty Payments due during the Term.
(d) Additional Obligations Upon Termination. If this Agreement is
terminated prior to the end of the Term for any reason, Licensee
shall (1) immediately cease all manufacturing, distributing and
shipping Licensed Products and shall immediately cease processing
and cancel all outstanding orders of Licensed Products; (2)
immediately provide DISCOVERY with a written report, duly certified
by an officer of Licensee to be true and accurate, detailing the
type and quantity of Licensed Products remaining in Licensee's
inventory; (3) provide DISCOVERY the right, in the exercise of its
sole discretion, to purchase from Licensee said remaining inventory,
or any portion thereof, at Licensee's cost; (4) immediately destroy
all remaining inventory not purchased by DISCOVERY and provide
DISCOVERY with an affidavit signed by an officer of Licensee
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attesting to such destruction; and (5) pay all amounts due DISCOVERY
and fulfill all other obligations, conditions and limitations set
forth in this Agreement.
(e) Final Reports and Payments. Within twenty (20) days following the
expiration of the Sell-Off Period, Licensee shall file a Report for
the Sell-Off Period consistent with the terms of clause 7(b) of Part
II and, subject to the provisions of clause 14(c) of Part II, remit
the amounts due DISCOVERY pursuant to clause 8 of Part II. In
addition, Licensee shall make available for review by DISCOVERY at
any time during any Business Day of the Sell-Off Period all invoices
for sales or distribution of Licensed Products during such Sell-Off
Period. Any Licensed Products remaining in inventory, possession or
control of Licensee at the end of the Sell-Off Period shall be
destroyed, unless otherwise agreed in writing by DISCOVERY, and
Licensee shall provide DISCOVERY with an affidavit signed by an
officer of Licensee attesting to such destruction.
Return of DISCOVERY Materials. Any and all materials, including but not limited
to, confidential documents and Artwork, delivered to Licensee by or on behalf of
DISCOVERY during the Term shall be promptly returned to DISCOVERY, at Licensee's
expense, within thirty (30) days after the expiration or termination of this
Agreement, unless sooner requested.
Accrued Rights. Termination of this Agreement for whatever reason shall be
without prejudice to any existing rights and/or claims that each party may have
against the other at the date of termination.
15. PROMOTION AND SALE.
(a) Best Efforts. Licensee shall use its best efforts, and at its sole
cost and expense, to manufacture, sell, distribute, advertise,
promote and support its sale of Licensed Products in the Territory
during the Term.
(b) Third-Party Manufacturer and Distributor Agreements. Licensee shall
maintain personnel adequate to manufacture, sell, distribute,
promote and execute the sale of Licensed Products pursuant to this
Agreement, and to fulfill the marketing plan required in clause 9 of
Part H in Schedule A hereto. In the event Licensee intends to use
third-party manufacturers or distributors for the sale of Licensed
Products, Licensee notify and obtain approval from DISCOVERY and
arrange for such entities to execute agreements in the form to be
provided by DISCOVERY at Licensee's request ("Third-Party
Agreement"). Licensee agrees to (i) strictly enforce the Third-Party
Agreement against any third-party manufacturers or distributors
authorized by DISCOVERY hereunder; (ii) advise DISCOVERY of any
violations thereof and of the corrective actions taken by Licensee
and the results thereof; and (iii) at the reasonable request of
DISCOVERY, to terminate such Third-Party Agreement with any
third-party manufacturer or distributor that violates the terms of
said Third-Party Agreement.
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Sales to DISCOVERY. DISCOVERY retains for itself, its parent,
subsidiary and affiliated entities, the right to develop and sell
products, including Licensed Products, bearing or embodying the
Licensed Materials, through any and all DISCOVERY entity-owned or
equity stake distribution channels, including but not limited to,
retail operations, e-commerce operations and catalog operations, and
to use Licensed Products for promotional purposes within or outside
the Territory. To that end, Licensee hereby agrees to sell to
DISCOVERY Licensed Products for such purposes at Licensee's
wholesale price multiplied by 0.75, with no minimum quantity per
purchase order. Such sales to DISCOVERY pursuant to this clause
shall not be included in the computation of Net Sales nor the
computation of Royalty Payments due DISCOVERY.
(d) Licensee's Evaluation of License. Licensee agrees and acknowledges
that Licensee has independently evaluated its business and its
ability to utilize this Agreement in its business and to achieve the
goals set by Licensee for its business, and that DISCOVERY is not
responsible or liable to Licensee for any failure of Licensee to
exploit this License in accordance with Licensee's own expectations.
16. LICENSEE'S CONDUCT. Licensee hereby warrants that it shall not use the
Licensed Materials in any manner which may, in DISCOVERY's judgment, be
inconsistent with DISCOVERY's public image or which may in any way
disparage or adversely affect DISCOVERY or its reputation, nor shall
Licensee, or any of its agents or employees, take any actions or conduct
the operation of Licensee's business as it relates to the Licensed
Products in any manner which may, in DISCOVERY's judgment, be inconsistent
with DISCOVERY's public image or which may disparage DISCOVERY or its
reputation.
17. PROTECTION OF LICENSED MATERIALS.
(a) Recognition. Licensee acknowledges that the Licensed Materials are
famous throughout the world and have significant value for use in
connection with the sale of Licensed Products, and further that all
of Licensee's uses of the Licensed Materials under this Agreement
shall, as between Licensee and DISCOVERY, inure to the benefit of
DISCOVERY. Licensee acknowledges that it is not acquiring any
interests or rights in the use of the Licensed Materials apart from
the license set forth in this Agreement.
(b) Injunctive Relief. Licensee acknowledges and agrees that the
Licensed Materials possess a special, unique and extraordinary
character that makes difficult the assessment of the monetary
damages that would be sustained as a result of the unauthorized use
of the Licensed Materials. Licensee recognizes that the unauthorized
or unapproved use of the Licensed Materials will cause immediate and
irreparable damage to DISCOVERY for which DISCOVERY would not have
an adequate remedy at law. Therefore, Licensee agrees that, in the
event of said unauthorized or unapproved use of the Licensed
Materials by Licensee, in addition to such other legal and equitable
rights and remedies as shall be available to DISCOVERY, DISCOVERY
shall be entitled to injunctive and other equitable relief, without
the necessity of proving damages or furnishing a bond or other
security.
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(c) Use of Licensed Materials. Licensee agrees not to use at any time
during the Term or thereafter any other trademark, brand name, trade
name, symbol, logo, design, character or the like which is similar
to or may be confused with the Licensed Materials. Licensee will not
take any action that will harm or prejudice the Licensed Materials
or DISCOVERY's rights therein in any way during the Term or
thereafter.
(d) Ownership of Intellectual Property. All copyright, trademark, trade
dress or other intellectual property and proprietary rights in the
Licensed Products, Product Materials and Advertising Materials
(including but not limited to product design and, if applicable,
game play) shall be owned, throughout the world and for their
relevant term, by DISCOVERY, notwithstanding their creation by
Licensee or a third party on Licensee's behalf, and shall hereby be
deemed a work made for hire within the meaning of the United States
Copyright Laws. Licensee further hereby assigns to DISCOVERY and/or
DISCOVERY's designee, Licensee's present and future intellectual
property rights, throughout the world and for their relevant term,
in the Licensed Products, Product Materials and Advertising
Materials heretofore or hereafter created, including but not limited
to rights arising from the Licensee's use, adaptation or
modification of the Licensed Materials or any other branding used in
relation to the Licensed Products, Product Materials and Advertising
Materials, and Licensee agrees to execute any documents necessary to
perfect the transfer of such rights to DISCOVERY or its designee.
Notwithstanding the foregoing, Licensee retains all rights to its
own trademarks and trade names.
(e) Corporate Use. Licensee shall identify itself in all transactions as
a Licensee of, and separate legal entity from, DISCOVERY as opposed
to an integrated, divisional or consolidated part of DISCOVERY's
business. Licensee shall not use any of the Licensed Materials in
Licensee's name or in the name of any operating entity or business
formed by Licensee or in which Licensee has a business or financial
interest, without the prior written consent of DISCOVERY. Licensee
shall not use or incorporate any of the Licensed Materials on or in
connection with any business signs, business cards, stationery items
or other similar materials. Licensee further agrees that it shall
not use or incorporate, in any manner or form, any of the Licensed
Materials as a domain name, nor shall Licensee seek trademark,
copyright or domain name registration of the same, without the prior
written consent of DISCOVERY.
(f) Infringement. Licensee shall promptly advise DISCOVERY of any
activity potentially infringing upon the Licensed Materials and
shall further promptly provide written notice to DISCOVERY of all
claims and potential claims of which it has notice or knowledge and
all suits threatened or brought against Licensee involving the
Licensed Materials. Any decision with respect to the protection and
defense of the Licensed Materials shall be solely in the discretion
of DISCOVERY and Licensee may not take any action with respect
thereto without the prior written consent of DISCOVERY. In no event
shall the Licensee have the right, without DISCOVERY's prior written
consent, to acknowledge the validity of any claim brought by any
party in connection with the Licensed Materials, to obtain or seek a
license from such party, or to take any action which might impair
DISCOVERY's ability to contest the claim. Licensee shall cooperate
with DISCOVERY with respect to actions described in this clause
which are taken by DISCOVERY. The expenses for Licensee's
cooperation shall be subject to DISCOVERY's prior approval and shall
be reimbursed by DISCOVERY.
-23-
(g) Language. Licensee may use translated or "localized" versions of the
Licensed Materials provided that such versions have been prior
approved in writing by DISCOVERY.
(h) Use of Other Marks or Characters. Licensee agrees that it will not
affix on or in connection with the sale, distribution, advertising
or promotion of Licensed Products any marks or legal notices other
than Licensee's trade name and Licensee's copyright and/or trademark
notices, and then only in a manner approved in writing by DISCOVERY.
Licensee shall not associate any characters with the Licensed
Characters or the Licensed Materials prescribed by law and any
credits required by DISCOVERY on the Licensed Products and in
connection with packaging and on all promotional materials of any
description, including, but not limited to, catalogues, brochures,
and advertisements and any other usages referencing the Licensed
Materials. Prior to affixing said copyright, trademark or other
legal notice or credit on Licensed Products, packaging, advertising
and promotional materials, Licensee shall obtain DISCOVERY's written
approval regarding the desired content, form, location and size of
each said notice pursuant to the procedures set forth in clause 12
of Part II.
Trademark and Copyright Notices. Licensee shall affix such
copyright, trademark or other legal notice as shall be required by
DISCOVERY and as
Trademark Registration Maintenance. Licensee shall, at DISCOVERY's
request and DISCOVERY's expense, assist DISCOVERY in confirming,
registering, renewing or prosecuting the rights of DISCOVERY or its
designee in the Licensed Materials, in any country or with any
government agency, and Licensee shall execute any required documents
in this regard, including, but not limited to, providing DISCOVERY
with all necessary dates and other information sufficient to enable
DISCOVERY or its designee to apply for and obtain copyright and
trademark registrations. Prior to distribution of the Licensed
Products, Licensee shall provide DISCOVERY, free of charge, twelve
(12) samples of each Licensed Product and twelve (12) samples of
each label, hangtag, packaging or wrapping material used in
connection with the Licensed Products for use as trademark and
copyright registration specimens.
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18. INDEMNIFICATION AND INSURANCE COVERAGE.
(a) Indemnification by DISCOVERY. DISCOVERY covenants and agrees to
defend, indemnify and hold harmless Licensee, its officers,
directors, agents and employees, for, from and against any and all
losses, claims, causes of action, damages, expenses, judgments,
awards, petitions, demands, costs or liabilities of any type, joint
or several, to which Licensee or any of them may become subject
(including its reasonable attorney's fees) for trademark and
copyright infringement arising out of Licensee's use of the Licensed
Materials as strictly authorized under this Agreement, provided
that: (i) Licensee uses all reasonable efforts and corrective action
to mitigate the exposure of DISCOVERY to any damages or claims; (ii)
DISCOVERY is given prompt written notice of the event; and (iii)
Licensee shall cooperate in the defense of such claim as reasonably
required by DISCOVERY and the cost of Licensee's cooperation shall
also be treated as an expense to be paid by DISCOVERY. DISCOVERY
reserves the sole right to conduct and control, settle or compromise
any and all such claims or legal actions for itself and on behalf of
Licensee.
(b) Indemnification by Licensee. Licensee covenants and agrees to
defend, indemnify and hold harmless DISCOVERY, its parent,
subsidiary and affiliated companies, and the officers, directors,
agents and employees of the foregoing for, from and against any and
all losses, claims, causes of action, damages, expenses, judgments,
awards, petitions, demands, costs or liabilities of any type, joint
or several, to which DISCOVERY or any of them may become subject
(including its reasonable attorneys' fees) directly or indirectly on
account of: (i) the manufacture, sale, distribution, advertising,
promotion or use of any Licensed Products; (ii) any act or omission
of Licensee or its agents or employees arising from or relating to
this Agreement; (iii) any breach or claimed breach of this Agreement
or activity relating thereto by Licensee; and (iv) Licensee's use of
the Licensed Materials except as strictly provided for and
authorized under this Agreement, provided that (a) DISCOVERY uses
all reasonable efforts and corrective action to mitigate the
exposure of Licensee to any damages or claims; (b) Licensee is given
prompt written notice of the event; and (c) DISCOVERY shall
cooperate in the defense of such claim as reasonably required by
Licensee and the cost of DISCOVERY's cooperation shall also be
treated as an expense to be paid by Licensee. Licensee reserves the
right to settle or compromise any and all such claims or legal
actions for itself and on behalf of DISCOVERY.
(c) Licensee Insurance. During each License Year of the Term, Licensee
shall obtain and maintain from a licensed and admitted insurance
carrier with a rating not less than A from Best, a product liability
insurance policy providing coverage in the amount of two million
United States dollars ($2,000,000) for personal injuries arising out
of each occurrence and one million United States dollars
($1,000,000) for property damage arising out of each occurrence and
an advertising liability insurance policy providing coverage of two
million United States dollars ($2,000,000) for each occurrence
(hereinafter collectively the without at least thirty (30) days
prior written notice to DISCOVERY.
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Simultaneously with the execution of this Agreement, Licensee shall
submit to DISCOVERY a copy of the fully paid Policies or
certificates of insurance, certified by an officer of Licensee as a
true and accurate complete copy. Licensee's obligations pursuant to
this clause 18(c) of Part II shall survive termination or expiration
of this Agreement. Licensee acknowledges that DISCOVERY reserves the
right to seek reimbursement from Licensee for any liability incurred
by DISCOVERY that is not fully covered by Licensee's insurance.
19. COMPLIANCE WITH LAWS AND REGULATIONS. Licensee warrants that its business
practices and activities as they relate to the performance of this
Agreement and the obligations hereunder, including but not limited to the
manufacture of Licensed Products, shall be in compliance with all
applicable legal requirements, standards, laws, regulations and
ordinances, including, but not limited to, all applicable child and forced
labor laws and regulations in the United States and in the Territory. Upon
any finding or determination that Licensee's business practices or
activities have violated any applicable labor laws or regulations,
Licensee shall take all necessary steps to correct such violation,
including without limitation, paying all applicable back wages found due
to workers. Licensee shall ensure that it will not distribute or cause the
distribution or sale of Licensed Products that Licensee knows or should
reasonably know were manufactured in violation of any applicable legal
requirements, standards, laws, regulations or ordinances. Licensee further
warrants that to the best of Licensee's knowledge, the Licensed Products
will not infringe the patent or intellectual property rights or other
rights of third parties.
20. RESTRICTION ON ASSIGNMENTS. Without the prior written consent of
DISCOVERY, which DISCOVERY may grant or deny in its sole discretion,
Licensee shall not directly or indirectly assign, transfer, sublicense or
encumber any of its rights or obligations under this Agreement. For
purposes of this Agreement, an assignment of this Agreement will include,
without limitation, the following: (1) a transfer or conveyance of the
beneficial ownership or control of fifty percent (50%) or more of
Licensee's controlling stock; (ii) Licensee becoming a part of any merger
or consolidation; or (iii) the sale or transfer of all or substantially
all of Licensee's assets. If Licensee attempts to grant a security
interest in the Licensed Products or assign, transfer, sublicense or
otherwise encumber any portion of this Agreement without DISCOVERY's prior
written consent, DISCOVERY shall have the right to terminate this
Agreement immediately.
21. NOTICE. All notices, statements, reports, correspondence, communications
and the like, required under this Agreement shall be in writing and sent
via a reputable private overnight delivery service, charges prepaid, to
the Contact Person and the address of Licensee and DISCOVERY as set forth
on page one of this Agreement, unless said address is later changed by
written notice given to the other parties. In addition to the Contact
Person for DISCOVERY set forth on page one of this Agreement, a copy of
any and all legal notices shall be sent to: General Counsel, DISCOVERY
LICENSING, INC., One Discovery Place, Silver Spring, Maryland 20910.
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Notice shall be deemed to be received and effective two (2) Business Days
following the day on which Notice was deposited with a reputable express
delivery service.
22. MISCELLANEOUS.
(a) Non-Waiver. Waiver of or failure by DISCOVERY to complain of any
act, omission or default on the part of Licensee, no matter how long
the same may continue or how many times such shall occur, shall not
be deemed to be a waiver of rights, or of any similar future act,
omission or default under this Agreement.
(b) Relationship. This Agreement (and all its provisions) is a license
only, and does not constitute a franchise. The parties intend and
acknowledge that their relationship created by this Agreement or
otherwise is not subject to the franchise or other business
opportunity laws of any country or state and sub-division thereof.
This Agreement shall not create nor be considered as constituting a
partnership, employer-employee relationship, joint venture, or
agency. Neither the parties hereto nor any of their employees,
representatives or agents shall have the power or authority to bind
or obligate any other party, except as explicitly set forth in this
Agreement.
(c) Governing Law and Disputes. THIS AGREEMENT SHALL BE DEEMED TO HAVE
BEEN NEGOTIATED AND EXECUTED IN NEW YORK, NEW YORK, UNITED STATES OF
AMERICA. THIS AGREEMENT AND ANY DISPUTE ARISING UNDER THIS AGREEMENT
SHALL BE GOVERNED, CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PRINCIPLES. ALL DISPUTES PERTAINING TO THE AGREEMENT SHALL BE
DECIDED BY A STATE OR FEDERAL COURT LOCATED IN THE CITY OF NEW YORK
AND LICENSEE AND DISCOVERY HEREBY IRREVOCABLY CONSENT TO PERSONAL
JURISDICTION IN ANY OF SAID COURTS. THE PARTIES FURTHER HEREBY
EXPRESSLY WAIVE ANY OBJECTIONS TO THE VENUE OF SAID COURTS AND THE
SERVICE OF PROCESS AND OTHER LEGAL DOCUMENTS AND PLEADINGS BY ANY
METHOD APPROVED BY SAID COURTS.
(d) Controlling Language. Licensee and DISCOVERY agree that this
Agreement has been drafted in the English language by consent of the
parties hereto and all provisions of this Agreement shall be
construed and interpreted in the English language as commonly used
in the United States of America.
(e) Confidentiality. This Agreement and information related to its
execution and content shall be kept confidential by the parties,
except as maybe required by law and to the extent certain
disclosures by Licensee are required in connection with Licensee's
control of its third-party manufacturers and distributors.
(f) Severability, Entire Agreement and Headings. If any term, covenant,
condition or provision of this Agreement or the application thereof
to any person or circumstance, shall to any extent be invalid or
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unenforceable, the remainder of this Agreement or the application of
such term or provision to any person or circumstance other than
those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each other term, covenant, condition or
provision of this Agreement shall be valid and shall be enforced to
the fullest extent provided by law. This instrument contains the
entire and only agreement between the parties hereto relating to the
subject matter hereof and no oral statements or representations or
prior written material not herein contained shall have any force or
effect. The headings to the clauses, sub-clauses, paragraphs,
sub-paragraphs and Schedules hereof are included only for reference
purposes and shall not be construed to contravene or vary the
language herein. This Agreement shall not be construed against any
party based upon the identity of the drafter of the Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by an authorized
representative of the parties as of the Effective Date first above written.
DISCOVERY LICENSING, INC. CONSPIRACY ENTERTAINMENT CORP.
By: /s/ Michael Ulica By: /s/ Sirus Ahmadi
------------------------- ----------------------------
Name: Michael Ulica Name: Sirus Ahmadi
Title: CFO, Consumer Products Title: President and CEO
Date: July 28, 2003 Date: July 23, 2003
SCHEDULE A
TO
DISCOVERY RETAIL LICENSE AGREEMENT
MARKETING PLAN
The MARKETING PLAN for LICENSE YEAR 1 and each License Year thereafter
shall include, but not be limited to, the following:
_____ 1. Category/Market & Competitive Overview
_____ 2. Product SKU Plan
_____ 3. Product Rollout Strategy & Timeline
_____ 4. Planned Advertising and Promotional Programs for:
a) Trade
b) In-Store
c) Consumer Media
_____ 5. Projected Units by Quarter and by Year
_____ 6. Projected Net Sales by Quarter and by Year, in U.S. Dollars