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Exhibit 99.4
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,
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