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Exhibit 10.2
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
AGREEMENT dated as of April 19, 2000, between TOON BOOM
TECHNOLOGIES INC., a corporation formed under the laws of Canada (the
"Licensor"), and XXXX XXX MEDIA, INC., a Colorado corporation (the
"Licensee").
Licensor is a software development company dedicated to providing
state-of-the-art, high performance tools to the cartoon animation industry.
Licensor's products historically have been positioned at the high-end segment of
the market, and are commonly known as "TicTacToon" and "USAnimation." Licensor
intends to expand its product line by adding two versions of a product dedicated
to the creation of cartoons on the World Wide Web, commonly known as "WEBtoon
products," one dedicated to the prosumer market and one with a subset of the
functionalities of the prosumer product and dedicated to the consumer market,
thereby enabling Licensor to broaden its user demographics to include the
prosumer and consumer mass market in addition to its high-end professional base.
Licensee is an Internet-based, multimedia company founded by comic book
icon Xxxx Xxx to produce exciting original branded characters and content for
exploitation in all media. Licensee wishes to create and develop in conjunction
with Licensor user interfaces for the WEBtoon products to enhance such products
acceptance by the prosumer and consumer mass markets.
Licensor desires to grant to Licensee a non-exclusive license to market
and sell, or sublicense the consumer version of the WEBtoon products bundled
with value added original content of Licensee worldwide, and the Licensee
desires to accept such appointment, subject to the terms and conditions of this
Agreement.
Accordingly, Licensor and Licensee hereby agree as follows:
I. PRODUCTS
The WEBtoon products will consist of: (i) a new product aimed at the
prosumer market (including in particular low end creators of Web sites) which is
in the development stage and the initial description of which is contained in
Schedule 1, and (ii) a consumer mass market product consisting of a subset of
the prosumer product with more limited functionalities and the initial
description of which is contained in Schedule 1 and both offering animation
templates such as pre-sets and libraries of already made sequences of characters
which are in the development stage. The consumer mass market product hereinafter
shall be referred to as the "Consumer Product" and the prosumer product
hereinafter shall be referred to as the "Prosumer Product" and both the Consumer
Product and the Prosumer Product, with contributions by Licensee as contemplated
in Sections 3.02 and 4.01(a), shall be known as the "WEBtoon System," all
intellectual property and trade secret rights in which shall be owned by
Licensor from their creation (except for such Licensee content as described in
Article V hereof). All intellectual property and trade secret rights in
modifications, changes, enhancements, conversions, upgrades, or additions made
to the WEBtoon System, whether made by Licensor, Licensee, or a third party,
shall be the property of Licensor (except for such Licensee content as described
in Article V hereof), shall be considered a part of the WEBtoon System, and the
Licensee shall receive a license to the Consumer Product in accordance with
Article III of this Agreement. Licensee shall not be entitled to receive any
portion of the source code of the WEBtoon system, except as otherwise provided
for in the Software Escrow Agreement attached as Schedule 3.04 hereto. Licensee
hereby undertakes not to decompile or reverse engineer the WEBtoon system or
otherwise attempt to recreate its source code or gain access to it. Both parties
acknowledge that the expression "Webtoon" as used in this Agreement, is used
only for reference purposes and the actual products name will not contain the
expression Webtoon which is not available for use by the parties.
II. LICENSED TERRITORY
Except where otherwise explicitly noted, the licenses granted by this
Agreement are worldwide (collectively, the "Licensed Territory").
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III. DEVELOPMENT AND LICENSE TO LICENSEE
SECTION 3.01. WEBtoon System Development. Subject to the terms and
conditions of this Agreement, Licensor agrees to develop the WEBtoon System,
starting first with the Prosumer Product and continuing with the Consumer
Product at no cost to Licensee other than as expressly set forth herein.
SECTION 3.02. Software Development and Implementation. Licensor and
Licensee agree to consult each other without any charge to the other party
regarding the specifications which are the features, the functionalities and the
user interfaces of the Prosumer Product and of the Consumer Product. However,
the final decision, including on which functionalities of the Prosumer Product
shall be retained in the Consumer Product shall remain with Licensor. Licensee
shall have the right to terminate this Agreement if Licensee disagrees with the
specifications finally retained by Licensor for any of the Prosumer Product or
Consumer Product by written notice given to Licensee and taking effect at least
thirty (30) days after receipt of such notice by Licensor unless in the meantime
the parties shall have agreed in writing on the original or revised
specifications. Licensor will install a prototype of both the Prosumer Product
and the Consumer Product in its offices or another location, provided that the
prototypes are accessible by Licensee. Licensor will present a prototype review
of the Prosumer Product to Licensee, which the parties agree shall occur by
August 1, 2000. At the time of prototype review, Licensee will communicate any
suggested changes, modifications and enhancements to Licensor. Licensor will
make its best efforts in order to incorporate changes resulting from prototype
review and accepted by Licensor and install and implement the completed Prosumer
Product, according to the proposed specifications, in final form as promptly as
practicable in the circumstances following completion of the prototype review.
Immediately thereafter, Licensor and Licensee will conduct beta testing of the
Prosumer Product in accordance with the terms of the Beta Testing Agreement, a
copy of which is annexed hereto as Schedule 3.02, until the completion of a
release version. Immediately after completion of the final prototype version of
the Prosumer Product, Licensor will present a prototype review of the Consumer
Product to Licensee, which the parties agree is targeted to occur during the
third quarter of the year 2000 and the above process shall be repeated with the
Consumer Product. Licensee agrees to make available to Licensor, at no cost to
it, for purposes of beta testing the Prosumer Product and the Consumer Product
substantially the same persons having tested Licensee's website,
xxx.xxxxxxx.xxx.
SECTION 3.03. License Grant from Licensor to Licensee. In
consideration of the payment of the royalties provided in Section 6.03 hereof,
Licensor hereby grants to Licensee, with the right to grant sublicenses to its
Affiliates and to third parties approved in writing by Licensor, such approval
not to be unreasonably withheld, a personal, non-assignable, non-exclusive
license (the "Licensee License"), in the Licensed Territory, to offer for sale
or to license the Consumer Product but only bundled with significant original
Licensee value added content such as its new fourteen Super Heroes and Super
Villains as Licensee shall so desire, for an initial term of five (5) years from
the date of first commercial release of the Consumer Product by Licensor or
Licensee whichever occurs first, such initial term being renewable with the
consent of both parties and according to terms and conditions to be agreed upon
by the parties, which Licensee License the Licensee hereby accepts. The Licensee
License also shall include any enhancements to the Consumer Product provided by
Licensor pursuant to any other agreement during the term of the Licensee
License. The Licensee License shall not include reproduction or modification
rights. All reproductions of the Consumer Product shall be performed by Licensor
either electronically by download by the end-user from a site controlled by
Licensor (but the command to download may be given by the end-user from a site
controlled by Licensee in a mode transparent to the end-user) or physically in
case physical products are needed subject, in this latter case, to agreement
between the parties on the reproduction, packaging and shipping costs as
contemplated in Section 6.03(a) hereof.
SECTION 3.04. Escrow of WEBtoon System Software. Concurrently with
execution of this Agreement, the parties shall execute a Software Source Code
Escrow Agreement with the firm of Xxxxxx, X'Xxxx, General Partnership, at 0000
Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx, X0X 0X0, or such other mutually
agreed upon escrow agent (collectively, the "escrow agent") substantially in the
form of Schedule 3.04 and shall use their best efforts to have such agreement
executed by escrow agent promptly.
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IV. OBLIGATIONS
SECTION 4.01. By Licensee.
(a) Engineering Services. Licensee, shall contribute to the
development of the WEBtoon System engineering services through developers from
Pentafour Media, Inc. of India ("Pentafour") providing to Licensor at the site
of Licensor in the Montreal area, Canada the services of qualified developers
valued by the parties in the amount of Two Hundred Fifty Thousand U.S. Dollars
(US$250,000), which contribution shall be based upon mutually agreeable
developers, deliverables and milestones as well as daily rates and out of pocket
expenses to be assumed by Licensee to Pentafour or to such developers as more
particularly described in Schedule 4.01(a). All intellectual property and trade
secret rights in the result of the work performed by such developers shall be
owned by Licensor. Such developers shall enter into such agreements pertaining
to intellectual property assignment, waiver of moral rights and confidentiality
as Licensor in its discretion shall require. Licensor shall have the right to
require Licensee to replace any developer for cause upon notice to Licensee in
which case Licensee shall arrange to have such developer replaced promptly by a
developer of the same or superior expertise and experience as the other
developers made available by Licensee to Licensor and continuing to perform
services for Licensor. In such case, Licensee shall pay all transportation
expenses of the replacement developer to Montreal and from Montreal to India at
the end of the project, such amounts being in addition to the above amount of
Two Hundred Fifty Thousand U.S. Dollars (US$250,000).
(b) Promotional and Marketing Services. Licensee shall contribute
promotional and marketing services to the development of the WEBtoon System
valued by the parties in the amount of Two Hundred Fifty Thousand U.S. Dollars
(US$250,000), which contribution shall be based upon the attainment of
milestones and deliverables to be mutually agreed upon by Licensee and Licensor.
Licensee undertakes that Mr. Xxxx Xxx, on behalf of Licensee, shall be required
to assist in marketing and promoting the WEBtoon Products worldwide but
physically only from Los Angeles, California, on terms to be mutually agreed
upon by Licensee and Licensor. Attached as Schedule 4.01(b) hereto is a detailed
plan describing the minimum Licensee promotional and marketing services plan of
the WEBtoon Products for such value. Licensor shall assume all out-of-pocket
pre-approved promotional, advertising, travel, lodging and meal expenses
incurred by Licensee's personnel and/or consultants in providing such
promotional and marketing services described in this Section which expenses
shall all be deducted by the Licensee from the amount of $250,000 provided in
this Section.
SECTION 4.02. By Licensor. During the term of the Licensee License,
Licensor hereby grants Licensee a royalty-free, limited exclusive license to use
and right of access at Licensee's principal development location in California,
U.S.A., for a six (6) week period prior to the scheduled commercial release of
each of the Prosumer Product and Consumer Product, as they then exist, and as
the same may be modified or enhanced for general commercial release from time to
time. Licensor acknowledges and agrees that Licensee also shall have the
non-exclusive right to use during the term of the Licensee License certain
mutually identified enhancements and features of the technology underlying the
WEBtoon Products solely for Licensee's own content programming, which
enhancements and features shall be negotiated by the parties in good faith.
V. PROPRIETARY RIGHTS AND LICENSE TO LICENSOR
SECTION 5.01. Licensee Content. All Licensee content shall remain the
sole and exclusive property of Licensee, including without limitation, all
copyrights, trademarks, patents, trade secrets and any other proprietary rights.
Nothing in this Agreement shall be construed to grant Licensor any ownership
right in, or license to, such content, except as expressly set forth in Section
5.04 of this Agreement. To the extent that Licensor updates, modifies, combines
or otherwise creates any derivative work from intellectual property contributed
by Licensee other than as contemplated in Sections 4.01 (a) and (b), such shall
be conclusively deemed to be owned solely by Licensee.
SECTION 5.02. Proprietary Rights. Except as otherwise provided in
Section 5.01 hereof, all intellectual property and trade secret rights in all
materials included in or pertaining to the WEBtoon System and all other
deliverables hereunder, any updates or modifications thereto or derivative works
thereof, whether made by Licensor, Licensee or a third party and all ideas,
designs, and formats embodied therein, including but not limited to any computer
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software (in object code and source code form) and such other licenses and
middleware required, script, the end user interface, programming code, applets,
data, information or HTML or other scripts developed or provided by any party or
its suppliers under this Agreement, audiovisual displays created hereunder
(collectively, the "Work Product") are and shall remain the property of Licensor
from their creation, and all rights, title and interest therein shall vest in
Licensor and shall be deemed to be a "work made for hire" for Licensor including
the services rendered by or on behalf of Licensee hereunder. To the extent that
title to the Work Product does not, by operation of law, vest in Licensor or is
not considered works made for hire, then all right, title and interest therein
are hereby irrevocably assigned to Licensor effective from the moment of their
creation. The Work Product, all copyright, trademark, trade dress, trade secret,
patent and other proprietary rights therein shall belong exclusively to Licensor
with Licensor having the right to obtain and to hold in its own name copyright
and trademark registrations and such other protections as may be appropriate to
the subject matter, and any extensions and renewals thereof. In addition, any
and all data and information about, or provided by, end users and related to the
Consumer Product at any time whether or not included in a database and/or any
report in the possession of Licensor or Licensee during the term of the Licensee
License ("User Information"), shall be the joint property of Licensor and
Licensee, and shall be, to the extent permitted by applicable laws, communicated
to the other party to be used by such party for any purpose except (i) for a
purpose for which any necessary consent was not obtained from the end user or
(ii) for competing with the other party. Each party agrees to give the other
party any reasonable assistance and to execute any further documents required to
perfect the rights defined in this Section and in other Sections of this
Agreement.
SECTION 5.03. Confidentiality.
(a) During the course of this Agreement and the negotiation between
the parties which led to the execution of this Agreement, information that is
confidential or proprietary to one party ("Disclosing Party") may be or may have
been disclosed to the other party ("Receiving Party"), including, but not
limited to software, technical processes and formulas, source codes, product
designs, sales, cost and other unpublished financial information, product and
business plans, advertising revenues, usage rates, advertising relationships,
projections, and marketing data and other information which according to the
circumstances surrounding their disclosure ought in good faith to be treated as
confidential ("Confidential Information"). Confidential Information shall not
include information that the Receiving Party can demonstrate (i) is, as of the
time of its disclosure, or thereafter becomes part of the public domain through
a source other than the Receiving Party, (ii) was known to the Receiving Party
as of the time of its disclosure, (iii) is independently developed by the
Receiving Party, or (iv) is subsequently learned from a third party not under a
confidentiality obligation to the Disclosing Party. Except as provided for in
this Agreement, each party shall not make any disclosure of the Confidential
Information to anyone other than its employees or advisors who have a need to
know in connection with this Agreement. Each party shall notify its employees
and advisors of their confidentiality obligations with respect to the
Confidential Information and shall require its employees and advisors to comply
with these obligations. The confidentiality obligations of each party and its
employees and advisors shall survive the expiration or termination of this
Agreement.
(b) The parties hereto agree that the transactions that are the
subject of this Agreement, are of a confidential nature and shall not be
disclosed except to the parties shareholders, directors, employees and advisors
on a "need to know" basis or as required by law and that, following the
execution of this Agreement, a joint press release shall be issued in order to
summarize these transactions and, following the publication of said press
release, each party undertakes not to make any public announcement without
having obtained the prior written consent of the other party to that effect,
except as otherwise may be required to comply with a party's legal disclosure
obligations.
SECTION 5.04. Grant of Licenses to Licensor.
(a) Licensee hereby grants to Licensor and its Affiliates a personal,
non-assignable, non-exclusive, royalty-free license (the "Licensor Limited
License") in the Licensed Territory to reproduce, edit, modify, adapt,
translate, exhibit, publish, transmit, participate in the transfer of,
reproduce, create derivative works from, distribute, perform, display, and
otherwise use Licensee content to create and distribute tutorials, help
messages, documentation and packaging for the Prosumer Product and the Consumer
Product and, to the extent agreed upon from time to time by Licensee, for any
other purposes without the right to sublicense for an initial term commencing on
the date of first commercial release of either the Prosumer Product or Consumer
Product, whichever occurs first, and terminating five (5) years from the date of
first commercial release of the Consumer Product, such initial term being
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renewable with the consent of both parties and according to terms and conditions
to be agreed upon by the parties, which Licensor Limited License Licensor hereby
accepts.
(b) In consideration of the payment of the royalties provided in
Section 6.04 hereof, Licensee hereby grants to Licensor, with the right to grant
sublicenses to its Affiliates and to third parties approved in writing by
Licensee, such approval not to be unreasonably withheld, a personal,
non-assignable, non-exclusive license (the "Licensor General License"), in the
Licensed Territory, to reproduce and offer for sale or to license the same
Licensee content as Licensee distributes with the Consumer Product under the
Licensee License, but only bundled with the Consumer Product, for an initial
term of five (5) years from the date of first commercial release of the Consumer
Product, with Licensee content, by Licensee, such initial term being renewable
with the consent of both parties and according to terms and conditions to be
agreed upon by the parties, which Licensor General License the Licensor hereby
accepts. The Licensor General License also shall include any enhancements to the
Licensee content bundled with the Consumer Product as Licensee may from time to
time make, during the term of the Licensor General License. The Licensor General
License shall not include modification rights. All reproductions of the Licensee
content shall be performed by Licensor at its cost.
VI. OTHER CONSIDERATION; ROYALTY PAYMENTS
SECTION 6.01. By Licensee.
(a) Warrants. Licensee shall, simultaneously with the execution of
this Agreement, issue warrants to Licensor to purchase thirty thousand (30,000)
shares of Licensee's Common Stock, at the lower of the closing bid price on the
close of the transactions contemplated by this Agreement or the closing bid
price on April 10, 2000, to be exercised on a five year period, as per the terms
of the Purchase Warrants attached as Schedule 6.01 (a) hereto.
(b) Software Purchase Agreement. Licensee hereby confirms the license
software purchase obligations set forth in that certain letter agreement dated
January 4, 2000 between the parties, and attached as Schedule 6.01(b) hereto
which licenses shall be governed by Licensor standard terms and conditions of
license applicable to such products. Payment for such licenses shall occur upon
execution of this Agreement by both parties.
SECTION 6.02. By Licensor.
(a) Restricted Securities. Licensor shall, simultaneously with the
execution of this Agreement, issue such number of warrants to Licensee entitling
Licensee to an equivalent number of its share capital representing approximately
two point ninety-six percent (2.96%) of the issued and outstanding capital stock
of Licensor at the time of the execution of this Agreement but after the
issuance to financial investors of the shares described in this section of which
one-third (1/3) shall be issued in consideration for Licensee's consulting
services previously rendered to Licensor and upon payment by Licensee to
Licensor of the licenses described in Section 6.01(b) hereto, one-third (1/3)
shall be issued in consideration for Licensee's engineering services in tranches
upon attainment of the milestones specified in Schedule 4.01(a) and in the
Warrant Agreement attached as Schedule 6.02(a), and one-third (1/3) shall be
issued in consideration for Licensee's promotional and marketing services in
tranches upon attainment of the milestones specified in Schedule 4.01(b) and in
the Purchase Warrants attached as Schedule 6.02(a). Said shares shall be
identical shares (in all respects, including without limitation, rights,
preferences, powers, privileges, restrictions, etc.) to the shares to be issued
to the financial investors contributing not less than One Million U.S. Dollars
(US$1,000,000) specifically allocated and to be applied to assist in the
development and launch of the WEBtoon Products (collectively, the "Securities").
(b) Warrants. Licensor shall, simultaneously with the execution of
this Agreement, issue warrants to Licensee to purchase one hundred fifty
thousand (150,000) shares of Licensor's Securities, at a purchase price per
share of CDN$0.70, to be exercised on a five year period, as per the terms of
the Purchase Warrants
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attached as Schedule 6.02 (b) hereto. Said shares shall be identical shares (in
all respects, including without limitation, rights, preferences, powers,
privileges, restrictions, etc.) to the Securities.
SECTION 6.03. Royalty Payments by Licensee.
(a) Consumer Product Sales. In consideration of the Licensee License,
Licensee shall pay Licensor a royalty related solely to the revenues generated
from the sale or license of the Consumer Product bundled with the Licensee
content, in an amount equal to thirty percent (30%) of Licensee's net revenues
of the sale or license of the Consumer Product and of such Licensee content
after the recoupment by Licensee of all of its costs, and the allocation of an
off-the-top service/distribution fee of twenty percent (20%) of gross revenue.
When a sale or license is granted by Licensee to one of its Affiliates for
resale, re-licensing or sub-licensing, Licensee's net revenues shall be
calculated by taking the Affiliates' net revenues and not including the net
revenues earned by Licensee from such sale or license to its Affiliates. The
minimum royalty payable to Licensor on the sales or licenses of the Consumer
Product bundled with Licensee content packages shall be not less than Eight U.S.
Dollars (US$8.00) per unit; provided, however, that if the Eight U.S. Dollars
(US$8.00) per unit is not financially practicable due to marketplace factors,
Licensor and Licensee agree to negotiate in good faith an alternative mutually
acceptable royalty structure. Further, if any physical product needs to be
reproduced by Licensor, in case the Consumer Product is not downloaded from the
Licensor's site, the amount of Eight U.S. Dollars (US$8.00) shall be increased
to take into account the costs of reproduction, packaging and shipping of the
physical products including documentation. If such Consumer Product bundled with
Licensee content is bundled by an OEM, then (i) each such OEM shall be subject
to approval by Licensor; (ii) if the per unit royalty payable to Licensor in
such case is below Eight U.S. Dollars (US$8.00), the Consumer Product shall be
modified by Licensor for such purposes to only allow use of "skins" of Licensee
and of Licensee's animation templates but not of those of others and (iii)
Licensee and Licensor shall share equally all license fees, royalties,
commissions, or other payments made by such OEM (in this section, the "OEM
Payments").
Licensee shall within thirty (30) days of the beginning of each
quarter of each calendar year, submit to Licensor a report indicating the number
of the Consumer Products sold or otherwise licensed by Licensee and the OEM
Payments received during the preceding quarter during the term of the Licensee
License, the amounts necessary to calculate the royalty and the OEM Payments and
the total amount due to Licensor as payment of the royalty and share of the OEM
Payments. Licensee shall at the same time as submitting the report remit to
Licensor any amount of royalty and OEM Payments due and payable, in US Currency.
Furthermore, Licensee shall remit to Licensor the sum due and payable under this
Section within thirty (30) days after the termination date of the Licensee
License accompanied with a report showing the above details.
Any amount due but unpaid by Licensee to Licensor shall bear interest
at a rate equal to the yearly rate of interest which Royal Bank of Canada
announces publicly from time to time in Canada as its prime and lending rate
which is its reference rate for determining rates of interest applicable to
loans made by it in Canada in Canadian dollars, plus two percent (2%); such
interest shall be calculated from the date the report is due until the date the
full amount of the amount due is paid to Licensor.
Licensee shall keep true and accurate records and books of account
containing all data reasonably required for the computing of and verification of
the royalty to be paid in accordance with this Section during the term of the
Licensee License and for a period of one (1) year thereafter. Licensee will at
all reasonable times during the term of the Licensee License and for a period of
one (1) year thereafter, but not more frequently than once in any twelve month
period, upon Licensor's request, produce the records and books for periodic
inspection by Licensor. Should the reported royalty differ from that actually
paid by Licensee then Licensor will immediately notify Licensee of the
difference and request clarification of same.
The cost of any inspection referred to above shall be borne by
Licensor unless the royalty provided to Licensor was understated by more than
five percent (5%), in which case the cost of the inspection shall be paid by
Licensee.
In the event that the said inspection reveals any underpayment of
royalty due to Licensor, Licensee will promptly pay Licensor the full amount of
that underpayment together with interest thereon at a rate equal to the yearly
rate of interest which Royal Bank of Canada announces publicly from time to time
in Canada as its prime and
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lending rate which is its reference rate for determining rates of interest
applicable to loans made by it in Canada in Canadian dollars, plus two percent
(2%); such interest shall be calculated from the date the report is due until
the date the full amount of that underpayment of royalty is paid to Licensor.
SECTION 6.04 Royalty Payments by Licensor.
(a) Consumer Product Sales. In consideration of the Licensor General
License, Licensor shall pay Licensee a royalty related solely to the revenues
generated from the sale or license of the Consumer Product bundled with the
Licensee content, in an amount equal to thirty percent (30%) of Licensor's net
revenues of the sale or license of the Consumer Product and of such Licensee
content after the recoupment by Licensor of all of its costs, and the allocation
of an off-the-top service/distribution fee of twenty percent (20%) of gross
revenue. When a sale or license is granted by Licensor to one of its Affiliates
for resale, re-licensing or sub-licensing, Licensor's net revenues shall be
calculated by taking the Affiliates' net revenues and not including the net
revenues earned by Licensor from such sale or license to its Affiliates. The
minimum royalty payable to Licensee on the sales or licenses of the Consumer
product bundled with Licensee content packages shall be not less than Eight U.S.
Dollars (US$8.00) per unit; provided, however, that if the Eight U.S. Dollars
(US$8.00) per unit is not financially practicable due to marketplace factors,
Licensor and Licensee agree to negotiate in good faith an alternative mutually
acceptable royalty structure. If such Consumer Product bundled with Licensee
content is bundled by an OEM, then (i) each such OEM shall be subject to
approval by Licensee; (ii) if the per unit royalty payable to Licensee in such
case is below Eight U.S. Dollars (US$8.00), the Consumer Product shall be
modified by Licensor for such purposes to only allow use of "skins" of Licensee
and of Licensee's animation templates but not of those of others and (iii)
Licensor and Licensee shall share equally all license fees, royalties,
commissions or other payments made by such OEM (in this section, the "OEM
Payments").
Licensor shall within thirty (30) days of the beginning of each
quarter of each calendar year, submit to Licensee a report indicating the number
of the Consumer Products bundled with Licensee content sold or otherwise
licensed by Licensor and the OEM Payments received during the preceding quarter
during the term of the Licensor General License, the amounts necessary to
calculate the royalty and the OEM Payments and the total amount due to Licensee
as payment of the royalty and share of the OEM Payments. Licensor shall at the
same time as submitting the report remit to Licensee any amount of royalty and
OEM Payments due and payable, in US Currency. Furthermore, Licensor shall remit
to Licensee the sum due and payable under this Section within thirty (30) days
after the termination date of the Licensor General License accompanied with a
report showing the above details.
Any amount due but unpaid by Licensor to Licensee shall bear interest
at a rate equal to the yearly rate of interest which Royal Bank of Canada
announces publicly from time to time in Canada as its prime and lending rate
which is its reference rate for determining rates of interest applicable to
loans made by it in Canada in Canadian dollars, plus two percent (2%); such
interest shall be calculated from the date the report is due until the date the
full amount of the amount due is paid to Licensee.
Licensor shall keep true and accurate records and books of account
containing all data reasonably required for the computing of and verification of
the royalty to be paid in accordance with this Section during the term of the
Licensor General License and for a period of one (1) year thereafter. Licensor
will at all reasonable times during the term of the Licensor General License and
for a period of one (1) year thereafter, but not more frequently than once in
any twelve month period, upon Licensee's request, produce the records and books
for periodic inspection by Licensee. Should the reported royalty differ from
that actually paid by Licensor then Licensee will immediately notify Licensor of
the difference and request clarification of same.
The cost of any inspection referred to above shall be borne by
Licensee unless the royalty provided to Licensee was understated by more than
five percent (5 %), in which case the cost of the inspection shall be paid by
Licensor.
In the event that the said inspection reveals any underpayment of
royalty due to Licensee, Licensor will promptly pay Licensee the full amount of
that underpayment together with interest thereon at a rate equal to the yearly
rate of interest which Royal Bank of Canada announces publicly from time to time
in Canada as its prime and lending rate which is its reference rate for
determining rates of interest applicable to loans made by it in Canada in
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Canadian dollars, plus two percent (2%); such interest shall be calculated from
the date the report is due until the date the full amount of that underpayment
of royalty is paid to Licensee.
VII. REPRESENTATIONS AND WARRANTIES
SECTION 7.01. Licensor Representations and Warranties . Licensor
hereby represents and warrants to Licensee:
(a) it will be the sole and beneficial owner of the WEBtoon System
except for portions of it which may be licensed from third parties and it has
the right to grant the Licensee License;
(b) the WEBtoon System will include only information that Licensor is
authorized to use and to authorize Licensee to use;
(c) the WEBtoon System will not constitute a libel or defamation, or
conflict with or infringe upon or violate any copyrights, trademark rights,
trade secret rights, rights of publicity or privacy or other third-party rights
except patent rights;
(d) the WEBtoon System will not give rise to any claims against
Licensee for any guild or other royalty fees or payments of any kind;
(e) except with respect to the Licensee content, all obligations owed
to third parties with respect to the activities contemplated to be undertaken by
Licensor under this Agreement with respect to the WEBtoon System or by Licensee
under the Licensee License, including but not limited to all third-party
licensing fees, will be fully paid up by Licensor so that Licensee will not have
any obligations with respect thereto;
(f) the WEBtoon System will be free from any pre-programmed devices,
such as "viruses" or other such devices, that will cause any component thereof
to be erased or become inoperable or incapable of processing or affect
operations of other systems; at the time of delivery to Licensee or an end-user
as is detectable by use of a commercially released up to date virus detection
software as used by Licensor;
(g) it has the power and authority to enter into and perform its
obligations under this Agreement without the consent of any third party or that
it has obtained any required consent;
(h) this Agreement has been duly executed and delivered and
constitutes (or will constitute, as the case may be) the legal, valid and
binding obligation of the Licensor, enforceable against it in accordance with
its terms; and
(i) the execution and performance of this Agreement by Licensor will
not violate any agreement to which Licensor is a party.
SECTION 7.02. Licensee Representations and Warranties. Licensee
hereby represents and warrants to Licensor:
(a) it will be the sole and beneficial owner of the Licensee content
except for portions of it which may be licensed from third parties and it has
the right to grant the Licensor Limited License and the Licensor General
License;
(b) the Licensee content will include only information that Licensee
is authorized to use and to authorize Licensor to use;
9
(c) the Licensee content will not constitute a libel or defamation,
or conflict with or infringe upon or violate any copyrights, trademark rights,
trade secret rights, rights of publicity or privacy or other third-party rights
except patent rights;
(d) the Licensee content will not give rise to any claims against
Licensor for any guild or other royalty fees or payments of any kind;
(e) except with respect to the WEBtoon System, all obligations owed
to third parties with respect to the activities contemplated to be undertaken by
Licensee under this Agreement with respect to the Licensee content or by
Licensor under the Licensor Limited License or Licensor General License,
including but not limited to all third-party licensing fees, will be fully paid
up by Licensee so that Licensor will not have any obligations with respect
thereto;
(f) the Licensee content will be free from any pre-programmed
devices, such as "viruses" or other such devices, that will cause any component
thereof to be erased or become inoperable or incapable of processing or affect
operations of other systems; at the time of delivery to Licensor or an end-user
as is detectable by use of a commercially released up to date virus detection
software as used by Licensee;
(g) it has the power and authority to enter into and perform its
obligations under this Agreement without the consent of any third party or that
it has obtained any required consent;
(h) this Agreement has been duly executed and delivered and
constitutes (or will constitute, as the case may be) the legal, valid and
binding obligation of the Licensee, enforceable against it in accordance with
its terms;
(i) the execution and performance of this Agreement by Licensee will
not violate any agreement to which Licensee is a party; and
(j) it is acquiring the Securities and Warrants for its own account
for investment purposes, and not with a view to selling or otherwise
distributing the Warrants (or underlying shares).
SECTION 7.04. Disclaimer of Warranty. THE WARRANTIES SET FORTH IN
THIS AGREEMENT ARE LIMITED WARRANTIES AND ARE THE ONLY WARRANTIES MADE BY THE
RESPECTIVE PARTIES. THE PARTIES EXPRESSLY DISCLAIM, AND HEREBY EXPRESSLY WAIVE,
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION,
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
SECTION 7.05 Survival of Representations and Warranties. All
representations and warranties of the parties shall survive for a period of one
(1) year after the termination of this Agreement or the expiration of all
licenses granted under this Agreement whichever occurs first.
VIIA. CONDITIONS PRECEDENT TO CLOSING
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place at the offices of the Licensor, on the day on which
the last of the conditions set forth in this Article VIIA is fulfilled or
waived, but not later than April 26, 2000 (the "Closing Date"), or at such other
place, date or time as the parties hereto may otherwise mutually agree. The
Closing shall be effective as of the close of business on the day of the Closing
Date.
The obligations of the Licensee under this Agreement are, at the
option of the Licensee, subject to the satisfaction, at or prior to the Closing
Date of the condition that the Licensor shall have received equity financing
from Canadian institutional investors in an amount not less than One Million
Five Hundred Thousand Canadian Dollars (CAN$1,500,000) specifically allocated
and to be applied to the development and launch of the WEBtoon System and
10
that Licensee shall have obtained any necessary exemption from the Quebec
Securities Commission for the issue of the Licensor Purchase Warrants.
The obligations of the Licensor under this Agreement are, at the
option of the Licensor, subject to the satisfaction, at or prior to the Closing
Date, of the condition that the Licensor shall have obtained any necessary
exemption from the Quebec Securities Commission for the issue of the Licensee
Purchase Warrants.
VIII. INDEMNIFICATION
SECTION 8.01. Indemnification by Licensee. Licensee agrees to
indemnify, defend, and hold harmless Licensor, its directors, officers,
employees and agents, and defend any action brought against same with respect to
any third party claim, demand, cause of action, debt or liability, including
reasonable attorneys' fees, to the extent that such action is based upon (i) a
claim that any of the Licensee content as provided by Licensee hereunder or the
exercise of any rights granted by Licensee to the Licensee content hereunder
(provided that Licensor has followed Licensee's instructions included with such
Licensee content) infringes or violates any rights of third parties, excluding
patent rights but including, without limitation, rights of publicity, rights of
privacy, copyrights, trademarks or trade secrets , (ii) Licensee's breach of any
covenants, warranties or representations made herein, (iii) the negligence or
willful misconduct of Licensee, and/or (iv) any breach of this Agreement by
Licensee or any act or omission or alleged act or alleged omission by Licensee
in connection with this Agreement.
SECTION 8.02. Indemnification by Licensor. Licensor agrees to
indemnify, defend, and hold harmless Licensee, its directors, officers,
employees and agents, and defend any action brought against same with respect to
any claim, demand, cause of action, debt or liability, including reasonable
attorneys' fees, to the extent that such action arises out of or in connection
with (i) a claim that any of the WEBtoon System or the exercise of any rights
granted by Licensor to the Consumer Product hereunder (provided that Licensor
has followed Licensee's instructions included with such Consumer Product)
infringes or violates any rights of third parties, excluding patent rights but
including, without limitation, rights of publicity, rights of privacy,
copyrights, trademarks or trade secrets, (ii) Licensor's breach of any
covenants, warranties or representations made herein, (iii) the negligence or
willful misconduct of Licensor; and/or (iv) any breach of this Agreement by
Licensor or any act or omission or alleged act or alleged omission by Licensor
in connection with this Agreement.
SECTION 8.03. Notice. In claiming any indemnification hereunder, an
indemnified party shall promptly provide the indemnifying party with written
notice of any claim which the indemnified party believes falls within the scope
of the foregoing Sections. An indemnified party may, at its own expense, assist
in the defense if it so chooses, provided that the indemnifying party shall
control such defense and all negotiations relative to the settlement of any such
claim and further provided that any settlement intended to bind an indemnified
party shall not be final without the indemnified party's written consent, which
shall not be unreasonably withheld.
SECTION 8.04. Limitation of Liability. NEITHER PARTY SHALL HAVE
LIABILITY UNDER ANY CIRCUMSTANCES FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL,
INCIDENTAL, OR PUNITIVE DAMAGES. THIS LIMIT OF LIABILITY IS A MATERIAL TERM OF
THIS AGREEMENT AND THE PARTIES' EXECUTION OF THIS AGREEMENT WAS DEPENDENT UPON
ITS INCLUSION. THE LIABILITY OF EACH PARTY HEREUNDER, INCLUDING UNDER ARTICLE
VII AND SECTIONS 8.01 AND 8.02 SHALL NOT EXCEED IN THE AGGREGATE THE ROYALTIES
PAID BY LICENSEE TO LICENSOR FOR THE LICENSEE LICENSE GRANTED HEREUNDER.
IX. TERMINATION
SECTION 9.01. Termination of Agreement. In addition to the provisions
of Section 3.02, either party may terminate this Agreement in the event of the
occurrence of any of the following events:
(a) effective upon delivery of thirty (30) days' written notice of
termination, upon the occurrence of the breach by the other party of any of its
obligations hereunder, if such breach continues for thirty (30) days after
receipt by the other party of notice defining such breach in reasonable detail,
unless such breach
11
cannot with due diligence be cured within such 30-day period, in which case such
failure shall not be deemed to continue if the other party proceeds promptly and
with due diligence to cure the failure and diligently completes the curing
thereof; and
(b) effective upon delivery of one (1) day written notice of
termination, upon the occurrence of the filing of a voluntary petition in
bankruptcy by other party or an involuntary petition in bankruptcy is filed
against other party and is not dismissed within sixty (60) days thereafter, or,
if a receiver or trustee of any of other party's property is appointed and not
vacated within sixty (60) days thereafter, or if other party shall be adjudged
insolvent by final judgment, or if an assignment shall be made of other party's
property for the benefit of creditors, or in the event of any other
circumstances which prevent effective performance by other party under this
Agreement.
SECTION 9.02. Effect of Termination.
(a) Termination of this Agreement shall not release or discharge
either party hereto from any obligation, debt or liability which may previously
have occurred and remains to be performed upon the date of termination.
Termination of this Agreement shall not affect any end-user license to use the
Consumer Product granted prior to the date of termination of this Agreement.
(b) Effective on the termination of this Agreement, Licensee shall
return to Licensor any and all papers, material and property including but not
limited to, the price lists of the products, the advertising material,
catalogues, technical and promotional material obtained from Licensor or used by
Licensee during the term of this Agreement, without making or retaining copies
thereof.
(c) Effective on the termination of this Agreement, all warrants or
options granted by either party which have not vested shall be automatically
cancelled.
X. GENERAL PROVISIONS
SECTION 10.01. Entire Agreement; Amendments. This Agreement
(including the exhibits, schedules and other documents referred to herein)
contains the entire agreement among the parties hereto with respect to the
subject matter hereof. This Agreement may be changed only by an instrument in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
SECTION 10.02. Notice. All notices, requests, demands and other
communications shall be in writing and deemed to have been duly given when
delivered personally, by facsimile transmission upon receipt of a "clear" or
"ok" transmission notice, or three days following deposit in the United States
mail, first class, postage prepaid, duly addressed:
If to Licensee: Xxxx Xxx Media, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Chief Operating Officer
Fax: (000) 000-0000
If to Licensor: Toon Boom Technologies, Inc.
0, Xxxxxxx Xxxxxx
Xxxxxxxx (Xxxxxx)
XXXXXX X0X 0X0
Attention: Chief Executive Officer
Fax: (000) 000-0000
Any party may, pursuant to written notice in compliance with this Section, alter
or change the address, facsimile number or the identity of the person to whom
any notice is to be sent.
12
SECTION 10.03. Further Assurances. Each party hereto shall do such
further acts, including executing any and all documents which may be necessary
or expedient in order to further the purposes of this Agreement.
SECTION 10.04. Governing Law; Venue. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of Illinois. All
disputes or controversies arising out of or in connection with this Agreement or
the transactions contemplated herein shall be finally settled to the exclusion
of the courts under the Rules of Arbitration of International Chamber of
Commerce by one or more arbitrators appointed in accordance with said Rules and
all arbitration proceedings shall take place in Chicago, Illinois.
SECTION 10.05. Severability. In case any one or more of the
provisions or any portion of any provision contained in this Agreement should be
found to be invalid, illegal or unenforceable in any respect, such provision or
portion thereof shall be modified or deleted in such manner so as to afford the
parties the fullest protection commensurate with making this Agreement, as
modified, legal and enforceable under applicable laws, and the validity,
legality and enforceability of any such provision shall not in any way be
affected or impaired thereby, such remaining provisions or portion of any such
provision construed as severable and independent thereof.
SECTION 10.06. Article and Section Headings. The headings of Articles
and Sections of this Agreement are for convenient reference only, and shall not
in any manner govern, limit, modify or construe this Agreement or any part or
provisions hereof or otherwise be given any legal effect.
SECTION 10.07. Pronouns; Gender; Number. When the context so requires
in this Agreement, the masculine gender includes the feminine and/or the neuter,
and the singular number includes the plural.
SECTION 10.08. No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall any party hereto be estopped from
enforcing any provision of this Agreement, except by written instrument of the
party charged with such waiver or estoppel. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, shall operate only as to
the specific term or condition waived and shall not constitute a waiver of such
term or condition for the future or as to any act other than that specifically
waived.
SECTION 10.09. Limited Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties named herein. No party may assign
either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other party; provided, however, that
either party may assign any or all of its rights and interests hereunder to one
or more of its Affiliates.
SECTION 10.10. Affiliates. The term "Affiliate" as used in this
Agreement with respect to any party means any corporation, joint venture,
partnership, trust, or other business entity directly or indirectly,
controlling, controlled by, or under common control with, such party, control
meaning owning a majority of the common stock of such corporation, joint
venture, partnership, trust, or other business entity or otherwise being in a
position to direct its affairs.
SECTION 10.11. Attorneys' Fees. If either party brings an action for
judicial review or enforcement of this Agreement, the prevailing party in any
such action, trial or appeal shall be entitled to its reasonable attorneys' fees
to be paid by the nonprevailing party as fixed by the court.
SECTION 10.12. No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the parties.
SECTION 10.13. Expenses. Each party shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
SECTION 10.14. Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Each party has been represented by independent counsel who have carefully
negotiated the provisions of this
13
Agreement, or has had an opportunity to be represented by independent counsel
and has knowingly, voluntarily and willingly waived the right to such
independent counsel. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The parties
intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
SECTION 10.15. Incorporation of Exhibits and Schedules. The exhibits
and schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
SECTION 10.16. Specific Performance. Each party acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each party agrees that the other
party shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any action instituted in any court of the
United States or Canada or any state or province thereof having jurisdiction
over the parties and the matter, in addition to any other remedy to which they
may be entitled, at law or in equity.
SECTION 10.17. Independent Contractors. Each party and its personnel,
in performance of this Agreement, are acting as independent contractors and not
as employees or agents of the other party. No personnel of either party shall
have the authority to bind the other party or otherwise to create legal
obligations on behalf of the other party .
SECTION 10.18. Force Majeure. If the performance of any part of this
Agreement by either party is prevented, hindered, delayed or otherwise made
impracticable by reason of any flood, riot, fire, judicial or governmental
action, labor disputes, act of God or any other causes beyond the reasonable
control of either party, that party shall be excused from such to the extent
that it is prevented, hindered or delayed by such causes, provided that the
party claiming force majeure has taken all reasonable measures to avoid such
cause.
SECTION 10.19. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Each party hereto, and its
respective successors and assigns, shall be authorized to rely upon the
signatures of all of the parties hereto which are delivered by facsimile as
constituting a duly authorized, irrevocable, actual, current delivery of this
Agreement with original ink signatures of each person and entity; provided,
however, that each party hereto that delivers such facsimile signatures to
another party hereto, covenants and agrees that it shall deliver an executed
original of the same to the party so receiving the previous facsimile signatures
within five (5) days after delivery of such facsimile signatures.
14
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, by their duly authorized representatives, all as of the date first
above written.
LICENSEE: XXXX XXX MEDIA, INC.
BY /s/ GILL CHAMPION
-----------------------------------------
Gill Champion,
Chief Operating Officer
LICENSOR: TOON BOOM TECHNOLOGIES, INC.,
BY: /s/ XXXXXXX XXXXXXXX
---------------------------------------------
Xxxxxxx Xxxxxxxx,
President and Chief Executive Officer
