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Exhibit 10.14  

 
 

CONSULTING AGREEMENT
  FOR FOUNDING MEMBERS OF THE
  PHARMACOPEIA, INC.
  SCIENTIFIC ADVISORY BOARD    
    

        This Agreement is made as of March     , 1993, between PharmaCopeia, Inc. (the "Company") and Paul A. Bartlett (the "Consultant") and
shall be effective upon execution by the Consultant (the "Effective Date") . 

        The
Consultant has been involved in scientific research in fields of particular interest to the Company. The Company wishes to retain the Consultant in a consulting capacity as a
founding member of the Company's Scientific Advisory Board, and the Consultant desires to perform such consulting services. Accordingly, the parties agree as follows: 

        1.    Services.    

        1.1   The
Consultant will advise the Company's management, employees and agents, at reasonable times, in matters related to the Company's field of interest, as requested by
the Company as set forth below. The Company's principal field of interest is the design and development of pharmaceuticals utilizing state of the art methodologies in synthetic organic and medicinal
chemistry and related areas, including but not limited to the generation and use of combinatorial chemical libraries (the "Company's Field of Interest"). The Company's Field of Interest and area of
consultation are collectively referred to in this Agreement as the "Designated Field." In addition, the Consultant shall assist the Company with development of its general scientific direction and
strategy, recruitment of full-time scientific and management personnel, interactions with stockholders, potential investors, and potential strategic or corporate partners of the Company, and
identification of new inventions and technologies in the Designated Field. 

        1.2   Consultant
will provide up to 25 full days of consulting per year (such days are referred to below as "Consulting Days"). Consultation may be sought by the Company over
the telephone, in person at the Consultant's office, at the Company's offices or another reasonable location (it is anticipated that 10 days shall be at the Company's offices) or through written
correspondence, and will involve reviewing activities and developments in the Company's Field of Interest. If the Company requests additional consulting days, the Consultant will be paid a fee for
each additional day as set forth below. The Consultant also will participate as a founding member of the Company's Scientific Advisory Board and agrees to use his best efforts to attend Scientific
Advisory Board meetings. Time spent at Scientific Advisory Board meetings will be considered to be Consulting Days. 

        2.    Cash Compensation.    The Consultant will be paid an annual fee of $75,000 per year starting as of the date of
the Company's first official Scientific Advisory Board meeting (the "Commencement Date"), and $1,000 for each Consulting Day in excess of 25 full days per year. Consultant shall not be entitled to any
fees for any services rendered to the Company prior to the Commencement Date. The annual fee shall be paid in four equal quarterly installments in advance on the first day of each calendar quarter;
except for the first installment, which shall cover the remaining term of the calendar quarter in which the Commencement Date occurs and be paid pro rata based on the number of days remaining in such
quarter. Any fee for excess Consulting Days will be paid at the end of the relevant quarter. Reasonable expenses of the Consultant incurred at the request of the Company will be reimbursed promptly by
the Company, subject to customary verification. 

        3.    Stock.    

        3.1   Promptly
after execution of this Agreement, the Consultant will be offered the opportunity to purchase 275,000 shares of the Company's Common Stock (the "Stock") at the
founder stock price of $.001/share as set forth below. 

 

        3.2   The
Stock will be issued pursuant to the Company's standard form of Restricted Stock Purchase Agreement providing that the stock will vest 25% immediately with the 75%
remaining balance vesting monthly over a four-year period commencing as of March 1, 1993 based upon continued service to the Company as a Consultant (any unvested Stock may be repurchased by
the Company at a price equal to the original purchase price) and containing certain other restrictions prohibiting transfer of the Stock for specific time periods, provided that in the event that
Consultant's consulting services are involuntarily terminated by the Company without cause, an additional 50% of the unvested shares as of the date of such termination shall vest. 

        4.    Term.    The term of this Agreement will begin on the Effective Date of this Agreement and will end at the end
of the calendar quarter in which the fourth anniversary of this Agreement occurs or upon earlier termination as provided below (the "Term"). This Agreement may be terminated at an earlier time prior
to the fourth anniversary hereof by either party with at least 30 days written notice. The Term will be automatically renewed for successive one-year periods, unless either party provides written
notice at least thirty (30) days prior to the end of the Term that such party does not wish to renew this Agreement. Upon termination, all accrued payments will be made and, regardless of quarter, the
unpaid portion of the annual fee will be paid in proportion to the portion of the Consulting Day commitments set forth in Section 1.2 that has been provided. 

        5.    Certain Other Contracts.    

        5.1   The
Consultant is currently employed by an academic or research institution (the "Institution"). The Company recognizes that the Consultant's primary responsibility is
to the Institution. In connection with such employment, the Consultant has entered into certain agreements with the Institution relating to ownership of intellectual property rights, conflicts of
interest and other matters, and is subject to certain policy statements of the Institution (collectively, the "Institutional Agreement"). If any provision of this Agreement is in conflict with the
Institutional Agreement, then the Institutional Agreement will govern to the extent of such conflict, and the conflicting provisions of this Agreement will not apply. Consultant agrees to furnish the
Company with copies of such agreements and policy statements. 

        5.2   The
Consultant will not disclose to the Company any information that the Consultant is obligated to keep secret pursuant to an existing confidentiality agreement with a
third party, and nothing in this Agreement will impose any obligation on the Consultant to the contrary. 

        5.3   The
consulting work performed hereunder will not be conducted on time that is required to be devoted to the Institution or any other third party. The Consultant shall
not use the funding, resources and facilities of the Institution or any other third party to perform consulting work hereunder and shall not perform the consulting work hereunder in any manner that
would give the Institution or any third party rights to the product of such work. Nothing done in Consultant's academic research shall be considered part of services performed hereunder and nothing
herein shall restrict Consultant's academic research. 

        5.4   The
Consultant has disclosed and, during the Term, will disclose to the Chief Executive Officer of the Company any conflicts between this Agreement and any other
agreements binding the Consultant. 

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        6.    Exclusive Services During the Term.    Subject to written waivers that may be provided by the Company upon
request, which shall not be unreasonably withheld, the Consultant agrees that during the Term of this Agreement he will not directly or indirectly (i) provide any services in the Field of
Interest, to any other business or commercial entity, (ii) provide any services to any business or commercial entity competitive with the Company, (iii) participate in the formation of
any business or commercial entity in the Company's Field of Interest or otherwise competitive with the Company, or (iv) solicit or hire away any employee or consultant of the Company. The
Consultant has disclosed his relationships with the companies listed on Exhibit A attached hereto and the foregoing will not apply to such relationships disclosed on Exhibit A.
Consultant shall notify the Company of all other consulting agreements which Consultant has entered into, or any consulting services which Consultant may provide, to any third party. 

        7.    Direction of Projects and Inventions to the Company.    Subject to the Consultant's obligations under the
Institutional Agreement and confidentiality obligations to third parties, during the Term of this Agreement, the Consultant will use his best efforts (i) to disclose to the Chief Executive
Officer of the Company, on a confidential basis, technology and product opportunities which come to the attention of the Consultant in the Company's Field of Interest, and any invention, improvement,
discovery, process, formula or method or other intellectual property relating to or useful in, the Company's Field of Interest (collectively "New Discoveries"), whether or not patentable or
copyrightable, and whether or not discovered or developed by Consultant, and (ii) will regard to any New Discoveries discovered or developed by Consultant at the Institution, to solicit and
encourage the Institution to enter into an agreement with the Company to exclusively license such New Discovery to the Company. 

        8.    Inventions Discovered by the Consultant While Performing Services Hereunder.    The Consultant will promptly and
fully disclose to the Chief Executive Officer of the Company any invention, improvement, discovery, process, formula, technique, method, trade secret, or other intellectual property, whether or not
patentable, whether or not copyrightable (collectively, "Invention") made, conceived, developed or first reduced to practice by the Consultant, either alone or jointly with others, while performing
services hereunder. The Consultant hereby assigns to the Company all of his right, title and interest in and to any such Inventions. The Consultant will execute any documents necessary to the perfect
the assignment of such Inventions to the Company and to enable the Company to apply for, obtain, and enforce patents or copyrights in any and all countries on such Inventions. The Consultant hereby
irrevocably designates the Secretary of the Company as his agent and attorney-in-fact to execute and file any such document and to do all lawful acts necessary to apply for and obtain patents and
copyrights, and to enforce the Company's rights under this paragraph. This Section 8 will survive the termination of this Agreement. 

        9.    Confidentiality.    

        9.1   The
Consultant acknowledges that, during the course of performing his services hereunder, the Company will be disclosing information to the Consultant, and the
Consultant will be developing information related to the Company's Field of Interest, Inventions, projects, products, potential customers, personnel, business plans, and finances, as well as other
commercially valuable information (collectively, "Confidential Information"). The Consultant acknowledges that the Company's business is extremely competitive, dependent in part upon the maintenance
of secrecy, and that any disclosure of the Confidential Information would result in serious harm to the Company. 

        9.2   The
Consultant agrees that the Confidential Information will be used by the Consultant only in connection with consulting activities hereunder, and will not be used in
any way that is detrimental to the Company. 

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        9.3   The
Consultant agrees not to disclose, directly or indirectly, the Confidential Information to any third person or entity, other than representatives or agents of the
Company. The Consultant will treat all such information as confidential and proprietary property of the Company. 

        9.4   The
term "Confidential Information" does not include information that (i) is or becomes generally available to the public other than by disclosure in violation of
this Agreement, (ii) was within the relevant party's possession prior to being furnished to such party, (iii) becomes available to the relevant party on a nonconfidential basis, or
(iv) was independently developed by the relevant party without reference to the information provided by the Company. 

        9.5   The
Consultant may disclose any Confidential Information that is required to be disclosed by law, government regulation or court order. If disclosure is required, the
Consultant will give the Company advance notice so that the Company may seek a protective order or take other action reasonable in light of the circumstances. 

        9.6   Upon
termination of this Agreement, the Consultant will promptly return to the Company all materials containing Confidential Information as well as data, records,
reports and other property, furnished by the Company to the Consultant or produced by the Consultant in connection with services rendered hereunder, together with all copies of any of the foregoing.
Notwithstanding such return, the Consultant shall continue to be bound by the terms of the confidentiality provisions contained in this Section 9 for a period of three years after the
termination of this Agreement. 

        10.    Freedom to Publish.    

        10.1 The
Company acknowledges that Consultant's obligation to disseminate new knowledge and research findings. Notwithstanding the confidentiality provisions, or any other
provision, of this Agreement, the Consultant may publish and make oral presentations of the results of the Consultant's work performed pursuant to this Agreement under the terms set forth in this
Section 10. 

        10.2 The
Consultant acknowledges that publication or oral disclose of any Invention or other work prior to filing for patent or copyright protection could result in the
complete loss of any commercial value of the Consultant's research to the Institution, the Company, and/or the Consultant, as the case may be. The Consultant will provide the Company with sufficient
disclosure regarding Inventions owned by the Company under Section 8 at least 90 days prior to publication to allow the Company to evaluate such disclosure; Consultant will work with the
Institution (and the Company if appropriate) to file patent or copyright applications prior to disclosure or publication, or to modify such publication if such disclosure regarding Inventions owned by
the Company under Section 8 would materially affect the business of the Company. 

        11.    Use of Name.    It is understood that the name of the Consultant and Consultant's affiliation with the
Institution will appear in disclosure documents required by securities laws, and other regulatory and administrative filings in the ordinary course of the Company's business. It is also understood
that the name of the Consultant and Consultant's affiliation with the Institution will appear in such filings and disclosure documents in connection with the Company's Scientific Advisory Board. The
above described uses will be deemed to be non-commercial uses. The name of the Consultant or the Institution will not be used for any commercial purpose without the Consultant's consent. 

        12.    No Conflict; Valid and Binding.    The Consultant represents that neither the execution of this Agreement nor
the performance of the Consultant's obligations under this Agreement (as modified to the extent required by Section 5) will result in a violation or breach of any other agreement by which the
Consultant is bound. The Company represents that this Agreement has been duly authorized and executed and is a valid and legally binding obligation of the Company, subject to no conflicting
agreements. 

4

 

        13.    Notices.    Any notice provided under this Agreement shall be in writing and shall be deemed to have been
effectively given (i) upon receipt when delivered personally, (ii) one day after sending when sent by private express mail service (such as Federal Express), or (iii) 5 days after
sending when sent by regular mail to the following address: 

	 	 	In the case of the Company:
	

 	
 	

 	
 	

PharmaCopeia, Inc.

c/o Avalon Ventures

1020 Prospect Street, Suite 405

La Jolla, CA 92037

Attn: Lawrence A. Bock

          Acting President
	

 	
 	

In the case of the Consultant:
	

 	
 	

 	
 	

Paul A. Bartlett

Department of Chemistry

University of California

Berkeley, CA 94720

or
to other such address as may have been designated by the Company or the Consultant by notice to the other given as provided herein. 

        14.    Independent Contractor; Withholding.    The Consultant will at all times be an independent contractor, and as
such will not have authority to bind the Company. Consultant will not act as an agent nor shall he be deemed to be an employee of the Company for the purposes of any employee benefit program,
unemployment benefits, or otherwise. The Consultant recognizes that no amount will be withheld from his compensation for payment of any federal, state, or local taxes and that the Consultant has sole
responsibility to pay such taxes, if any, and file such returns as shall be required by applicable laws and regulations. Consultant shall not enter into any agreements or incur any obligations on
behalf of the Company. 

        15.    Assignment.    Due to the personal nature of the services to be rendered by the Consultant, the Consultant may
not assign this Agreement. The Company may assign all rights and liabilities under this Agreement (as a group with other similar agreements with members of the Scientific Advisory Board) to a
subsidiary or an affiliate or to a successor to all or a substantial part of its business and assets without the consent of the Consultant. Subject to the foregoing, this Agreement will inure to the
benefit of and be binding upon each of the heirs, assigns and successors of the respective parties. 

        16.    Severability.    If any provision of this Agreement shall be declared invalid, illegal or unenforceable, such
provision shall be severed and the remaining provisions shall continue in full force and effect. 

        17.    Remedies.    The Consultant acknowledges that the Company would have no adequate remedy at law to enforce
Sections 6, 8 and 9 hereof. In event of a violation by the Consultant of such Sections, the Company shall have the right to obtain injunctive or other similar relief, as well as any other
relevant damages, without the requirement of posting bond or other similar measures. 

        18.    Governing Law; Entire Agreement; Amendment.    This Agreement shall be governed by the laws of the State of
California applicable to agreements made and to be performed within such State, represents the entire understanding of the parties, supersedes all prior agreements between the parties, and may only be
amended in writing. 

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        IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

	PHARMACOPEIA, INC.	 	CONSULTANT:
	

By:	
 	

/s/  LAWRENCE A. BOCK      
 Lawrence A. Bock

Acting President	
 	

/s/  PAUL A. BARTLETT      
 Paul A. Bartlett
	 	 	 	 	Date:	 	

6

 
 
 

EXHIBIT A
  
    Other Relationships

[List;
if none so indicate.] 

Advisory
services currently provided to other pharmaceutical companies 

Agouron
Pharmaceuticals, Inc. consultant

Sandoz Research Institute Scientific Advisory Board

Schering-Plough, Inc. consultant to process development group

SmithKline Beecham, Inc. Chemical Technologles Advisory Board

Tularik, Inc. Scientific Advisory Board 

7

[PHARMACOPEIA LETTERHEAD]  

March
27, 2003 

Paul
A. Bartlett, Ph.D.

Department of Chemistry

University of California

Berkeley, CA 94720-1460 

	Re:
	Consulting
Agreement dated March 1993 between

Pharmacopeia, Inc. and Paul A. Bartlett 

Dear
Paul: 

        We
are pleased to acknowledge the automatic renewal of your Consulting Agreement referenced above for another one-year term, which runs until March 31, 2004. 

        We
appreciate your efforts and value your contributions to Pharmacopeia. 

Sincerely
yours, 

/s/  STEPHEN A. SPEARMAN, PH.D.      

Stephen
A. Spearman, Ph.D. 

	cc:
	Michael
G. Lenahan

Brian Posner 

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CONSULTING AGREEMENT FOR FOUNDING MEMBERS OF THE PHARMACOPEIA, INC. SCIENTIFIC ADVISORY BOARD

EXHIBIT A Other RelationshipsExhibit 10.35

 

RETAIL AND PROMOTIONAL LICENSE

WARNER BROS. CONSUMER PRODUCTS INC.

#14559-SCOO

 

RETAIL AND PROMOTIONAL LICENSE AGREEMENT made
November 10, 2003, by and between Warner Bros. Consumer Products Inc.,
whose address is 4000 Warner Blvd., Burbank, CA 91522 (hereinafter referred to
as “LICENSOR”) and Poore Brothers, Inc., whose address is 3500 S. La Cometa
Drive, Goodyear, AZ 85338, Attention: Eric Kufel (hereinafter referred to as
“LICENSEE”).

 

WITNESSETH:
The parties hereto
mutually agree as follows:

 

1.                                      DEFINITIONS: As used in this Agreement, the following
terms shall have the following respective meanings:

 

(a)                                  “Channels of Distribution”: Licensee may conduct the Licensed Promotion
and shall sell and distribute the Licensed Products and/or the Licensed
Premiums through the following Channels of Distribution only (as such channels
are defined and numbered in Exhibit I attached hereto and incorporated herein
by reference):

 

	
   

  	
  CHANNEL

  	
   

  	
  EXHIBIT 1
  NUMBER

  

 

[*]

 

All other Channels of
Distribution defined in Exhibit I which are not specified above in this
Paragraph 1(a) are specifically excluded from this Agreement.

 

[*]

 

(b)                                 “Guaranteed Consideration”:
[*]

 

(c)                                  “Licensed Premium(s)”: Licensee shall have the right to include
premiums incorporating the Licensed Property in association with the Licensed
Promotion.

 

Any and all such premiums
shall be determined by the parties at a later date and shall be added to this
License Agreement pursuant to a written amendment, provided, however, that
Licensor shall have the absolute right to approve in writing all the elements
(i.e. all premiums as well as all product packaging, advertising, etc.) prior
to manufacture of said premiums.

 

For purposes of this
subparagraph, the term “premium” shall be defined as including, but not
necessarily limited to, combination sales, free or self-liquidating items
offered to the public in conjunction with the sale or promotion of a product or
service, including traffic building or continuity visits by the
consumer/customer, or any similar scheme or device, the prime intent of which
is to use the premiums in such a way as to promote, publicize and or sell the
products, services or business image of the user of such item.

 

(d)                                 “Licensed Products”: Salted Snacks Category (incorporating the
Licensed Property in its packaging and in the shapes of the individual snack
items within each package) defined as: Potato Chips, Potato Crisps, 2-D Potato
or Corn Snacks, 3-D Potato or Corn Snacks, Pretzels, Cheese Puffs, Tortilla
Chips, Pellet Fried Snacks, Extruded Fried Snacks.

 

It is understood and agreed
that for the purposes of this Agreement, Salted Snacks Category shall exclude
the following: pre-popped popcorn, nuts, crackers, and cookies.

 

(e)                                  “Licensed Promotion”: The right to utilize the Licensed Property in
connection with the advertising and promotion of the Licensed Products and with
the manufacture, distribution and advertisement of Licensed Premiums as set
forth below:

 

(i)                                     Licensee shall invest [*] of its annual Net
Sales (as defined in Paragraph 4(b) below) of the Licensed Products towards
trade and consumer marketing support (“Annual Marketing Support”). [*] of such
Annual Marketing Support investment shall be allocated towards television media
commitments (the “TV Commitment”) on Time Warner networks each calendar year to
support the Licensed Products. In the event, Licensor is no longer affiliated
with television

 

[*] = CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) PURSUANT TO SEC
RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

 

media outlets during the
Term, Licensee may utilize other television networks to fulfill the TV
Commitment.

 

It is understood and agreed
that the Annual Marketing Support set forth above may include the Annual FSI
Requirement set forth in separate license agreement #13770-WBLT between
Licensee and Licensor.

 

(ii)                                  Licensee shall support the launch of the
Licensed Product with a FSI during the 2004 calendar year.

 

(iii)                               Licensor shall allow Licensee to run a :05 to
: 07 second tag at Licensee’s option themed with the Licensed Property on its
existing television commercial spot featuring the Looney Tunes Property  licensed to Licensee under separate license
agreement #13770-WBLT.

 

(f)                                    “Licensed Property”: The fictional cartoon characters as they
appear in the animated television series entitled “SCOOBY-DOO” as follows: SCOOBY-DOO, FRED JONES, DAPHNE BLAKE, VELMA DINKLY,
SHAGGY ROGERS, MYSTERY MACHINE including said characters’
representations, names, likenesses and all environmental settings, artwork and
other materials associated therewith. 
Licensee further understands and agrees that the rights granted herein
are limited only to the cartoon characters set forth above and that any and all
rights in, to or associated with any theatrical motion picture, movie of the
week, television special or direct to video containing the “SCOOBY-DOO” cartoon
characters, whether live action, animation or both, as well as with any sequels
thereto, are specifically excluded herefrom, it being understood that all
rights in and to said property are reserved exclusively to Licensor for use
and/or licensing as it deems appropriate to third parties of its choice at
Licensor’s sole discretion. 
Furthermore, no film clips, stills, sound bites, voices, music or other
audio clips are included herein. If Licensee wishes to use any such elements,
Licensee must separately procure the necessary rights and any rights clearance
or related fees arising from same shall be at Licensee’s sole expense.

 

(g)                                 “Marketing Date”: Date Licensed Products first shipped to
customer, but not later than March 30, 2004.

 

(h)                                 “Royalty Rate”: Licensee shall pay to Licensor the following sums:

 

(i)                                     [*] of Net Sales (as defined in Paragraph
4(b) below) of all Licensed Products; and

 

(ii)                                  [*] of Net Purchase Price of all Licensed
Premiums distributed by Licensee hereunder. The term “Net Purchase Price”
herein shall mean the price actually paid by Licensee for any Licensed
Premium(s) authorized and distributed hereunder. It is understood and agreed
that any Royalties paid to Licensor on Net Purchase Price of Premiums shall be
in addition to and shall not offset the Guaranteed Consideration hereunder.

 

(g)                                 “Style Guide”: Any materials provided by Licensor to
Licensee which sets forth the style, format, characterization and any artwork
depicting the Licensed Property which has been approved by Licensor in writing.

 

(i)                                     “Term”: October 2, 2003 through [*].

 

(j)                                     “Territory”: United States (fifty states), Puerto Rico,
United States Virgin Islands, and United States Military Bases.

 

2.                                       GRANT OF LICENSE:

 

(a)                                  Subject to the restrictions, 1imitations,
reservations and conditions and Licensor’s approval rights set forth in this
Agreement, Licensor hereby grants to Licensee and Licensee hereby accepts for
the Term of this Agreement, a license to utilize the Licensed Property solely
on or in connection with the Licensed Promotion and the Licensed Products and/or
Licensed Premiums throughout the Territory on an exclusive basis in the Salted
Snack Category as defined in Paragraph 1(d), except that sales of Licensed
Products and Licensed Premiums sold through Airport Gift and Other Airport
Stores shall be on a non-exclusive basis.

 

(b)                                 Without limiting any other approval rights of
Licensor as contained herein, no television commercials (animated or live
action) may be utilized under this Agreement without the specific prior written
approval of Licensor.

 

[*] = CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) PURSUANT TO SEC
RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

 

3.                                      RESERVATION OF RIGHTS;
PREMIUMS:

 

(a)                                  Licensor reserves all rights not expressly
conveyed to Licensee hereunder, and Licensor may grant licenses to others to
use the Licensed Property, artwork and textual matter in connection with other
uses, services and products without limitation.

 

(b)                                 Notwithstanding anything to the contrary
stated herein, Licensor, for itself and its affiliates, specifically reserves
the right, without limitation throughout the world, to itself use, or license
any third party(s) of its choice to use the Licensed Property for the
marketing, manufacture, distribution and sale of products and/or the promotion
of services similar or identical to those licensed herein in Paragraphs l(c)
and 1(d) above for sale through any catalogue(s) or online website produced or
distributed by or on behalf of Licensor or its affiliated companies, or for
sale or distribution in any theaters, arenas or restaurants or for sale or
distribution in connection with any home video product, including DVD or other
formats, or for sale or distribution in the retail stores known as “Warner
Bros. Studio Stores” and any other retail stores operated by or on behalf of
Licensor or its affiliated companies, or for sale or distribution in any
theme/amusement parks operated by or on behalf of Licensor and its affiliated
companies, including without limitation, the Six Flags and Movie World parks or
its licensees, Six Flags, Movie World, or their affiliated companies. In
addition, Licensor reserves the right to allow Six Flags and Movie World to
manufacture (or have manufactured by a third party) products similar or
identical to those licensed herein for distribution or sale in theme and/or
amusement parks owned or operated by Six Flags and/or Movie World. Further,
Licensor reserves the right to use, or license others to use, and/or
manufacture products similar or identical to those licensed herein for use as
premiums. Nothing contained herein shall be construed to mean that Licensee is
granting a license to Licensor to utilize Licensee’s proprietary and/or
patented technology.

 

(c)                                  Licensee specifically understands and agrees
that no rights are granted herein with respect to the Warner Bros. “shield”
logo or trademark, or any other trademark(s), logo(s) or copyrights owned by
Licensor other than those specifically set forth above in the Licensed
Property, it being understood that all rights in and to said properties are
reserved exclusively to Licensor for use and/or licensing as it deems
appropriate to third party(s) of its choice. 
Notwithstanding the foregoing Licensee may use the Warner Bros. shield
logo in connection with the legal line referenced in Paragraph 8(d) below as
instructed by Licensor’s Brand Assurance Department.

 

(d)                                 Licensee agrees that it will not use, or
knowingly permit the use of, and will exercise due care that its customers
likewise will refrain from the use of, the Licensed Products as premiums or the
Licensed Premiums as products for retail sale, except with the prior written
consent of Licensor.

 

4.                                       CONSIDERATION:

 

(a)                                  The Guaranteed Consideration paid by Licensee
as set forth above shall be applied against such royalties as are, or have
become, due to Licensor. No part of such Guaranteed Consideration shall be
repayable to Licensee. Royalties earned in excess of the Guaranteed
Consideration applicable to the Term hereof shall not offset any Guaranteed
Consideration required in respect of the succeeding renewal term (if any);
likewise, royalties earned in excess of the Guaranteed Consideration applicable
to the renewal term (if any) shall not offset any Guaranteed Consideration
applicable to any prior term.

 

(b)                                 Royalty Payments: Licensee shall pay to
Licensor a sum equal to the Royalty Rate as set forth above of (i) all Net
Sales by Licensee of the Licensed Products and/or (ii) Net Purchase Price of
the Licensed Premiums covered by this Agreement. The term “net sales” herein
shall mean [*]. No costs incurred in the manufacture, sale, distribution,
advertisement, or exploitation of the Licensed Products shall be deducted from
any royalties payable by Licensee.

 

(c)                                  Royalties shall be payable concurrently with
the periodic statements required in Paragraph 5(a) hereof, except to the extent
offset by the Guaranteed Consideration theretofore remitted.

 

[*] = CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED
AND FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) PURSUANT TO SEC
RULE 24b-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

 

5.                                      PERIODIC STATEMENTS:

 

(a)                                  Within thirty (30) days after the end of the
first fiscal quarter after the date of execution of the License Agreement and
promptly on the 25th day after the end of each fiscal quarter thereafter,
Licensee shall furnish to Licensor complete and accurate statements certified
to be accurate by Licensee, or if a corporation, by an officer of Licensee,
showing the (i) number of units; (ii) country in which manufactured, sold,
distributed and/or to which shipped; (iii) Description (as such term is defined
below) of the Licensed Products and/or Licensed Premiums; (iv) gross sales
price or Net Purchase Price (if applicable); and (v) itemized deductions from
gross sales price and net sales price (if applicable) together with any returns
made during the preceding fiscal quarter. Such statements shall be in such
formats as Licensor shall reasonably require (which formats may be amended by
Licensor from time to time) and shall be furnished to Licensor whether or not
any of the Licensed Products and/or Licensed Premiums have been distributed
during fiscal quarters to which such statements refer. Receipt or acceptance by
Licensor of any of the statements furnished pursuant to this Agreement or of
any sums paid hereunder shall not preclude Licensor from questioning the
correctness thereof at any time, and in the event that any inconsistencies or
mistakes are discovered in such statements or payments, they shall immediately
be rectified and the appropriate payments made by Licensee. Upon demand of
Licensor, Licensee shall at its own expense, but not more than once in any
twelve (12) month period, furnish to Licensor a detailed statement by an
officer of Licensee showing the (i) number of units; (ii) country in which
manufactured, sold, distributed and/or to which shipped; (iii) Description of
the Licensed Products and/or Licensed Premiums; (iv) gross sales price or Net
Purchase Price (if applicable); and (v) itemized deductions from gross sales
price and net sales price (if applicable) of the Licensed Products and/or
Licensed Premiums covered by this Agreement distributed and/or sold by Licensee
up to and including the date upon which Licensor has made such demand. For
purposes of this Paragraph 5(a), the term “Description” shall mean a detailed
description of the Licensed Products and/or Licensed Premiums including the
nature of each of the Licensed Products and/or Licensed Premiums, any and all
names and likenesses, whether live actors or animated characters, from the
Licensed Property utilized on the Licensed Products and/or Licensed Premiums
and/or any related packaging and/or wrapping material, and any other components
of the Licensed Property utilized on the Licensed Products and/or Licensed
Premiums and/or any related packaging and/or wrapping material. In the event
Licensor is responsible for the payment of any additional third party
participations based on Licensee not reporting by character name and likeness
as provided above, Licensee shall be responsible for reimbursing Licensor for
the full amount of all such third party claims, including without limitation
the participation itself, interest, audit and reasonable attorneys’ fees.
Licensee understands and agrees that it is a material term and condition of
this Agreement that Licensee include the Description on all statements. In the
event Licensee fails to do so, Licensor shall have the right to terminate this
Agreement, in accordance with the provisions of Paragraph 14 herein.

 

(b)                                 On all statements and payments required
hereunder, Licensee will reference the contract number(s) set forth on the
first page of this Agreement (and/or such other contract number(s) designated
by Licensor in a written notice to Licensee). If Licensee chooses to deliver
statements by e-mail, Licensee will deliver such statements to the following
e-mail address: wbcproyrep@warnerbros.com.

 

If Licensee chooses to
deliver payments by wire transfer, Licensee will deliver such payments as
follows:

 

BANK OF AMERICA

1850 Gateway Blvd. #5693

Concord, CA 94520

USA

 

Account Number: 1257-000503

ABA #: 121000358

 

 

Swift Code: BofA US 6S

Account Name: Warner Bros.

Reference: WBCP / Licensee
Name / Contract Number

 

If the United States Postal
Service is used to deliver statements and/or payments, Licensee will deliver
such statements and/or payments to the following:

 

WARNER BROS. CONSUMER PRODUCTS INC.

21477 Network Place

Chicago, IL 60673-1214

USA

 

If Federal Express or any
other courier service is used to deliver statements and/or payments, Licensee
will deliver such statements and/or payments to the following:

 

BANK ONE

Attention WBCP lockbox
#21477

525 West Monroe

8th Floor Mail Room

Chicago, IL 60661

Telephone Number
312-732-5500

 

(c)                                  Any payments which are made to Licensor
hereunder after the due date required therefore, shall bear interest at the
then current prime rate, as published in The Wall Street Journal (New York
edition), plus three (3%) percent (or the maximum rate permissible by law, if
less) from the date such payments are due to the date of payment. Licensor’s
right hereunder to interest on late payments shall not preclude Licensor from
exercising any of its other rights or remedies pursuant to this Agreement or
otherwise with regard to Licensee’s failure to make timely remittances.

 

6.                                      BOOKS AND RECORDS:

 

(a)                                  Licensee shall keep, maintain and preserve
(in Licensee’s principal place of business) for at least two (2) years
following expiration or termination of the Term of this Agreement or any
renewal(s) hereof (if applicable), complete and accurate records of accounts
including, without limitation, purchase orders, inventory records, invoices,
correspondence, banking and financial and other records pertaining to the
various items required to be submitted by Licensee as well as to ensure
Licensee’s compliance with local laws as required pursuant to Paragraph 13(k)
hereof. Such records and accounts shall be available for inspection and audit
up to two (2) times per year during or after the Term of this Agreement or any
renewal(s) hereof (if applicable) during reasonable business hours and upon
reasonable notice by Licensor or its nominees. Licensee agrees not to cause any
interference with Licensor or nominees of Licensor in the performance of their
duties. During such inspections and audits, Licensor shall have the right to
take extracts and/or make copies of Licensee’s relevant records as it deems
reasonably necessary. Licensor agrees to keep confidential all information and
copies obtained by Licensor pursuant to this Paragraph other than with respect
to required disclosures in connection with disputes between the parties or as
otherwise required by law, court order or governmental process.

 

(b)                                 The exercise by Licensor in whole or in part,
at any time of the right to audit records and accounts or of any other right
herein granted, or the acceptance by Licensor of any statement or statements or
the receipt and/or deposit by Licensor, of any payment tendered by or on behalf
of Licensee shall be without prejudice to any rights or remedies of Licensor
and such acceptance, receipt and/or deposit shall not preclude or prevent
Licensor from thereafter disputing the accuracy of any such statement or
payment.

 

(c)                                  If pursuant to its right hereunder Licensor
causes an audit and inspection to be instituted which thereafter discloses a
deficiency between the amount found to be due to Licensor and the amount
actually received or credited to Licensor, then Licensee shall, upon Licensor’s
demand, promptly pay the deficiency, together with interest thereon at the then
current prime rate from the date such amount became due until the date of
payment, and, if the deficiency is more than five percent (5%) of all payments
made by Licensee during the period covered by

 

 

the audit, then Licensee
shall pay the reasonable costs and expenses of such audit and inspection.

 

7.                                       INDEMNIFICATIONS:

 

(a)                                  During the Term, and continuing after the
expiration or termination of this Agreement, Licensor shall indemnify Licensee
and its affiliates and shall hold them harmless from any loss, liability,
damage, cost or expense, including reasonable attorneys’ fees, arising out of
any claims or suits which may be brought or made against Licensee and its
affiliates by reason of the breach by Licensor of the warranties or
representations as set forth in Paragraph 12 hereof, provided that Licensee
shall give prompt written notice, and full cooperation and assistance to
Licensor relative to any such claim or suit and provided, further, that
Licensor shall have the option to undertake and conduct the defense of any suit
so brought. Licensee shall not, however, be entitled to recover for lost
profits. Licensee shall cooperate fully
in all respects with Licensor in
the conduct and defense of said suit and/or proceedings related thereto.

 

(b)                                 During the Term, and continuing after the expiration
or termination of this Agreement, Licensee shall indemnify Licensor and each of
its affiliates, and shall hold them harmless from any loss, liability, damage,
cost or expense including reasonable attorneys fees, arising out of any claims
or suits which may be brought or made against Licensor or any of its
affiliates, by reason of: (i) any breach of Licensee’s covenants and
undertakings hereunder; (ii) any unauthorized use by Licensee of the Licensed
Property; (iii) any use of any trademark or copyright on or in connection with
the Licensed Products, the Licensed Premiums or the Licensed Promotion (except
trademarks or copyrights in the Licensed Property used in accordance with the
terms of this Agreement), design, patent, process, method or device on or in
connection with the Licensed Products, the Licensed Premiums or the Licensed
Promotion; (iv) Licensee’s non-compliance with any applicable federal, state or
local laws or with any other applicable regulations; and (v) any alleged
defects and/or inherent dangers (whether obvious or hidden) in the Licensed
Products and/or Licensed Premiums, or the use thereof. Provided, however, that
Licensor shall give prompt written notice, and full cooperation and assistance
to Licensee relative to any claim or suit and provided, further, that Licensee
shall have the option to undertake and conduct the defense of any suit so
brought. Licensor shall cooperate fully in all respects with Licensee in the
conduct and defense of said suit and/or proceedings related thereto. Provided,
however, that Licensor shall give prompt written notice, and full cooperation and assistance to Licensee relative to any such claim or
suit and provided, further, that Licensee shall have the option to undertake
and conduct the defense of any suit so brought. Licensor shall cooperate fully in all respects with Licensee in the conduct and defense of said suit
and/or proceedings related thereto.

 

(c)                                  With regard to Paragraph 7(b) above, Licensee
agrees to obtain, at its own expense, Commercial General Liability Insurance,
including product liability and contractual liability coverage providing
adequate protection for Licensor and each of its affiliates and Licensee
against any such claims or suits in amounts no less than three million dollars
($3,000,000) per occurrence, combined single limits. Simultaneously with the
execution of this Agreement, Licensee undertakes to submit to Licensor a fully
paid policy or certificate of insurance naming Licensor and each of its
affiliates as additional insured parties and, requiring that the insurer shall
not terminate or materially modify such policy or certificate of insurance
without written notice to Licensor at least thirty (30) days in advance
thereof. Such insurance shall at all times be primary and not contributory with
any insurance carried by Licensor or any of their affiliates. Further the
delivery of the policy or certificate, as provided in this Paragraph 7(c) are
material obligations of Licensee.

 

8.                                      ARTWORK; COPYRIGHT AND
TRADEMARK NOTICES:

 

(a)                             The Licensed Property shall be displayed or
used only in such form and in such manner as has been specifically approved in
writing by Licensor in advance and Licensee undertakes to assure usage of the
trademark(s) and character(s) solely as approved hereunder. Licensee further
agrees and acknowledges that any and all Artwork (defined below) created,
utilized, approved and/or authorized for use hereunder by Licensor which
otherwise features or includes the Licensed Property shall be owned in its
entirety exclusively by Licensor excluding intellectual property rights in and
to any elements that are owned by Licensee or

 

 

licensed by Licensee from a
third party and do not include the Licensed Property. “Artwork” as used herein
shall include, without limitation, all pictorial, graphic, visual, audio,
audio-visual, digital, literary, animated, artistic, dramatic, sculptural,
musical or any other type of creations and applications, whether finished or
not, including, but not limited to, animation (including, without limitation,
animation produced by Warner Bros. Animation), drawings, designs, sketches,
images, tooling and tooling aids, illustrations, film, video, electronic,
digitized or computerized information, software, object code, source code,
on-line elements, music, text, dialogue, stories, visuals, effects, scripts,
voiceovers, logos, one-sheets, promotional pieces, packaging, display
materials, printed materials, photographs, interstitials, notes, shot logs,
character profiles and translations, produced by Licensee or for Licensee,
pursuant to this Agreement. Licensor reserves for itself or its designees all
rights to use any and all Artwork created, utilized and/or approved hereunder
without limitation excluding intellectual property rights in and to any elements
that are owned by Licensee or licensed by Licensee from a third party and do no
include the Licensed Property. Nothing contained herein shall be construed to
mean that Licensee is granting a license to Licensor to utilize Licensee’s
proprietary, patented technology, and/or intellectual property rights whether
alone or in combination with the Licensed Property.  Notwithstanding the foregoing, the parties agree that the term
“Artwork” excludes any elements of the Licensed Products and other materials created
in connection herewith, and all related intellectual property rights,
independently created by Licensee, solely or jointly with any third party, or
licensed to Licensee from a third party, that do not use, exploit or derive
from any of the Licensed Property, including, for example, any original,
independently created Licensee artwork used in Licensee’s packaging,
advertising, and products that does not use, exploit or derive from any of the
Licensed Property.

 

(b)                                 Licensee acknowledges that, as between
Licensor and Licensee, the Licensed Property, Artwork and all derivative works
thereof, and all other depictions, expressions and derivations thereof,
excluding intellectual property rights in and to any elements that are owned by
Licensee or licensed by Licensee from a third party and do not include the
Licensed Property, and all copyrights, trademarks and other proprietary rights
therein are owned exclusively by Licensor and Licensee shall have no interest
in or claim thereto, except for the limited right to use the same pursuant to
this Agreement and subject to its terms and conditions.

 

Licensor acknowledges that,
as between Licensor and Licensee, the Licensee’s intellectual property and all
derivative works thereof, and all copyrights, trademarks and other proprietary
rights therein are owned exclusively by Licensee and Licensor shall have not
interest in or claim thereto.

 

Licensee agrees and
acknowledges that any Artwork created by Licensee or for Licensee hereunder is
a “work made for hire” for Licensor under the U.S. Copyright Act, and any and
all similar provisions of law under other jurisdictions, and that Licensor is
the author of such works for all purposes, and that Licensor is the exclusive
owner of all the rights comprised in the undivided copyright and all renewals,
extensions and reversions therein, in and to such works in perpetuity and
throughout the universe. Licensee hereby waives and releases in favor of
Licensor all rights (if any) of “droit moral,” rental rights and similar rights
in and to the Artwork (the “Intangible Rights”) and agrees that Licensor shall
have the right to revise, condense, abridge, expand, adapt, change, modify, add
to, subtract from, re-title, re-draw, recolor, or otherwise modify the Artwork,
without the consent of Licensee. Licensee hereby irrevocably grants, transfers
and assigns to Licensor all right, title and interest, including copyrights,
trademark rights, patent rights and other proprietary rights, it may have in
and to the Artwork and all derivative works, in perpetuity and throughout the
universe. Licensee acknowledges that Licensor shall have the right to terminate
this Agreement in the event Licensee asserts any rights (other than those
specifically granted pursuant to this Agreement) in or to the Licensed Property
or Artwork.

 

Licensee hereby warrants
that any and all work created by Licensee under this Agreement apart from the
materials provided to Licensee by Licensor is and shall be wholly original with
or fully cleared by Licensee and shall not copy or otherwise infringe the
rights of any third parties, and Licensee hereby indemnifies Licensor and will
hold Licensor harmless from any such claim of infringement or otherwise
involving Licensee’s performance hereunder, under the terms of Paragraph 7(b).
At the request of Licensor, Licensee shall execute such form(s) of assignment
of copyright or other papers as Licensor may reasonably request in order to

 

 

confirm and vest in Licensor
the rights in the properties as provided for herein. In addition, Licensee
hereby appoints Licensor as Licensee’s Attorney-in-Fact to take such actions
and to make, sign, execute, acknowledge and deliver all such documents as may
from time to time be necessary to confirm in Licensor, its successors and
assigns, all rights granted herein. If any third party makes or has made any
contribution to the creation of Artwork authorized for use hereunder, Licensee
agrees to obtain from such party a full confirmation and assignment of rights
so that the foregoing rights shall vest fully in Licensor, in the Form of the
Contributor’s Agreement attached hereto as Exhibit 2 and by this reference made
a part hereof, prior to commencing work, and subject to the prior written
approval of Licensor, ensuring that all rights in the Artwork and Licensed
Property arise in and are assigned to Licensor. Promptly upon entering into
each such Contributor’s Agreement, Licensee shall give Licensor a copy of such
Contributor’s Agreement. Licensee assumes all responsibility for such parties
and agrees that Licensee shall bear any and all risks arising out of or
relating to the performance of services by them and to the fulfillment of their
obligations under the Contributor’s Agreement.

 

(c)                                  Upon expiration or termination of this
Agreement for any reason, or upon demand by Licensor at any time, Licensee
shall promptly deliver to Licensor all Artwork or Licensed Property, whether
finished or not, including drawings, drafts, sketches, illustrations, screens,
data, digital files and information, copies or other items, information or
things created in the course of preparing the Licensed Property, excluding any
elements that are owned by Licensee or licensed by Licensee from a third party
and all materials provided to Licensee by Licensor hereunder, or, at Licensor’s
option and instruction, shall destroy some or all of the foregoing and shall
confirm to Licensor in writing that Licensee has done so. Licensee shall not
use such Artwork or Licensed Property, items, information or things, material,
for any purpose other than is permitted under this Agreement. For any Licensee
elements and/or intellectual property that utilize Licensed Property or Artwork
in whole or in part, Licensee shall destroy such elements and/or intellectual
property upon expiration or termination of this Agreement for any reason and
shall confirm to Licensor in writing that Licensee has done so.

 

(d)                                 Licensee shall, within thirty (30) days of
receiving an invoice, pay Licensor for Artwork executed for Licensee by
Licensor (or by third parties under contract to Licensor) for use in the
development of the Licensed Products and/or Licensed Premiums and any related
packaging, display and promotional materials at Licensor’s prevailing
commercial art rates. The foregoing shall include any Artwork that, in
Licensor’s opinion, and subject to Licensee’s written approval, is necessary to
modify Artwork initially prepared by Licensee and submitted for approval.
Estimates of Artwork charges are available upon request. Licensor shall submit
to Licensee, for Licensee’s prior approval, any increases of ten percent (10%)
or more above the estimate originally approved by Licensee, and Licensee shall
not be obligated to pay for such increased cost if Licensee has not provided
its approval thereof.

 

(e)                                  Licensee shall cause to be imprinted,
irremovably and legibly on the packaging of each Licensed Product and/or
Licensed Premium manufactured, distributed or sold under this Agreement, and
all printed and/or televised advertising, promotional, packaging and wrapping material
wherein the Licensed Property appears, the following copyright and/or trademark
notice(s) or such other notice as may be approved by Licensor:

 

TM
& © Hanna-Barbera.

(s03)

 

(The year date shall be as
instructed by Licensor.)

 

(f)                                    In no event shall Licensee use, in respect to
the Licensed Products and/or Licensed Premiums and/or in relation to any
advertising, promotional, packaging or wrapping material, any copyright or
trademark notices which shall conflict with, be confusing with, or negate, any notices
required hereunder by Licensor in respect to the Licensed Property.

 

(g)                                 Licensee agrees to deliver to Licensor free
of cost six (6) of each of the Licensed Products and/or Licensed Premiums
together with their packaging and wrapping material for trademark registration
purposes in compliance with applicable laws, simultaneously upon distribution
to the public. Any copyrights or trademarks with respect to the Licensed
Promotion or Licensed Products and/or Licensed Premiums shall be procured by
and for the benefit of Licensor and

 

 

at Licensor’s expense.
Licensee further agrees to provide Licensor with the date of the first use of
the Licensed Products and/or Licensed Premiums in interstate and intrastate
commerce.

 

(h)                                 Licensee shall assist Licensor, at Licensor’s
expense, in the procurement, protection, and maintenance of Licensor’s rights
to the Licensed Property. Licensor may, in its sole discretion, commence or
prosecute and effect the disposition of any claims or suits relative to the
imitation, infringement and/or unauthorized use of the Licensed Property either
in its own name, or in the name of Licensee, or join Licensee as a party in the
prosecution of such claims or suits. Licensee agrees to cooperate fully with
Licensor in connection with any such claims or suits and undertakes to furnish
full assistance to Licensor in the conduct of all proceedings in regard
thereto. Licensee shall promptly notify Licensor in writing of any known
infringements or imitations or unauthorized uses by others of the Licensed
Property, on or in relation to promotions similar to the Licensed Promotion or
products identical to similar to or related to the Licensed Products and/or
Licensed Premiums. Licensor shall in its sole discretion have the right to
settle or effect compromises in respect thereof. Licensee shall not institute
any suit or take any action on account of such infringements, imitations or
unauthorized uses.

 

(i)                                     Licensee acknowledges receipt of Licensor’s
Style Guide and undertakes to utilize the depictions of the Licensed Property
(and, if authorized by Licensor, any emblems and/or devices associated
therewith) in the form as set forth therein on all Licensed Products as well as
advertising, promotional, packaging or wrapping materials. In the event that
Licensee desires to utilize renditions which vary from those as set forth in
the Style Guide, Licensee shall make a request to Licensor in that connection,
and if the request is approved, Licensor shall prepare appropriate Artwork and
deliver same to Licensee. Licensee shall utilize such Artwork solely in the
form furnished by Licensor, if Licensee decides to use such Artwork in
Licensee’s sole discretion, shall pay a reasonable fee to Licensor in respect
thereof not later than one month after delivery thereof by Licensor to
Licensee, and such fee shall be additional to and not offset by any Guaranteed
Consideration referred to in Paragraph 1(b) hereinabove.

 

(j)                                     If Licensee is unable or unwilling to use
artwork from the Licensor’s Style Guide and if Licensor is unable or unwilling
to provide Licensee with Artwork as described in subparagraph (h) above and if
Licensor expressly consents in writing, which consent shall not be unreasonably
withheld, but may be subject to such conditions as Licensor may elect in its
sole discretion, then and only then may the Licensee create or procure the
creation of Artwork. In any event, Licensee shall assign or procure the
assignment in writing of all rights, copyright and otherwise, in and to any
Artwork, and it is intended that this provision shall take effect as an
assignment of prospective copyrights in Artwork yet to be created by or for.
The Licensee further undertakes to take all and any steps necessary for the
recordal or registration of the assignment(s) referred to hereinabove.

 

9.                                      APPROVALS AND QUALITY
CONTROLS:

 

(a)                                  Licensee agrees to strictly comply and
maintain compliance with the quality standards, specifications and rights of
approval of Licensor in respect to any and all usage of the Licensed Property
on or in relation to the Licensed Products and/or Licensed Premiums throughout
the Term of this Agreement and any renewals or extensions thereof (if
applicable). Licensee agrees to furnish to Licensor free of cost for its
written approval as to quality and style, samples of each of the Licensed
Products and/or Licensed Premiums, together with their packaging, hangtags, and
wrapping material, as follows in the successive stages indicated: (i) rough
sketches/layout concepts; (ii) finished artwork or final proofs; (iii)
pre-production samples or strike-offs; and (iv) finished products, including
packaged samples.

 

(b)                                 No Licensed Products and/or Licensed Premiums
and no material utilizing the Licensed Property shall be manufactured, sold,
distributed or promoted by Licensee without prior written approval. In addition
to the foregoing, Licensee understands that it shall furnish to Licensor,
scripts and storyboards of any proposed media use of the Licensed Property as
may be authorized hereunder, in sufficient time for Licensee to make all
revisions which Licensor in its sole discretion may request. Licensee may,
subject to Licensor’s prior written approval, use textual and/or pictorial
matter pertaining to the Licensed Property on promotional, display and
advertising material as may, in its reasonable judgment, promote the sale of
the Licensed

 

 

Products and/or Licensed
Premiums. All advertising and promotional materials relating to the Licensed
Promotion and Licensed Products and/or Licensed Premiums must be submitted to
the Licensor for its written approval at the following stages appropriate to
the medium used. For print materials, submissions are to be made at the
following stages: (a) rough sketches or layout concepts; (b) finished artwork
or final proofs; and (c) finished materials. For television commercials, if
approved by Licensor, submissions are to be made at the following stages: (a)
initial concept; (b) storyboard, including written text; (c) pencil tests and
voice-overs for animation and/or selection of performers for live action; and
(d) a cassette of the finished commercial prior to air date. For radio or other
audio materials, if approved by Licensor, submissions are to be made at the
following stages: (a) initial concept; (b) script; (c) voice-overs; and (d) a
cassette of the finished commercial prior to the air date.

 

(c)                                  Approval or disapproval shall lie in
Licensor’s sole discretion. Licensor shall use its best efforts to approve,
disapprove or otherwise comment upon any items submitted to it for approval as
may be required hereunder within ten (10) business days after receipt by it of
such item(s). In the event that Licensor fails to approve, disapprove or
otherwise comment upon the item(s) so submitted within said ten (10) business
days, then Licensee shall have the right to notify Licensor of such failure by
facsimile (evidenced by written confirmation of facsimile transmittal) and
Licensor shall thereafter be required to approve, disapprove or otherwise
comment upon the item(s) so submitted within seven (7) business days after
receipt by it of said facsimile and failure to do so shall be deemed approval
of any item(s) so submitted. Any Licensed Products and/or Licensed Premiums not
so approved in writing shall be deemed unlicensed and shall not be manufactured,
distributed or sold. If any unapproved Licensed Products and/or Licensed
Premiums are being distributed or sold, Licensor may, together with other
remedies available to it including, but not limited to, immediate termination
of this Agreement, require such Licensed Products and/or Licensed Premiums to
be promptly withdrawn from the market and to be destroyed, such destruction to
be attested to in a certificate signed by an officer of Licensee.

 

(d)                                 Any material modification of a Licensed Product
and/or Licensed Premium must be submitted in advance for Licensor’s written
approval as if it were a new Licensed Product and/or Licensed Premium. Any
change involving the Artwork appearing on a Licensed Product shall constitute a
material modification of such Licensed Product. Approval of a Licensed Product
and/or Licensed Premium which uses particular artwork does not imply approval of such artwork for use with a different Licensed
Product and/or Licensed Premium.

 

(e)                                  Licensed Products and/or Licensed Premiums
must conform in all material respects to the final production samples approved
by Licensor. If in Licensor’s reasonable judgement, the quality of a Licensed
Product and/or Licensed Premium originally approved has deteriorated in later
production runs, or if a Licensed Product and/or Licensed Premium has otherwise
been altered, Licensor may, in addition to other remedies available to it,
require that such Licensed Product and/or Licensed Premium be immediately
withdrawn from the market.

 

(f)                                    Licensee shall permit Licensor to inspect
Licensee’s manufacturing operations, testing and manufacturing payroll records
(including those operations and relevant records of any supplier or
manufacturer approved pursuant to Paragraph 10 (b) below) with respect to the
Licensed Products and/or Licensed Premiums.

 

(g)                                 If any changes or modifications are required
to be made to any material submitted to Licensor for its written approval in
order to ensure compliance with Licensor’s specifications or standards of
quality, Licensee agrees promptly to make such changes or modifications.

 

(h)                                 Subsequent to final approval, no fewer than
twenty-four (24) production samples of Licensed Products and/or Licensed
Premiums will be sent to Licensor, to ensure quality control simultaneously
upon distribution to the public. In addition, Licensor shall have the right to
purchase any and all Licensed Products and/or Licensed Premiums in any quantity
at the maximum discount price Licensee charges its best customer, assuming
similar quantities and shipment terms.

 

(i)                                     To avoid confusion of the public, Licensee
agrees not to associate other characters or properties with the Licensed
Property on the Licensed Products and/or Licensed Premiums or in any packaging,
promotional or display materials unless Licensee receives Licensor’s prior

 

 

written approval.
Furthermore, Licensee agrees not to use the Licensed Property (or any component
thereof) on any business sign, business cards, stationery or forms, nor as part
of the name of Licensee’s business or any division thereof.

 

(j)                                     Pursuant to this Agreement, Licensee shall
use its reasonable commercial efforts to notify its customers of the
requirement that Licensor has the right to approve all promotional, display and
advertising materials that incorporate the Licensed Property. It is understood
and agreed that the use of images featuring the Licensed Product and its
approved packaging in promotional, display and advertising materials is
excluded from this requirement, provided, however, none of the Licensed
Property is utilized separately from the Licensed Product and its packaging.

 

(k)                                  Any request by Licensee to use animation or
animated character voices in Licensed Products or related packaging or
advertising materials (including, without limitation, television or radio
commercials) is subject to Licensor’s prior written approval. If the requested
use is so approved by Licensor, such animation or character voices will be
produced for or provided to Licensee by Warner Bros. Animation or other third
parties identified and approved by Licensor, and will be subject to such
additional fees and other terms set forth in a separate agreement (or
agreements) between Licensee and Warner Bros. Animation and/or other third
parties identified and approved by Licensor. In the event any video or sound
clips (“Clips”) or stills shots (“Stills”) from any television series or motion
picture are approved by Licensor in writing for use by Licensee in Licensed
Products or related packaging or advertising materials (including, without
limitation, television or radio commercials), such Clips or Stills will be
provided by Warner Bros. Television and/or Warner Bros. Theatrical, as
applicable, subject to the terms set forth in Paragraph 9 (1) below and, if
required by Licensor, pursuant to such additional fees and other terms set
forth in a separate agreement (or agreements) between Licensee and Warner Bros.
Television and/or Warner Bros. Theatrical. Any payment made or payable to third
parties (including, without limitation, Warner Bros. Animation, Warner Bros.
Television and Warner Bros. Theatrical) with respect to such animation,
character voices, Clips or Stills will be in addition to and will not offset
the Guaranteed Consideration required to be paid by Licensee hereunder.

 

(l)                                     Licensee will not make or authorize any
reproduction whatsoever of any Clips or Stills, in whole or in part, except in
connection with the Licensed Products and/or related packaging or advertising
materials as such may be approved for use by Licensor as set forth above in
Paragraph 9(k). Licensee will not have the right to edit or otherwise alter the
Clips or Stills, or any portion thereof, except as specifically approved in
writing by Licensor. Licensee will be solely responsible for, and will obtain,
all other authorizations, consents and releases, including, but not limited to,
authorization of any talent appearing in, or whose voice may be used in, the
Clips or Stills, and will pay all reuse fees and other compensation as may be
required by applicable collective bargaining or individual contracts or by law.
Without limiting the foregoing, if any music is included in the Clips as
exhibited, Licensee will obtain a11 necessary music synchronization and
performance rights from the copyright proprietors of such music and such other
persons or entities, including performing rights societies, as may own or
control the rights thereto and will obtain all necessary master recording
licenses required in connection with any music included in the soundtrack of
the Clips. Licensee’s use of the Clips or Stills will not affect Licensor’s
continued and separate copyright ownership of the Clips or Stills or the
production from which the Clips or Stills were taken, or Licensor’s continued
ownership of the trademarks and any other intellectual property rights
associated with any characters or other elements appearing or embodied in the
Clips or Stills or such production. Licensee will hold any copyrights in trust
for Licensor insofar as the Clips or Stills are concerned (and, upon Licensor’s
request, the Licensed Products and/or related packaging or advertising
materials will bear a specific copyright notice for the Clips or Stills in a
form prescribed by Licensor and will contain appropriate credit to Licensor as
required by Licensor, e.g., “Clips from the Motion Picture used courtesy of
Warner Bros. Entertainment Inc.”). Promptly upon completion of the approved
use, Licensee will, at its own expense, return to Licensor all Clip and/or
Still related materials delivered to Licensee by Licensor, including without
limitation, preprint material, positive prints and any video copies of Clips.

 

 

(m)                               Licensor’s approval of Licensed Products
and/or Licensed Premiums (including, without limitation, the Licensed Products
and/or Licensed Premiums themselves as well as promotional, display and
advertising materials) shall in no way constitute or be construed as an
approval by Licensor of Licensee’s use of any trademark, copyright and/or other
proprietary materials not owned by Licensor.

 

10.                               DISTRIBUTION; SUBLICENSE
MANUFACTURE:

 

(a)                                  Within the Channels of Distribution set forth
in Paragraph 1(a) hereof, Licensee shall sell the Licensed Products/Licensed
Premiums to wholesalers, distributors or retailers for sale or resale and distribution
directly to the public. If Licensee sells or distributes the Licensed
Products/Licensed Premiums at a special price, directly or indirectly, to
itself, including without limitation, any subsidiary of Licensee or to any
other person, firm, or corporation affiliated with Licensee (including any
affiliated distributors) or its officers, directors or major stockholders, for
ultimate sale to unrelated third parties, Licensee shall pay royalties with
respect to such sales or distribution, based upon the price generally charged
the trade by Licensee.

 

(b)                                 Licensee shall not be entitled to sublicense
any of its rights under this Agreement. In the event Licensee is not the
manufacturer of the Licensed Products and/or Licensed Premiums, Licensee shall,
subject to the prior written approval of Licensor, which approval shall not be
unreasonably withheld, be entitled to utilize a third party manufacturer in
connection with the manufacture and production of the Licensed Products and/or
Licensed Premiums, provided that such manufacturer shall execute a letter in
the form of Exhibit 3 attached hereto and by this reference made a part hereof
In such event, Licensee shall remain primarily obligated under a11 of the
provisions of this Agreement and any default of this Agreement by such
manufacturer shall be deemed a default by Licensee hereunder. In no event shall
any such third party manufacturer agreement include the right to grant any
rights to subcontractors.

 

11.                                 GOODWILL: Licensee recognizes the great value of the
publicity and goodwill associated with the Licensed Property and acknowledges:
(i) such goodwill is exclusively that of Licensor; and (ii) that the Licensed
Property has acquired a secondary meaning as Licensor’s trademarks and/or
identifications in the mind of the purchasing public. Licensee further
recognizes and acknowledges that a breach by Licensee of any of its covenants,
agreements or undertakings hereunder will cause Licensor irreparable damage,
which cannot be readily remedied in damages in an action at law, and may, in
addition thereto, constitute an infringement of Licensor’s copyrights,
trademarks and/other proprietary rights in, and to the Licensed Property,
thereby entitling Licensor to equitable remedies, and costs.

 

12.                                 LICENSOR’S WARRANTIES AND
REPRESENTATIONS: Licensor
represents and warrants to Licensee that:

 

(a)                                  It has, and will have throughout the Term of
this Agreement, the right to license the Licensed Property to Licensee in
accordance with the terms and provisions of this Agreement; and

 

(b)                                 The making of this Agreement by Licensor, and
use by Licensor of the Licensed Property pursuant to this Agreement does not
violate any agreements, rights or obligations of any person, firm or
corporation.

 

13.                               LICENSEE’S WARRANTIES AND
REPRESENTATIONS: Licensee
represents and warrants to Licensor that, during the Term and thereafter:

 

(a)                                  It will not attack the title of Licensor (or
third parties that have granted rights to Licensor) in and to the Licensed
Property or any copyright or trademarks pertaining thereto, nor will it attack
the validity of the license granted hereunder;

 

(b)                                 It will not harm, misuse or bring into
disrepute the Licensed Property;

 

(c)                                  It will conduct the Licensed Promotion as
well as manufacture, promote and distribute the Licensed Products and/or
Licensed Premiums in accordance with the terms of this Agreement, and in
compliance with all applicable government regulations and industry standards;

 

 

(d)                                 It will not create any expenses chargeable to
Licensor without the prior written approval of Licensor in each and every
instance. It will not cause or allow any liens or encumbrances to be placed
against, or grant any security interest (except to U.S. Bank National
Association, a National banking association) in, the Licensed Property, and/or
it will not intentionally cause or allow any liens or encumbrances to be placed
against, or grant any security interest (except to U.S. Bank National
Association, a National banking association) in Licensee’s inventory, contract
rights and/or accounts receivables, and/or proceeds thereof, with respect to
the Licensed Products without Licensor’s prior written consent;

 

(e)                                  It will use reasonable commercial efforts to
protect its right to manufacture, promote and distribute the Licensed Products
and/or Licensed Premiums hereunder;

 

(f)                                    It will at all times comply with all
government laws and regulations, including but not limited to product safety,
food, health, drug, cosmetic, sanitary or other similar laws relating or
pertaining to the conduct of the Licensed Promotion as well as the manufacture,
distribution, advertising or use of the Licensed Products and/or Licensed
Premiums, and shall maintain its appropriate customary high quality standards
during the Term hereof. It shall comply with any regulatory agencies which
shall have jurisdiction over the Licensed Promotion or Licensed Products and/or
Licensed Premiums and shall procure and maintain in force any and all
permissions, certifications and/or other authorizations from governmental and/or
other official authorities that may be required in response thereto. Each
Licensed Product and/or Licensed Premium and component thereof distributed
hereunder shall comply with all applicable laws, and regulations. Licensee
shall follow reasonable and proper procedures for testing that all Licensed
Products and/or Licensed Premiums comply with such laws, regulations and
standards. Licensee shall permit Licensor or its designees to inspect testing
records and procedures with respect to the Licensed Products and/or Licensed
Premiums for compliance. Licensed Products and/or Licensed Premiums that do not
comply with all applicable laws, regulations and standards shall automatically
be deemed unapproved and immediately taken off the market;

 

(g)                                 It shall, upon Licensor’s request, provide
credit information to Licensor including, but not limited to, fiscal year-end
financial statements (profit-and-loss statement and balance sheet) and
operating statements;

 

(h)                                 It will provide Licensor with the date(s) of
first use of the Licensed Products and/or Licensed Premiums in interstate and
intrastate commerce, where appropriate;

 

(i)                                     It will, pursuant to Licensor’s instructions,
duly take any and all necessary steps to secure execution of all necessary
documentation for the recordation of itself as user of the Licensed Property in
any jurisdiction where this is required or where Licensor reasonably requests
that such recordation shall be effected. Licensee further agrees that it will
at its own expense cooperate with Licensor in cancellation of any such
recordation at the expiration of this Agreement or upon termination of
Licensee’s right to use the Licensed Property. Licensee hereby appoints
Licensor its Attorney-in-Fact for such purpose;

 

(j)                                     It will not deliver or sell Licensed Products
and/or Licensed Premiums outside the Territory or knowingly deliver or sell
Licensed Products and/or Licensed Premiums to a third party for delivery
outside the Territory;

 

(k)                                  It will not use any labor that violates any
local labor laws, including all wage and hour laws, laws against discrimination
and that it will not use prison, slave or child labor in connection with the
manufacture of the Licensed Products and/or Licensed Premiums;

 

(l)                                     It shall not send, share with or otherwise disclose
any Artwork to any third party, including licensees of Licensor, but with the
exception of approved third party manufacturers hereunder, without the prior
written consent of Licensor;

 

(m)                               It shall at all times comply with all
commercially reasonable manufacturing, sales, distribution, retail and
marketing policies and strategies promulgated in writing by Licensor from
time-to-time, and provided the same shall not materially increase the costs of
manufacturing, sales, distribution, retail and marketing the Licensed Products;
and

 

 

(n)                                 If requested by Licensor to do so, it will
use reasonable efforts to utilize specific design elements of the Licensed
Property provided to Licensee by Licensor on any promotional or advertising
materials and/or hangtags, labels or other materials with respect to the
Licensed Products and/or Licensed Premiums.

 

14.                               TERMINATION BY LICENSOR:

 

(a)                                  Licensor shall have the right to terminate
this Agreement without prejudice to any rights which it may have, whether
pursuant to the provisions of this Agreement, or otherwise in law, or in
equity, or otherwise, upon the occurrence of any one or more of the following
events (herein called “defaults”):

 

(i)                                     Licensee materially defaults in the
performance of any of its obligations provided for in this Agreement; or

 

(ii)                                  Licensee shall have failed to deliver to
Licensor or to maintain in full force and effect the insurance referred to in
Paragraph 7(c) hereof; or

 

(iii)                               Licensee shall fail to make any payments due
hereunder on the date due; or

 

(iv)                              Licensee shall fail to deliver any of the
statements required herein or to give access to the premises and/or 1icense
records pursuant to the provisions hereof to Licensor’s authorized
representatives for the purposes permitted hereunder; or

 

(v)                                 Licensee shall fail to comply in all material
respects with any laws, or regulations as provided in Paragraph 13(f) or any
governmental agency or other body, office or official vested with appropriate
authority finds that the Licensed Products and/or Licensed Premiums are harmful
or defective in any way, manner or form, or are being manufactured, sold or
distributed in contravention of applicable laws, regulations or standards, or
in a manner likely to cause harm; or

 

(vi)                              Licensee shall be unable to pay its debts
when due, or shall make any assignment for the benefit of creditors, or shall
file any petition under the bankruptcy or insolvency laws of any jurisdiction,
county or place, or shall have or suffer a receiver or trustee to be appointed
for its business or property, or be adjudicated a bankrupt or an insolvent; or

 

(vii)                           Licensee does not commence in good faith to
execute the Licensed Promotion (i.e. manufacture, distribute and sell the
Licensed Products and/or Licensed Premiums) on or before the Marketing Date or
thereafter fails to diligently and continuously execute the Licensed Promotion;
or

 

(viii)                        Licensee shall execute the Licensed Promotion
and/or manufacture, sell or distribute (whichever first occurs) any of the
Licensed Products and/or Licensed Premiums without the prior written approval
of Licensor as provided in Paragraph 9 hereof; or

 

(ix)                                Licensee undergoes a change of control as
defined in Attachment A, attached hereto and incorporated herein by reference,
provided that Licensor must give written notice of termination, if at all,
within thirty (30) days after written notice of the change in control is given
to Licensor by Licensee; or

 

(x)                                   Licensee uses Artwork which has not been
approved by Licensor in compliance with the provisions of Paragraph 8(h), (i)
or (j) hereof; or

 

(xi)                                A manufacturer approved pursuant to Paragraph
10(b) hereof shall sell Licensed Products and/or Licensed Premiums to parties
other than Licensee or engage in conduct, which conduct if engaged in by Licensee
would entitle Licensor to terminate this Agreement; or

 

(xii)                             Licensee delivers or sells Licensed Products
and/or Licensed Premiums outside the Territory or knowingly sells Licensed
Products and/or Licensed Premiums(s) to a

 

 

third party who Licensee
knows intends to, or who Licensee reasonably should suspect intends to, sell or
deliver such Licensed Products and/or Licensed Premiums outside the Territory;
or

 

	
  (xiii)

  	
  Licensee uses any labor
  that violates any local labor laws and/or it uses prison, slave or child
  labor in connection with the manufacture of the Licensed Products and/or
  Licensed Premiums; or

  
	
   

  	
   

  
	
  (xiv)

  	
  Licensee has made a
  material misrepresentation or has omitted to state a material fact necessary
  to make the statements not misleading as they pertain to this Agreement; or

  
	
   

  	
   

  
	
  (xv)

  	
  Licensee shall materially
  breach any other agreement in effect between Licensee on the one hand and
  Licensor on the other.

  

 

(b)                                 In the event any of these defaults occur,
Licensor shall give notice of termination in writing to Licensee in the manner
prescribed in Paragraph 16 below. Licensee shall have fifteen (15) days from
the date of giving notice in which to correct any of these defaults (except
defaults based on non-payment of monies to Licensor which must be cured within
ten (10) days and defaults based on subdivisions (vii), (viii), (x) and (xii)
above which are not curable), and failing such, this Agreement shall thereupon
immediately terminate, and any and all payments then or later due from Licensee
hereunder (including Guaranteed Consideration) shall then be immediately due
and payable in full and no portion of those prior payments shall be repayable
to Licensee.

 

(c)                                  Licensee shall have the right to terminate
this Agreement without prejudice to any other rights which it may have, whether
pursuant to the provisions of this Agreement, or otherwise at law or in equity,
if Licensor defaults in the performance of any of its obligations provided for
in this Agreement or in the event of a material breach by Licensor of its
warranties or representations set forth in this Agreement. In the event any
such default occurs, Licensee shall give notice of termination in writing to
Licensor by certified mail. Licensor shall have thirty (30) days from the date
of giving notice in which to correct any default or, if the correction would
reasonably take more than thirty (30) days, such additional time as is needed
so long as Licensor diligently pursues such correction, and failing such
correction, this Agreement shall thereupon immediately terminate, and any and
all Guaranteed Consideration later due from Licensee hereunder shall no longer
be due; provided, however, that no portion of prior payments hereunder shall be
repayable to Licensee.

 

15.                               FINAL STATEMENT UPON
EXPIRATION OR TERMINATION: Licensee
shall deliver, as soon as practicable, but not later than forty-five (45) days
following expiration or termination of this Agreement, a statement indicating
the number and description of Licensed Products and/or Licensed Premiums on
hand together with a description of all advertising and promotional materials
relating thereto. Following expiration or termination of this Agreement,
Licensee shall immediately cease any and all manufacturing of the Licensed
Products and/or Licensed Premium. However, if Licensee has complied with all
the terms of this Agreement, including, but not limited to, complete and timely
payment of the Guaranteed Consideration and Royalty Payments, then Licensee may
continue to distribute its remaining inventory, on a non-exclusive basis only,
for a period not to exceed ninety (90) days following such expiration (the
“Sell-Off Period”), subject to payment of applicable royalties thereto. In no
event, however, may Licensee distribute during the Sell-Off Period an amount of
Licensed Products and/or Licensed Premiums that exceeds the average amount of
Licensed Products and/or Licensed Premiums distributed during any consecutive
ninety (90) day period during the Term. In the event this Agreement is
terminated by Licensor for any reason under this Agreement, Licensee shall be
deemed to have forfeited its Sell-Off Period. If Licensee has any remaining
inventory of the Licensed Products and/or Licensed Premiums following the
Sell-Off Period, Licensee shall, at Licensor’s option, make available such
inventory to Licensor for purchase at or below cost, deliver up to Licensor for
destruction said remaining inventory or furnish to Licensor an affidavit
attesting to the destruction of said remaining inventory. Licensee shall, at
Licensor’s option, deliver to Licensor at no charge all Artwork (except tooling
and tooling aids) related to the Licensed Products, deliver up to Licensor for
destruction Artwork or furnish to Licensor an affidavit attesting to the
destruction of said Artwork. Licensee shall furnish to Licensor an affidavit
attesting to the destruction or removal of the Licensed Property from all
tooling and tooling aids. Licensor shall have the right to conduct a physical
inventory in order to ascertain or verify such inventory and/or statement. In
the event that Licensee refuses to permit Licensor to conduct such physical
inventory,

 

 

Licensee shall forfeit its
right to the Sell-Off Period hereunder or any other rights to dispose of such
inventory. In addition to the forfeiture, Licensor shall have recourse to all
other legal remedies available to it.

 

16.                               NOTICES: Except as otherwise specifically provided
herein, all notices which either party hereto are required or may desire to
give to the other shall be given by addressing the same to the other at the
address set forth above, or at such other address as may be designated in
writing by any such party in a notice to the other given in the manner
prescribed in this paragraph.  All such
notices shall be sufficiently given when the same shall be deposited so
addressed, postage prepaid, in the United States mail and/or when the same
shall have been delivered, so addressed, by facsimile or by overnight delivery
service and the date of transmission by facsimile, receipt of overnight
delivery service or two business days after mailing shall for the purposes of
this Agreement be deemed the date of the giving of such notice.

 

17.                               NO PARTNERSHIP, ETC.: This Agreement does not constitute and shall
not be construed as constitution of a partnership or joint venture between
Licensor and Licensee. Neither party shall have any right to obligate or bind
the other party in any manner whatsoever, and nothing herein contained shall
give, or is intended to give, any rights of any kind to any third persons.

 

18.                               NO
SUBLICENSING/NON-ASSIGNABILITY: This Agreement shall bind and inure to the benefit of Licensor, its
successors and assigns. This Agreement is personal to Licensee. Licensee shall
not sublicense, franchise or delegate to third parties its rights hereunder
(except as set forth in Paragraph 10(b) hereof) without the prior written
consent of Licensor. Neither this Agreement nor any of the rights of Licensee
hereunder shall be sold, transferred or assigned by Licensee and no rights
hereunder shall devolve by operation of law or otherwise upon any receiver,
liquidator, trustee or other party. Notwithstanding the foregoing, Licensor
shall not seek injunctive relief to prevent Licensee from consummating a
“change of control” as defined in Attachment A, and any termination of this
Agreement as a result of a “change of control” shall be in accordance with
Paragraph l4(a)(ix) above.

 

19.                               BANKRUPTCY RELATED
PROVISIONS:

 

(a)                                  The parties hereby agree and intend that this
Agreement is an executory contract governed by Section 365 of the U.S.
Bankruptcy Code (“Bankruptcy Code”).

 

(b)                                 In the event of Licensee’s bankruptcy, the
parties intend that any royalties payable under this Agreement during the
bankruptcy period be deemed administrative claims under the Bankruptcy Code
because the parties recognize and agree that the bankruptcy estate’s enjoyment
of this Agreement will (i) provide a material benefit to the bankruptcy estate
during its reorganization and (ii) deny Licensor the benefit of the exploitation
of the rights through alternate means during the bankruptcy reorganization.

 

(c)                                  The parties acknowledge and agree that any
delay in the decision of trustee of the bankruptcy estate to assume or reject
the Agreement (the “Decision Period”) materially harms Licensor by interfering
with Licensor’s ability to alternatively exploit the rights granted under this
Agreement during a Decision Period of uncertain duration. The parties recognize
that arranging appropriate alternative exploitation would be a time consuming
and expensive process and that it is unreasonable for Licensor to endure a
Decision Period of extended uncertainty. Therefore, the parties agree that the
Decision Period shall not exceed sixty (60) days.

 

(d)                                 Licensor, in its interest to safeguard its
valuable interests (including, without limitation, its intellectual property
rights in the Licensed Property), has relied on the particular skill and
knowledge base of Licensee. Therefore, the parties acknowledge and agree that
in a bankruptcy context this Agreement is a license of the type described by
Section 365(c)(1) of the Bankruptcy Code and may not be assigned without the
prior written consent of the Licensor.

 

20.                               CONSTRUCTION AND DISPUTE
RESOLUTION: This Agreement
shall be construed in accordance with the laws of the State of California of
the United States of America without regard to its conflicts of laws
provisions. Any and all controversies, claims or disputes arising out of or
related to this Agreement or the interpretation, performance or breach thereof,
including, but not

 

 

limited to, alleged
violations of state or federal statutory or common law rights or duties, and
the determination of the scope or applicability of this agreement to arbitrate
(“Dispute”), except as set forth in subparagraphs (b) and (c), below, shall be
resolved according to the procedures set forth in subparagraph (a), below,
which shall constitute the sole dispute resolution mechanism hereunder:

 

(a)                                  Arbitration:  In the event that the parties are unable to
resolve any Dispute informally, then such Dispute shall be submitted to final
and binding arbitration. The arbitration shall be initiated and conducted
according to either the JAMS Streamlined (for claims under $250,000) or the
JAMS Comprehensive (for claims over $250,000) Arbitration Rules and Procedures,
except as modified herein, including the Optional Appeal Procedure, at the Los
Angeles office of JAMS, or its successor (“JAMS”) in effect at the time the
request for arbitration is made (the “Arbitration Rules”). The arbitration
shall be conducted in Los Angeles County before a single neutral arbitrator
appointed in accordance with the Arbitration Rules. The arbitrator shall follow
California law and the Federal Rules of Evidence in adjudicating the Dispute. The
parties waive the right to seek punitive damages and the arbitrator shall have
no authority to award such damages. The arbitrator will provide a detailed
written statement of decision, which will be part of the arbitration award and
admissible in any judicial proceeding to confirm, correct or vacate the award.
Unless the parties agree otherwise, the neutral arbitrator and the members of
any appeal panel shall be former or retired judges or justices of any
California state or federal court with experience in matters involving the
entertainment industry. If either party refuses to perform any or all of its
obligations under the final arbitration award (following appeal, if applicable)
within thirty (30) days of such award being rendered, then the other party may
enforce the final award in any court of competent jurisdiction in Los Angeles
County. The party seeking enforcement shall be entitled to an award of all
costs, fees and expenses, including attorneys’ fees, incurred in enforcing the
award, to be paid by the party against whom enforcement is ordered.

 

(b)                                  Injunctive Relief:  Notwithstanding the foregoing, either party
shall be entitled to seek injunctive relief (unless otherwise precluded by any
other provision of this Agreement) in the state and federal courts of Los
Angeles County.

 

(c)                                  Other Matters:  Any Dispute or portion thereof, or any claim
for a particular form of relief (not otherwise precluded by any other provision
of this Agreement), that may not be arbitrated pursuant to applicable state or
federal law may be heard only in a court of competent jurisdiction in Los
Angeles County.

 

21.                               WAIVER, MODIFICATION ETC.: No waiver, modification or cancellation of
any term or condition of this Agreement shall be effective unless executed in
writing by the party charged therewith. No written waiver shall excuse the
performance of any acts other than those specifically referred to therein. The
fact that the Licensor has not previously insisted upon Licensee expressly
complying with any provision of this Agreement shall not be deemed to be a
waiver of Licensor’s future right to require compliance in respect thereof and
Licensee specifically acknowledges and agrees that the prior forbearance in
respect of any act, term or condition shall not prevent Licensor from
subsequently requiring full and complete compliance thereafter. If any term or
provision of this Agreement is
held to be invalid or unenforceable by any court of competent jurisdiction or
any other authority vested with jurisdiction, such holding shall not affect the
validity or enforceability of any other term or provision hereto and this
Agreement shall be interpreted and construed as if such term or provision, to the extent the same shall have
been held to be invalid, illegal or unenforceable, had never been contained
herein. Headings of paragraphs herein are for convenience only and are without
substantive significance.

 

22.                               CONFIDENTIALITY: The Artwork and the materials and information
supplied to one party by the other hereunder constitute, relate to, contain and
form a part of confidential and proprietary information of the disclosing
party, including, but not limited to, Style Guides, design elements, character
profiles, unpublished copyrighted material, release dates, marketing and
promotional strategies, information about new products, properties and
characters, the terms and conditions of this Agreement, and other information
which is proprietary in nature or is a trade secret (collectively, the
“Proprietary Information”). The parties acknowledge and agree that the
Proprietary Information is highly confidential and that disclosure of the
Proprietary Information will result in serious harm to the owner thereof. Among
other damage, unauthorized disclosure of the Proprietary Information will. (i)
damage carefully planned marketing strategies, (ii) reduce interest in the
Licensed Property, (iii)

 

 

make unique or novel
elements of the Licensed Property susceptible to imitation or copying by
competitors, infringers or third parties prior to Licensor’s release of the
information or materials, (iv) damage proprietary protection in undisclosed or
unpublished information or materials, and (v) provide unauthorized third
parties with materials capable of being used to create counterfeit and
unauthorized merchandise, audio-visual products or other products, all of which
will seriously damage Licensor’s rights and business. Except as expressly
approved in writing by the owner of the Proprietary Information, the other
party shall not reproduce or use the Proprietary Information of the other party
and shall not discuss, distribute, disseminate or otherwise disclose the
Proprietary Information or the substance or contents thereof, in whole or in
part, in its original form or in any other form, with or to any other person or
entity other than employees of the parties and, in the case of Licensee, third
parties who have executed a Contributor’s Agreement (as provided in Paragraph
8(b)) or third party manufacturer’s agreement (as provided in Paragraph 10(b))
and been approved by Licensor as provided hereunder, and such employees and
third parties shall be given access to the Proprietary Information only on a
“need-to-know” basis. The foregoing restrictions shall not apply to any
information which, (i) at the time of disclosure, is in the public domain or
which, after disclosure, becomes part of the public domain by publication or
otherwise through no action or fault of the receiving party; (ii) information
which the receiving party can show was in its possession at the time of
disclosure and was not acquired, directly or indirectly, from the other party;
(iii) information which was received from a third party having the legal right
to transmit the same; (iv) information which is independently developed,
conceived, or created without use of or reference to any Proprietary
Information of the other party; or (v) information which is disclosed pursuant
to valid court order, other legal process, or disclosure laws. Notwithstanding
anything herein to the contrary, either party to this Agreement and its
representatives may disclose to any and all persons, without limitation of any
kind, the tax treatment and tax structure of the transactions contemplated by
this Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure.

 

23.                               ENTIRE AGREEMENT: This Agreement constitutes the entire
Agreement between the parties concerning the subject matter hereof and cancels
and supersedes any prior understandings and agreements between the parties
hereto with respect thereto. There are no representations, warranties, terms,
conditions, undertakings or collateral agreements, expressed, implied or
statutory, between the parties other than as expressly set forth in this
Agreement.

 

24.                                 ACCEPTANCE BY LICENSOR: This instrument, when signed by Licensee
shall be deemed an application for license and not a binding agreement unless
and until accepted by Licensor by signature of a duly authorized officer and
the delivery of such a signed copy to Licensee. The receipt and/or deposit by
Licensor of any check or other consideration given by Licensee and/or delivery
of any material by Licensor to Licensee shall not be deemed an acceptance by
Licensor of this application. The foregoing shall apply to any documents
relating to renewals or modifications hereof.

 

This Agreement shall be of
no force or effect unless and until it is signed by all of the parties listed
below:

 

 

	
  AGREED and ACCEPTED:

  	
  AGREED and ACCEPTED:

  
	
   

  	
   

  
	
  WARNER
  BROS. CONSUMER PRODUCTS INC.

  	
  POORE
  BROTHERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Gary R. Simon, Senior Vice
  President

  Business & Legal Affairs

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
								

 

 

EXHIBIT 1

#14559-SCOO

 

CHANNELS OF DISTRIBUTION

DEFINITIONS

 

LICENSEE
MAY SELL THE LICENSED PRODUCTS ONLY THROUGH THE CHANNELS OF DISTRIBUTION AS
SPECIFIED ABOVE IN PARAGRAPH 1(a) OF THIS LICENSE AGREEMENT AND AS SUCH
CHANNELS ARE DEFINED IN THIS EXHIBIT 1. ALL OTHER CHANNELS OF DISTRIBUTION
DEFINED IN THIS EXHIBIT 1, WHICH ARE NOT SPECIFIED IN PARAGRAPH 1(a) ABOVE, ARE
SPECIFICALLY EXCLUDED FROM THIS LICENSE AGREEMENT.

 

1.                                       “Airport Gift and Other Airport Stores” shall mean gift and other stores located
within airports, excluding Duty-Free Store Operators (as defined below).
Examples of Airport Gift and Other Stores include, without limitation, Paradies and W.H. Smith.

 

2.                                       “Amusement Game Redemption” shall mean distribution of products as
prizes awarded in amusement games.

 

3.                                       “Amusement Park Gift Stores” shall mean gift stores located within
amusement parks, such as Six Flags, Paramount Parks, Universal Theme Parks,
Dollywood, Walt Disney World and the Disneyland Resort.

 

4.                                       “Art & Craft Stores” shall mean stores that offer for sale
primarily art and craft supplies. Examples of Art & Craft Stores include,
without limitation, Fast Frame, Michaels and
Michaels MJ Designs.

 

5.                                       “Athletic Apparel & Footwear Stores” shall means stores that offer for sale
primarily athletic apparel and footwear. Examples of Athletic Apparel &
Footwear Stores include, without limitation, Footlocker,
Athlete’s Foot and Champs.

 

6.                                       “Automotive/Carwash Stores” shall mean (a) stores that offer for sale
primarily automotive supplies, or (b) stores located at carwash or gasoline
station premises.

 

7.                                       “Baby Specialty Stores” shall mean stores that offer for sale
primarily infant apparel, furniture, accessories and other products designed
specifically for babies. Examples of Baby Specialty Stores include, without
limitation, Babies R Us.

 

8.                                       “Beauty Supply Stores” shall mean stores that offer for sale
primarily cosmetics, haircare products, beauty accessories and personal
grooming related items.

 

9.                                       “Business to Business” shall mean when a licensee sells product to
another business and the items sold are used for corporate gifts, prizes, etc.

 

10.                                 “Camera/Photo Specialty Stores” shall mean stores that offer for sale
primarily camera equipment and supplies.

 

11.                                 “Candy/Confectionery Specialty Stores” shall mean stores that offer for sale
primarily candy and confectionery products. Examples of Candy/Confectionery
Specialty Stores include, without limitation, FAO
Schweetz and The Sweet Factory.

 

12.                                 “Catalog Showrooms” shall mean stores that offer a broad
assortment of products for sale primarily through a catalog along with display
of samples of products in a showroom. Examples of Catalog Showrooms include,
without limitation, Service Merchandise.

 

13.                                 “Chain Book Stores” shall mean chain stores (containing twenty
(20) or more individual stores) that offer for sale primarily books. Examples of
Chain Book Stores include, without limitation, B. Dalton, SuperCrown, Walden Books and Brentano’s.

 

 

14.                                 “Chain Comic Book Stores” shall mean chain stores (containing twenty
(20) or more individual stores) that offer for sale primarily comic books.

 

15.                                 “Chain Drug Stores” shall mean chain stores (containing twenty
(20) or more individual stores) that offer for sale primarily prescription and
over-the-counter drugs, personal care products and household products. Examples
of Chain Drug Stores include, without limitation, Walgreens, Rite-Aid, Thrifty/Payless, C.V.S./Revco, Thrift Drug, Phar
Mor, Longs Drugs, Jean Coutu, London Drugs and Shopper’s Drug Mart.

 

16.                                 “Chain Jewelry Stores” shall mean chain stores (containing twenty
(20) or more individual stores) that offer for sale primarily jewelry. The
“Chain Jewelry Stores” channel shall specifically exclude Guild Jewelers (as
defined below). Examples of Chain Jewelry Stores include, without limitation, Sterling, Barry’s, Lipman’s and Hellsburg.

 

17.                                 “Chain Toy Stores” shall mean chain stores (containing twenty
(20) or more individual stores) that offer for sale primarily toys. In order to
be considered a “Toy Store” hereunder, the total number of toy-type SKU’s
(stock-keeping units) must represent eighty percent (80%) or more of such
store’s total SKU’s. The “Chain Toy Stores” channel shall specifically exclude
Toy Specialty/Better Toy Chain Stores (as defined below). Examples of Chain Toy
Stores include, without limitation, Toys R
Us.

 

18.                                 “Coffee Specialty Stores” shall mean stores that offer for sale
primarily specialty coffee and related products, such as coffee mugs. Examples
of Coffee Specialty Stores include, without limitation, Starbucks, Buzz Coffee, Gloria Jeans and The Coffee Beanery.

 

19.                                 “College/University Stores” shall mean stores located on the campuses of
colleges or universities,

 

20.                                 “Commercial Facilities” shall mean offering products for sale to
architectural firms or interior designers working with commercial facilities,
such as hotels and daycare facilities.

 

21.                                 “Computer Specialty Stores” shall mean stores that offer for sale
primarily computer equipment and supplies. Examples of Computer Specialty
Stores include, without limitation, Comp USA.

 

22.                                 “Convenience Stores” shall mean stores that offer for sale
primarily packaged and “quick service” food products, are generally open 24
hours a day, and are designed to offer greater convenience than larger
Supermarket/Grocery Stores. Examples of Convenience Stores include, without
limitation, 7-11, AMIPM, Dairy Mart and
Circle K.

 

23.                                 “Dental/Medical Profession” shall mean institutions or offices that
provide dental or medical services, such as hospitals, laboratories or doctors’
offices.

 

24.                                 “Direct Mail Catalogs” shall mean catalogs that offer products for
sale and are mailed directly to consumers’ homes. The “Direct Mail Catalogs”
channel shall specifically exclude catalogs for fundraising purposes which
shall be included in the “Fundraising” channel defined below. Examples of
Direct Mail Catalogs include, without limitation, Spiegel, Hearth & Home,
Domestications, Tapestry, Company Store, Hammacher Schlemmer, Fingerhut, Amway,
Lillian Vernon, Regal, Avon and Sears Catalog.

 

If Licensor grants to
Licensee the right to. distribute Licensed Products through any
Direct Mail Catalogs: (a) each such catalog shall be specified in the Channels
of Distribution set forth in Paragraph 1(a) of the License Agreement or
otherwise expressly approved in writing by Licensor on a case-by-case basis,
and (b) each such catalog depicting or referring to the Licensed Products or
the Licensed Property must be submitted to Licensor for prior written approval
in accordance with Licensor’s Brand Assurance policies and procedures.

 

25.                                 “Direct Response” shall mean print advertisement, free
standing inserts (“FSI’s”) and other promotional material (except catalogs)
that are mailed directly to consumers’ homes for the purpose of soliciting
product sales directly from consumers. The “Direct Response” channel shall
specifically exclude direct mail catalogs which shall be included in the
“Direct Mail Catalog” channel defined above.

 

 

If Licensor grants to
Licensee the right to distribute Licensed Products through Direct Response,
each print advertisement, FSI and other promotional material depicting or
referring to the Licensed Products or the Licensed Property must be submitted
to Licensor for prior written approval in accordance with Licensor’s Brand
Assurance policies and procedures.

 

26.                                 “Door-to-Door Solicitation” shall mean offering products for sale
through personal visits by salespersons to consumers’ homes.

 

27.                                 “Duty-Free Operators” shall mean (a) stores usually located in
transit locations (i.e. airports, in-flight, train, ferry stations, cruise
lines and ports) which offer products for sale to international travelers free
of taxes and duties and (b) sales offered to diplomat shops, diplomat suppliers
and individual diplomats free of taxes and/or duties. If Licensor grants to
Licensee the right to distribute products through Duty-Free Operators, such
channels of distribution (like all other channels of distribution granted)
shall be limited to those stores located within the Territory.

 

28.                                 “Educational Institutions” shall mean offering products (generally
books) for sale to public or private schools or other educational institutions.
Examples of Educational Institutions include, without limitation, the Los
Angeles Unified School District.

 

29.                                 “Educational Specialty Stores” shall mean stores that offer for sale primarily
educational products. Examples of Educational Specialty Stores include, without
limitation, Imaginarium and Nature Company.

 

30.                                 “Electronics Stores” shall mean stores that offer for sale
primarily electronic products. Examples of Electronics Stores include, without
limitation, Circuit City, Fry’s and
Best Buy.

 

31.                                 “Family Restaurants” shall mean a food service establishment or
group of food service establishments that offer a sit down meal menu conducive
to all members of the family and generally offers table service to customers.
Examples of Family Restaurants include, without limitation, Denny’s and Friendly’s.

 

32.                                 “Fashion Accessory Stores” shall mean stores that offer for sale
primarily costume jewelry, hair accessories and other fashion accessories.
Examples of Fashion Accessory Stores include, without limitation, Claire’s Boutique, Afterthoughts, It’s About Time,
Piercing Pagoda, Ardene and Bentley’s.

 

33.                                 “Fashion Specialty Boutiques” shall mean stores that offer for sale
primarily fashion apparel product. Examples of Fashion Specialty Boutiques
include, without limitation, Fred Segal,
Urban Outfitters, American Rag, and Dr. J’s.

 

34.                                 “Florists” shall mean stores or companies that offer for sale primarily flowers.
Examples of Florists include, without limitation, Conroy’s, FTD and 1-800-Flowers.

 

35.                                 “Food Service” shall mean locations that provide food
service to consumers in cafeterias, hospital food services, school lunch
programs, and similar institutional food service locations.

 

36.                                 “Fundraising” shall mean offering products for sale
through catalogs, direct mail brochures, prize programs and in-school sales,
which are used by schools and charitable, religious or other organizations to
raise funds. Examples of Fundraising companies include, without limitation, Giftco, Springwater and Darlington Farms.

 

37.                                 “Furniture Stores” shall mean stores that offer for sale
primarily furniture. Examples of Furniture Stores include, without limitation, Wickes, Homemakers, Kiddles and Levitz.

 

38.                                 “Garden Specialty Stores” shall mean stores that offer for sale
primarily garden supplies and plants. Examples of Garden Specialty Stores
include, without limitation, Armstrong’s,
Callaway’s and Wolf Nurseries.

 

39.                                 “Gift Retailers” shall mean stores that ( a) offer products
for sale that are in somewhat related product categories and are known as “gifts” in the trade, which products generally are classified in the trade as “better” quality and are higher priced (as compared to
National and Regional

 

 

Discount/Mass Retailers’
products), (b) do not usually discount merchandise or sell it at greatly
reduced prices, (c) usually focus more on aesthetics in merchandise displays
than on price, and (d) generally require individual store servicing by
suppliers in merchandise set-up, display, SKU maintenance and reordering.
Suppliers to Gift Retailers typically advertise in trade publications, such as “Gift
& Stationery Business”,  “Giftware News” and “Gifts &
Decorative Accessories”.

 

Suppliers to Gift Retailers
usually include companies such as Enesco, Midwest of Cannon Falls, New Creative
Enterprises, Dale Tiffany, Pacific Rim, Ande Rooney, Waterford, GiftCraft,
Carson Industries, Possible Dreams, Lenox, Department 56, Lefton, Swarovski and
Flambro. The “Gift Retailers” channel shall specifically exclude Novelty Gift
Stores (as defined below), Duty-Free Store Operators (as defined above), and
Airport Gift and Other Airport Stores (as defined above).

 

40.                                 “Gourmet Food Specialty Stores” shall mean stores that offer for sale
primarily gourmet and specialty food products. Examples of Gourmet Food
Specialty Stores include, without limitation, Bristol
Farms, Whole Foods and Gelsons.

 

41.                                 “Greeting Card Stores” shall mean stores that offer for sale
primarily greeting cards. Examples of Greeting Card Stores include, without
limitation, Hallmark.

 

42.                                 “Guild Jewelers” shall mean stores that offer for sale
primarily fine jewelry which is generally classified in the trade as “best” or
“highest” quality, Examples of Guild Jewelers include, without limitation, Mayers, Rogers and Bailey Banks & Biddle.

 

43.                                 “Hobby & Model Stores” shall mean stores that offer for sale
primarily hobby and model supplies.

 

44.                                 “Home Improvement Stores” shall mean stores that offer for sale
primarily hardware and home improvement supplies. Examples of Home Improvement
Stores include, without limitation, Home
Depot, OSH, Home Base, Lowes and Home Hardware.

 

45.                                 “Home Specialty Stores” shall mean stores that offer for sale
primarily bedding, towels and other bathroom products, kitchen merchandise and
housewares. Examples of Home Specialty Stores include, without limitation, Strouds, Linens ‘N’ Things, 3D Bed & Bath, Bed/Bath/Beyond and Luxury Linens.

 

46.                                 “Ice Cream Shops” shall mean stores that offer for sale primarily
ice cream, ice cream cakes and similar frozen dessert products. Examples of Ice
Cream Shops include, without limitation, Baskin-Robbins,
Dairy Queen and Ben and Jerry’s Shops.

 

47.                                 “In-Store Bakeries” shall mean the in-store bakery departments
within Supermarket/Grocery Stores, National and Regional Discount/Mass
Retailers and Warehouse Clubs. Such departments offer for sale primarily
freshly baked breads, cakes, cookies and similar bakery items.

 

48.                                 “Internet” shall mean offering products for sale through the electronic network
known as the Internet.

 

49.                                 “Mall Clothing Specialty Stores” shall mean stores that offer for sale
primarily clothing and are located within a mall. Examples of Mall Clothing
Specialty Stores include, without limitation, Millers
Outpost, Wet Seal, Au Coin Des Petites, La Senza, Suzie Shier and Reitmans.

 

50.                                 “Mid-Tier Department Stores” shall mean stores that offer products for
sale in a broad assortment of unrelated product categories, which products are
generally classified in the trade as “better” (but not “best”) quality
products. Examples of Mid-Tier Department Stores include, without limitation, JC Penney, Sears, Mervyn’s, SteinMart, Kohls, Fred
Meyer, The Bay, Clemont and Simon’s.

 

51.                                 “Military Exchange Services” shall mean military headquarters as well as
individual bases of armies and/or airforces of each country within the
Territory. Examples of Military Exchange Services include, without limitation,
U.S. Army and Airforce Exchange Service
(“AAFES”) and the Canadian Forces
Exchange Service (“CANEX”). If Licensor grants to Licensee the right
to distribute products through Military Exchange Services, such channel of
distribution shall be limited to the Military Exchange Services of the
countries within the Territory, but shall include all of such Military Exchange
Services’ stores located anywhere in the world.

 

 

52.                                 “Music/Video Stores” shall mean stores that offer for sale
primarily musical recordings, on compact discs, cassettes or other media,
and/or movie recordings on videos, laser disks or other media for home use by
consumers. Examples of Music/Video Stores include, without limitation, Blockbuster, Musicland, Tower Records, Virgin Records,
Wherehouse Records, Sam Goody’s and Suncoast.

 

53.                                 “National Discount/Mass Retailers” shall mean stores that (a) have nation-wide
distribution, (b) offer products for sale in a broad assortment of unrelated
product categories, which products generally are not classified in the trade as
“better/best” quality products, (c) are usually “self-service” with more of an
emphasis on price than aesthetics, and (d) generally do not require individual
store servicing by suppliers. Suppliers to National Discount/Mass Retailers
typically advertise in trade publications, such as “Discount Store News”
and “Discount Merchandiser”, and usually attend the IMRA (International
Mass Retailer Association) trade show. The “National Discount/Mass Retailers”
channel shall specifically exclude the in-store bakery departments of such
stores, which shall be included in the “In-Store Bakeries” channel defined
above. Examples of National Discount/Mass Retailers include, without
limitation, Walmart, K-Mart, Target, Zellers,
Biway and Canadian Tire.

 

54.                                 “Non-Chain Book Stores” shall mean stores or groups of stores
(containing fewer than twenty (20) individual stores) that offer for sale
primarily books.

 

55.                                 “Non-Chain Comic Book Stores” shall mean stores or groups of stores
(containing fewer than twenty (20) individual stores) that offer for sale
primarily comic books.

 

56.                                 “Non-Chain Drug Stores” shall mean stores or groups of stores
(containing fewer than twenty (20) individual stores) that offer for sale
primarily prescription and over-the-counter drugs, personal care products and
household products.

 

57.                                 “Non-Chain Jewelry Stores” shall mean stores or groups of stores
(containing fewer than twenty (20) individual stores) that offer for sale
primarily jewelry. The “Non-Chain Jewelry Stores” channel shall specifically
exclude Guild Jewelers (as defined above).

 

58.                                 “Non-Chain Toy Stores” shall mean stores or groups of stores
(containing fewer than twenty (20) individual stores) that offer for sale
primarily toys. In order to be considered a “Toy Store” hereunder, the total
number of toy-type SKU’s must represent eighty percent (80%) or more of such
store’s total SKU’s. Examples of Non-Chain Toy Stores include, without
limitation, Talbot’s Toyland and Tons of Toys, Inc.

 

59.                                 “Non-Mall Clothing Specialty Stores” shall mean stores that offer for sale
primarily clothing and are not located within a mall. Examples of Non-Mall
Clothing Specialty Stores include, without limitation, Kids Mart, Kids R Us, Clothestime and Fashion Bug.

 

60.                                 “Novelty Gift Stores” shall mean stores that offer for sale
primarily novelty gift items. The “Novelty Gift Stores” channel shall
specifically exclude Airport Gift and Other Airport Stores and Duty-Free
Operators (as such terms are defined above). Examples of Novelty Gift Stores
include, without limitation, Spencer’s and
It Stores.

 

61.                                 “Off-Price/Closeout Stores” shall mean stores that offer for sale
primarily discounted apparel and other merchandise. Examples of
Off-Price/Closeout Stores include, without limitation, Marshall’s, T.J. Maxx, Ross Dress For Less, Hit or
Miss, Tuesday Morning and Winners.

 

62.                                 “Office Specialty Stores” shall mean stores that offer for sale
primarily office supplies. Examples of Office Specialty Stores include, without
limitation, Office Depot, Staples and Office
Max.

 

63.                                 “Outlet Stores” shall mean stores that offer for sale
primarily discounted merchandise of a particular manufacturer or retailer.

 

64.                                 “Party Stores” shall mean stores that offer for sale
primarily party supplies. Examples of Party Stores include, without limitation,
Party City and Party World.

 

65.                                 “Pet Stores” shall mean stores that offer for sale
primarily pet supplies. Examples of Pet Stores include, without limitation,
PetCo and PetSmart.

 

 

66.                                 “Quick Service Restaurants” shall mean a food service establishment or
group of food service establishments that offer rapid meal menus to consumers
and generally do not offer table service to customers. Examples of Quick
Service Restaurants include, without limitation, Subway and Burger King.

 

67.                                 “Regional Discount/Mass Retailers” shall mean stores that (a) have regional
distribution, (b) generally offer products for sale in a broad assortment of
unrelated product categories, which products generally are not classified in
the trade as “better/best” quality products, (c) are usually “self-service”
with more of an emphasis on price than aesthetics, and (d) generally do not
require individual store servicing by suppliers. Suppliers to Regional
Discount/Mass Retailers typically advertise in trade publications, such as “Discount
Store News” and “Discount Merchandiser”, and usually attend the IMRA
(International Mass Retailer Association) trade show. The “Regional
Discount/Mass Retailers” channel shall specifically exclude the in-store bakery
departments of such stores, which shall be included in the “In-Store Bakeries”
channel defined above. Examples of Regional Discount/Mass Retailers include,
without limitation, Meijers, Caldor, Ames,
Bradlees, Hill’s, Rose’s, Venture, Shopko, Cotter, Fields, Giant Tiger, Harts,
Northwest and Saan Stores.

 

68.                                 “Retail Bakeries” shall mean stores that offer for sale
primarily freshly baked breads, cakes, cookies and similar bakery items. The
“Retail Bakeries” channel shall specifically exclude In-Store Bakeries (as
defined above).

 

69.                                 “School Book Clubs/Fairs” shall mean offering products for sale
through book catalogs distributed to teachers and students at public or private
schools (usually elementary or high school) or through book fairs conducted on
the premises of such schools. Examples of School Book Clubs/Fairs include,
without limitation, Troll Book Club and Scholastic Book Fair.

 

70.                                 “Souvenir Stores” shall mean stores that offer for sale
primarily souvenirs.

 

71.                                 “Sporting Good Stores” shall mean stores that offer for sale
primarily sporting goods, equipment, athletic apparel, and other merchandise
that reflects a sports theme. Examples of Sporting Good Stores include, without
limitation, Big 5 and Sports Chalet.

 

72.                                 “Sports Stadium Shops” shall mean concessionaire shops located
within stadiums or arenas where sporting events are held.

 

73.                                 “Stationery Stores” shall mean stores that offer for sale
primarily stationery. Examples of Stationery Stores include, without
limitation, Farr’s Stationaires.

 

74.                                 “Street Vendors” shall mean individual merchants who offer products
for sale in stands, booths or other non-permanent structures usually located on
the sidewalk and designed to attract passing pedestrians.

 

75.                                 “Supermarket/Grocery Stores” shall mean stores that offer for sale
primarily packaged food products. The “Supermarket/ Grocery Stores” channel
shall specifically exclude the in-store bakery departments of such stores,
which shall be included in the “In-Store Bakeries” channel defined above. The
“Supermarket/Grocery Stores” channel shall specifically exclude Gourmet Food
Specialty Stores (as defined above) and Convenience Stores (as defined above).
Examples of Supermarket/Grocery Stores include, without limitation, Kroger, Safeway, American Stores, Albertson’s, Winn
Dixie, Food Lion, Von’s, Finast, Ralphs, Marsh and Superstores.

 

76.                                 “Swap Meets/Flea Markets” shall mean offering products for sale
through organized events known as swap meets or flea markets, which involve a
group of vendors offering for sale a variety of products, often collectibles or
antiques.

 

77.                                 “Television Home Shopping” shall mean offering products for sale
through cable and broadcast television, including infomercials, QVC and Home
Shopping Network. The “Television Home Shopping” channel shall specifically
exclude sales through the Internet, CD-Interactive and other electronic media.

 

 

78.                                 “Theatrical Concessions” shall mean the retail section that sells
such items as popcorn, soda and candy within chain and non-chain movie theater
locations such as Cineplex Odeon, Loews and Cinemark,

 

79.                                 “Toy Specialty/Better Toy Chain Stores” shall mean companies that offer for sale
primarily specialty toys. Examples of Toy Specialty/Better Toy Chain Stores
include, without limitation, FAO Schwarz,
Zany Brainy, Imaginarium, and Noodle Kidoodle.

 

80.                                 “Toy Wholesalers” shall mean companies that offer for sale
primarily toys to retail stores. In order to be considered a “Toy Wholesaler”
hereunder, the total number of toy-type SKU’s must represent eighty percent
(80%) or more of such wholesaler’s total SKU’s.

 

81.                                 “Trackside - CART” shall mean offering products for sale at
races organized and sponsored by Championship Auto Racing Teams.

 

82.                                 “Trackside - NASCAR” shall mean offering products for sale at
races organized and sponsored by the National Association for Stock Car Racing.

 

83.                                 “Trackside - NHRA” shall mean offering products for sale at
races organized and sponsored by the National Hot Rod Association.

 

84.                                 “Upstairs Department Stores” shall mean stores that (a) offer products
for sale in a broad assortment of unrelated product categories, which products
are generally classified in the trade as “best” quality products, and (b) offer
a high level of customer service with a strong emphasis on store aesthetics.
Examples of Upstairs Department Stores include, without limitation, Bloomingdale’s, Macy’s, Nordstrom, May Department
Stores, Saks Fifth Avenue, Neiman Marcus and Dillards.

 

85.                                 “Vending Machines” shall mean self-contained automated
dispensing equipment operated by insertion of coin or paper currency or the
equivalent thereof (i.e. debit cards, credit cards, etc.).

 

86.                                 “Wall Decor Stores” shall mean stores that offer for sale
primarily wall decor products. Examples of Wall Decor Stores include, without
limitation, Deck The Walls, Aaron Brothers and
Prints Plus.

 

87.                                 “Warehouse Clubs” shall mean stores that offer for sale
products in large sizes and quantities with more of an emphasis on price than
service or store aesthetics, The “Warehouse Clubs” channel shall specifically
exclude the in-store bakery departments of such stores, which shall be included
in the “In-Store Bakeries” channel defined above. Examples of Warehouse Clubs
include, without limitation, Sam’s Club and
Price Costco.

 

88.                                 “WBSS International” shall mean the retail stores known as Warner
Bros. Studio Stores, which are operated outside the United States.

 

If Licensor grants to
Licensee the right to sell Licensed Products to WBSS International: (a) such
rights shall be worldwide, notwithstanding any restrictions as to “Territory”
contained in the Agreement, and (b) such rights shall be non-exclusive,
notwithstanding any exclusivity provisions contained in the Agreement,

 

 

EXHIBIT 2

 

#14559-SCOO

 

CONTRIBUTOR’S
AGREEMENT

 

The undersigned (“Contributor”) has been
engaged by Poore Brothers, Inc. (“Licensee”), in connection with an agreement
between Licensee and Warner Bros. Consumer Products Inc. (“Warner”) date
                                                              (the
“Agreement”) to work on or contribute to the creation of certain products
(“Licensed Products”) that exploit certain of Warner’s intellectual property
rights and/or related packaging, wrapping, advertising or promotional materials
(“Collateral Materials”).

 

Contributor agrees and acknowledges that any
creation, whether finished or not, and all copyrights, trademarks and other
intellectual property rights contained therein and all tangible embodiments
thereof that uses, exploits or derives from any of Warner’s intellectual
property (“Artwork”) created by Contributor in connection herewith, solely or
jointly with Licensor, Licensee or any other party, will be deemed a “work made
for hire” for Licensor under the U.S. Copyright Act, and any and all similar
provisions of law under other jurisdictions, and that Licensor will be deemed
the author and the exclusive owner of such Artwork, and all intellectual
property rights therein, in perpetuity and throughout the universe.  For clarification, the term “Artwork” does
not include any elements of the Licensed Products or other materials created in
connection with Contributor’s engagement by Licensee that do not use, exploit
or derive from any of Warner’s intellectual property.  In the event any such Artwork cannot be deemed a “work made for
hire” as set forth above, Contributor hereby assigns to Licensor all right,
title and interest in and to such Artwork. Contributor hereby irrevocably
appoints Licensor as Contributor’s attorney-in-fact for the purpose of
executing documents on Contributor’s behalf as deemed necessary or desirable by
Licensor to confirm such assignment, which appointment is coupled with an
interest. If Contributor has any rights, including without limitation “artist’s
rights” or “moral rights,” in such Artwork which cannot be assigned,
Contributor agrees to waive enforcement worldwide of such rights against
Licensor. In the event that Contributor has any such rights that cannot be
assigned or waived, Contributor hereby grants to Licensor, an exclusive,
worldwide, irrevocable, perpetual, transferable license to use, reproduce,
distribute, create derivative works of, publicly perform, publicly display and
digitally transmit such Artwork in any medium or format, whether now known or
later developed, for any purpose.

 

To induce Licensor to consent to the
engagement of Contributor by Licensee, Contributor hereby acknowledges the
proprietary and confidential nature of the information that Licensee or
Licensor may provide to Contributor, or that Contributor might gain access to
as the result of the privileged relationship created by this engagement (the
“Proprietary Information”) and agrees to: (a) hold the Proprietary Information
in strict confidence, using no less than a reasonable degree of care to protect
such Proprietary Information; (b) use the Proprietary Information solely as
necessary to perform the services required by the engagement (the “Permitted
Use”); (c) if Contributor is a business entity rather than an individual,
disclose the Proprietary Information only to Contributor’s employees with a
need to know such Proprietary Information in connection with the Permitted Use
and who have signed confidentiality agreements or are otherwise legally bound
by confidentiality obligations consistent with, and no less restrictive than,
the terms of this paragraph; and (d) return (to either Licensee or Licensor) or
destroy (upon the written direction of Licensee or Licensor) all tangible and
intangible materials containing the Proprietary Information promptly following
the expiration or termination of Contributor’s engagement. Contributor
acknowledges and agrees that the Proprietary Information is highly confidential
and that unauthorized use or disclosure of such Proprietary Information will
result in serious, irreparable harm for which Licensor’s remedies at law would
be inadequate. Accordingly, Contributor acknowledges and agrees that if any
such unauthorized use or disclosure occurs, Licensor will be entitled, in
addition to any other remedies available to it at law or in equity, to the
issuance of injunctive or other equitable relief.

 

	
  CONTRIBUTOR:

  
	
   

  
	
   

  	
   

  
	
  Signature

  
	
   

  
	
   

  	
   

  
	
  Print Name

  
	
   

  
	
   

  	
   

  
	
  Address

  
	
   

  
	
   

  	
   

  
	
  Country

  
	
   

  
	
   

  	
   

  
	
  Date

  

 

AGREED and
ACCEPTED:

 

WARNER
BROS. CONSUMER PRODUCTS INC.

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Gary
  R. Simon, Senior Vice President

  Business & Legal Affairs

  
	
   

  
	
  Date:

  	
   

  	
   

  
					

 

 

EXHIBIT 3

 

#14559-SCOO

 

WARNER BROS.
CONSUMER PRODUCTS INC.

4000 Warner Boulevard

Bridge Building 156 South - 4th Floor

Burbank, CA 91522

 

Re: Approval
of Third Party Manufacturer

 

To Whom It May Concern:

 

This letter will serve as notice to Warner
Bros. Consumer Products Inc. (“Licensor”) that pursuant to Paragraph 10(b) of
the that certain License Agreement between Licensor and Poore Brothers, Inc.
(“Licensee”)
dated                                                       ,
200  (the “Agreement”), the undersigned company (“Manufacturer”) has
been engaged as the manufacturer for Licensee in connection with the
manufacture of the Licensed Products (as defined in the Agreement).
Manufacturer hereby acknowledges that it may not manufacture Licensed Products
for, or sell or distribute Licensed Products to, anyone other than Licensee.
Manufacturer hereby further acknowledges that it has received a copy and is
cognizant of the terms and conditions set forth in the Agreement. Manufacturer
hereby agrees to be bound by and comply with all such terms and conditions in
connection with Manufacturer’s performance as a manufacturer of the Licensed
Products as if named as Licensee under the Agreement. Manufacturer will not use
any prison, slave or child labor in connection with the manufacture of the
Licensed Products, and will comply with all local laws, including without
limitation, labor laws, wage and hour laws and anti-discrimination laws.
Licensor will, at anytime, have the right to inspect the facilities and records
of Manufacturer to ensure compliance therewith. It is understood that this
engagement is on a royalty-free basis and that Manufacturer may not subcontract
any work hereunder to any third party without Licensor’s prior written
approval.

 

To induce Licensor to consent to the
engagement of Manufacturer by Licensee, Manufacturer hereby acknowledges the
proprietary and confidential nature of the information that Licensee or
Licensor may provide to Manufacturer, or that Manufacturer might gain access to
as the result of the privileged relationship created by this engagement (the
“Proprietary Information”) and agrees to: (a) hold the Proprietary Information
in strict confidence, using no less than a reasonable degree of care to protect
such Proprietary Information; (b) use the Proprietary Information solely as
necessary to perform the services required by the engagement (the “Permitted
Use”); (c) disclose the Proprietary Information only to Manufacturer’s
employees with a need to know such Proprietary Information in connection with
the Permitted Use and who have signed confidentiality agreements or are
otherwise legally bound by confidentiality obligations consistent with, and no
less restrictive than, the terms of this paragraph; and (d) return (to either
Licensee or Licensor) or destroy (upon the written direction of Licensee or
Licensor) all tangible and intangible materials containing the Proprietary
Information promptly following the expiration or termination of Manufacturer’s
engagement. Manufacturer acknowledges and agrees that the Proprietary
Information is highly confidential and that unauthorized use or disclosure of
such Proprietary Information will result in serious, irreparable harm for which
Licensor’s remedies at law would be inadequate. Accordingly, Manufacturer acknowledges
and agrees that if any such unauthorized use or disclosure occurs, Licensor
will be entitled, in addition to any other remedies available to it at law or
in equity, to the issuance of injunctive or other equitable relief

 

Manufacturer understands that its engagement
as the manufacturer for Licensee is subject to Licensor’s written approval.
Manufacturer therefore requests that Licensor sign in the space below, thereby
showing Licensor’s acceptance of Manufacturer’s engagement as set forth above.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Manufacturer/ Company Name

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Print Name:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Date

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Product(s) Manufacturing

  

 

	
  AGREED and ACCEPTED:

  
	
   

  
	
  WARNER BROS. CONSUMER
  PRODUCTS INC.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Gary
  R. Simon, Senior Vice President

  Business & Legal Affairs

  
	
   

  
	
  Date:

  	
   

  	
   

  
					

 

 

ATTACHMENT A

 

#14559-SCOO

 

(a) “Change of Control”
means and includes each of the following:

 

(1)                                  Any transaction or series of transactions,
whereby any person (as that term is used in Section 13 and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is or becomes
the beneficial owner (as that term is used in Section 13(d) of the Exchange
Act) directly or indirectly, of securities of the Licensee representing more
than fifty percent (50%) of the combined voting power of the Licensee’s then
outstanding securities; provided, that for purposes of this paragraph,
the term “person” shall exclude (A) a trustee or other fiduciary holding
securities under an employee benefit plan of the Licensee or a subsidiary of
Licensee and (B) a corporation owned directly or indirectly by the stockholders
of the Licensee in substantially the same
proportions as their ownership in the Licensee;

 

(2)                                  Any merger, consolidation, other corporate
reorganization or liquidation of the Licensee in which the Licensee is not the
continuing or surviving corporation or entity or pursuant to which shares of
Stock would be converted into cash, securities, or other property, other than
(A) a merger or consolidation with a wholly owned subsidiary, (B) a
reincorporation of the Licensee in a different jurisdiction, or
(C) other transaction in which there is no substantial change in the
stockholders of the Licensee;

 

(3)                                  Any merger or consolidation of the Licensee
with or into another entity or any other corporate reorganization, if more than
fifty percent (50%) of the combined voting power of the continuing or surviving
entity’s securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of the
Licensee immediately prior to such merger, consolidation or other
reorganization;

 

(4)                                  The sale, transfer, or other disposition of
all or substantially all of the assets of the Licensee; or

 

(5)                                  A change or series of related or unrelated
changes in the composition of the Board of Directors of Licensee, during any
twenty-four (24) month period beginning on the first anniversary of the date of
this Agreement, as a result of which fewer than fifty percent (50%) of the
incumbent directors are directors who either (1) had been directors of the
Licensee on the later of such first anniversary or the date twenty-four (24)
months prior to the date of the event that may constitute a Change of Control
(the “Original Directors”) or (ii) were elected, or nominated for election, to
the Board of Directors of the Licensee with the affirmative votes of a least a
majority of the aggregate of the Original Directors who were still in office at
the time of the election or nomination and the directors whose election or
nomination was previously so approved.

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