1
EXHIBIT 10.27
INFORMATION SYSTEMS SERVICE AGREEMENT
AGREEMENT, dated as of April 6, 1998, between XXXXXXXX ELECTRONICS GAMES,
INC., a Delaware corporation ("WEG"), and MIDWAY GAMES INC., a Delaware
corporation ("Midway"), each with an address at 0000 Xxxxx Xxxxxxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxx 00000.
W I T N E S S E T H :
WHEREAS, on the date hereof, WMS Industries Inc. ("WMS") is distributing
(the "Distribution") all of its shares of Midway's common stock to holders of
the shares of WMS' common stock outstanding on March 31, 1998;
WHEREAS, prior to the Distribution, Midway has been a majority-owned
subsidiary of WMS;
WHEREAS, the parties formerly provided for certain arrangements whereby
WEG, an indirect, wholly-owned subsidiary of WMS, has been providing certain
information system services to Midway; and
WHEREAS, the parties desire to set forth the terms of continuing
arrangements under which WEG will continue to provide certain information
systems and related services to Midway following the Distribution.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound, the parties hereby agree as
follows:
1. STANDARD SERVICES TO BE SUPPLIED.
1.1 Computer Systems. WEG shall provide Midway with access to its
computer systems for business applications including, without limitation, order
entry, financial and manufacturing modules, marketing and sales and engineering
(including electronic engineering documentation and blueprint systems) and will
perform all support for the computer systems. In addition, WEG shall modify and
implement the software to be used by Midway in conjunction with such systems at
Midway's request.
2
1.2 Network Services; Desktop Computers. WEG shall coordinate the
provision and maintenance of cabling, wiring, switching components, routers and
gateway and the purchasing, maintaining and upgrading of network servers for
Midway. In addition, unless Midway directs otherwise, WEG shall coordinate and
negotiate with third-party vendors the purchase and installation of desktop
computers and related hardware and the configuration of software products for
Midway.
1.3 Telecommunications Services. WEG shall provide telecommunications
services to Midway, which will include selection, organization, programming and
maintenance of a PBX system and a service provider for telephone communication.
In addition, unless Midway directs otherwise, WEG shall provide activation and
deactivation functions for cellular telephones and monitor usage of the PBX
system.
1.4 Additional Support Services. WEG shall make available helpdesk
services from 6:00 a.m. to 6:00 p.m. to Midway personnel with respect to any
problems or questions pertaining to telecommunications, infrastructure,
communications, business application systems and desktop
services.
1.5 Consulting Committee. A committee shall be formed consisting of an
equal number of representatives from Midway and WEG, which committee will meet
from time to time to consult, advise and attempt to resolve differences with
respect to prioritization of tasks between the parties, system capacity and
system modifications and enhancements
2. PAYMENT FOR STANDARD SERVICES. In consideration for the services provided
by WEG pursuant to Section 1 of this Agreement, Midway shall pay WEG an amount
equal to the cost to WEG of the services provided plus 6.6% of such cost. Such
cost shall be determined by multiplying WEG's total annual cost for each area
of service described in Sections 1.1, 1.2 and 1.3 for both WMS (and its
subsidiaries) and Midway ("Aggregate Services Cost") by the percentage of
Midway's usage of each such service (the "Midway Percentage"). The Midway
Percentage for: (i) computer systems shall be determined by dividing the number
of Midway passwords to the AS 400 by the total number of passwords to such
system; (ii) network and desktop services shall be determined by dividing the
number of Midway's personal computer
3
network passwords by the total number of such passwords; (iii)
telecommunications services shall be determined by dividing the number of Midway
telephone hook-ups by the total number of telephone hook-ups. Helpdesk services
shall be included in the above. A semi-annual budget for each of the areas of
services set forth in Sections 1.1, 1.2 and 1.3 hereof shall be developed and
agreed upon in advance by December 15th and June 15th of each year in order to
determine the estimated Aggregate Services Cost. By the end of each month, WEG
shall estimate the Midway Percentage for the previous month. Based upon the
product of (i) one-sixth, (ii) the semi-annual budgeted Aggregate Services Cost,
(iii) the estimated Midway Percentage Usage, and 106.6%, WEG shall xxxx Midway
prior to the end of each month, and Midway shall pay such xxxx by the 10th day
of the following month. Within 10 days after the completion of WEG's
independent annual audit, WEG shall calculate the actual Aggregate Services Cost
and the actual Midway Percentage for the prior fiscal year and shall render a
statement of such calculation to Midway. Payment shall be made or offset with
the next monthly payment (or paid by WEG to Midway on the due date of such
payment if the adjustment is larger than the next such monthly payment) to
reconcile the amount billed in the previous year with the actual figures, plus
the 6.6% xxxx-up. If Midway disputes the accuracy of the reconciliation
statement or explanation submitted by WEG, Midway shall nevertheless pay the
invoiced charges on a timely basis, and if such dispute remains unresolved for
60 days, Midway may submit such dispute to a "Big Six" accounting firm mutually
acceptable to the parties for resolution, whose decision shall be final. The
cost of such submission shall be borne by Midway; provided, however, that if
such review indicates a discrepancy in Midway's favor of ten percent (10%) or
greater, such cost shall be borne by WEG. If Midway fails to dispute a
statement or explanation within 60 days after receipt of the reconciliation
statement from WEG, Midway shall be deemed to accept such charges, provided that
Midway shall not be deemed to accept any such charges in the event Midway's
dispute thereof is premised upon WMS' willful misconduct, malfeasance or fraud.
3. OTHER SERVICES TO BE SUPPLIED.
3.1 System Development. Upon Midway's request, WEG may provide services
to develop the communications, networking, operating and computer systems of
Midway.
3.2 Special Projects. Upon Midway's request, WEG may provide any such
other
4
services to Midway not specifically described in Section 1 or this Section 3.
3.3 Payment for Requested Services. In consideration for the requested
services provided by WEG pursuant to this Section 3, Midway shall pay WEG an
amount equal to the cost to WEG of the requested service(s) plus 6.6% of such
cost. WEG shall xxxx such amount to Midway at the end of each month in which
the requested services are provided, and Midway shall make payment to WEG for
services provided pursuant to this Section 3 within 15 days after receipt by
Midway of each invoice therefor. The total cost to complete the requested
service shall be estimated and agreed upon in advance, and WEG shall provide to
Midway periodic updates on the remaining costs for completion of the requested
services.
4. EXCLUSIVITY. Except as specifically provided herein, Midway shall not,
without the prior written consent of WEG, engage any third party to render any
of the services described in Sections 1 and 3, except to the extent of any
service described in Section 3 hereof which is not provided to Midway by WEG.
5. EFFECTIVE DATE AND TERM. This Agreement is effective as of April 6, 1998
and will continue in effect for a period of three years and for successive
renewal periods of eighteen months each; provided, however, that either party
may terminate this Agreement for any reason upon eighteen months' prior written
notice, or otherwise pursuant to Section 6 hereof.
6. DEFAULT. If either party materially defaults hereunder, the non-defaulting
party may terminate this Agreement effective immediately (subject to the cure
periods set forth below) upon written notice to the defaulting party. The
non-defaulting party shall be entitled to all remedies provided by law or
equity (including reasonable attorneys' fees and costs of suit incurred). The
following events shall be deemed to be material defaults hereunder: (a) failure
by either party to make any payment required to be made to the other hereunder,
which failure is not remedied within ten days after receipt of written notice
thereof; (b) except as otherwise provided herein, failure by either party
substantially to perform in accordance with the terms and conditions of this
Agreement, which failure is not remedied within 30 days after receipt of
written notice from the other party specifying the nature of such default;
(c)(i) filing of a
5
voluntary bankruptcy petition by either party; (ii) filing of an involuntary
bankruptcy petition against either party which is not dismissed within 60 days;
(iii) assignment for the benefit of creditors made by either party; or (iv)
appointment of a receiver for either party or any material part of its property.
7. MISCELLANEOUS.
7.1 No waiver by either party of any default shall be effective unless in
writing, nor shall any such waiver operate as a waiver of any other default or
of the same default on any future occasion.
7.2 Each party warrants and represents that proceeding herewith is not
inconsistent in any material way with any contractual obligations, expressed or
implied, undertaken with any third party.
7.3 In the event that any term or provision of this Agreement shall
violate any applicable statute, ordinance or rule of law in any jurisdiction in
which it is used, or otherwise be unenforceable, such provision shall be
ineffective in such jurisdiction only to the extent of such violation without
invalidating any other provision hereof.
7.4 Neither party shall, without the prior written consent of the other,
assign any rights or delegate any obligations under this Agreement, such
consent not to be unreasonably withheld, conditioned or delayed, except that
WEG may assign any such rights or delegate any such obligation to WMS or any of
its subsidiaries.
7.5 The headings used in this Agreement are inserted only for the purpose
of convenience and reference, and in no way define or limit the scope or intent
of any provision or part hereof.
7.6 This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
herein, expressed or implied, shall be construed to give any other person any
legal or equitable rights hereunder. No person shall be deemed to be a third
party beneficiary of this Agreement. Nothing herein shall be construed to be
an admission or waiver of any rights, claims and defenses the parties may have
against third parties, which rights, claims and defense the parties
specifically reserve.
7.7 All notices and other communications hereunder shall be in writing and
shall be
6
delivered by hand, by facsimile or mailed by registered or certified mail
(return receipt requested) to the parties at the addresses set forth on the
first page of this Agreement (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice is received.
7.8 The parties each shall take such actions and execute such documents
and instruments as may be reasonably requested by the other party to implement
the terms and provisions of this Agreement.
7.9 All controversies and disputes arising out of or under this Agreement
shall be determined pursuant to the laws of the State of Illinois, United
States of America, regardless of the laws that might be applied under
applicable principles of conflicts of laws.
7.10 This Agreement constitutes the entire understanding between the
parties hereto (and supersedes all prior written or oral communications)
relating to the subject matter covered in this Agreement. No amendment,
modification, extension or failure to enforce any condition of this Agreement
by either party shall be deemed a waiver of any of its rights herein. This
Agreement shall not be amended except by a writing executed by all the parties
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
XXXXXXXX ELECTRONICS GAMES, INC.
By: /s/ Xxxxxx X. Xxxx, Xx.
_________________________________
Name: Xxxxxx X. Xxxx, Xx.
Title: Sr. Vice President-Finance
MIDWAY GAMES INC.
By: /s/ Xxxx X. Xxxxxxxx
_________________________________
Name: Xxxx X. Xxxxxxxx
Title: President
7
GUARANTY
WMS Industries Inc. does hereby guaranty all of the performance and
financial obligations of WEG under this Agreement to which this Guaranty is
affixed. This Guaranty is unconditional, irrevocable, continuing and without
limitation, and shall be binding upon the successors and assigns of the
undersigned.
WMS INDUSTRIES INC.
By: /s/ Xxxxxx X. Xxxx, Xx.
_________________________________
Name: Xxxxxx X. Xxxx, Xx.
Title: Vice President-Finance
