Exhibit 10.3

 

AGREEMENT

 

This Agreement (the “Agreement”) is entered into as of December 22, 2009, by and
between JAKKS Pacific, Inc. (“JAKKS”) and THQ Inc. (“THQ”) (collectively, the
“Parties”).

 

WHEREAS, THQ and JAKKS are equal owners and co-members of THQ/JAKKS Pacific, LLC
(the “LLC”), a limited liability company, and are parties to an LLC operating
agreement dated October 25, 1999, as amended (the “LLC Agreement”);

 

WHEREAS, the LLC publishes videogames pursuant to a videogame license agreement
with WWE dated June 10, 1998 as subsequently amended (the “WWE License”);

 

WHEREAS, pursuant to the WWE License, the LLC holds the exclusive right to
manufacture and sell WWE videogames through December 31, 2009, with an option to
renew for an additional five year term commencing on January 1, 2010 (the
“Renewal Term”);

 

WHEREAS, WWE desires to execute a new license agreement with THQ effective as of
January 1, 2010, pursuant to which THQ would be licensed to publish WWE
videogames independent and outside of the LLC;

 

WHEREAS, THQ desires to execute a new license agreement with WWE to be effective
January 1, 2010, pursuant to which THQ is to publish WWE videogames independent
and outside of the LLC;

 

WHEREAS, JAKKS contends that under the WWE License the LLC has the exclusive
right to manufacture and sell WWE videogames during the Renewal Term, and under
the LLC Agreement, THQ is precluded from independently seeking a license with
WWE, and WWE is precluded from negotiating or issuing a license to THQ, now and
through the Renewal Term; however, subject to the terms and conditions herein
and for the consideration recited below, JAKKS is willing to terminate the LLC
Agreement and to permit THQ and WWE to execute a license outside of the LLC;

 

WHEREAS, simultaneously herewith JAKKS, THQ and the LLC are entering into a
Settlement Agreement and Mutual Release (the “JAKKS/THQ/LLC Agreement”);

 

NOW, THEREFORE, for good and favorable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:

 

1.  Payments.  THQ shall pay JAKKS a total of U.S. $20,000,000 (Twenty Million
U.S. Dollars) according to the schedule set forth below:

 

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(i)            $6 million on or before June 30, 2010;

 

(ii)           $6 million on or before June 30, 2011;

 

(iii)          $4 million on or before June 30, 2012; and

 

(iv)          $4 million on or before June 30, 2013.

 

2.             THQ’s obligation to make the foregoing payments is unconditional
and absolute, and may not be reduced or offset by any amounts asserted by THQ to
be owing by JAKKS for any reason, and shall not be subject to any defenses,
set-offs or counterclaims.

 

3.             Default.  In the event that THQ fails to make (i) any payment due
hereunder, or (ii) the Preferred Return payment referenced in
Section 5(iv) below, THQ shall owe interest thereon from the date of default
until the date of payment in full at the rate of eighteen percent (18%) per
annum, notwithstanding any statutory pre- or post-judgment interest rates.  For
avoidance of doubt, this interest obligation does not apply if THQ in good faith
makes the Preferred Payment referenced in Section 5(iv) below but JAKKS
subsequently challenges the amount of the Preferred Return payment.

 

4.             Termination of the WWE License.  THQ and JAKKS agree that the LLC
shall not renew the WWE License and that any notice of renewal heretofore sent
to WWE shall be of no force and effect.  Accordingly, on December 31, 2009, the
WWE License shall terminate.

 

5.             Termination of the LLC Agreement.  As of December 31, 2009, THQ
and JAKKS agree that the LLC Agreement shall terminate and be of no further
force or effect whatsoever (the “LLC Termination”).  It is further understood
and agreed that:

 

(i)            The Parties will promptly take all steps and execute all
documents necessary and sufficient to dissolve the LLC as of December 31, 2009.

 

(ii)           Ownership of, and all right, title and interest in and to, all
assets, obligations and liabilities of the LLC, including, but not limited to,
intellectual property belonging to the LLC shall vest fully and automatically in
THQ, effective January 1, 2010, without any further act or action required by
the Parties.  To the extent the Parties need to execute other documents to
effectuate the terms of this provision, the Parties agree promptly to execute
any such documents.

 

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(iii)          Notwithstanding any principle of law or provision in the LLC
Agreement that might be argued to the contrary, THQ is free to enter into a
videogame license with WWE effective January 1, 2010 on any terms and conditions
that THQ may deem, in its sole and absolute discretion, appropriate.

 

(iv)          For the avoidance of doubt, THQ will, on behalf of the LLC,
continue to pay JAKKS a “Preferred Return” of 6% with respect to the LLC’s sales
of WWE videogames through, but only through December 31, 2009 pursuant to
paragraph 5 of the LLC Agreement.  JAKKS has no right, however, to a Preferred
Return, or to otherwise participate in any revenues or profits, with respect to
sales of WWE videogames occurring on or after January 1, 2010.  THQ will provide
a final accounting and payment to JAKKS of said Preferred Return for sales from
October 1, 2009 through and including December 31, 2009, by no later than
March 31, 2010.

 

6.             Representations and Warranties.  The Parties make the following
representations and warranties to one another:

 

6.1           Each of the Parties hereto acknowledges that no other Party, nor
any agent or attorney of any other Party, has made any promise, representation,
or warranty, whatsoever, express or implied, not contained herein, concerning
the subject matter hereof, to induce it to execute this instrument.  Each of the
Parties acknowledges that it has not executed this instrument in reliance on any
such promise, representation, or warranty not contained herein.

 

6.2           Each of the Parties hereto has read this Agreement carefully and
knows and understands the contents thereof.  Each of the Parties is fully aware
of the legal and binding effect of this Agreement.  Each of the Parties has made
such an investigation of the facts pertinent to this Agreement and of all the
matters pertaining thereto as it deemed necessary.

 

6.3           Each of the Parties hereto acknowledges that it has been
represented by counsel in the preparation, negotiation and execution of this
Agreement and that it has executed this document with the consent and the advice
of such legal counsel.

 

6.4           Each of the Parties hereto acknowledges and agrees that the terms
of this Agreement are contractual and not merely recitals and are the result of
negotiations between Parties of equal bargaining positions.  All recitals are
incorporated by reference into this Agreement.

 

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6.5           Each individual signing this Agreement warrants and represents
that he or she has full authority to execute the same on behalf of the Party on
whose behalf he or she signs.  Each of the Parties hereto agrees to execute all
documents and instruments necessary to implement this Agreement.

 

7.             Notices.  All notices required and/or permitted hereunder must be
given in writing and shall be sent, by personal or overnight delivery (including
but not limited to, by messenger service) addressed as follows:

 

To JAKKS:

Michael Dwyer

 

JAKKS Pacific, Inc.

 

22619 Pacific Coast Hwy

 

Malibu, CA 90265-5080

 

 

 

and

 

 

 

Jonathan J. Lerner

 

Skadden, Arps, Slate, Meagher & Flom LLP

 

Four Times Square

 

New York, NY 10036

 

 

To THQ:

Executive Vice President, Business and Legal Affairs

 

THQ Inc.

 

29903 Agoura Road

 

Agoura Hills, CA 91301

 

 

 

and

 

 

 

Steven A. Marenberg

 

Irell & Manella LLP

 

1800 Avenue of the Stars, Suite 900

 

Los Angeles, CA 90067

 

8.             Miscellaneous Provisions.

 

8.1           Successors and Assigns.  This Agreement shall inure to the benefit
of, and shall be binding upon, each Party’s respective successors, assigns,
affiliates, subsidiaries, parent companies, predecessors, successors, divisions,
operating companies, officers, directors, agents, employees, representatives,
shareholders, heirs, partners, investors, accountants, and attorneys,
individually and in the capacity indicated.

 

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8.2           Integration.  This Agreement and the JAKKS/THQ/LLC Agreement,
including any exhibits(s) hereto, constitutes the entire agreement and
understanding between the Parties concerning the subject matter hereof, and
supersedes and replaces all prior negotiations, proposed agreements and
agreements, written or oral, between the Parties relating thereto.  This
Agreement may be amended, modified, canceled, and/or waived only by a written
instrument that expressly refers to this Agreement and is executed subsequent to
this Agreement by duly authorized representatives of each of the Parties.

 

8.3           Modifications.  No modification, amendment, or waiver of any of
the provisions contained in this Agreement, nor any future representation,
promise, or condition in connection with the subject matter of this Agreement,
shall be binding upon any Party unless made in writing and signed by such Party.

 

8.4           Joint Preparation.  This Agreement shall be construed without
regard to the Party or Parties responsible for their preparation, and shall be
deemed as prepared jointly by the Parties hereto.  In resolving any ambiguity
and/or uncertainty existing herein, the Parties agree that no consideration
and/or weight shall be given to the identity of the Party drafting said
documents.

 

8.5           Severability.  If any part, term, and/or provision of this
Agreement is held by a court or other tribunal to be invalid, illegal, and/or
otherwise unenforceable, such part, term and/or provision shall be inoperative
and void insofar as it is in conflict with law, but the validity of the
remaining parts, terms, and/or provisions shall not be affected and the rights
and obligations of the Parties shall be construed and enforced as if this
Agreement did not contain the particular part, term and/or provision held to be
invalid and/or unenforceable.  This provision shall not apply to Sections [1, 2,
3, 4, 5 and 8.8] of this Agreement, said terms being integral and non-severable
parts of this Agreement, without which it would not have been entered into by
the Parties.

 

8.6           Governing Law.  This Agreement shall be construed in accordance
with the laws of the State of California applicable to agreements that are
executed and fully performed within the State of California.

 

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8.7           Dispute Resolution.  Except as provided in Section 8.8 below, any
disputes regarding or relating to any aspect of this Agreement’s formation,
meaning, performance or breach, or arising out of or relating in any way to this
Agreement, shall be determined exclusively by arbitration before a single
arbitrator pursuant to the commercial arbitration procedures of the American
Arbitration Association (“AAA”), and administered by AAA in accordance with its
Commercial Arbitration Rules.  The Parties shall endeavor in good faith first to
attempt to resolve the controversy or claim through mediation administered by
the AAA, before commencing any arbitration.  Any mediation or arbitration shall
be confidential (except as may be required in any judicial proceeding brought to
enforce these arbitration provisions or any award rendered hereunder) and shall
be conducted in Los Angeles County and the parties hereto irrevocably submit to
the jurisdiction of the state and federal courts of California for any
proceedings incidental to arbitration or for the confirmation and enforcement of
any award.  The prevailing party in such arbitration shall be entitled to
recover its reasonable costs and attorneys’ fees as shall be determined by the
arbitrator.

 

8.8           JAKKS’ Right to Commence Expedited Arbitration Proceeding.  In the
event that THQ fails to make any of the payments referenced in Sections 1-3 or
5(iv) herein, no earlier than five (5) days after the default, JAKKS shall have
the right to commence an expedited arbitration proceeding in either New York
County or Los Angeles County and have its claim finally and exclusively
determined in accordance with the Expedited Procedures of the AAA’s Commercial
Arbitration Rules in effect as of the Effective Date (the “Rules”), except that
Rule E-10 regarding compensation of the arbitrators shall not apply and Rule E-4
shall be modified as follows: (i) within five (5) business days of the service
of JAKKS’ Demand for Arbitration, the parties shall attempt to agree on a single
arbitrator to adjudicate JAKKS’ claim, and (ii) if the parties cannot agree, the
AAA will appoint a single arbitrator within five (5) business days thereafter. 
The parties irrevocably submit to the jurisdiction of the state and federal
courts of New York and California for any proceedings incidental to arbitration
or for the confirmation and enforcement of any award.  Unless the arbitrator
finds that THQ was not in default of any of its payment obligations referenced
in Sections 1-3 or 5(iv) herein, THQ shall reimburse JAKKS for all attorneys
fees and/or costs incurred in connection with the expedited arbitration
proceeding including, without limitation, (i) all AAA fees and the arbitrator’s
compensation and (ii) any attorneys fees and/or costs incurred in connection
with the arbitration proceeding, confirmation of the Arbitration Award and/or
enforcement of the resulting judgment.  In the event that the arbitrator finds
that THQ was

 

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not in default of any of its payment obligations referenced in Sections 1-3 or
5(iv) herein, JAKKS shall reimburse THQ for all attorneys fees and/or costs
incurred in connection with the expedited arbitration proceeding.  For avoidance
of doubt, the procedures set forth herein do not apply if THQ in good faith
makes the Preferred Payment referenced in Section 5(iv) below but JAKKS
subsequently challenges the amount of the Preferred Return payment; in that
event, the parties shall follow the dispute resolution procedures in the LLC
Agreement.

 

8.9           Counterparts.  This Agreement may be executed in counterparts and
by facsimile or PDF signature, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement dated as of
December 22, 2009.

 

 

THQ INC.

 

JAKKS PACIFIC, INC.

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

 

 

Its:

 

 

Its:

 

 

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