Product Development And License Agreement

EXHIBIT 10.43


PRODUCT DEVELOPMENT AND LICENSE AGREEMENT


This Product Development and License Agreement (the "Agreement") is entered into as of September 7, 1995 (the "Effective Date") by and among YES! Entertainment Corporation (including its affiliates and subsidiaries), with its principal place of business at 3875 Hopyard Road, Suite 375, Pleasanton, California 94588 ("YES!"), and Machina, Inc., a California corporation, located at 21 South Park, San Francisco, California 94107 ("Licensor").


WITNESSETH:


WHEREAS, YES! desires to have certain product design concepts developed and certain development work undertaken in order to implement such product design concepts for the children's and youth markets; and


WHEREAS, YES! desires to receive an exclusive license to such product concepts and other property rights embodied in the development work provided under this Agreement; and


WHEREAS, Licensor desires to provide such services and to license such rights to YES! on the terms and conditions set forth below;


NOW THEREFORE, for and in consideration of the mutual covenants and promises set forth below, the parties agree as follows:


1. 1.1 License. Licensor grants to YES! a license (including the
------- right to sublicense) to the concept of a line of self-contained, electro- mechanical arcade-like games that are contained in a compact plastic housing, including modifications to or derivatives thereof, and specifically including but not limited to the implementations of such product concept described on Exhibit A (the "Product"). This license shall be exclusive for the children's and youth market. This license shall be non-exclusive for all other markets.


1.2 Scope of License. The license conveyed in this Section 1
---------------- encompasses all proprietary rights in the Product, including but not limited to, trade secrets (including Confidential Information as defined by this Agreement), copyrights, and patents. Such license includes, but is not limited to, the rights to make, have made, use, sell, distribute, copy, modify, have modified, create derivative works, display, or sublicense the Product.


1.3 Title. Licensor shall retain all right, title and interest
----- in and to any proprietary rights owned by Licensor and not licensed to YES! pursuant to this Agreement. All proprietary rights of Licensor incorporated in the Product shall be licensed to YES! as provided in Section 1.1.


2. SERVICES. It is understood that Licensor shall use its best efforts
-------- in the performance of its development obligations (the "Services") under this Agreement. The Product and Services shall be treated as Confidential Information of YES! as provided in Section 9 and shall be licensed to YES!


[*CONFIDENTIAL TREATMENT REQUESTED]


as provided by Section 1. Licensor shall fully guarantee and be responsible for its own and any other necessary party's obligations (including, but not limited to, the performance of Services and the granting of licenses) under this Agreement. Licensor shall provide all necessary licenses (including necessary third party licenses) and documentation to effectuate the licenses provided for by this Agreement.


3. ADDITIONAL SERVICES. The terms and conditions for additional Services
------------------- beyond the services provided by Licensor in connection with the development of the implementations of the Products described in Exhibit A may be as mutually
--------- agreed by YES! and Licensor. It is understood that this Section 3 applies only to the providing of Services by Licensor; nothing in this Section 3 shall limit YES!'s rights under this Agreement, including the license in Section 1.


4. WARRANTY. Licensor represents and warrants that it has full and
-------- exclusive power and authority to enter into this Agreement and to grant the rights licensed hereby, and that no consent of any third party is required in connection herewith. Licensor hereby represents and warrants that the rights granted hereunder do not interfere in any way with the rights granted to any third party. Licensor further warrants that the Product shall be free from errors, except those errors directly resulting from faulty specifications provided by YES! or work completed by YES!. If the Product contains any errors (except those directly resulting from faulty specifications provided by YES!), then Licensor, at its own expense, shall promptly ensure that the Product is free from errors. Licensor represents and warrants to YES! that it has taken all necessary actions to grant the rights provided for by this Agreement.


5. INDEMNITY. Licensor will indemnify YES! against and hold YES!
--------- harmless from any reasonable loss, cost, liability or expense (including court costs and the reasonable fees of attorneys and other professionals) (collectively "Legal Costs") arising out of, or resulting from, (i) any breach of or inaccuracy in Section 4 hereof or (ii) any claim of any person or entity that the Product or any implementation thereof infringes any intellectual property right (including copyright, trademark, trade secret, or patent) of any third party. YES! shall be entitled to deduct from any payments otherwise owing to Licensor, including payments owing Licensor under any other agreement to which YES! and Licensor are parties, any Legal Costs incurred by YES! as a result of an infringement claim as described in this Section 5, but YES! shall have no right to recover more than [*] percent ([*]%) of any amounts previously paid to Licensor under this or any other Agreement by and between or among YES! and Licensor; provided, however, that in no event shall Licensor's total liability under this Section 5 exceed the total royalties paid or payable to Licensor under this Agreement, including the Advance Against Royalties or any other fees paid to Licensor hereunder or in connection herewith. YES! shall add Licensor as an additional insured under its general liability insurance policy.


6. LIMITATION OF LIABILITY. EXCEPT FOR A BREACH OF CONFIDENTIALITY
----------------------- OBLIGATIONS IN SECTION 9 OR FOR THE INFRINGEMENT INDEMNITY IN SECTION 5, IN NO EVENT SHALL LICENSOR'S OR YES!'S LIABILITY OF ANY KIND TO ANY OTHER PARTY INCLUDE ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES.


[*CONFIDENTIAL TREATMENT REQUESTED]


-2-


7. COMPENSATION.
------------


7.1 Definition. For purposes of this Agreement, "Net Sales" shall
---------- mean the gross sales price received by YES! on its sales of the Product to non- subsidiary customers, less: (i) customary rebates, cash and trade discounts, and reserves and/or credits for returns and allowances, (ii) transportation charges, including shipping and insurance, and (iii) sales or other excise taxes imposed upon and paid by seller with respect to such sales. Notwithstanding the foregoing, the sales by YES! subsidiaries to unaffiliated third parties shall be considered Net Sales, subject to all exceptions to Net Sales listed in Subsections (i), (ii), and (iii) of this Section 7.1.


7.2 Royalties. Provided that YES! chooses to market the Product,
--------- including modifications to or derivatives thereof, and specifically including the implementations of the Product described in Exhibit A, YES! shall pay to
--------- Licensor a royalty on Net Sales of the Product sold by YES! (including its affiliates and subsidiaries) ("Earned Royalties"). Subject to the provisions of Sections 7.4, 7.5 and 7.6, the royalty rate shall be as follows:


(a) Initial Sales. Until such time as there shall have been
------------- paid to or generated for the account of Licensor royalties in an amount not greater than [*] dollars ($[*]), the Advance Against Royalties actually paid to Licensor pursuant to Section 7.3 hereof, the royalty rate on Net Sales shall be [*] percent ([*]%).


(b) Subsequent Sales. At such time as there shall have been
---------------- paid to or generated for the account of Licensor royalties in an amount equal to or greater than [*] dollars ($[*]), the royalty rate on Net Sales shall decrease to and thereafter shall be [*] pecent ([*]%).


7.3 Advance Against Royalties. Subject to the terms of this Section
------------------------- 7.3, YES! shall advance Licensor up to [*] dollars ($[*]) (the "Advance Against Royalties ...