PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES AND EXCHANGE ACT OF
1934, AS AMENDED, CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PROVISIONS OF THIS AGREEMENT. SUCH CONFIDENTIAL INFORMATION HAS BEEN (i) OMITTED
FROM THIS VERSION OF THE AGREEMENT, (ii) MARKED WITH ASTERISKS (**) TO INDICATE
SUCH DELETIONS AND (iii) FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of July 29, 1997, between Take Two Interactive
Software, Inc., a New York corporation having offices at 000 Xxxxxxxx, Xxx Xxxx,
XX 00000 ("Take Two") and GameTek, Inc., a Delaware Corporation with offices at
0 Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx 00000 ("GameTek").
W I T N E S S E T H :
WHEREAS, GameTek owns or controls the rights in and to the Game Titles
(defined below), and desires to enter into this agreement providing for Take
Two's distribution of Software Devices (defined below) embodying the Game
Titles;
WHEREAS, Take Two is engaged in the business of distributing, marketing,
selling, advertising and otherwise exploiting Software Devices and desires to
distribute the Software Devices embodying the Game Titles on the terms provided
herein;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS:
Capitalized terms used herein, but not otherwise defined herein, shall have
the meanings set forth below:
1.1 "Basic Term" means the period commencing on the date on which such
party hereto has executed and delivered to the other party hereto a copy of this
Agreement, and ending on August 31, 1998; provided, however, that if GameTek is
able to obtain from Califon Productions, Inc. or its affiliates ("Califon") an
extension of its license for "Wheel of Fortune" and "Jeopardy!", then the Basic
Term shall extend through the last day of such extension.
1.2 "Bug" means a repeatable phenomenon of unintended events or actions
during the running of a Software Device under normal conditions that results in:
(a) the software component of such Software Device being unable to
perform repeatedly and without interruption in the manner in which such
Software Device is commonly intended to be used; or
(b) the destruction or corruption of the data embodied in such
Software Device.
1.3 "Distributed Product" or "Distributed Products" means Software Devices
embodying a Game Title and playable on the Game Machine.
1.4 "Documentation" means the technical documentation for each Game.
1.5 "Exploitation Period" with respect to any Game Title means the date
commencing on the date hereof and ending on the expiration of the Basic Term
with respect to such Game Title.
1.6 "Game Machine" means the Nintendo N64 console game system.
1.7 "Game Title" or "Game Titles" means, individually or collectively, as
the context requires, the computer software games developed by or on behalf of
GameTek that are set forth on Schedule "A" .
1.8 "Manual" means a document that describes in reasonable detail in the
English language the operation and functions of the computer software and
contains instructions for using the Distributed Products.
1.9 "SKU" or "sku" means stock keeping unit.
1.10 "Software Device" means any device on or by which computer software
and its associated visual images, with or without sound, may be embodied or
recorded for later operation, manipulation or communication to users and which
are designed for use with the Game Machine.
1.11 "Territory" means the world.
1.12 "Third Party Royalties" means, with respect to any unit of any Game
Title distributed by Take Two hereunder, the aggregate of all royalties payable
by GameTek to Califon Productions, Inc., Xxxxx Xxxxx, and Xxxx Xxxxxx or their
respective successors or assigns in respect of the sale or other disposition of
such unit. Attached as Schedule A hereto is a description of the amount of each
such Third Party Royalty.
2. RIGHTS AND OBLIGATIONS OF Take Two:
Subject to the terms and conditions hereof, GameTek hereby grants to Take
Two, and Take Two hereby accepts and agrees to perform and discharge, the
following rights and obligations, which shall be deemed exclusive within the
Territory during the Basic Term:
2.1 Distribution Rights and Obligations.
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(a) GameTek hereby engages Take Two, and Take Two hereby agrees to be
engaged by GameTek, as GameTek's sole and exclusive seller and distributor
of Distributed Products throughout the Territory during the Exploitation
Period. During the Exploitation Period for each Game Title, Take Two may
distribute such Distributed Products through all available wholesale
channels, and Take Two shall order and maintain inventories of appropriate
quantities of Distributed Products with respect to each Game Title as shall
be reasonably necessary to meet anticipated demand.
(b) Take Two shall have the right to use, publish and permit others to
use and publish GameTek's name, and, subject to obtaining the prior
approval of the relevant intellectual property licensor (i.e., Califon
Productions, Inc., Xxxxx Xxxxx and Xxxx Xxxxxx), any names of or trademarks
associated with, or embodied in, any Game Title or reproduction or
simulation thereof, the script, speech, images, characters,
characterizations, designs, graphics, art work and other characteristics
(including the name, voice and likeness of Xxxxx Xxxxx and Xxxx Xxxxxx)
associated with each Game Title, and the name of each Game Title
(collectively, the "Marks"), in connection with the sale, advertising,
distribution and exploitation thereof.
(c) Take Two shall have the right, solely for advertising, publicity
and promotional purposes, to perform and display the Distributed Products
publicly, and to permit the public performance thereof, but only in a
manner consistent with ordinary custom and practice in the industry for the
promotion of products similar to the Game Titles.
(d) GameTek shall furnish to Take Two in camera ready form, and Take
Two shall have the right to use, all artwork, textual material and other
materials prepared by GameTek in connection with the Distributed Products,
including advertising, packaging and wrapping materials (collectively,
"Packaging and Promotional Materials"), to the extent created by or on
behalf of GameTek in connection with Distributed Products.
(e) All rights in and to the Game Titles, Packaging and Promotional
Materials and/or Marks not expressly granted to Take Two herein are
reserved to GameTek.
2.2 Intellectual Property Rights.
(a) As between GameTek and Take Two, GameTek retains all copyright,
patent, trade secret, trade xxxx and trade name rights in and to the
Distributed Products, including all packaging, designs, logos, slogans,
advertising materials and promotional materials and in all other materials
delivered by GameTek to Take Two (collectively, "GameTek Property"), and
Take Two will not have or acquire any right, title or interest therein or
thereto under any circumstance whatsoever except for the specific rights
granted herein. Take Two shall not, during the Basic Term or at any time
thereafter, take any action that attacks, or that otherwise reasonably may
be expected to adversely affect or derogate from, GameTek's ownership of or
rights in the GameTek Property or the validity thereof, nor shall Take Two
apply for any registration or file any document or take any action that
would adversely affect GameTek's ownership of or rights in the GameTek
Property or aid or abet anyone else in doing so, or use or authorize the
use of any trademark, trade name or word, symbol or combination thereof or
other designation identical with or confusingly
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similar to the trademarks and/or trade names that constitute part of the
GameTek Property. Take Two will not alter, remove, obscure, erase or deface
any proprietary rights notices contained on or incorporated in any SKU or
the packaging of any SKU. If Take Two is called upon or required to produce
any packaging, advertising and promotional materials for a Game Title, Take
Two will include thereon such proprietary rights notices as may be
designated and approved by GameTek.
(b) Promptly upon request, Take Two will provide GameTek with a
template for Take Two's logo and legend for inclusion on any packaging,
advertising, game manuals or promotional materials produced in connection
with any Game Title, which template shall be reasonably acceptable to
GameTek. GameTek will include Take Two's logo and legend, as incorporated
in any such approved template, on all such packaging, advertising and
promotional materials with respect to Game Titles. Prior to the use of any
such materials, GameTek will provide samples thereof to Take Two for Take
Two approval, which shall not be unreasonably withheld or delayed. Such
materials will be deemed approved by Take Two unless, within fifteen (15)
days following the submission thereof to Take Two, Take Two shall notify
GameTek in writing of any objection it may have thereto, specifying the
reasons for such objection in reasonable detail and describing how such
objections may be remedied in order to render the submitted materials
acceptable to Take Two.
3. MANUFACTURING; PRICING.
3.1 GameTek represents that, prior to the delivery of any Game Title
hereunder, it shall have designed the computer software and all documentation
relating to such Game Title, to the extent necessary for same to be manufactured
into Distributed Products and distributed by Take Two pursuant to this
Agreement, and operated and perceived through the Game Machines. The Distributed
Products shall consist of standard four (4) megabyte cartridges.
3.2 Take Two shall notify GameTek from time to time reasonably in advance
of any required delivery date of the number of units that Take Two wishes
GameTek to have manufactured in order to enable Take Two to fulfill its
distribution requirements for each Game Title. Each such notification shall be
accompanied by (i) a wire transfer of funds, either (at Take Two's option) to an
account designated by GameTek or directly to Nintendo of America ("Nintendo") on
behalf of GameTek, sufficient to enable GameTek to pay for the manufacture of
the Distributed Products so ordered or, if requested by GameTek, (ii) the
provision of an irrevocable documentary letter of credit in favor of Nintendo on
behalf of GameTek in form satisfactory to Nintendo, for the full amount of the
manufacturing cost of the goods ordered. In any event, Take Two shall arrange
and pay for shipment of the goods from Japan (including all customs duties and
similar charges) and for insuring the goods through delivery to Take Two or its
customers, as applicable. Promptly and in no event later than two (2) business
days after its receipt of such order and funds or letter of credit, GameTek
shall arrange with Nintendo for the manufacture of such Distributed Products,
including the posting of requisite letters of credit in favor of the
manufacturer.
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3.3 GameTek shall deliver to Nintendo the preliminary and final code for
each Game Title in accordance with the delivery schedule set forth in Schedule
"A" annexed hereto and shall use its reasonable best efforts to obtain in a
timely manner all necessary approvals from Nintendo.
3.4. The purchase price payable by Take Two hereunder for each unit of
Distributed Product shall be the sum of (i) the total cost charged to GameTek by
Nintendo for the manufacture of the product, plus (ii) to the extent not
included in (i) above or otherwise paid by Take Two directly, all insurance and
transportation charges, import duties, custom fees and similar charges incurred
in shipping the unit into its warehouse in the United States, (the sum of the
amounts described in clauses (i) and (ii) being referred to collectively as
"GameTek's Cost of Goods") plus (iii) all Third Party Royalties payable in
respect of the sale or other disposition of such unit, plus (iv) $(**) (such
$(**) per unit being referred to as the "GameTek Share"). Transportation to Take
Two or its customers shall be arranged and paid for by Take Two. The portion of
the purchase price constituting GameTek's Cost of Goods shall be paid by Take
Two as provided in Section 3.2 hereof. The portion of such purchase price
consisting of Third-Party Royalties shall be paid by Take Two to GameTek within
thirty days after the end of each calendar month by wire transfer of immediately
available funds into an account designated by GameTek in writing to Take Two
commencing with the first sale by Take Two of Distributed Products. GameTek's
Share in respect of any of the first (**) units sold hereunder shall be
payable in accordance with the payment schedule set forth in Section 5.1(a).
GameTek's Share in respect of any units in excess of (**) units shall only
accrue and become payable upon (i) the collection by Take Two of all receivables
from the sale of at least (**) and (ii) upon collection of the proceeds of
sale of the relevant units in excess of (**). Payment of GameTek's Share with
respect to units in excess of (**) shall be made within 30 days of the close
of the month in which the GameTek Share is earned with respect to such units.
Notwithstanding the foregoing, in the event that the Guaranty (as hereinafter
defined) is reduced pursuant to the provisions of Sections 5.1(a) or (c) hereof,
the (**) units referred to above in this paragraph shall be proportionately
reduced.
3.5 Take Two shall be responsible, at its sole cost and expense, for the
marketing, promotion and advertising of each Game Title, including co-operative
advertising credits, shelf or "slot" fees and any similar discounts, credits or
payments, provided that the amount to be spent thereon and the manner in which
such expenditures shall be made shall be determined exclusively by Take Two in
the exercise of its reasonable business judgment.
3.6 If any customer returns a unit on which Take Two has paid the GameTek
Share (including returns for defects or "Bugs"), then Take Two shall have the
right to recoup the amount of the GameTek Share and the Third Party Royalties
previously paid by Take Two in respect of such unit from any other monies
payable to GameTek hereunder. Except as otherwise provided in Section 7.4
hereof, if Take Two grants any customer price protection or a markdown of
inventory in respect of any Distributed Product, an amount equal to 50% of the
dollar value of any such price protection or markdown of inventory actually
granted to such customer will be recoupable by Take Two out of monies otherwise
payable to GameTek hereunder if, but only if, GameTek has authorized such price
protection or markdown in a writing that specifies the account name, inventory
quantity to be adjusted in price, and the per
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unit and aggregate price adjustment being authorized. GameTek shall not
unreasonably withhold or delay its consent to any such price protection or xxxx
down. If and to the extent Take Two is unable to recoup any amounts owing by
GameTek by reason of the provisions of this Section 3.6 within ninety (90) days
after such amount first becomes due, then Take Two may notify GameTek of such
fact and demand that GameTek pay the unrecouped amount. GameTek shall pay such
unrecouped amount promptly after receipt of such demand for payment, but only to
the extent that such payment does not reduce the aggregate amount of the GameTek
Share received and retained by GameTek hereunder to below $(**) (or such lesser
amount to which the Guaranty may reduced as provided in Sections 5.1(a) and (c)
hereof). For purposes of clarity, it is the express intention of the parties
that returns, price protection and markdowns shall not reduce the aggregate
amount of the GameTek Share paid to and retained by GameTek in respect of the
Guaranty to less than $(**) (or such lesser amount to which the Guaranty may be
reduced as provided in Sections 5.1(a) (c) hereof).
4. PACKAGING, TESTING, ETC.:TRANSLATIONS
4.1 GameTek will place the game machine, medium and other operating
requirements (such as minimum memory capacity) on the front outside of each
Distributed Product, and will shrink-wrap all Distributed Product and will
incorporate into the design of the packaging all relevant bar code information.
4.2. GameTek shall use its reasonable best efforts to ensure that each
Distributed Product shall, in each different configuration in which such
Distributed Product is to operate, be free of Bugs or other defects. GameTek
shall be fully responsible for implementing all necessary corrective measures to
correct any Bugs or other defects found to exist. Each party shall immediately
notify the other party in writing if it discovers any Bugs or other defects in
any Distributed Products.
4.3. All packaging for the Distributed Products shall contain credit to
Take Two or its affiliates as distributor, GameTek as publisher and to
appropriate third parties. The forms of such credits with respect to Take Two
and GameTek shall be substantially in the forms annexed hereto in Schedule "B".
The credits related to such third parties shall be in such form, substance and
scope as to comply with GameTek's contractual obligations relating thereto.
4.4 All title and other ownership rights to each Distributed Product
incorporating a Game Title shall vest in Take Two at such time as the goods are
delivered for shipment by the manufacturer. GameTek shall retain a security
interest in the goods until Take Two shall have paid to GameTek the full
purchase price thereof. Take Two shall bear the risk of loss of any such
Distributed Product from and after the moment at which such Distributed Product
is shipped from the manufacturer's facility.
4.5 Take Two shall use its reasonable best efforts, consistent with
standard industry custom and practice, to sell and to distribute the Distributed
Products throughout the Territory during the Basic Term, subject to the terms to
this Agreement.
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4.6 All advertising, packaging and marketing and promotional materials
proposed to be used by Take Two in connection with any of the Game Titles shall
be submitted to GameTek for its written approval prior to any use or
distribution thereof. GameTek shall be deemed to have approved any materials so
submitted unless, within thirty (30) days following its receipt thereof, GameTek
delivers to Take Two a written objection to the submitted materials specifying
in reasonable detail the nature of such objection and the manner in which the
submitted material must be changed in order to meet GameTek's approval.
4.7 Upon request by Take Two, GameTek shall prepare translated versions of
one or both Game Titles. With respect to any such translation request, Take Two
shall, at its own cost, provide GameTek with a complete and accurate translation
of the text of the Game Title (including all relevant documentation) into the
selected language, and GameTek shall insert such translated text into the Game
Title within thirty (30) days after its receipt thereof from Take Two. The
foreign language version of the text for each screen shot within any Game Title
must be close enough to the length of the English version of such text to enable
it to fit within the same text window as the English text. The parties shall
agree on the fee that GameTek will charge and that Take Two will pay for
including such translated text into the Game Title and related documentation
prior to the delivery of the translated text to GameTek. If the parties cannot
agree on a fee for such services, GameTek shall charge $40.00 per hour for each
man hour expended is performing such services.
5. GUARANTEES AND ADVANCES.
5.1 Guarantees Payable by Take Two.
(a) Take Two guarantees to GameTek a minimum aggregate GameTek Share
of $(**) (the "Guaranty") with respect to the first two Game Titles
released hereunder (subject to possible reduction in the manner and to the
extent described below). The Guaranty shall be payable in the manner
described below:
(i) $(**) payable upon execution and delivery of this Agreement;
(ii) $(**) payable within three business days after delivery to
Take Two of written notice of final code approval from Nintendo of
Japan, Inc. for "Wheel of Fortune" game cartridge;
(iii) $(**) payable within three business days after the first
commercial shipment from the manufacturer of "Wheel of Fortune" game
cartridges;
(iv) $(**) payable within three business days after delivery to
Take Two of written notice of final code approval from Nintendo of
Japan, Inc. for "Jeopardy!" game cartridge;
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(v) $(**) payable within three business days after the first
commercial shipment from the manufacturer of "Jeopardy!" game
cartridges;
(vi) $(**) payable within one hundred twenty (120) days after
first shipment of the second Game Title released hereunder;
(vii) $(**) payable within two hundred forty (240) days after
first shipment of the second Game Title released hereunder; and
(viii)$(**) payable within three hundred sixty (360) days after
first shipment of the second Game Title released hereunder;
provided, however, that if for any reason GameTek is unable to obtain from
Califon an extension of its existing license for "Wheel of Fortune" and
"Jeopardy!" beyond August 31, 1998, then Take Two shall have no obligation
to make the milestone payments described in clauses (vi), (vii) and (viii)
above, and the aggregate Guaranty payable by Take Two hereunder shall be
reduced from $(**) to $(**), the foregoing being Take Two's sole remedy
hereunder for any failure by GameTek to obtain such license extension.
All payments made hereunder shall be made by wire transfer of immediately
available funds to an account which GameTek shall designate at least two
full business days prior to the due date of any relevant payment.
(b) Notwithstanding any contrary provision contained herein, (i) Take
Two shall be entitled to recoup out of the GameTek Share otherwise payable
to GameTek in respect of any Game Title covered hereunder, on a fully
cross-collateralized basis, the full amount of the advance Guaranty
payments theretofore paid by Take Two to GameTek pursuant to Section 5.1(a)
above, and (ii) to the extent that Take Two furnishes GameTek with
documentation evidencing the fact that Take Two has incurred more than
$150,000 in advertising, marketing, promotion and sales support for the
Game Titles, Take Two may recoup up to $(**) of such costs in excess of
$150,000 from the GameTek Share otherwise payable to GameTek in respect of
the first (**) units of Distributed Product sold or distributed by Take
Two hereunder in excess of the Guaranty (i.e., units (**) through
(**); provided that such numbers shall be proportionately reduced if the
Guaranty is reduced pursuant to the provisions of Sections 5.1(a) or (c)
hereof).
(c) If GameTek (i) is unable to obtain from Califon an extension of
its existing license beyond August 31, 1998, and (ii) does not deliver the
notice of final code approval for the "Wheel of Fortune" game cartridge
and/or the "Jeopardy!" game cartridge by the dates specified in Schedule
"A" annexed hereto, then for each and every month or partial month that
delivery of either such approval notice is delayed beyond the date
specified in Schedule "A," the amount payable by Take Two upon delivery of
such notice shall be decreased by $100,000, provided that the aggregate
amount of such decrease occasioned by the late delivery of either such
notice shall not exceed the amount specified in Schedule "A" as payable
upon delivery of such notice.
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(d) If GameTek does not deliver the notice of final code approval for
either the "Wheel of Fortune" game cartridge or the "Jeopardy!" game
cartridge within ninety (90) of the delivery date specified in Schedule "A"
annexed hereto, then Take Two shall have the option on written notice to
GameTek to delete such Game Title from this Agreement without GameTek being
in default as a result thereof, and GameTek shall, within ten (10) business
days of such notice, refund to Take Two all amounts paid by Take Two to
GameTek in respect of the Game Title so deleted. Notwithstanding the
foregoing, if GameTek's rights with respect to any Game Title terminate
prior to the end of the Expoitation Period therefor as a result of a
failure by GameTek to comply with its obligations under any agreement with
respect thereto, Take Two shall have the right to perform or cause to be
performed such obligations, and the reasonable out-of-pocket expenses
incurred by Take Two in connection therewith (to the extent such expenses
exceed amounts that otherwise would have been payable by Take Two hereunder
with respect to such Game Title) shall be recoupable by Take Two out of
funds otherwise payable to GameTek hereunder on a fully
cross-collateralized basis, or at Take Two's election, paid directly by
GameTek with thirty days after receipt of Take Two's invoice therefor.
5.2 Unless and to the extent expressly provided otherwise in this
Agreement, each party hereto shall bear all costs and expenses incurred in
connection with the performance of its obligations hereunder, without any right
of contribution from the other party hereto.
6. RIGHT OF INSPECTION; LATE PAYMENT.
6.1 Each party shall maintain, throughout the term of this Agreement and
for three years thereafter, at its principal executive offices complete and
accurate books of account concerning sales of the Distributed Products
hereunder. Upon five business days' prior written notice, either party hereto,
or its agents on its behalf, may examine the other party's books and records
relating to the sale of the Distributed Products in order to verify the accuracy
thereof,
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during normal business hours, and upon reasonable prior written notice; provided
that neither party may conduct more than one such audit in any six month period.
6.2 If either party fails or refuses to pay any amount owing to the other
party hereunder when due, then the party in default shall reimburse the other
party for any collection expenses it may incur and the amount not timely paid,
including any such collection expenses, shall bear interest at a rate per annum
equal to 3% over the prime rate announced from time to time by Citibank, N.A.,
accruing from the first date on which such monies were due and owing.
7. REPRESENTATIONS AND WARRANTIES:
7.1 Take Two hereby warrants and represents that:
(i) This Agreement has been duly authorized, executed and delivered by
Take Two; Take Two has the full power and authority to enter into this
Agreement and to perform its obligations hereunder and is free to enter
into this Agreement; this Agreement constitutes the valid and binding
obligation of Take Two, enforceable in accordance with its terms; and the
making of this Agreement by Take Two does not violate any agreement, right
or obligation existing between Take Two on the one hand, and any other
person, firm or corporation, on the other hand;
(ii) No consents of any third parties are required for Take Two to
enter into this Agreement; and
(iii) Take Two shall devote substantially the same degree of
diligence, effort, resources and care to the performance of its obligations
hereunder as it devotes to the distribution of its proprietary products or
to the performance of its current contractual obligations to third parties
with respect to similar products.
7.2 GameTek hereby represents and warrants that:
(i) This Agreement has been duly authorized, executed and delivered by
GameTek; GameTek has the full power and authority to enter into this
Agreement and to perform its obligations hereunder and is free to enter
into this Agreement; this Agreement constitutes the valid and binding
obligation of GameTek, enforceable in accordance with its terms; the making
of this Agreement by GameTek does not violate any agreement, right or
obligation existing between GameTek on the one hand, and any other person,
firm or corporation, on the other hand; and GameTek has not heretofore
granted such rights to the Game Titles to any other person, party or
company for use in connection with the Distributed Products;
(ii) Neither the computer software, nor the documentation incorporated
in any Game Title, nor the Game Title itself distributed by Take Two
hereunder, or any part of any character, object, sound or music embodied
therein infringes or shall infringe upon any common law or statutory rights
of any third party including, without limitation, contractual
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rights, patents, copyrights, trade secrets, rights of privacy, or other
intellectual property rights. The Distributed Products will be free of
material defects in materials and workmanship;
(iii) GameTek shall keep Take Two apprised of any material changes to
the delivery dates set forth in Schedule "A" annexed hereto;
(iv) There are no royalties payable to any third parties in respect of
the Game Titles other than those specified in Schedule "A" annexed hereto.
7.3 Take Two shall make no warranties or representations of any kind with
respect to the Distributed Products to any purchaser end-user thereof, whether
express or implied. To the extent permitted by applicable law, GameTek's
warranty set forth in the last sentence of Section 7.2(iii) above, is the only
warranty, express or implied, that GameTek will make to any third party with
respect to the Distributed Products (such warranty to be limited to ninety (90)
days from the date of purchase by the end-user) and all implied warranties
including but not limited to the implied warranties of merchantability and
fitness for a particular purpose are hereby disclaimed. Any product recalls
shall be GameTek's sole responsibility.
7.4 (a) WalMart, Inc. ("WalMart") has claimed that it is entitled to in
excess of $400,000 in credits from GameTek for price protection, returns, stock
balancing and the like. GameTek disputes that it owes WalMart such amount and
has requested that WalMart furnish it with documentation establishing its rights
to all or any part of such amount. GameTek and WalMart have agreed that, to the
extent WalMart establishes its entitlement to any part of such amount through
documentation that is satisfactory to GameTek (such demonstrated and agreed
credit, the "WalMart Agreed Credit"), WalMart shall recoup the WalMart Agreed
Credit solely by taking a 10% discount off the invoiced price of any GameTek
product subsequently purchased by WalMart from GameTek. Take Two shall not offer
any such discount on GameTek products that it sells to WalMart nor shall it
solicit or encourage a request by WalMart for any such discount in connection
with sales made by Take Two to WalMart hereunder. If, however, WalMart demands
such a discount on product purchased by it from Take Two hereunder without any
such offer, solicitation or encouragement by Take Two, then Take Two may grant
WalMart a 10% discount on the invoiced price of any Distributed Products sold to
WalMart hereunder and may recoup the full amount of such discount from amounts
otherwise payable to GameTek hereunder; provided that in no event may Take Two
recoup from GameTek under this Section 7.4(a), in the aggregate, more than the
total amount of the WalMart Agreed Credit.
(b) Toys "R" Us, Inc. ("Toys") has claimed that it is entitled to
approximately $250,000 in credits from GameTek for price protection, returns,
stock balancing and the like. GameTek and Toys have agreed that Toys shall
recoup the full amount of such credit (the "Toys Agreed Credit") solely by
taking a 10% discount off the invoiced price of any GameTek product subsequently
purchased by Toys from GameTek. Take Two shall not offer any such discount on
GameTek products that it sells to Toys nor shall it solicit or encourage a
request by Toys for any such discount in connection with sales made by Take Two
to Toys hereunder. If, however, Toys demands such a discount on product
purchased by it from Take Two hereunder without any such offer, solicitation or
encouragement by Take Two, then Take
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Two may grant Toys a 10% discount on the invoiced price of any Distributed
Products sold to Toys hereunder and may recoup the full amount of such discount
from amounts otherwise payable to GameTek hereunder; provided that in no event
may Take Two recoup from GameTek under this Section 7.4(b), in the aggregate,
more than the total amount of the Toys Agreed Credit.
8. INDEMNIFICATION; INSURANCE.
8.1 Take Two shall indemnify GameTek, its subsidiaries, parents and
affiliates and their respective officers, directors, employees and agents (the
"GameTek Parties") and undertakes to defend the GameTek Parties, and hold the
GameTek Parties harmless from any actions, claims, suits, proceedings, loss,
liability, cost, expense (including reasonable attorney's fees) or damage
suffered by any of them arising out of or connected in any way with any acts,
omissions or misrepresentations by Take Two that constitute a breach of this
Agreement by Take Two or any breach by Take Two of its representations,
warranties or agreements herein made, including without limitation the
reasonable costs of any direct claim by GameTek against Take Two by reason of
the foregoing. GameTek shall not settle any such third party claim or proceeding
without Take Two's prior written consent, which shall not be unreasonably
withheld or delayed. Take Two shall have the right, at its expense, to
participate in the defense thereof with counsel of its choice, provided further
that GameTek shall have the right at all times, in its sole discretion, to
retain or resume control of the conduct thereof. Take Two shall provide GameTek
with any assistance that GameTek reasonably requests in connection therewith at
GameTek's cost.
8.2 GameTek shall indemnify Take Two, its subsidiaries, parents and
affiliates and their respective officers, directors, employees and agents (the
"Take Two Parties") and undertakes to defend the Take Two Parties and hold the
Take Two Parties harmless from any actions, claims, suits, proceedings, loss,
liability, cost, expense (including reasonable attorney's fees) or damage
suffered by any of them arising out of or connected in any way with any acts,
omissions or misrepresentations by GameTek that constitute a breach of this
Agreement by GameTek or any breach by GameTek of its representations, warranties
and agreements herein made, including without limitation the reasonable costs of
any direct claim by Take Two against GameTek by reason of the foregoing. Take
Two shall promptly notify GameTek of any such third party claim or proceeding
and shall not settle any such claim without GameTek's prior written consent,
which shall not be unreasonably withheld or delayed. GameTek shall have the
right, at GameTek's expense, to participate in the defense thereof with counsel
of GameTek's choice, provided that Take Two shall have the right at all times,
in Take Two's sole discretion, to retain or resume control of the conduct
thereof. GameTek shall provide Take Two with any assistance that Take Two
reasonably requests in connection therewith at Take Two's cost.
8.3 (a) Take Two shall obtain and maintain at its own expense, product
liability and errors and omissions insurance from a recognized and qualified
insurance company naming GameTek as insured in the amount of at least $1 million
per occurrence and $2 million in the aggregate against any claims, suits, loss
or damage arising out of any personal injury or property damage arising out of
the Distributed Products. Such policy shall
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not be subject to cancellation or material amendment except after thirty (30)
days prior written notice to GameTek. GameTek will be named as an additional
insured on such policy. As proof of such insurance, a fully paid certificate of
insurance will be submitted to GameTek by Take Two on or before approval by
Nintendo of Japan, Inc. of the final code for the first Game Title released
hereunder.
(b) GameTek shall obtain and maintain at its own expense, product liability
and errors and omissions insurance from a recognized and qualified insurance
company naming Take Two as insured in the amount of at least $1 million per
occurrence and $2 million in the aggregate against any claims, suits, loss or
damage arising out of any personal injury or property damage. Such policy shall
not be subject to cancellation or material amendment except after thirty (30)
days prior written notice to Take Two. Take Two will be named as an additional
insured on such policy. As proof of such insurance, a fully paid certificate of
insurance will be submitted to Take Two by GameTek on or before the execution of
this Agreement approval by Nintendo of Japan, Inc. of the final code for the
first Game Title released hereunder.
9. EXPIRATION OR TERMINATION OF AGREEMENT:
9.1 In the event that GameTek materially breaches this Agreement with
respect to a Game Title hereunder and such breach is not cured within thirty
(30) days after receipt of notice from Take Two of such breach (in the case of
any delay in receipt of final code approval from Nintendo for any Game Title,
GameTek shall not be deemed to be in breach until the ninety (90) day period
referred to in Section 5.1(d) has expired; however, GameTek shall have no
further cure rights with respect thereto), then, without in any way limiting any
of Take Two's other rights and remedies in such event, and notwithstanding any
provision to the contrary contained herein, Take Two shall have the right at its
sole election to terminate this Agreement with respect to the affected Game
Title to which GameTek's material breach relates, upon written notice to GameTek
(the "Termination Notice"). In such event, and without in any way limiting any
of Take Two's rights and remedies, and notwithstanding any provision to the
contrary contained herein, but only with respect to the affected Game Title
which is the subject of the Termination Notice, GameTek shall pay to Take Two an
amount equal to any unrecouped portion of the Guaranty allocable to such Game
Title (as set forth on Schedule "A") and theretofore paid by Take Two to GameTek
hereunder. All such amounts as described above may be deducted from payments to
be made to GameTek hereunder, or Take Two shall have the option to require that
GameTek repay to Take Two any such amount owed pursuant hereto, which GameTek
shall do within thirty (30) days following Take Two's written request therefor.
In addition, if so requested by Take Two, GameTek shall purchase from Take Two
all remaining inventory with respect to the affected Game Title at Take Two's
cost, and Take Two shall deliver such inventory to a location or locations
designated by GameTek upon Take Two's receipt of such purchase price. Payment of
any amount owing to Take Two hereunder shall be made within thirty (30) days of
Take Two's invoice therefor.
9.2 In the event Take Two fails to render any accounting or pay any monies
owing to GameTek hereunder or if Take Two otherwise materially breaches this
Agreement
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with respect to a Game Title hereunder and such breach is not cured within
thirty (30) days (in the case of a payment default, within two (2) business days
after notice of default) after receipt of notice from GameTek of such breach,
then without in any way limiting any of GameTek's other rights and remedies in
such event, and notwithstanding any provision to the contrary contained herein,
GameTek shall have the right at its sole election to terminate this Agreement.
9.3 If either party to this Agreement files a petition in bankruptcy or is
adjudged a bankrupt, or if a petition in bankruptcy is filed against such party
and is not dismissed with prejudice within sixty (60) days (the "bankrupt or
insolvent party"), the other party shall have the right to terminate this
Agreement, upon written notice to the bankrupt or insolvent party.
9.4 Upon any expiration or termination of this Agreement, all rights
granted to Take Two herein shall immediately revert to GameTek, with the
consequences described below. If the expiration or termination relates to less
than all Game Titles covered hereby, then the provisions of this Section 9.4
shall relate only to such affected Game Titles:
(i) Take Two shall continue to satisfy all of its payment obligations
then or at any time thereafter becoming due and payable;
(ii) GameTek shall thereafter be free to distribute or authorize
others to distribute the affected Game Titles;
(iii) Take Two shall not thereafter advertise, distribute or sell
Distributed Products incorporating the affected Game Titles, and will cease
all display, advertising and use of related GameTek Property, except that
Take Two may, if the termination of this Agreement was not by GameTek as a
result of a breach or default by Take Two, sell off existing inventories of
such Distributed Products in the Territory on a non-exclusive basis for a
period of six (6) months (which is equal to the length of the sell-off
period granted to GameTek under its licenses with Califon Productions,
Inc.), subject to all the other terms and conditions hereof. If this
Agreement is terminated by GameTek by reason of a breach or default by Take
Two, then Take Two shall, at GameTek's request ship such inventory at Take
Two's expense to GameTek's California warehouse promptly upon Take Two's
receipt of payment by GameTek of Take Two's manufacturing cost for such
inventory. In any case, Take Two shall, within ten (10) business days after
any expiration or termination of the Exploitation Period for any Game
Title, deliver to GameTek a complete and accurate statement indicating the
number, description and whereabouts of all units of Distributed Products
relating to such Game Title that are in Take Two's inventory as of the date
of such expiration or termination of the applicable Exploitation Period;
and
(iv) Take Two shall return to GameTek all materials furnished to Take
Two by GameTek hereunder with respect to the affected Game Titles or give
evidence satisfactory to GameTek of their destruction.
9.5 Notwithstanding any contrary provision contained herein but subject to
Take Two's exclusive rights with respect to Distributed Products in the
Territory during the
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Basic Term, each of the parties acknowledges and agrees that during the term of
this Agreement and thereafter each party shall be free to market, sell,
distribute, license or sublicense or otherwise deal in or exploit any software
titles, whether for use on personal computers or game console systems, including
titles that may be competitive with the Game Titles, without any liability or
obligation to the other party by reason thereof.
10. NOTICES:
All notices, statements and/or payments to be given to the parties
hereunder shall be addressed to the parties at the addresses set forth on the
first page hereof or at such other address as the parties shall designate in
writing from time to time. All notices shall be in writing and shall either be
served by personal delivery (to an officer of each company), mail, or facsimile
(if confirmed by mail or personal delivery of the hard copy), all charges
prepaid. Except as otherwise provided herein, such notices shall be deemed given
when personally delivered, all charges prepaid, or on the date five (5) days
following the date of mailing, except that notices of change of address shall be
effective only after the actual receipt thereof. Copies of all notices to Take
Two should be sent to Take Two, Attention: Office of the President, with a copy
to Xxxxxx Xxxx & Xxxxxxxx, LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxx Xxxxxx, Esq. Copies of all notices to GameTek
should be sent to GameTek, Attention: Office of the President, and to Xxxxxxxx,
Xxxxxx & Xxxxxx, LLP, 000 Xxxxx Xxxx Xxxx, Xxxxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxx X. Xxxxxx, Esq.
11. MISCELLANEOUS:
11.1 Take Two shall have the right, at its election, to assign any of its
rights or obligations hereunder, in whole or in part, to any subsidiary,
affiliated, or related company, or to any person, firm or corporation owning or
acquiring all or substantially all of Take Two's stock or assets, provided that
any such assignment by Take Two shall not relieve Take Two of its obligations
hereunder, and provided further, that the assignee shall acknowledge to GameTek
in writing that such assignment is subject to, and the assignee agrees to be
bound by, the terms and conditions of this Agreement.
11.2 The entire understanding between the parties hereto relating to the
subject matter hereof is contained herein. There are no representations,
warranties, terms, conditions, undertakings or collateral agreements, express or
implied, between the parties other than as expressly set forth in this
Agreement. This Agreement cannot be changed, modified, amended or terminated
except by an instrument in writing executed by both Take Two and GameTek. The
Schedules annexed hereto constitute a part of this agreement. The headings and
captions used herein are inserted for convenience of reference only and shall
not affect the construction or interpretation of this Agreement. This Agreement
shall not be deemed effective, final or binding upon Take Two or GameTek until
signed by each of them. Only the final, executed Agreement is admissible as the
written agreement between the parties and prior drafts, if any, incorporating
revisions or original language may not be used, and shall not be admissible as
evidence for any purpose in any litigation that may arise between
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the parties. This Agreement shall be deemed to have been drafted by all the
parties hereto, since all parties were assisted by their counsel in reviewing
and agreeing thereto, and no ambiguity shall be resolved against any party by
virtue of its participation in the drafting of this Agreement.
11.3 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 act
other than those specifically referred to therein and shall not be deemed or
construed to be a waiver of such terms or conditions for the future or any
subsequent breach thereof. Except as otherwise provided in this Agreement, all
rights and remedies herein or otherwise shall be cumulative and none of them
shall be in limitation of any other right or remedy.
11.4 This Agreement does not constitute and shall not be construed as
constituting a partnership, joint venture, sublicense or agency relationship
between Take Two and GameTek. Neither Take Two nor GameTek shall have any right
to obligate or bind the other in any manner whatsoever, and nothing herein
contained shall give or is intended to give any rights of any kind to any third
persons.
11.5 Any claim, dispute or disagreement between the parties arising out of
or relating to this Agreement or the transactions or relationships contemplated
hereby shall be resolved by arbitration under the Commercial Arbitration Rules
of the American Arbitration Association, as in effect from time to time before a
single arbitrator in New York City, New York. The decision of the arbitrator
shall be in writing, shall include an award of reasonable attorneys' fees to the
prevailing party, and either party may enter judgment thereon in any court of
competent jurisdiction. Notwithstanding the foregoing, in the event of any
breach or threatened breach by either party of the provisions of this Agreement,
the aggrieved party may seek and obtain a temporary restraining order,
preliminary injunction or other equitable relief restraining such breach or
threatened breach from any court of competent jurisdiction.
11.6 This Agreement shall be governed by the laws of the State of New York
applicable to contracts made to be wholly performed in the State of New York
(without regard to choice of law). Subject to the provisions of Section 11.5
hereof, any action, suit or proceeding may be brought in any of the courts of
the State of New York , in New York City, New York, or any of the federal courts
within the Southern District of New York. Each of the parties hereto irrevocably
submits to the personal jurisdiction of such courts in connection with any such
action, suit or proceeding. In any action, suit or proceeding arising out of or
relating to this Agreement or the transactions or relationships contemplated
hereby (including any arbitration proceeding) the prevailing party will be
entitled to recover court costs and reasonable fees of attorneys, accountants
and expert witnesses incurred by such a party in connection with such action.
Any process in any action or proceeding commenced in such courts may, among
other methods, be served upon GameTek or Take Two, as applicable, by delivering
or mailing the same, via registered or certified mail, return receipt requested,
addressed to GameTek or Take Two, as applicable, at the addresses set forth in
the first page hereof or such other address as the parties, as applicable, may
designate pursuant to Section 10 hereof. Any such service by delivery or mail
shall be deemed to have the same force and effect as personal service within the
State of New York.
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11.7 Except for GameTek's delivery obligations with respect to delivery of
notice of final code approval for the Game Titles pursuant to Schedule "A"
annexed hereto (which are subject to certain exclusive remedy provisions) and as
may otherwise be provided herein, neither party shall be deemed to be in breach
of any of its obligations hereunder unless and until it shall have been given
specific written notice by certified or registered mail, return receipt
requested, of the nature of such breach and it shall have failed to cure such
breach within thirty (30) days (ten days in the case of a payment default) after
receipt of such written notice.
11.8 If any provision of this Agreement is or becomes or is deemed invalid,
illegal or unenforceable under the applicable laws or regulations of any
jurisdiction, such provision will be deemed amended to conform to such laws or
regulations if such amendment can be effected without materially altering the
intention of the parties; otherwise it shall be stricken and the remainder of
this Agreement shall remain in full force and effect.
11.9 Wherever the approval or consent of a party is required hereunder,
such approval or consent shall be in writing and shall not be unreasonably
withheld or delayed.
11.10 If Take Two is not able to receive payment from any customer in
United States dollars because such payment is prohibited or restricted by
applicable laws or governmental regulations, then GameTek's Share may be paid by
Take Two in the same currency in which Take Two receives such payment, applying
Citibank N.A.'s exchange rate as in effect on the date such payment is due to
GameTek.
12. CONFIDENTIAL INFORMATION
12.1 Each party hereto shall keep in confidence and not disclose to any
third party, without the written permission of the other party, the proprietary
information of such other party disclosed under or pursuant to this Agreement.
This requirement of confidentiality shall not apply to information that is (a)
in the public domain through no wrongful act of the receiving party; (b)
rightfully received by the receiving party from a third party who is not bound
by a restriction of nondisclosure; (c) already in the receiving party's
possession without restriction as to disclosure; or (d) required to be disclosed
by applicable rules and regulations of government agencies or judicial bodies.
This obligation of confidentiality shall survive termination of this Agreement.
13. EFFECT ON AGREEMENT OF BANKRUPTCY OF GAMETEK
13.1 This Agreement and all rights and licenses granted by GameTek to Take
Two pursuant to this Agreement are and shall otherwise be deemed to be, for the
purpose of Section 365(n) of the United States Bankruptcy Code (the "Bankruptcy
Code") an executory agreement under which GameTek is a licensor of "intellectual
property" as defined under Section 101(35A) of the Bankruptcy Code. The
provisions of Section 14 herein relating to the source code escrow and any
separate escrow agreements entered into thereunder shall be
- 17 -
considered "supplementary agreements" (as that term is used in the Bankruptcy
Code) to such license and grant of intellectual property rights. GameTek agrees
that if GameTek as a debtor-in-possession or if a trustee in bankruptcy rejects
this Agreement, Take Two may elect to retain its rights under this Agreement as
provided under Section 365(n) of the Bankruptcy Code. Upon written request of
Take Two to GameTek or the trustee in bankruptcy, GameTek or such trustee shall
allow Take Two to exercise its rights under this Agreement and shall not
interfere with the rights of Take Two as provided in this Agreement, provided
that Take Two shall continue to pay all payments as and when due to GameTek
hereunder and shall continue to otherwise perform all of its obligations
hereunder when due.
14. SOURCE CODE ESCROW
14.1 Deposit of Source Code Into Escrow. GameTek represents, warrants and
covenants that, within 10 days after the execution of this Agreement, it shall
deposit a copy of the source code for the Game Titles and all related technical
information necessary to complete and manufacture the Game Titles (except for
proprietary third party software tools) with an escrow agent to be mutually
agreed upon in writing by GameTek and Take Two (the "Escrow Agent"). GameTek
shall provide updated source code and technical information to the Escrow Agent
on a bi-weekly basis in accordance with and as required by this Agreement or any
amendment hereto. Take Two shall be entitled, at its sole cost, to audit the
escrowed source code and technical information periodically at the offices of
the escrow agent to ensure GameTek's compliance with the deposit requirements of
this Section 14, but without making any copies thereof or removing any portion
thereof from the escrow agent's offices. In addition to the foregoing, in the
event of an occurrence of a condition for release of the source code, Take Two
shall be entitled to obtain from GameTek the source code for any portions of the
of the Game Titles or technical information relating thereto, including
work-in-progress, that has been created but not deposited with the Escrow Agent.
Fees and expenses of any Escrow Agent shall be paid by Take Two.
14.2 Conditions for Release of Source Code. Such copies of the source code
and technical information shall be held in escrow and shall be released to Take
Two only upon the payment of any duplication costs and other handling charges of
the Escrow Agent, and only during the term and prior to the termination of this
Agreement, in the event that:
(a) GameTek (i) files a petition for relief or reorganization in
bankruptcy; (ii) makes an assignment for the benefit of creditors or is
adjudicated as bankrupt or insolvent (iii) a custodian, receiver trustee or
other officer with similar powers is appointed for it or its property or
(iv) an involuntary petition in bankruptcy is filed against GameTek which
is not stayed or discharged within ninety (90) days after filing; or
(b) GameTek ceases to actively develop the Game Titles either directly
or indirectly through the loss and non-replacement of key individuals
responsible for development of the Game Titles (such cessation of
development to be deemed conclusively to have occurred in the event of a
delay of ninety (90) days or more in the delivery of any milestone required
to be delivered by GameTek hereunder); or
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(c) GameTek materially fails or discontinues to correct any Bugs or
other defects or comply with any requests by Nintendo for modifications
necessary to obtain required Nintendo approvals and such failure or
discontinuance continues for thirty (30) days after notice of default from
Take Two. GameTek shall promptly provide Take Two with copies of any
request by Nintendo (including memoranda of any oral request), for such
modifications.
14.3 Development of Game Titles. In the event of a release of the source
code pursuant to this Section 14, GameTek shall use its reasonable best efforts
to assign its rights under any applicable agreement with respect to the Game
Titles in order to facilitate the completion of development of such Game Titles.
Take Two may hire any software developer or programmer or outside development
companies, regardless of whether such persons or entities were previously
employed by GameTek, in order to complete the development of the Game Titles but
may not solicit any employees or contractors then employed or retained by
GameTek; provided that to the extent that the services of any such employees or
contractors then employed or retained by GameTek are required for the completion
of any Game Title, the parties shall enter into a service sharing arrangement
under which Take Two may obtain the services of such employees and/or
contractors on a part-time or after-hours basis for the purpose of completing
the development of such Game Title as long as such sharing does not materially
interfere with GameTek's operations. GameTek hereby consents to the utilization
by such persons or entitles of intellectual property of GameTek necessary to
complete the development of the affected Game Titles and agrees to cooperate
with Take Two in obtaining the services of persons or entities required to
complete development of the Game Titles.
[Balance of page left blank intentionally.]
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IN WITNESS WHEREOF, the parties hereto have signed this agreement as of the
day and year first above written.
TAKE TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Xxxx Xxxxx
-----------------------------------
Its: CEO
-----------------------------------
Date: July 29, 1997
-----------------------------------
GAMETEK, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Its: Authorized Signer
----------------------------------
Date: July 29, 1997
---------------------------------
72371 (taken from 72342)
[Signature page to GameTek/Take Two N64 Distribution Agreement.]
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SCHEDULE A
Game Titles:
a. Wheel of Fortune for the Nintendo N64 game system
b. Jeopardy! for the Nintendo N64 game system
Milestone Schedule:
a. Written notice of final code approval for Wheel of Fortune - September
18, 1997.
b. Written notice of final code approval for Jeopardy! - November 10,
1997
Third Party Royalties:
a. Wheel of Fortune: (i) (**)% of the aggregate of (i) GameTek's Cost of
Goods, (ii) the GameTek Share, and (iii) all Third Party Royalties (exclusive of
any Third Party Royalties payable to Califon Productions, Inc.) with respect to
each unit, payable to Califon Productions, Inc.; and
(ii) $(**) per unit, payable to Xxxxx Xxxxx.
b. Jeopardy!: (i) (**)% of the aggregate of (i) GameTek's Cost of Goods,
(ii) the GameTek Share, and (iii) all Third Party Royalties (exclusive of any
Third Party Royalties payable to Califon Productions, Inc.) of each unit,
payable to Califon Productions, Inc.; and
(ii) $(**) per unit, payable to Xxxx Xxxxxx.
72371 (taken from 72342)
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