Sublicense Agreement - Funimation Productions Ltd. and Atari Inc.
This Sublicense Agreement ("AGREEMENT") is entered into as of December 31, 2004,
by and among FUNIMATION PRODUCTIONS, Ltd., a Texas limited partnership having
its registered office at 6851 NE Loop 820, Suite 247, Fort Worth, Texas 76180
U.S.A. ("LICENSOR"), and Atari, Inc., a Delaware corporation having its
principal offices at 417 Fifth Avenue, New York, NY 10016 ("LICENSEE").
WITNESSETH:
WHEREAS, Licensor is the licensee of certain "Broadcasting Rights", "Video
Rights" and "Merchandising Rights" relating to the "Film", the "Property" and
the "Trademark", identified more fully in Schedule A attached hereto; and
WHEREAS, through its license from TOEI ANIMATION CO., LTD. ("TOEI"),
Licensor has the power and authority to grant to Licensee, within the "Licensed
Territory" identified in Schedule A attached hereto, the right, privilege, and
license to use, manufacture, and sell those types of Licensed Products (as such
term is defined in Schedule A attached hereto) which incorporate or are
otherwise based on the Film, the Property and/or the Trademark, and to use the
Trademark on or in association with the Licensed Products; and
WHEREAS, Licensee has represented that it has the ability to manufacture
or have manufactured, market and distribute the Licensed Products in the
Licensed Territory and to exploit the Trademark on or in association with the
Licensed Products; and
WHEREAS, Licensee desires to obtain from Licensor the license to use,
manufacture, and sell Licensed Products in the Licensed Territory and to exploit
the Trademark on or in association with the Licensed Products further described
in this Agreement; and
WHEREAS, both Licensee and Licensor are in agreement with respect to the
terms and conditions upon which Licensee shall use, manufacture, and sell
Licensed Products and exploit the Trademark.
NOW, THEREFORE, in consideration of the promises and agreements set forth
herein, the parties, each intending to be legally bound, do hereby agree as
follows:
1. License.
(a) Licensor hereby grants to Licensee for the Term of this
Agreement as recited in Schedule A attached hereto, the exclusive right and
license to use the Film and the Property in connection with the development,
publishing, manufacture, sale, distribution and advertisement of the Licensed
Products within the Licensed Territory only. It is understood and agreed that
this license shall pertain only to the Licensed Products and does not extend to
any other product or service.
(b) Licensor hereby grants to Licensee for the Term of this
Agreement as recited in Schedule A attached hereto, an exclusive license to use
the Trademark on, or in association with, the Licensed Products, as well as on
packaging, promotional, and advertising material associated therewith, within
the Licensed Territory only.
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(c) Licensee shall not, directly or indirectly, make or authorize
any use of the Licensed Products or the Trademark, like or similar, in any other
country outside the Licensed Territory and will not knowingly sell the Licensed
Products to persons who intend to resell the Licensed Products, or exploit the
Trademark, in any country outside the Licensed Territory, provided, however,
that the foregoing prohibitions shall not apply in the event that Licensee is
otherwise licensed by Licensor or a third party with a legal right to grant such
a license covering territories outside the Licensed Territory.
(d) Licensee shall not sell or otherwise distribute the Licensed
Products to jobbers, wholesalers, distributors, retail stores, or
merchants whose sales or distributions are or will be made primarily for
publicity purposes, combination sales, premiums, self liquidating offers
("SLO"), giveaways, vending, or similar methods of merchandising, or whose
business methods are questionable. Licensee's rights do not include the
right to manufacture or market premium, promotional, or SLO items, except
in connection with commercially reasonable promotional and marketing
activities directly associated with the Licensed Products as authorized by
Licensor and only if first approved in writing by Licensor. Licensor
reserves the right to market premium, promotional, and SLO Licensed
Products and is free to use any manufacturer. This paragraph shall in no
way limit Licensee from selling Licensed Products in connection with OEM
arrangements, as such are commonly known in the industry, subject to the
approval of Licensor, not to be unreasonably withheld.
(e) Licensed Products shall specifically exclude articles associated
directly or indirectly with any "Book Publishing Rights" unless first approved
in writing by Licensor. For purposes hereof, the term "Book Publishing Rights"
shall mean the right to publish comic books, story books, poster books,
calendars, and/or sticker albums or any other product based upon the Property,
the Film or the Trademark which tells a narrative story, but shall not include
(i) the Guides, or (ii) premiums associated with the Licensed Products which are
first approved in writing by Licensor.
(f) Unless otherwise agreed in writing by the parties hereto,
Licensee shall not sublicense any of the rights licensed under this Agreement,
except that Licensee shall have the right to outsource manufacturing and
development to third parties, as well as the publishing rights to the Guides,
contracted by Licensee and approved by Licensor (not to be unreasonably
withheld) and shall have the right to outsource distribution in any portion of
the Licensed Territory where Licensee does not maintain its own distribution
network to a third party contracted by Licensee and approved by Licensor, not to
be unreasonably withheld. Licensor hereby approves the use of Sega, Sony,
Nintendo and Microsoft and each of their authorized manufacturers for
manufacturing hereunder and Prima as a print publisher of the Guides.
(g) On Licensed Products and packaging and marketing materials
associated therewith Licensee shall endeavor to adhere as faithfully as may be
practicable to the form in which the Property has appeared in the Film, making
due allowance for modifications necessitated by the change from one medium into
another. No substantial departures shall be made in the general appearance of
the Property or the Trademark without Licensor's prior written consent. It is
expressly agreed that the designs available to be exploited hereunder shall be
limited to the Property, and any designs from original comics, publishing items
or other products
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manufactured outside the Licensed Territory which do not appear in the Film are
not available for exploitation hereunder.
(h) Licensee shall not change or permit any change of the Property
without obtaining the prior written consent of Licensor.
2. Term of this Agreement.
This Agreement and the provisions hereof, except as otherwise provided
herein, shall be in full force and effect commencing on the date first noted
above and shall extend for a "Term" as recited in Schedule A attached hereto.
3. Compensation.
(a) Licensee shall pay to Licensor a "Guaranteed Minimum Royalty" in
accordance with the terms of Schedule A attached hereto. This royalty advance
shall represent a non-refundable but recoupable advance against the Royalty
which cumulatively accrues and becomes payable during the Term of this
Agreement.
(b) (1) During the Term of this Agreement, a "Royalty" shall accrue
with respect to each of the Licensed Products in the percentage recited in
Schedule A attached hereto, based on Licensee's "Net Sales" (being hereafter
defined) of each of the Licensed Products. Royalty payments shall be due and
payable within thirty (30) days following the expiration of each "Royalty
Period" (hereafter defined).
(2) "Net Sales" shall mean Licensee's gross sales (the gross
invoice amount billed customers), calculated at the Licensee's wholesale list
price, less bonafide discounts, price protection chargebacks, shipping errors,
and returns plus a fifteen percent (15%) reserve for returns, plus a reserve of
up to three (3%) for any of the foregoing items which cannot be readily applied
to specific Licensed Products, such reserve to be reconciled no less frequently
than once per year with documentation provided to Licensor by Licensee which
shows the application of such items to specific Licensed Products. The return
reserve shall be returned on a rolling, semi-annual basis. For the avoidance of
any doubt, this means that a reserve for returns withheld in the First Quarter
shall be returned (to the extent not used) in the Third Quarter and so forth. As
used in the definition of Net Sales, price protection chargebacks shall have the
same meaning as customarily defined in the industry (i.e., the original
wholesale price minus the new wholesale price when Licensee makes a change in
the SRP where certain retailers require an accounting chargeback such that their
remaining un-sold inventory cost from Licensee is reduced to the new, lower
wholesale price; price protection chargebacks must be documented, invoice by
invoice, retailer by retailer). With respect to other retailer chargebacks
relating to inventory management (other than price protection chargebacks),
Licensor agrees to consider allowing deductions therefor in good faith on a
case-by-case basis, provided, however, that the final decision on any such
deduction will be Licensor's in its sole discretion. Except as specifically set
forth above in this paragraph 3(b)(2), no costs incurred in the manufacturing,
selling, advertising, and distribution of the Licensed Products, uncollectible
amounts, or allowances for uncollectible accounts shall be deducted in
determining "Net Sales".
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(3) A Royalty obligation shall accrue upon each sale of a
Licensed Product regardless of the time of collection by Licensee. For purposes
of this Agreement, a Licensed Product shall be considered "sold" upon the date
when such Licensed Product is billed, invoiced, shipped, or paid for, whichever
event occurs first, specifically excluding rentals which are considered sold
upon receipt of rental income.
(4) If Licensee sells any Licensed Products to any party
affiliated with Licensee or in any way directly or indirectly related to or
under the common control with Licensee, or sells any Licensed Product in a
transaction which is not bona fide, at a price which is less than the highest
price charged to other parties by Licensee, the Royalty payable to Licensor
shall be computed on the basis of the highest price charged to other parties by
Licensee.
(5) With respect to any revenue sharing arrangements for the
Licensed Products between Licensor and customers which rent the Licensed
Products (each a "Rental Arrangement"), Licensee shall, within thirty (30) days
of the execution of such Rental Arrangement, notify Licensor and provide to
Licensor copies of any contracts or other documents memorializing such Rental
Arrangement. The compensation due Licensor from Licensee with respect to
Licensed Product units sold or otherwise distributed by Licensee pursuant to any
such Rental Arrangement (each a "Rental Unit") shall not be computed on the
basis of Net Sales, but shall be computed at the applicable Royalty Rate (as set
forth in Paragraph 9 of Schedule A) as a percentage of Licensee's Rental
Arrangement Revenue. As used in this Agreement, the term "Rental Arrangement
Revenue" means any and all revenue derived by Licensee from each Rental
Arrangement, including, without limitation, any and all "order processing fees"
and similar items. For further clarity, Licensor's share of Rental Arrangement
Revenue shall be considered part of Licensor's Royalties. If, at the end of the
second full Royalty Period (as hereafter defined) during which a particular
Licensed Product is commercially available, the cumulative number of Rental
Units of such Licensed Product exceeds ten percent (10%) of the cumulative total
units of such Licensed Product sold or otherwise distributed by Licensee, then:
(i) Licensor and Licensee shall in good faith renegotiate the division, on
retroactive and prospective bases, between Licensee and Licensor of the Rental
Arrangement Revenue derived from the applicable Rental Arrangement, and (ii)
Licensee shall thereafter not enter into any Rental Arrangement without first
receiving Licensor's prior written approval, which shall not be unreasonably
withheld or delayed.
(6) Prior to Licensee exploiting the Guides, it is understood
and agreed that the parties shall first agree on a royalty rate to be paid to
Licensor in connection with the exploitation of the Guides.
(c)
(1) Licensee shall provide Licensor with a written Royalty
statement certified as accurate by a duly authorized officer of Licensee on a
quarterly basis, no later than thirty (30) days after the termination of the
preceding full "Royalty Period". Such statement shall be separated on a country
by country basis, showing the stock number, description, product wholesale list
price, gross sales and units, number of Rental Units, Rental
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Arrangement Revenue and Licensor's share thereof, product returns and units, and
Net Sales and units for each Licensed Product. Such statement shall also show
the total amount of units manufactured for each Licensed Product during the
Royalty Period.
(2) Such statements shall be furnished to Licensor whether any
Licensed Products were sold during the Royalty Period or whether any Royalty
payments are or will be due and payable. For purposes hereof, "Royalty Periods"
(being based on Contract Year quarters) shall terminate on the last day of
March, June, September, and December of each Contract Year during the Term of
this Agreement with the exception of the first and last Contract Year quarters
which may be "short" depending upon the effective date of this Agreement.
(3) The receipt or acceptance by Licensor of any Royalty
statement, or the receipt or acceptance of any Royalty payment made, shall not
prevent Licensor from subsequently challenging the validity or accuracy of such
statement or payment. In no event shall the receipt or acceptance of any Royalty
payment operate as a waiver of any of Licensor's contractual and/or legal
rights.
(d)
(1) All Royalty payments due hereunder shall be made in United
States currency drawn on a United States bank, unless otherwise agreed by the
parties.
(2) Late payments shall incur interest at the rate of one and
one-quarter percent (1.25%) per month or the maximum allowed by law, whichever
is lower, from the date such payments were originally due.
(3) All payments to be made by Licensee hereunder shall be
made without set-off, counterclaim, condition, or qualification, except as
specified in section (b)(2) above, and without deduction for or on account of
any tax, levy, impost, duty, charge, fee deduction or withholding of whatever
nature.
(4) Upon expiration of this Agreement, or earlier termination
of this Agreement in the event of Licensee's breach of this Agreement, all
Royalty obligations shall be accelerated and shall immediately become due and
payable.
(5) Licensee's obligations for the payment of a Royalty shall
survive the expiration or earlier termination of this Agreement and will
continue for so long as Licensee continues to sell or otherwise market the
Licensed Products.
4. Audit.
(a) Licensor shall have the right, upon at least five (5) days
written notice, to inspect Licensee's books and records and all other documents
and material in the possession of or under the control of Licensee with respect
to the subject matter of this Agreement (including, without limitation, purchase
orders, invoices, inventory records, shipping, receiving, bills of lading,
manufacturing invoices, and letters of credit), at the place where such records
are normally retained by Licensee. Licensor shall have free and full access
thereto for such purposes and shall be permitted to make copies thereof and
extracts therefrom. This right to inspect
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includes, without limitation, Licensor's right to inspect all consumer and other
complaints pertaining to the Licensed Products.
(b) In the event that such inspection reveals a discrepancy between
the amount of Royalty owed Licensor and that which was actually paid, Licensee
shall pay such discrepancy, plus interest, calculated at the rate of one and
one-quarter percent (1.25%) per month or the maximum allowed by law, whichever
is lower. In the event that such discrepancy is in excess of five percent (5%)
over a period of at least two Royalty Periods as determined by an independent
certified public accountant working on a non-contingency basis, Licensee shall
also reimburse Licensor for the cost of such inspection including any
accountants' and attorneys' fees incurred in connection therewith.
(c) All books and records relative to Licensee's obligations
hereunder shall be maintained and kept accessible and available to Licensor for
inspection within the mainland United States for at least three (3) years after
the issuance of the statement for which such books and records correspond (but
not for cumulative purposes). In addition Licensee shall retain for a reasonable
period of time such records as may be necessary in order to enable Licensee and
Licensor to defend lawsuits which may be instituted by third parties.
(d) In the event that an investigation of Licensee's books and
records is made, certain confidential and proprietary business information of
Licensee may necessarily be made available to the person or persons conducting
such investigation. It is agreed that such confidential and proprietary business
information shall be retained in confidence by Licensor and shall not be used by
Licensor or disclosed to any third party without the prior express written
permission of Licensee unless required by law. It is understood and agreed,
however, that such information may be used in any proceeding based on Licensee's
alleged failure to pay its actual Royalty obligation(s). Licensor shall not
conduct more than one audit per year and shall not audit any books and records
of Licensee more than once.
(e) In addition to the inspections described herein, Licensee shall
at any time (but not more than twice in any calendar year) provide to Licensor
upon its written request a Licensed Product sales datafile/electronic
spreadsheet containing complete and accurate information.
5. Licensee's Obligations.
(a) Licensee shall use its commercially reasonable, good faith
efforts to promote, market, sell and distribute the Licensed Products.
(b) Licensee shall be solely responsible for the manufacture,
production, marketing, sale, and distribution of the Licensed Products and will
bear all related costs associated therewith.
(c) It is the intent of the parties that Licensee shall design,
market, and ship the Licensed Products in all countries in the Territory.
(d) Licensee shall not utilize any dominant feature of the Film, the
Property, or the Trademark on any product other than the Licensed Products or
approved premiums.
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(e) Licensee shall not assert unauthorized rights in the Film, the
Property, the Licensed Products, or the Protections.
(f) Licensee shall use the English language on the Licensed
Products.
(g) Licensee shall not grant sublicenses hereunder or otherwise
assign, transfer, alienate, encumber, or charge any of its rights or obligations
hereunder without the express written consent of Licensor, except as expressly
permitted in this Agreement. Licensor recognizes that Licensee may outsource
development of the Licensed Products and/or distribution of the Licensed
Products outside of the United States (but within the Territory) and agrees that
it will promptly approve (to the extent not already approved in this Agreement)
any reasonable party chosen by Licensee for such purposes so long as such party
is under contract with Licensee. Licensee shall not sell any Licensed Product to
another party to incorporate the Licensed Product with another product to be
marketed or sold without the prior written approval of Licensor.
(h) Licensor and its affiliates may purchase any Licensed Product(s)
in any quantity up to five percent (5%) of the total shipped units by Licensee
of such Licensed Product at fifteen percent (15%) below the lowest prices (as
sold or offered for sale) to any other party minus any sales commissions, agent
fees, and distribution costs as available. Licensor and its affiliates shall be
entitled to make such purchases under the same terms, conditions, and priority
level as Licensee's highest volume customers. Licensor shall have the right to
sell or distribute Licensed Products only through Licensor's web sites,
www.funimation.com, www.zstore.com, and www.dbzstore.com.
(i) Licensee hereby acknowledges that it is the intent of the
parties that this Agreement is binding upon any subdistributors utilized by
Licensee. Licensor retains the right to approve Licensee's distribution scheme
for the Licensed Products in the Territory, and, in this connection, Licensor
may require that any subdistributor assume the obligations of Licensee under
this Agreement in writing.
(j) Upon Licensee's creation or improvement of any Licensed Product,
Licensed Product concept, or Licensed Product design containing new or improved
artwork, Licensee shall furnish to Licensor within thirty (30) days of its
internal distribution, high quality, high resolution copies (digital format
preferred) of any artwork that has been created, purchased, or improved by
Licensee, and this artwork, to the extent it contains the Film or Property,
shall be the property of Licensor and Toei.
(k) Licensee shall display, in a prominent place on Licensee's
internet site or sites, a button linking to Licensor's internet site located at
www.dragonballz.com. Licensee shall use for this purpose a button design
provided by Licensor. Licensee shall display such button as soon as is
practicable upon receiving this design from Licensor, and shall make reasonable
efforts to keep such button and links functional throughout the Term.
(l) With respect to price protection chargebacks as described in
Paragraph 3 hereof, Licensee shall notify Licensor promptly upon the initiation
of any price decrease which will cause any such price protection chargeback.
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6. Advertising.
(a) Licensee agrees to advertise and promote then Licensed Products
commensurate with its other successful products. Licensee shall submit reports
to Licensor which contain information regarding past and future Licensed Product
advertising spending and future advertising plans relating to the Licensed
Products. Licensor and Licensee shall work together in good faith regarding the
frequency, format and content of such reports.
(b) Licensee's advertising and promotional material and other matter
shall incorporate the elements of the Film and the Property in a manner usually
employed by the industry in the merchandising of products similar to the
Licensed Products. However, no such advertising material or other matter shall
be used by Licensee until after Licensee shall have first submitted such
advertising material and other matter to Licensor, and Licensor has approved
same in writing. Any disapproval shall be in writing and shall state the reasons
for such disapproval. In the event Licensor fails to approve or offer the
reasons for disapproval within 20 business days, such material shall be deemed
approved.
(c) Licensor expressly retains the right to conduct other
advertising, whether through Licensor, Licensee, other sublicensees or
otherwise.
(d) Licensor shall have the right to use the name, trademarks and
copyrights of Licensee for the purpose of promoting the Property, the Film, and
the Licensed Products, provided that Licensor shall in not use them in such a
manner as would be likely to materially damage Licensee's goodwill, reputation,
or intellectual property rights.
7. Notices, Quality Control, and Samples.
(a) The license granted hereunder is conditioned upon Licensee's
full and complete compliance with the marking provisions of the trademark,
patent, and copyright laws of the United States and other countries within the
Territory.
(b) The Licensed Products, as well as all promotional, packaging,
and advertising material related thereto, shall include all appropriate legal
notices as required by Licensor to give appropriate notice to the consuming
public of Licensor's and Toei's respective rights, titles, and interests
thereto. Licensee agrees that, unless otherwise expressly approved in writing by
Licensor, each usage of the Property shall be followed by either the TM or the
(R) Trademark Notice symbol, as designated in writing by Licensor, and the
following legend shall appear at least once on each Licensed Product and on each
piece of promotional and packaging material:
English Version: Licensed by FUNimation Productions, Ltd.
(C) (Year of Manufacture) BIRD STUDIO/SHUEISHA, TOEI ANIMATION
If a Licensed Product is particularly small there may be a reasonable reduction
in the content, which is subject to approval by Licensor. Licensee shall display
all notices in accordance with
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the requirements under the Universal Copyright Convention and the Copyright Act
or other laws of the respective countries comprising the Licensed Territory
including, without limitation, the regulations thereunder. In addition, all
packaging for Licensed Products must include the logo of Licensor.
(c) The Trademark and copyright notices, if possible, shall be
permanently affixed to the Licensed Products, and if not possible, then on a tag
permanently glued, sewn or otherwise attached to the Licensed Products, in a
place where the public could reasonably find them. The Trademark and copyright
notices shall not be placed only on a hang tag.
(d) The Licensed Products shall be of a high quality which is at
least equal to comparable products manufactured and marketed by Licensee, and be
of such style, appearance, and quality as shall be reasonably adequate and
suited for exploitation to the best advantage. If Licensor reasonably determines
that the quality of a class of the Licensed Products falls below such standard,
Licensee shall use its commercially reasonable efforts to restore such quality.
(e) For each Licensed Product, Licensee shall furnish to Licensor
the concept, rough design and/or associated storyboards and representative
artwork, as well as master candidates, mock-ups of packaging, advertising, and
promotional materials for each Licensed Product for the purpose of obtaining
Licensor's written approval before Licensee starts manufacture or distribution,
such approvals not to be unreasonably withheld; for clarity, any non-approval on
the part of Toei, whether reasonable or unreasonable, shall constitute a valid
reason for Licensor's disapproval of the same approval submission. In the event
of any unreasonable disapproval by Toei, Licensor shall use its commercially
reasonable efforts to secure approval by Toei of the disapproved item. If
Licensor fails to respond by a written notice within twenty (20) business days
of receipt of a proper submission for approval, the required approval shall be
deemed to have been given for such submission. For the avoidance of doubt and
without limiting the generality of the foregoing, the Licensed Product
milestones, as established by course of dealing between Licensor and Licensee,
shall continue to be observed for purposes of the approval process.
(f) Licensee shall submit to Licensor at least eighteen (18) units
of each uniquely identified Licensed Product from the first production run
thereof, and thereafter shall, at least once during each calendar year, shall
submit to Licensor an additional twenty-four (24) sets of samples for each
uniquely identified Licensed Product.
(g) Licensee agrees to permit Licensor or its representative to
inspect at any time the facilities where the Licensed Products are being
manufactured and packaged and remove random samples for inspection on or off the
premises, excluding any manufacturing facility over which Licensee does not
have, and cannot readily, acquire, such right of access or inspection. Licensor
shall not unreasonably interfere with Licensee's manufacturing operations.
8. Notice and Payment.
(a) If, at any time after the execution of this Agreement, it shall become
necessary or convenient for one of the parties to deliver any notice, demand or
communication upon the other party, such notice, demand or communication shall
be in writing, signed by the party serving the same, personally delivered, or
sent by registered or certified mail, return receipt requested,
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postage prepaid, or by an internationally recognized guaranteed overnight
delivery service providing for signed receipt of delivery, and (1) if intended
for Licensor, shall be addressed to:
FUNimation Productions, Ltd.
6851 NE Loop 820, Suite 247
Fort Worth, Texas 76180
Attn: Stephanie D. Giotes
and (2) if intended for Licensee, shall be addressed to the Licensee contact as
stated in Schedule A or to such other address as either party may have furnished
to the other in writing as a place for the service of notice. Any notice shall
be deemed to have been delivered as of the time it is personally delivered, or
deposited in the United States mail or with such overnight delivery service.
(b) All required electronic communications from Licensee to Licensor
should be directed to Stephanie@funimation.com. Electronic communications shall
not constitute formal notice as described in (a) above.
9. Patents, Trademarks and Copyrights.
(a) Licensor may seek, in its own name or the name of Toei,
appropriate patent, trademark or copyright protections. Licensee shall not seek
any such protection without Licensor's prior written consent with respect to the
Film.
(b) It is understood and agreed that Toei and/or Licensor shall
retain all their respective rights, titles and interests in the Film, the
Property and any patent, copyright and trademark protections (including the
Trademark) in the same (collectively, the "Protections").
(c) Licensee acknowledges Toei's and Licensor's exclusive and
respective rights, titles, and interests in the Film, the Property, and the
Protections and, further, acknowledges that the Film, the Property, and the
Protections are unique and original to Licensor and Toei and that Licensor and
Toei are the respective owners thereof, and Licensor has the exclusive
Broadcasting Rights, Video Rights, and Merchandising Rights pertaining thereto
within the Licensed Territory. Licensee shall not, at any time during or after
the effective Term of this Agreement, dispute or contest, directly or
indirectly, Toei's or Licensor's exclusive and respective rights, titles and
interests to the Film, the Property and/or the Protections or the validity
thereof. The provisions of this paragraph shall also apply in case of
modifications or improvements to the Property or Licensed Products made by
mutual consent of the parties hereto. Licensee shall not in any way do anything
to infringe upon, harm, or contest Toei's or Licensor's respective proprietary
rights.
(d) Licensor acknowledges that the Licensed Products, including the
copyrights thereto, are unique and original to Licensee and that Licensee is the
owner thereof, including all underlying computer code, subject to the rights of
Licensor and/or Toei in the Property and the Film. Notwithstanding the above and
for the avoidance of doubt, Licensee shall have no ownership interest in the
Property or the Film itself.
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(e) Promptly after the execution of this Agreement, Licensor shall
provide Licensee with such drawings, diagrams, sculptures, and other renderings
of the Property as Licensor shall possess in such detail as to enable Licensee,
its permitted sublicensees and its contract developers and manufacturers to
utilize the Property in the development and manufacture of Licensed Products.
Promptly after Licensor has made or acquired any material additions,
improvements, or changes to the Property, it shall provide Licensee with such
drawings, diagrams, sculptures, and other renderings thereof as Licensor shall
possess in such detail as to enable Licensee, its permitted sublicensees, and
its contract developers and manufacturers to utilize such additions,
improvements, and changes in the development and manufacture of Licensed
Products. If Licensee requests any additions, improvements, or changes with
respect to the Property or requests any additional sculpting, packaging, or
artwork, Licensor may, but shall not be obligated to, provide the same to
Licensee. The cost of providing any such requested additions, improvements or
changes in materials shall be borne by Licensee and such costs shall be prepaid
by Licensee.
(f) Licensee shall cooperate fully and in good faith with Licensor
and Toei's for the purpose of securing and preserving Toei's and Licensor's
rights, titles, and interests in the Film, the Property, and the Protections
within the Territory. Licensee shall assist Licensor and Toei to the extent
necessary in the procurement of any protection of any of Licensor's and Toei's
rights. Licensee shall forthwith notify Licensor of any possible improper or
unlawful use of the Film, the Property, or the Protections by any third party.
Toei or Licensor, if either so desires, may commence or prosecute any claims or
suits in its own name and join Licensee as a party, if necessary, upon the
consent of Licensee (such consent not to be unreasonably withheld). Any claims
or lawsuits shall be prosecuted solely at the cost and expense of Toei and all
sums recovered, whether by judgment, settlement, or otherwise, shall be the
property of Toei, Licensor or Licensee, as their interests may appear; provided,
however, Licensee shall not be entitled to any portion of a recovery unless such
recovery is made in connection with claims pertaining specifically to the
Licensed Products and Licensee shall have borne an appropriate allocable share
of the costs of prosecuting any such claims or lawsuits, as determined by Toei
and Licensor in the exercise of their reasonable discretion. Upon request of
Toei or Licensor, Licensee shall execute all papers, testify on all matters, and
otherwise cooperate in every way necessary and desirable for the prosecution of
any such lawsuit. The party bringing suit shall reimburse Licensee for the
expenses incurred as a result of its cooperation.
(g) In the event that Licensor elects to not prosecute a claim to
protect the Property, Licensee shall be entitled, after first receiving written
approval from Licensor (such approval shall not be unreasonably withheld), to
prosecute a claim based on use of the Property to protect its exclusivity
interest in the Licensed Products.
(h) Licensee acknowledges that the Film, the Property, and the
Protections have acquired secondary meaning.
(i) Licensee agrees that its use of the elements of the Film, the
Property, and/or the Protections inures to the benefit of Toei and Licensor,
respectively, and that Licensee shall not acquire any rights in the Film, the
Property, or the Protections.
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(j) The parties agree to execute any documents reasonably requested
by the other party to effect any of the above provisions.
10. Termination.
The following termination rights are in addition to the termination rights
provided elsewhere in this Agreement:
(a) Immediate Right of Termination. Upon the occurrence of any of
the following events, Licensor shall have the right to immediately terminate
this Agreement by giving written notice to Licensee:
(1) Licensee fails to obtain or maintain product liability
insurance in the amount and of the type provided for herein and fails to cure
such failure within thirty (30) days of receipt of notice thereof; or
(2) Licensee files a petition in bankruptcy or is adjudicated
as bankrupt or insolvent, or makes an assignment for the benefit of creditors,
or an arrangement pursuant to any bankruptcy law, or if the Licensee
discontinues its business or a receiver is appointed for the Licensee or for the
Licensee's business and such receiver is not discharged within sixty (60) days;
or
(3) Licensee knowingly breaches any of the provisions of this
Agreement relating to the unauthorized assertion of rights in the Film, the
Property, the Licensed Products, or the Protections and does not cease such
breach immediately upon written notice from Licensor; or
(4) Licensee fails to make timely payment of Royalty when due
and such failure continues for thirty (30) days after receipt of written notice
thereof, it being understood that interest accruing from the original date is
not thereby waived; or
(5) Licensee sells any unapproved Licensed Product and does
not cease such sales as soon as reasonably practicable after written notice from
Licensor, it being understood and agreed that if Licensee so ceases then
Licensor's sole remedy shall be that all such unapproved Licensed Product sold
by Licensee shall be subject to double the royalty rate otherwise applicable as
liquidated damages.
(b) Licensor shall have the right to immediately terminate the
portion(s) of the Agreement relating to any Licensed Product(s) with respect to
any country or countries in the Licensed Territory if Licensee for any reason
fails to restore such Licensed Product to the previously approved quality level
within thirty (30) days after being advised to do so by Licensor. This
termination right shall be country specific only (i.e., a quality level breach
in South Africa shall not give rise to a United States termination right, only
to a South African termination right for the specific Licensed Product at
issue.)
(c) Right to Terminate on Notice. In instances other than those
otherwise contemplated under the terms of this Section 10, if either party
defaults in the performance of any provision of this Agreement the
non-defaulting party may give written notice to the defaulting party that if the
default is not cured within a forty-five (45) day period from such notice, this
Agreement shall terminate immediately upon notice by the non-defaulting party.
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Notwithstanding the previous sentence, the forty-five (45) day period shall be
suspended for so long as (i) the default is not capable of being cured within
such forty-five (45) day period and (ii) the defaulting party is actively
engaged in attempting to cure the default; provided however, in no event shall
the cure period exceed ninety (90) days. Suspension shall end and termination
may occur if, at any time, the default becomes capable of being immediately
cured and is not promptly cured or the defaulting party ceases its attempts to
cure the default.
11. Post Termination Rights.
(a) Not less than thirty (30) days prior to the expiration of this
Agreement or immediately upon earlier termination hereof, Licensee shall provide
Licensor with a complete "Inventory" which shall schedule all inventory of
Licensed Products then on-hand, whether in the form of work-in-progress or
finished goods.
(b) Intentionally omitted.
(c) Upon the expiration or earlier termination of this Agreement,
all of the rights of Licensee under this Agreement shall forthwith terminate and
immediately revert to Licensor and Licensee shall immediately discontinue all
use of the elements of the Film, Property, and the Protections, at no cost
whatsoever to Licensor.
(d) Upon early termination of this Agreement for any reason
whatsoever, Licensee agrees to immediately return to Licensor all material
relating to the elements of the Film, the Property, and the Protections
including, but not limited to, all artwork, color separations, prototypes and
the like, as well as any market studies or other tests or studies conducted by
Licensee with respect to the elements of the Film, the Property and the
Protections, at no cost whatsoever to Licensor. Molds, market studies, and other
tests may be destroyed.
(e) In the event that Licensee sells or distributes any Licensed
Products or other products which in any way utilize elements of the Film,
Property, or Protections without first receiving Final Written Approval from
Licensor as specified in Section 7 Licensor, without any limitation of
Licensor's other legal or equitable remedies, shall be entitled to 100% of all
revenue derived from such sales or distribution, and such unapproved products
shall be deemed counterfeit for all purposes. The foregoing shall not apply if
such selling or distributing of such product(s) can be proven by Licensee to
have occurred entirely by mistake or inadvertence.
12. Goodwill.
Licensee recognizes the value of the goodwill associated with the elements
of the Film, the Property, and the Protections and acknowledges that the
elements of the Film, the Property, and the Protections and all rights therein
including the goodwill pertaining thereto, belong exclusively to Toei and
Licensor, respectively.
13. Indemnity.
(a) Licensor shall defend, indemnify and hold Licensee, its
subsidiaries, affiliates, directors, shareholders, trustees, officers, agents,
servants, subcontractors, and
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employees (each referred to herein as an "Indemnified Party" and collectively as
the "Indemnified Parties") free and harmless from any and all claims, demands,
actions, causes of action, disputes, indebtedness, liabilities, obligations,
promises, judgments, contracts, executions of any nature, damages, costs, and
expenses, whether based upon contract, tort, or otherwise, or arising pursuant
to local, state, or federal statute, criminal or otherwise and which arise out
of or are related to any performance or non-performance of this Agreement by
Licensor or a breach of Licensor's warranties hereunder, or any claim by a third
party that the Property or Film infringes the copyright, trademark, patent or
other intellectual property right of such party (collectively and severally
referred to herein as the Claims"). Licensor shall pay or reimburse Licensee and
each Indemnified Party on demand for all costs and expenses (including, without
limitation, reasonable accountants' fees, attorneys' fees, and other expenses)
which arise out of or in connection with any Claims, whether or not formal legal
action is instituted, and shall pay any and all judgments that may be finally
rendered on account thereof, including, but not limited to, judgments awarding
actual, exemplary, or punitive damages.
(b) Licensee shall defend, indemnify and hold Licensor, Toei, and
their respective subsidiaries, affiliates, directors, shareholders, trustees,
officers, agents, servants, subcontractors, and employees (each referred to
herein as an "Indemnified Party" and collectively as the "Indemnified Parties")
free and harmless from any and all claims, demands, actions, causes of action,
disputes, indebtedness, liabilities, obligations, promises, judgments,
contracts, executions of any nature, damages, costs, and expenses, whether based
upon contract, tort, or otherwise, or arising pursuant to local, state, or
federal statute, criminal or otherwise and which arise out of or are related to
any performance or non-performance of this Agreement by Licensee or a breach of
Licensee's warranties hereunder, or any claim by a third party that the items
described in section 9(d), (except claims based upon the Property or the Film)
infringes the copyright, trademark, patent or other intellectual property right
of such party (collectively and severally referred to herein as the "Claims").
Licensee shall pay or reimburse Licensor and each Indemnified Party on demand
for all costs and expenses (including, without limitation, reasonable
accountants' fees, attorneys' fees, and other expenses) which arise out of or in
connection with any Claims, whether or not formal legal action is instituted,
and shall pay any and all judgments that may be finally rendered on account
thereof, including, but not limited to, judgments awarding actual, exemplary, or
punitive damages.
14. Insurance.
Licensee shall, throughout the Term of this Agreement including any
extended Term, obtain and maintain at its own cost and expense from a qualified
insurance company licensed to do business in appropriate state(s), an insurance
policy or policies covering general liability within the Territory, inclusive of
bodily injury, property damage, and personal injury, naming Toei and Licensor as
additional named insureds. Such policy shall provide protection against any and
all claims, demands, and causes of action arising out of any defects or failure
to perform, alleged or otherwise, of the Licensed Products or any material used
in connection therewith or any use thereof. The minimum amount of coverage
provided by the policies are detailed in Schedule A. The policies of insurance
shall be deemed primary insurance and any insurance obtained by Licensor shall
be excess insurance not subject to exposure until the coverage of Licensee's
policy shall be exhausted. The policy shall provide for fifteen (15) days prior
written
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notice to Toei and Licensor from the insurer by registered or certified mail,
return receipt requested, in the event of any intended modification,
cancellation, or termination thereof. Licensee agrees to furnish Licensor a
certificate of insurance evidencing same within thirty (30) days after execution
of this Agreement and in no event shall Licensee manufacture finished goods,
distribute, or sell the Licensed Products prior to receipt by Licensor of such
evidence of insurance shows coverage throughout the term. Licensee shall provide
to Licensor, as becomes necessary, a certificate evidencing current insurance as
required herein throughout the Term of this Agreement.
15. Jurisdiction
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO CONFLICT OF LAWS, AND THE STATE
COURTS OF TARRANT COUNTY, TEXAS SHALL HAVE EXCLUSIVE VENUE AND JURISDICTION OVER
ANY DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE,
NON-PERFORMANCE, EXISTENCE, VALIDITY, BREACH, OR TERMINATION THEREOF. THE
PARTIES HERETO EXPRESSLY WAIVE ANY DEFENSE OF LACK OF PERSONAL JURISDICTION OR
IMPROPER VENUE WITH RESPECT TO SUCH COURTS.
16. Intentionally Omitted.
17. Agreement Binding on Successors.
The provisions of this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, and where permitted, their sublicensees,
successors, and assigns.
18. No Joint Venture.
Nothing contained herein shall be construed as a joint venture or shall
make one party the agent of the other party.
19. Assignability and use by Affiliates.
Except as otherwise provided herein, Licensee shall not grant sublicenses
hereunder or otherwise assign, transfer, alienate, encumber or charge any of its
rights or obligations hereunder without the express written consent of Licensor.
Notwithstanding anything to the contrary in this Agreement, any right that may
be exercised by Licensee hereunder may be exercised by Infogrames Entertainment
S.A., or any entity which is 50% or more owned or controlled, directly or
indirectly, by Infogrames Entertainment S.A.
20. Waiver.
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No waiver by either party of any default shall be deemed as a waiver of
any prior or subsequent default of the same or other provisions of this
Agreement.
21. Severability.
If any term, clause, or provision hereof is held invalid or unenforceable
by a court of competent jurisdiction, such invalidity shall not affect the
validity or operation of any other term, clause, or provision; and such invalid
term, clause, or provision shall be deemed to be severed from the Agreement.
22. No Modification.
This Agreement shall not be modified or amended except in writing signed
by the parties hereto and specifically referring to this Agreement. The parties
hereby acknowledge the existence of the license agreement between the parties
dated October 27, 1999 and all amendments thereto, and that such agreement shall
continue in full force and effect according to its terms.
23. Warranties and Representations:
(a) Licensor represents and warrants, to its best actual knowledge,
that it has an agreement with the sole and exclusive owner of the Property,
that, Licensor has the full, exclusive and unrestricted right and power to grant
the license hereby granted to Licensee, that neither Licensor nor any other
party has granted or will grant during the Term licenses of Licensed Products in
the Territory to persons other than Licensee and that, to Licensor's knowledge,
the utilization of the "Artistic Rights and Elements" will not infringe on any
copyrights, trademarks or other proprietary rights of any other person. Artistic
Rights and Elements are defined as the trademarks, patents and copyrighted
materials associated with the Property supplied to Licensee from Licensor for
the incorporation or use with Licensed Products pursuant to this Agreement.
(b) Licensee represents and warrants that it has the power and
authority to enter into and to fully perform under this Agreement. Licensee
warrants and represents that, to the best of its knowledge, it owns the complete
rights to any elements of the Licensed Product which Licensee has created
necessary for the purposes contemplated by this Agreement except for any
Artistic Rights and Elements provided to Licensee from Licensor. Licensee
further warrants and represents that there is no contract with any other person,
firm or corporation which will in any way interfere with Licensee's ability to
perform under this Agreement. Licensee additionally warrants and represents that
the Licensed Product, other than those Artistic Rights and Elements supplied by
Licensor, are not obscene, libelous or otherwise unlawful; to the best of its
knowledge, do not infringe upon any trademark, trade name, patent or copyright;
and do not violate the private, civil or property rights, the right of privacy
or any other rights of any third party. Licensee makes no representation
whatsoever regarding the anticipated sales volume of the Licensed Products or
the revenue to be earned by Licensor hereunder.
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24. Distribution Limitations
Licensee shall have the right to use any available distribution channels,
except that, and notwithstanding any other provisions contained within this
Agreement, Licensee does not have the rights and may not utilize amusement
parks, theme parks, and/or vending machine distribution or marketing avenues.
Licensor reserves all rights in these areas.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have each caused to be affixed hereto its or his/her hand and seal
the day indicated.
LICENSOR:
FUNIMATION PRODUCTIONS, LTD,
a Texas Limited Partnership
By: /s/ Robert G. Brennan
-------------------------------
Name: Robert G. Brennan
Title: Director of Licensing
LICENSEE:
Atari, Inc.
a Delaware corporation
By: /s/ Harry M. Rubin
-------------------------------
Name: Harry M. Rubin
Title: Sr. Exec. VP
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SCHEDULE A
Licensee: Atari, Inc.
Licensee's Address: 50 Dunham Road
Beverly, MA 01915
Licensee Contact: Matt Collins
Licensee Telephone: 978.921.3700
Licensee Telefax No.: 978-921-3503
Licensee Email: matt.collins@atari.com
Licensee Web Site: atari.com
A copy of all notices to Licensee shall be sent to Licensee at Atari, Inc., 417
Fifth Avenue, New York, NY 10016, Attn.: General Counsel (fax: 212.726.4239).
1. Film.
Film is defined as the animated television series known as
"Dragonball", "Dragonball Z" and "Dragonball GT", including any new or
additional episodes and longer-running "specials" based on the foregoing for
which Licensor has rights, but excluding any and all prequels, sequels, feature
films, and theatrical releases relating to such animated television series.
Licensor does not have Book Publishing Rights and therefore artwork specifically
used by the book publishers may not be directly duplicated as part of the
definition of Property, unless such artwork is duplicated as part of the Film.
2. Property.
Property is defined as the title(s) of the Film, the Trademarks, the
characters appearing therein, the names, designs, figures, storylines, and
drawings connected with such characters and/or the Film and works of fine art,
such as scenes and symbols, contained in the Film.
3. Trademarks.
The following Trademarks form a part of this Agreement:
"Dragonball", "Dragonball Z", and "Dragonball GT"; and
All character names used in the Film.
4. Licensed Products.
(a) The term "Licensed Products" as used in this Agreement shall
mean: (i) interactive computer video games on the Licensed Platforms (as such
term is hereafter defined), and (ii) clue books, printed strategy guides and
hint books associated with such interactive
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computer video games (specifically excluding electronic and/or video-based
strategy guides) (referred to in this Agreement as the "Guides"). "Licensed
Products" shall not include products licensed by Licensor to Licensee pursuant
to the October 27, 1999 agreement, as amended, between the parties.
(b) The term "Licensed Platforms" as used in this Agreement shall
mean the interactive computer video game platforms as follow: Sony Playstation,
Sony Playstation 2, Microsoft Xbox, Microsoft Xbox2, Nintendo Gameboy Advance,
Nintendo DS, Sony PSP, Nintendo GameCube, and any platform clearly understood in
the industry to be the "next generation" of any of the foregoing platforms.
(c) During the Term and within the Licensed Territory, the license
granted to Licensee in this Agreement shall be exclusive for the Licensed
Products. However, notwithstanding any exclusivity, option, right of
negotiation, or similar right Licensee may have: (i) Licensor shall have the
right, for promotional purposes only, to develop and publish interactive games
on the Internet to the extent that such games are simple, do not have
significant development costs, and do not directly generate revenue, and (ii)
such exclusivity shall be applicable to Bandai only on the condition and to the
extent that Licensee, subject to Licensor's normal approval process, agrees to
continue to work in good faith with Bandai to release commercially viable titles
developed or co-developed by Bandai as Licensed Products in the Territory
pursuant to the same or substantially similar material terms and conditions
contained in the agreements between Bandai and Licensee regarding the Budokai
titles for the Playstation2.
(d) The parties understand and acknowledge that Licensor does not
currently have rights with respect to the Additional Platforms (as such term is
hereafter defined). Notwithstanding the foregoing, however, Licensor shall not,
at any time during the Term and within the Licensed Territory, license any
Additional Platform to any third party for use in connection with the Property.
Further, in the event that Licensor acquires the rights to license the use of
the Property for interactive computer games on any Additional Platform in the
Licensed Territory during the Term, Licensor shall, subject to good faith
negotiations regarding reasonable performance provisions (including, without
limitation, binding milestone dates and advances and/or minimum guarantees),
license to Licensee the rights to the Property for such Additional Platform(s),
in which event such Additional Platform shall become a Licensed Platform within
the meaning of this Agreement.
(e) The term "Additional Platforms" as used in this Agreement shall
mean the interactive video game platforms as follow: PC (including CD- and
DVD-ROM), Mac, wireless telecommunications devices (i.e., cell phones, PDAs with
wireless telephony capability, and similar devices), the Internet (including
massive multiplayer games) and any other platform not commercially available as
of the date of this Agreement which directly competes or will directly compete
with the Licensed Platforms; for further clarity, examples of games which do not
compete with the Licensed Platforms are Jakks' 10-in-1, Jazwares Table Top
Arcade game, Jazwares GT16, Radica Skannerz, and the next generation of the
foregoing.
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5. Licensed Territory.
The following countries shall constitute the Licensed Territory (the
"TERRITORY" or "LICENSED TERRITORY"):
USA (including all of its territories, possessions and military
bases), English-speaking Canada, Australia, New Zealand and South Africa. In the
event Licensor is or becomes licensed by Toei for the applicable rights in
additional territories during the Term, such territories shall automatically be
deemed part of the Licensed Territory.
6. Term.
(a) This Agreement shall commence on December 31, 2004 and
shall be for "Term" expiring on January 9, 2010, with the understanding that
Licensor and Licensee shall, on or before January 9, 2010, meet to discuss in
good faith the possibility of: (i) extending the Term of this Agreement, (ii)
adding a "sell-off" or "exploitation period" to the end of the Term, and (iii)
making the last year of the Term non-exclusive as to the creation and
development of interactive computer games; with the understanding that any
agreements between Licensor and Licensee with respect to any of the foregoing
shall be subject to the approval of Toei.
7. The Guaranteed Minimum Royalty is Ten Million U.S. Dollars
payable by January 15, 2005. It is understood and agreed that this Guaranteed
Minimum Royalty shall be cross-collateralized across all Licensed Products items
with the exception of the Guides.
8. Intentionally Omitted.
9. Royalty Rate. The Royalty Rate applicable to all Licensed
Product items (except for Guides) shall be:
(a) for total unit sales of each Licensed Product item up to five
hundred thousand (500,000) units of such individual Licensed Product item, eight
and one-half percent (8.5%) of Net Sales; and
(b) for total unit sales of each Licensed Product item in excess of
five hundred thousand (500,000) units of such individual Licensed Product item,
ten percent (10%) of Net Sales.
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10. Insurance Coverage Amounts:
The Insurance policies described in Section 14 shall be US$1 million
combined single limit with no deductible.
11. Delivery Materials/Information
Licensor shall provide Licensee the following materials:
(a) Style guide for Film.
(b) If available, a copy of color slides, transparencies,
advertising and promotional materials which Licensee requests from Licensor, the
costs of obtaining, duplication and shipping to be born by Licensee.
12. Promotion
Licensee agrees to use reasonable efforts to promote the Licensed
Products by displaying and promoting them to its main buyers of similar products
throughout the Term of this Agreement and to display and promote the Licensed
Products within Licensee's booth at trade shows it attends and at Licensee's
showrooms.
13. Advertising
Licensee's obligations are set forth in Section 6(a) of this
Agreement.
14. Yearly Product Plan
At least once each twelve month period, Licensee shall, through
meaningful consultation with Licensor, supply Licensor with a product plan,
which shall include such items as development schedules and milestones, product
listings, platforms, and quarterly release windows. Such plan shall be
non-binding and Licensee shall use its commercially reasonable efforts to adhere
to each such plan and to achieve the goals and targets set forth therein.
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