Fill and Sign the Hasbro Redacted License Agreement 41906 00033449 Form

-1- 9.07 Toy Designer License Agreement (Annotated)THIS AGREEMENT is entered into this 1st day of September, 199_ by and between THE DEVELOPMENT COMPANY, a New York corporation with offices at 1 Park Avenue, New York, New York 10017 (("LICENSOR") and THE TOY COMPANY, a New York Corporation with offices at 220 Fifth Avenue, New York, New York 10010 ("LICENSEE"). COMMENT This is the introduction to the Agreement which identifies the date of the Agreement as well as the parties and their respective addresses. It further identifies and defines how the parties will be referred to in subsequent paragraphs in the Agreement. WITNESSETH: WHEREAS, LICENSOR is the sole and exclusive owner of the Property or Properties identified more fully in Schedule A attached hereto (the "Property") and COMMENT This is a representation by the Licensor that it owns the Property. WHEREAS, LICENSOR has the power and authority to grant to LICENSEE the right, privilege and license to use, manufacture and sell those types of licensed products which incorporate or are otherwise based on the Property as identified in Schedule A attached hereto (the "Licensed Products"); and -2- COMMENTIn this provision the Licensor represents that it can enter into the Agreement. WHEREAS, LICENSEE has represented that it has the ability to manufacture, market and distribute the Licensed Products in the countries identified in Schedule A attached hereto (the "Licensed Territory"); COMMENT Here, the Licensee confirms it is able to manufacture and market the Licensed Products in the Licensed Territory. WHEREAS, LICENSEE desires to obtain from LICENSOR an exclusive license to use, manufacture, have manufactured and sell Licensed Products in the Licensed Territory; and COMMENT This is a statement of the intention of the Licensee. WHEREAS, both LICENSEE and LICENSOR have agreed to the terms and conditions upon which LICENSEE shall use, manufacture, have manufactured and sell Licensed Products. COMMENT In this paragraph the parties state their agreement to the license. -3- NOW, THEREFORE, in consideration of the promises and agreements set forth herein, the parties, each intending to be legally bound hereby, do promise and agree as follows: LICENSE LICENSE hereby grants to LICENSEE for the Term of this Agreement the exclusive right to use, manufacture, have manufactured, sell, distribute and advertise the Licensed Products in the Licensed Territory. The license includes a license under all patents and copyrights and any applications therefor with respect to the Property. It is understood, however, that this license grant and LICENSEE's obligation to pay royalties hereunder are not predicated or conditioned on LICENSOR seeking, obtaining or maintaining any patent or copyright protection for the Property. LICENSOR hereby retains all merchandising or ancillary product license rights. COMMENT This is the basic license grant whereby the Licensor permits the Licensee to use, manufacture, have manufactured, sell, distribute and advertise the Licensed Products. The Licensed Products and the Licensed Territory are defined in Schedule A. If the Licensee intends to subcontract manufacture, the grant must include the wording "having manufactured" here in the Agreement. It is also stated here that the Licensor is not required to seek and maintain patent or copyright protection in order to receive royalty compensation. Under any circumstance, the LICENSOR owns all rights to the property. -4- LICENSEE shall also have the right to grant sublicenses to third parties to manufacture or sell the Licensed products in countries in the Licensed Territory other than the United States subject to LICENSOR's prior express written approval of each such sublicense. COMMENT This permits the Licensee to sublicense the manufacture or sale of Licensed Products outside the United States subject to the Licensor's written approval. LICENSEE shall not make, use or sell the Licensed Products or any products which are confusingly or substantially similar thereto in any country outside the Licensed Territory and will not knowingly sell the Licensed Products to persons who intend to or are likely to resell them in a country outside the Licensed Territory. COMMENT By this paragraph, the Licensor restricts the Licensee's ability to sell outside the Licensed Territory and, hopefully, avoids gray market problems. TERM This Agreement shall be effective as of the date of execution by both parties and shall extend for so long as LICENSEE or its sublicensees or distributors continue to manufacture or sell the Licensed Products (the Term"). -5- COMMENTParagraph 2 defines the Term of the Agreement, which extends for as long as the Licensee continues to manufacture the Licensed Products. COMPENSATION In consideration for the licenses granted hereunder, LICENSEE agrees to pay to LICENSOR the royalty recited in Schedule A (the "Royalty") based on LICENSEE's Net Sales of Licensed Products. COMMENT The Royalty Rate is defined in Schedule A and is based on net sales. Should LICENSEE grant any approved sublicenses in countries outside the United States, LICENSEE shall pay LICENSOR FIFTY PERCENT (50%) of the gross income received by LICENSEE from such sublicensees. COMMENT This provides for a fifty-fifty split of gross income from sublicensing outside the U.S. The percentage may vary and, it is not uncommon to base the split on net, rather than gross, income. The Royalty owed LICENSOR shall be calculated on a quarterly calendar basis (the "Royalty Period") and shall be payable no later than thirty (30) days after the termination of -6- the preceding full calendar quarter, i.e., commencing on the first (1st) day of January, April, July and October, except that the first and last calendar quarters may be "short" depending on the effective date of this Agreement. COMMENTThe Royalty Period is typically a quarterly period although some toy companies prefer semiannual or annual payments. It is in the designer's best interest to keep the period as short as possible. For each Royalty Period, LICENSEE shall provide LICENSOR with a written royalty statement in a form acceptable to LICENSOR. Such royalty statement shall be certified as accurate by a duly authorized officer of LICENSEE reciting, on a country by country basis, the stock number, item, units sold, description, quantity shipped, gross invoice, amount billed customers less discounts, allowances, returns and reportable sales for each Licensed Product. Such statements shall be furnished to LICENSOR regardless of whether any Licensed Products were sold during the Royalty period or whether any actual Royalty was owed. COMMENT This defines what should be included in a sample royalty statement. The Agreement should specifically provide that a royalty statement be provided whether or not royalties are due and that all royalty statements be certified by an officer of the Licensee. -7- LICENSEE agrees to pay to LICENSOR an Advance against the royalties in the amount recited in Schedule A which may be credited against LICENSEE's actual royalty obligation to LICENSOR. COMMENT The Advance, which is identified in Schedule A, is recited in this provision. It specifically states that the Advance is credited against Licensee's royalty payments. During each calendar year during the Term of this Agreement, LICENSEE agrees to pay LICENSOR a Guaranteed Minimum Royalty as recited in Schedule A which may be credited against LICENSEE's actual royalty obligation to LICENSOR. The Guaranteed Minimum Royalty shall be calculated at the end of each calendar year. In the event that LICENSEE's actual royalties paid LICENSOR for any calendar year are less than the Guaranteed Minimum Royalty for such year, LICENSEE shall, in addition to paying LICENSOR its actual earned Royalty for such Royalty Period, pay LICENSOR the difference between the total earned Royalty for the year and the Guaranteed Minimum Royalty for such year. COMMENT The Guaranteed Minimum Royalty is recited in this provision, which is also credited against the Licensee's royalty obligation to Licensor. "Net Sales" shall mean LICENSEE's gross sales (the gross invoice amount billed -8- customers) of Licensed Products, less discounts and allowances actually shown on the invoice (except cash discounts which are not deductible in the calculation of Royalty) and, further, less any bona fide returns (net of all returns actually made or allowed as supported by credit memoranda actually issued to the customers) up to the amount of the actual sales of the Licensed Products during the royalty period. No other costs incurred in the manufacturing, selling, advertising, and distribution of the Licensed Products shall be deducted nor shall any deduction be allowed for any uncollectible accounts or allowances. COMMENTThis is a definition of Net Sales which recites what can and cannot be included therein. A Royalty obligation shall accrue upon the sale of the Licensed Products regardless of the time of collection by LICENSEE. A Licensed Product shall be considered "sold" when such Licensed Product is billed, invoiced, shipped, or paid for, whichever occurs first. COMMENT This provision defines the point of sale when a royalty becomes due, i.e., upon billing, invoicing, shipment or payment. If LICENSEE sells any Licensed Products to any affiliated or related party at a price less than the regular price charged to other parties, the Royalty shall be computed at the regular price. -9- COMMENTBy this provision, the Licensor is protected against "Sweetheart" sales to related companies and for promotional purposes. The receipt or acceptance by LICENSOR of any royalty statement or payment shall not prevent LICENSOR from subsequently challenging the validity of accuracy of such statement or payment. COMMENT This provision protects the Licensor against a possible argument that, by accepting the payment, it has waived any ability to subsequently challenge its accuracy. Upon expiration or termination of this Agreement, all Royalty obligations, including the Guaranteed Minimum Royalty, shall be accelerated and shall immediately become due and payable. COMMENT This provision accelerates all payments upon expiration or termination of the Agreement. Thus, if the Agreement is terminated in the first month of the year, the inventor does not have to wait until the end of the year to receive his Guaranteed Minimum Royalty. LICENSEE's obligations for the payment of Royalties shall survive expiration or termination of this Agreement and will continue for so long as LICENSEE continues to sell the Licensed Products. -10- COMMENTThe Licensor is insured a royalty even though the Agreement may have been terminated or expired. All payments due LICENSOR shall be made in United States currency by check drawn on a United States bank, unless otherwise specified by LICENSOR. COMMENT Payment in U.S. currency is particularly important when sales occur outside the United States. This avoids the Licensor having to bear the cost of collection charges by banks processing checks drawn on non-U.S. banks. Late payments shall incur interest at the rate of ONE PERCENT (1%) per month from the date such payments were originally due. COMMENT An interest charge in the amount of 1% is imposed. The interest rate may also be calculated at the prevailing prime rate plus one or two points. RECORD INSPECTION AND AUDIT LICENSOR shall have the right, upon reasonable notice, to inspect LICENSEE's books and records and all other documents and material in LICENSEE's possession or control with respect to the subject matter of this Agreement. LICENSOR shall have free and full -11- access thereto for such purposes and may make copies thereof. COMMENTThis is a basic audit provision. It is purposefully broad as it may be necessary, during an audit, to review manufacturing and inventory records as well as financial records. In the event that such inspection reveals an underpayment by LICENSEE of the actual Royalty owed LICENSOR, LICENSEE shall pay the difference, plus interest calculated at the rate of ONE PERCENT (1%) per month. If such underpayment be in excess of ONE THOUSAND UNITED STATES DOLLARS $1,000.00) for any Royalty Period, LICENSEE shall also reimburse LICENSOR for the cost of such inspection. COMMENT By this provision, the Licensee will, in the event that the audit reveals a discrepancy, pay the difference to the Licensor plus interest. This provision gives the Licensor the right to expect reimbursement of the cost of the audit if the discrepancy is more than $1,000. All books and records relative to LICENSEE's obligations hereunder shall be maintained and made accessible to LICENSOR for inspection at a location in the United States for at least two (2) years after termination of this Agreement. -12- COMMENTOne problem frequently encountered is destruction of records. This provision requires that the Licensee keep all books and records for at least two years after expiration of the Agreement. WARRANTIES AND OBLIGATIONS LICENSOR represents and warrants that it has the right power to grant the licenses granted herein and that there are no other agreements with any other party in conflict with such grant. COMMENT This is a representation on behalf of the Licensor that it can be grant the license and that it has not granted licenses of similar scope to any third party. LICENSOR further represents and warrants that it has no actual knowledge that the Property as submitted to LICENSEE infringes any valid rights of any third party. COMMENT This is another representation by the Licensor that it is not aware of any infringement of another's rights. LICENSEE represents and warrants that it will use its best efforts to promote, market, advertise, sell and distribute the Licensed Products in the Licensed Territory and agrees -13- to the Advertising Commitment recited in Schedule A. COMMENTThis is the toy company's representation that it is a responsible toy company and that it can do what it represents. It is important with start-up toy companies but of lesser importance with the major ones. LICENSEE shall be solely responsible for the manufacture, production, sale and distribution of the Licensed Products and will bear all costs associated therewith. LICENSOR shall introduce the Licensed Products in all countries in the Licensed Territory before the Product Introduction Date recited in Schedule A and commence shipment of Licensed products in all countries in the Licensed Territory before the Initial Shipment Date recited therein. This is a material provision of this Agreement. COMMENT This provision obligates the Licensee to introduce the Licensed Products in accordance with a specific schedule detailed in Schedule A. LICENSEE shall not be entitled to materially modify or change the Property without the prior written consent of LICENSOR, which consent shall not be unreasonably withheld. If such modification or change is later incorporated in an improved or modified product by LICENSEE, such improved product -14- shall be subject to the payment of a Royalty. Further, if LICENSEE incorporates any dominant feature of the Property on other products, such other products shall be subject to the payment of a Royalty. COMMENTBy this provision, any improvements or modifications to the initial Property made by the toy company remain covered by the Agreement and any such improvements or modifications will be owned by the Licensor. NOTICES AND SAMPLES LICENSEE shall fully comply with the marking provisions of the intellectual property laws of the applicable countries in the Licensed Territory. COMMENT The Agreement is made dependent upon the toy company's compliance with the applicable intellectual property laws of the countries in the Licensed Territory. The Licensed Products and all promotional, packaging and advertising material shall include all appropriate legal notices as required by LICENSOR. COMMENT The toy company is obligated to include all the appropriate trademark and copyright notices on packaging and advertising material as required by the Licensor. -15- The Licensed Products shall be of a high quality which are at least equal to comparable products manufactured and marketed by LICENSEE and in conformity with a standard sample approved by LICENSOR. COMMENT This is a broad quality control provision which is particularly important when a trademark is included in the licensing package. Any form of trademark licensing requires a quality control provision and this is perhaps the bare minimum for a trademark owner. If the quality of a class of the Licensed Products falls below such a production run quality, as previously approved by LICENSOR, LICENSEE shall use its best efforts to restore such quality. In the event that LICENSEE has not taken reasonable steps to restore such quality within thirty (30) days after notification by LICENSOR, LICENSOR shall have the right to terminate this Agreement. COMMENT This provision puts the teeth in the prior paragraph and gives the Licensor the right to terminate the Agreement on thirty days' notice if the Licensee fails to meet quality control standards. At least once during each calendar year, LICENSEE shall submit to LICENSOR three (3) samples of the Licensed Products for approval. -16- COMMENTThis gives the Licensor the right to review subsequent product to insure that quality levels are achieved as well as to stock its display shelves and provide samples to its favorite trademark attorney. NOTICES Any notice required to be given pursuant to this Agreement shall be in writing and mailed by certified or registered mail, return receipt requested or delivered by a national overnight express service. COMMENT This is a classic notice provision and governs how any notice regarding this Agreement should be made. PATENTS, TRADEMARKS AND COPYRIGHTS LICENSOR may, but is not obligated, to seek, in its own name and at its own expense, appropriate patent, trademark or copyright protection for the Property. LICENSOR makes no representation or warranty with respect to the validity of any patent, trademark or copyright which may be granted with respect to the Property. COMMENT By this provision, the Licensor may, but is not obligated, to seek and obtain appropriate intellectual property protection. Toy companies may want to impose such an -17- obligation on the Licensor depending on the property involved.In the event that LICENSOR has not sought patent protection for a particular feature of the Property or in a particular country, LICENSEE may request that LICENSOR apply for such protection and LICENSOR shall take reasonable steps to obtain such protection. In such event, LICENSEE shall advance LICENSOR the costs of obtaining and maintaining such protection. COMMENT This gives the toy company the right to request that the Licensor obtain protection where it deems it appropriate but puts the burden on the toy company to bear the cost for same. It is understood and agreed that LICENSOR shall retain all right, title and interest in the original Property and to any modifications or improvements made to the Property by LICENSEE. COMMENT The Licensor owns all rights in the Property as well as any modifications or improvements. The parties agree to execute any documents reasonable requested by the other party to effect any of the above provisions. -18- COMMENTOften, there is a requirement to execute legal documents or cooperate in an action. This provision imposes such a burden. LICENSEE acknowledges LICENSOR's exclusive rights in the Property and that the Property is unique and original to LICENSOR and that LICENSOR is the owner thereof. Unless otherwise permitted by law, LICENSEE shall not, at any time during or after the effective Term of the Agreement, dispute or contest, directly or indirectly, LICENSOR's exclusive right and title to the Property or the validity thereof. COMMENT This is an estoppel provision which prevents the toy company from subsequently challenging the Licensor's rights in the Property. It also lays the groundwork for a subsequent injunction against the toy company in the event of a breach of the Agreement. TERMINATION The following termination rights are in addition to the termination rights which may be provided elsewhere in the Agreement: Immediate right of Termination. LICENSOR shall have the right immediately to terminate this Agreement by giving written notice to LICENSEE in the event that LICENSEE does any of the following: -19- COMMENTThese are the grounds for immediate termination of the Agreement by the Licensor. No cure provision is required. fails to obtain or maintain product liability insurance in the amount and of the type provided for herein; or files a petition in bankruptcy or is adjudicated a 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 or dissolves its business or if a receiver is appointed for the LICENSEE or for the LICENSEE's business and such receiver is not discharged within thirty (30) days. COMMENT In the event of a bankruptcy by the Licensee, the Agreement may be terminated. There is, however, doubt whether this provision is enforceable under the Bankruptcy Act. Immediate Right to Terminate a Portion. LICENSOR shall have the immediate right to terminate the portion of this Agreement relating to any Property, Licensed Product, and/or country in the Licensed Territory if LICENSEE, for any reason, fails to meet the Product Introduction Date or the Initial Shipment Date specified in Schedule A with respect to such Property, Licensed Product or country or after the commencement of manufacture and sale of a particular Licensed Property in a particular country, LICENSEE ceases to sell commercial quantities of such -20- Licensed Product in such country for three (3) consecutive Royalty Periods. In such event, that Property, Licensed Product or country shall be deemed severed from the Agreement and revert to LICENSOR with no restrictions. COMMENTThis provision gives the Licensor the right to carve out portions of the Territory or pull back one or more Products and/or Properties should the toy company fail to commercialize all Properties in all countries in the Licensed Territory. Right to Terminate on Notice. Either party may terminate this Agreement on thirty (30) days written notice to the other party in the event of a breach of any provision of this Agreement by the other party, provided that, during the thirty (30) day period, the breaching party fails to cure such breach. COMMENT Every agreement should include a general termination provision and a time period in which a breach can be cured. This is such a provision. LICENSEE Right to Terminate. LICENSEE shall have the right to terminate this Agreement at any time on sixty (60) days written notice to LICENSOR, such termination to become effective at the conclusion of such sixty (60) day period. -21- COMMENTIt is not uncommon for the toy company to want to drop a new product. In such event, however, the toy company should be obligated to pay all guaranteed sums upon termination. POST-TERMINATION RIGHTS Not less than thirty (30) days prior to the expiration of this Agreement or immediately upon termination thereof, LICENSEE shall provide LICENSOR with a complete schedule of all inventory of Licensed Products then on-hand (the "Inventory"); COMMENT Upon termination, the Licensor is entitled to an inventory of the Licensed Products then on hand so that it can reasonably see what further products will be sold during the sell- off period. Upon expiration or termination of this Agreement, except for reason of a breach of LICENSEE's duty to comply with the quality control or legal notice marking requirements, LICENSEE shall be entitled, for three (3) months (the "Sell-off Period") and on a nonexclusive basis, to continue to sell such inventory. Such sales shall be subject to all the provision of this Agreement including the payment of a Royalty which shall be due within thirty (30) days after the close of the Sell- off period. At the end of the Sell-off Period, LICENSOR may require that the LICENSEE either destroy any product still on hand or, alternatively, purchase it from LICENSEE at a -22- price equal to 50% of LICENSEE's Net Selling Price. COMMENTA three month sell-off period is recited in this paragraph which gives the toy company the right to dispose of inventory on hand at the time of termination. This period is negotiable and typically anywhere from three months to a year. The Licensor should note, however, that by granting a sell-off period during the Christmas season, the toy company may be given an opportunity to sell 90% of its products. Upon the expiration or termination of this Agreement, all rights granted to LICENSEE under this Agreement shall forthwith terminate and immediately revert to LICENSOR and LICENSEE shall discontinue all use of the Property and the like. COMMENT This is a broad provision that insures all rights are referred back to the licensor upon termination or expiration. Upon expiration or termination of this Agreement, LICENSOR may require that the LICENSEE transmit to LICENSOR, at no cost, all material relating to the Property including all artwork, color separations, prototypes and the like, and any market studies or other tests conducted by LICENSEE with respect to the Property. -23- COMMENTIt is important that all material relating to the Property and/or Trademark be returned to the Licensor upon termination or expiration to give the Licensor the ability to resell the Property should it desire. In the event of termination of this Agreement other than due to a breach by LICENSOR, all monies paid to LICENSOR shall be deemed nonrefundable and LICENSEE's obligation to pay the Guaranteed Minimum Royalty for the year in which such termination becomes effective as well as for the year thereafter shall be accelerated and shall immediately become due and payable. COMMENT Upon termination, all payment obligations by the licensee are accelerated and become immediately due. INFRINGEMENTS LICENSOR shall have the right, in its sole discretion, to prosecute lawsuits against third parties for infringement of LICENSOR's rights in the Property. If LICENSOR does not institute an infringement suit within ninety (90) days after LICENSEE's written request that it do so, LICENSEE may institute and prosecute such lawsuit. COMMENT This provision recognizes that the Licensor will not always go after every -24- infringer and gives the toy company the right to do so should the Licensor elect not to.Any lawsuit shall be prosecuted solely at the expense of the party bringing suit and all sums recovered shall be divided equally between LICENSOR and LICENSEE after deduction of all reasonable expenses and attorney's fees. COMMENT This provision determines who will pay the cost of bringing a lawsuit and how recovered sums will be split. Each party agrees to cooperate fully with the other party in the prosecution of any such suit. The party bringing suit shall reimburse the other party for the expenses incurred as a result of such cooperation. COMMENT The parties agree to cooperate with each other in the event of a litigation.INDEMNITY LICENSEE agrees to defend, indemnify and hold LICENSOR, its officers, directors, agents and employees, harmless against all costs, expenses and losses (including reasonable attorneys' fees and costs) incurred through claims of third parties against LICENSOR based on the manufacture of sale of the Licensed Products including, but not limited to, actions founded on product liability. -25- COMMENTAs the toy company is responsible for the manufacture and sale of the Licensed products, it rightfully should hold the Licensor harmless in the event that there is a problem with such Licensed products. This is particularly true for product liability claims. LICENSOR agrees to defend, indemnify and hold LICENSEE, its officers, directors, agents and employees, harmless against all costs, expenses and losses (including reasonable attorneys' fees and costs) incurred through claims of third parties against LICENSEE based on a breach by LICENSOR of any representation and warranty made in this Agreement, provided, however, that such indemnity shall only be applicable in the event of a final decision by a court of competent jurisdiction from which no appeal of right exists and, further, shall be limited up to the lower or the amount of the actual monies received by LICENSOR for the Property in question under this Agreement or FIFTY PERCENT (50%) of LICENSEE's costs, expenses and losses (including reasonable attorneys' fees). COMMENT Likewise, the Licensor should hold the toy company harmless should it be found that the Licensor is not the rightful owner of the Property. This indemnity has, however, been limited only in the event of a final decision against it and further, only up to the monies received by Licensor under this Agreement or fifty percent of the Licensee's cost, whichever is lower. These limitations recognize the -26- relative sizes and financial positions of the respective parties. INSURANCELICENSEE shall, throughout the Term of the Agreement, obtain and maintain at its own cost and expense from a qualified insurance company licensed to do business in New York, standard Product Liability Insurance naming LICENSOR, its offices, directors, employees, agents, and shareholders as an additional insured. Such policy shall provide protection against 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 amount of coverage shall be a specified in Schedule A attached hereto. The policy shall provide for ten (10) days' notice to LICENSOR from the insurer by Registered or Certified Mail, return receipt requested, in the event of any 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, distribute or sell the Licensed Products prior to receipt by LICENSOR of such evidence of insurance. COMMENT By requiring the toy company to maintain product liability insurance, the Licensor is assured that the toy company will be able to live up to its indemnity. Under this provision, -27- the Licensor is named as an additional named insured under the policy. JURISDICTION AND DISPUTESThis Agreement shall be governed by the laws of the State of New York and all disputes hereunder shall be resolved in the applicable state or federal courts of New York. The parties consent to the jurisdiction of such courts, agree to accept service of process by mail, and waive any jurisdictional or venue defenses otherwise available. COMMENT The applicable law governing the Agreement will be depend upon the jurisdiction of the parties. AGREEMENT BINDING ON SUCCESSORS This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their heirs, administrators, successors and assigns. COMMENT This provision insures that the Agreement and its obligations will be binding upon successors of the parties. ASSIGNABILITY The license granted hereunder is personal to LICENSEE and may not be assigned by any act of LICENSEE or by operation of law unless in connection with a transfer of substantially all -28- the assets of LICENSEE or with the consent of LICENSOR. COMMENTBy rendering the license personal, the toy company is precluded from assigning the license and its obligations to a third party. WAIVER No waiver by either party of any default shall be deemed a waiver of any prior or subsequent default of the same provision or other provisions of this Agreement. COMMENT A waiver of a particular breach cannot be used as grounds for waiving subsequent breaches. SEVERABILITY If any 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 provision, and such invalid provision shall be deemed to be severed from the Agreement. COMMENT This provides that if a CLAUSE or paragraph in the Agreement is found unenforceable or invalid, it will not bring down the rest of the Agreement. -29- INTEGRATIONThis Agreement constitutes the entire understanding of the parties, and revokes and supercedes all prior agreements between the parties and is intended as a final expression of their agreement. It shall not be modified or amended except in writing signed by the parties hereto and specifically referring to this Agreement. This Agreement shall take precedence over any other documents which may be in conflict therewith. COMMENT The integration CLAUSE is one of the most important provisions in an Agreement because it avoid application or enforcement of any prior understandings between the parties and recites that the Agreement cannot be modified unless in writing. 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) (LICENSEE)By:___________________By:____________________Title:________________Title:_________________Date:_________________Date:__________________ COMMENT An officer for each party should sign the Agreement. -30- SCHEDULE A Property: The Property is defined as follows: COMMENTThe Property is identified preferably by a photograph or drawing. Licensed Products The Licensed Products are as follows: Toys and Games Licensed Territory The following countries shall Constitute the Licensed Territory:Worldwide COMMENT The Licensed Territory is recited here and can be anything from rights in a single city to worldwide rights. Most toy companies will want worldwide rights. Royalty Rate The Royalty Rate is as follows: FOUR PERCENT (4%).COMMENT The Royalty Rate is recited in this paragraph. Royalty Rates run from less than 1% to in excess of 15%. On average, however, typical toy property Royalty Rates run from 3% to 6%. -31- AdvanceThe following Advance shall be paid upon execution of this Agreement: Twenty Thousand Dollars ($20,000). Guaranteed Minimum Royalty During each year of the Term of this Agreement, LICENSEE hereby guarantees that LICENSOR shall receive a minimum royalty of: Fifty Thousand Dollars ($50,000). Product Liability Insurance Licensee shall obtain and maintain in effect an insurance policy of Five Million Dollars ($5,000,000) combined single limit, with a deductible amount not to exceed Twenty Five Thousand Dollars ($25,000), for each single occurrence for bodily injury and/or property damage. COMMENT The limitation of product liability insurance is recited in this paragraph. Good practice dictates the recitation of a maximum deductible amount to avoid a licensee from maintaining $2 million worth of insurance with a $1 million deductible. Product Introduction/Initial Shipment The Product Introduction Date for all Licensed Products in the United States shall be February 1, 20__. The Initial Shipment Date for all Licensed Products in the United States shall be July 1, 20__. -32- The Production Introduction Date and Initial Shipment Date for all other countries shall be one year after the applicable date in the United States. COMMENT The dates when the Licensed Products are to be introduced and shipped are recited in this paragraph.