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CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24B-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.20
FIRST AMENDMENT TO
GTIS MASTER OPTION AND LICENSE AGREEMENT FOR ATARI PC GAMES
This first amendment agreement (the "First Amendment") is made and
entered into this 12th day of March, 1998, by and between MIDWAY GAMES INC.
("MIDWAY"), a Delaware corporation with offices at 0000 Xxxxx Xxxxxxxxxx Xxxxxx,
Xxxxxxx, XX 00000 and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware
corporation with offices at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
W I T N E S S E T H:
WHEREAS, on March 27, 1996 WMS Industries Inc. ("WMS") and GTIS entered
into a Master Option and License Agreement for Atari PC Games (the "Master Atari
PC Agreement") pursuant to which WMS granted and agreed to cause its subsidiary,
Atari Games Corporation, to grant to GTIS certain rights with respect to the
manufacture, distribution and sale of versions of Games for use on Designated
Multipurpose Computer Platforms; and
WHEREAS, on July 1, 1996 WMS assigned its rights and delegated its
obligations under the Master Atari PC Agreement together with substantially all
other assets and liabilities comprising the video game business of WMS to its
then wholly-owned subsidiary, Midway; and
WHEREAS, GTIS and Midway desire to amend the Master Atari PC Agreement
as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. Definitions. Capitalized terms used, but not otherwise
defined or revised herein, shall have the meanings ascribed to such terms in the
Master Atari PC Agreement or the form of Home Computer Software Distribution and
License Agreement for Atari Games ("Atari Home Computer Software Distribution
and License Agreement") which is annexed to the Master Atari PC Agreement as
Exhibit A.
In addition, Section 1 of the Master Atari PC Agreement shall
be amended to add or replace definitions as follows:
1.1 "Delivery Date" shall have the meaning provided
in Section 6.1 below.
1.2 "Designated Multipurpose Computer Platforms"
shall mean IBM PC or Apple Macintosh or other compatible multipurpose home
computers which utilize floppy disks or CD-ROMS or other stand alone devices
which may hereafter replace or supplement floppy disks or CD-ROMS in all
operating systems now known or hereafter developed or designed for use on the
aforesaid multipurpose home computers. Designated Multipurpose Computer
Platforms shall not for purposes of this Agreement include (a) dedicated home
game systems, such as those marketed by Nintendo(R), Sega(R), Atari(R), Sony(R),
etc. or (b) On-Line Games.
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1.3 "Foreign Rights Only Games" shall have the
meaning provided in Section 3 below.
1.4 "Game" shall mean any coin-operated video game
(including kits), any home video game and any On-Line Game, released by any
member of the Atari Group or by any licensee of the Atari Group for sale in
commercial quantities in the normal course of business. Home video games shall
include games designed for play on dedicated home systems, such as those
marketed by Nintendo, Sega, Atari, Sony, etc. as well as on multipurpose home
computers, such as those marketed by IBM and Apple.
1.5 "Marketing Area" shall have the meaning provided
in Schedule C to the form of Home Computer Software Distribution and License
Agreement annexed as Exhibit A hereto.
1.6 "New Game Option Notice" shall have the meaning
provided in Section 4 below.
1.7 "New Games" shall have the meaning provided in
Section 3 below.
1.8 "New PC Titles" shall have the meaning provided
in Section 3 below.
1.9 "North America" shall mean (a) the United States
of America, its territories, possessions, and United States military
installations worldwide, (b) Canada and (c) Mexico.
1.10 "On-Line Games" shall mean games which require
access to on-line services, including, without limitation, the Internet, as a
substantial element of the game and which may not be played without such on-line
access, whether or not such games also require the use of floppy disks or
CD-ROMS or other stand alone devices or storage media in order to be played.
1.11 "Option Period" shall mean the period commencing
on the Effective Date and ending on the expiration date, including any
extensions thereof, of GTIS' first option to acquire licenses pursuant to
Section 2.1 of the GTIS Master PC Agreement.
1.12 "Reduction Amount" shall have the meaning
provided in Section 7 below.
1.13 "Required Foreign Release Date" shall have the
meaning provided in Section 6.1 below.
1.14 "Section 4 Game" shall have the meaning provided
in Section 4 below.
1.15 "Section 5.6 Game" shall have the meaning
ascribed in Section 5.6 below.
1.16 "Special Marketing Areas" shall have the meaning
provided in Section 6.1 below.
1.17 "Unaccepted PC Projects" shall have the meaning
provided in Section 3 below.
1.18 "Worldwide Rights Games" shall have the meaning
provided in Section 3.5 below.
1.19 "WMS Group" shall be replaced by reference to
"Midway Group," which shall mean Midway or any subsidiary, affiliate or other
entity, a
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majority of whose capital stock is owned directly or indirectly by Midway or
with respect to which during the term of the Master Atari PC Agreement, Midway,
directly or indirectly, has the legal power, without the consent of any third
party, to direct the acquisition of rights to or exploitation of Games on
Designated Multipurpose Computer Platforms. "WMS" shall be replaced by reference
to "Midway." For purposes of clarification, any entity a majority of whose
capital stock is acquired by Midway and any entity a majority of whose capital
stock is acquired by AGC shall not be deemed a member of the Midway Group or the
Atari Group, respectively, with respect to periods preceding the date on which
Midway or AGC, as the case may be, acquired such capital stock, and (i)
coin-operated video games (including kits), home video games or On-Line Games
which were released by such acquired entity prior to its date of acquisition by
the Midway Group or AGC, as the case may be, shall not be deemed to constitute
Games First Released by the Midway Group or the Atari Group, as the case may be,
unless such coin-operated video games, home video games or On-Line Games are
subsequently released by a member of the Midway Group or the Atari Group (which
shall include such acquired entity), respectively, and (ii) coin-operated games
(including kits), home video games or On-Line Games which are released by such
acquired entity on or after its date of acquisition by the Midway Group or AGC
shall be deemed to be Games First Released by the Midway Group or the Atari
Group, as the case may be, (which shall then include such acquired entity), and
shall be available for license by GTIS (subject to all limitations and
contractual agreements theretofore entered into by such acquired entity prior to
the date of its acquisition by the Midway Group or AGC, including any
limitations on the Midway Group's or the Atari Group's right to sublicense or
subdistribute such Games). (As used in the preceding sentence, the term "home
video games" shall have the meaning provided in the second sentence of Section
1.4 above.)
2. Elimination of Early Termination Events. All
references to "Early Termination Event" in the Master Atari PC Agreement are
hereby deleted in their entirety.
3. Termination of Option to License Games for North
America and Japan. Anything in the Master Atari PC Agreement to the contrary
notwithstanding, GTIS shall no longer have a first option to acquire a license
to manufacture, distribute and sell versions of the Games for play on Designated
Multipurpose Computer Platforms (a) in North America and, (b) from and after
March 27, 1998, in Japan (notwithstanding any provisions of the Japan Territory
Agreement to the contrary and without regard to satisfaction of any further
terms or conditions set forth therein), with respect to: (i) multipurpose home
computer games which were not under development by the Atari Group prior to
August 1, 1997, or for which the Atari Group had not made development advances
prior to August 1, 1997 ("New PC Titles"), (ii) Games which were available for
license by GTIS in accordance with Sections 2.4 or 2.5 of the Master Atari PC
Agreement as of the date hereof (i.e., Games which were the subject to a written
notice of availability given by the Atari Group to GTIS prior to the date hereof
and which, as of the date hereof, have not been rejected by GTIS or the period
during which GTIS' option to license such Game has not expired), but which GTIS
had not accepted as of the date hereof ("Unaccepted PC Projects"), or (iii) any
new Games, whether or not GTIS shall have exercised its option to license such
Games prior to the date hereof, First Released by the Atari Group after March 1,
1997 ("New Games"). (New PC Titles, Unaccepted PC Projects and New Games are
hereinafter sometimes referred to collectively as "Foreign Rights Only Games").
Unless the parties shall agree otherwise in writing, there shall be excluded
from Foreign Rights Only Games any New PC Titles, Unaccepted PC Projects and New
Games which have heretofore been offered to GTIS and which GTIS has declined to
accept, or for which the period during which GTIS had the right pursuant to
Sections 2.4 and 2.5 of the Master Atari PC Agreement to accept such Games has
expired. For clarification purposes, notwithstanding the termination of the
Japan Territory
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Period, (i) Home Computer Software Distribution and License Agreement for Atari
Games entered or deemed entered into prior to the termination of the Japan
Territory Period (i.e., on or before March 27, 1998) and still in effect on
March 27, 1998 shall continue for their term, and (ii) Games which are available
for license by GTIS in accordance with this Agreement as of March 27, 1998
(i.e., Games which were subject to a New Game Option Notice given or to be given
to GTIS by the Atari Group prior to March 27, 1998, and which, as of such date,
have not been rejected by GTIS or the period during which GTIS' option to
license such Game has not expired) shall continue to be available for license by
GTIS in Japan in accordance with the terms of this Agreement and the related
Home Computer Software Distribution and License Agreement for Atari Games.
3.1 Section 2.1 of the Master Atari PC Agreement
shall be amended to provide that GTIS shall have a first option to acquire a
license, in the form of the Atari Home Computer Software Distribution and
License Agreement (as amended pursuant to Section 3.3 below), to manufacture,
distribute and sell outside of North America and, from and after March 27, 1998,
outside of Japan, versions of Foreign Rights Only Games which become Accepted
Games during the Option Period for use solely on Designated Multipurpose
Computer Platforms, provided that such Foreign Rights Only Games are First
Released by the Atari Group or its licensees in North America for play on
Designated Multipurpose Computer Platforms during the Option Period.
3.2 Section 2.2 of the Master Atari PC Agreement
shall be amended to provide that the Atari Group shall not grant a license to
any third parties to manufacture, distribute and sell versions of a Foreign
Rights Only Game in the Licensed Territory, if such Foreign Rights Only Game
would be subject to GTIS' first option to manufacture, distribute and sell
versions of such Foreign Rights Only Game in the Licensed Territory on
Designated Multipurpose Computer Platforms, until such time as GTIS shall have
declined to acquire a license, or the option periods specified in Sections 2.4
or 2.5 of the Master Atari PC Agreement, whichever is applicable, shall have
expired or the applicable Atari Home Computer Software License Agreement shall
otherwise permit. GTIS understands, acknowledges and agrees that (a) with
respect to Foreign Rights Only Games manufactured by the Atari Group under
license from or which are purchased or otherwise acquired from third parties,
the rights granted by the Atari Group to GTIS (i) cannot exceed the rights
obtained by the Atari Group with respect to such Foreign Rights Only Games, (ii)
will be limited to the Licensed Territory, and (iii) are subject to all
limitations imposed on the Atari Group and are subject to all contractual
agreements theretofore entered into by such third party licensors or other
transferors, including limitations on the Atari Group?s right to sublicense or
subdistribute, and the form of Atari Home Computer Software License Agreement
will be deemed modified to the extent so required; and (b) although the Atari
Group is developing Games in the normal course of business, the Atari Group is
under no obligation to develop Games or to present any minimum number of Games
to GTIS under the Master Atari PC Agreement. If the Atari Group develops any
Game internally, then the Atari Group shall, subject to all of the provisions of
the Master Atari PC Agreement, including without limitation the provisions of
Sections 2.1, 2.2, 2.4 and 2.5 thereof (as herein amended), and Sections 4 and
5.5 below, offer to license the Game to GTIS for exploitation throughout the
Licensed Territory in accordance with the terms of the Master Atari PC Agreement
as herein amended. The Atari Group also agrees to use its best efforts to
acquire rights to exploit Games on Multipurpose Home Computer Platforms
throughout the Licensed Territory when it acquires rights to exploit Games on
Multipurpose Home Computer Platforms in North America, provided that the Atari
Group shall not be obligated to acquire such rights if it determines, in its
reasonable judgement, that such rights are not available on commercially
acceptable terms or terms which, in the reasonable judgement of the Atari Group,
would make it uneconomical for the Atari Group to acquire and license such
rights to GTIS hereunder, having due regard for economic and other terms
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and conditions generally applicable to the acquisition of similar rights for
comparable Games in the software industry. If the Atari Group shall determine
that rights to exploit a Game for play on Multipurpose Home Computer Platforms
throughout the Licensed Territory are not available in accordance with the
preceding sentence, then the New Game Option Notice delivered by the Atari Group
to GTIS with respect to such Game shall so indicate.
3.3 The form of the Atari Home Computer Software
Distribution and License Agreement with respect to all Foreign Rights Only Games
and Section 4 Games shall be amended and restated as provided in Exhibit A
hereto.
3.4 Anything herein or in the Master Atari PC
Agreement to the contrary notwithstanding, GTIS shall no longer have the first
option to acquire a license to manufacture, distribute and sell versions of any
Games for play on Designated Multipurpose Home Computers which (a) are Projects
in Progress, except only to the extent that such Projects in Progress constitute
Worldwide Rights Games and are listed on Schedule 1 hereto; or (b) are not
Foreign Rights Only Games (including Section 4 Games).
3.5 A list of those Accepted Games with respect to
which GTIS shall continue to be entitled to manufacture, sell and distribute
Licensed Products in all locations worldwide, including North America (subject
to third party territorial limitations) ("Worldwide Rights Games"), pursuant to
Atari Home Computer Software Distribution and License Agreements is annexed
hereto as Schedule 1.
3.6 Midway represents and warrants that set forth on
Schedule 2 annexed hereto is a complete list of all Games First Released (and
the platform upon which the Game was First Released) by the Atari Group for the
coin-operated, home video or On-Line markets after March 29, 1996.
4. Games Which Are Not Developed by the Atari Group for
Play on Designated Multipurpose Computer Platforms. With respect to Foreign
Rights Only Games which have not heretofore been the subject of a written notice
of availability given by the Atari Group to GTIS in accordance with Sections 2.4
or 2.5 of the Master Atari PC Agreement, the Atari Group shall indicate, in its
notice to GTIS pursuant to Section 2.4 or 2.5 of the Master Atari PC Agreement
(a "New Game Option Notice"), in addition to the information otherwise required
to be provided therein (as amended hereby), whether the Atari Group intends to
develop such Game for play in North America on a Designated Multipurpose
Computer Platform (and if so, on which such Designated Multipurpose Computer
Platform(s) (e.g., IBM, Macintosh, etc.) the Atari Group intends to develop such
Game). If the New Game Option Notice shall indicate that the Atari Group does
not intend to develop such Game for play in North America on a Designated
Multipurpose Computer Platform (or on all Designated Multipurpose Computer
Platforms which GTIS desires to license), then, notwithstanding the proviso at
the end of Section 3.1 above, GTIS may elect to exercise its option to license
such Game for play on a Designated Multipurpose Computer Platform by notice
given in the manner and within the time specified in Section 2.4 or 2.5 of the
Master Atari PC Agreement. A Game which the Atari Group has indicated its
intention not to develop for play in North America on a Designated Multipurpose
Computer Platform is hereinafter referred to as a "Section 4 Game". Upon receipt
of such notice from GTIS, the Atari Group will provide to GTIS or to a third
party developer selected by GTIS an IBM PC or compatible and/or Macintosh
readable disc or discs containing the source code for such Section 4 Game and,
if required by GTIS and available, samples of coin-operated game printed circuit
boards, graphics, sound and music data, user instruction materials, and such
other materials and technical support as are applicable and reasonably available
to the Atari Group for the conversion or development of such Section 4 Game for
play on the Designated Multipurpose Computer Platform. The
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obligation of the Atari Group to furnish such materials is subject to the timely
execution of a confidentiality agreement between the Atari Group and each third
party developer, converter and/or translator involved in the development of the
Section 4 Game in accordance with the Atari Group's usual terms and conditions
for confidentiality agreements with its developers and the requirements of any
third party having rights in the Game. GTIS shall be solely responsible for
developing, converting and localizing such Section 4 Games for play on the
Designated Multipurpose Computer Platform and shall bear [*] of the development
costs (including [*] of any advances) and Third Party Fees and Royalties and
out-of-pocket expenses incurred in connection therewith. Without limiting the
generality of the foregoing, GTIS shall be solely responsible for [*] costs of
programming, artwork, music and sound effects and testing, whether such
development work is performed by the Atari Group or third party developers,
including language translation providers, which GTIS elects to engage for such
purpose. None of such development costs and out-of-pocket expenses incurred by
GTIS shall be recoupable or repayable to GTIS in any manner or for any reason.
Any third party developer designated by GTIS to develop, convert and/or localize
the Section 4 Game for play on the Designated Multipurpose Computer Platform
shall be subject to the consent of the Atari Group, which consent shall not
unreasonably be withheld or delayed. Prior to any manufacture, distribution or
release of the Section 4 Game version by GTIS, GTIS shall furnish to the Atari
Group a completed and functioning Technically Acceptable Master Disc (together
with source code and all related development materials) for the Section 4 Game
version for its prior written approval, which shall not unreasonably be withheld
or delayed. The Atari Group shall own all copyrights, trademarks, intellectual
property and code of such Game version, other than "Pre-Existing Third Party
Materials" and generally available commercial software and any agreement between
GTIS and any third party developer shall explicitly so provide. The Atari Group
shall not, however, own the following (collectively, "Pre-Existing Third Party
Materials"): pre-existing utilities which are proprietary to GTIS, its
developers or their respective licensors and modifications thereto created
during development of the Game version by GTIS and not derived from the
intellectual property rights in the Game or any other materials furnished by the
Atari Group. GTIS will grant or cause its third party developer and all
licensors and others having rights to such Pre-Existing Third Party Materials to
grant to the Atari Group an irrevocable, worldwide, non-exclusive license with
respect to such Pre-Existing Third Party Materials, in perpetuity, without
payment of any royalties (except only the same per unit royalties, if any, as
may be payable by GTIS to its unaffiliated third party developers or licensors
for the use of such Pre-Existing Third Party Materials in connection with sales
by GTIS of the Game version), with the right to sublicense, to reproduce,
display, perform, distribute, make derivative works of, make, sell and otherwise
use such Pre-Existing Third Party Materials in connection with the development,
reproduction, manufacture, marketing, sale, distribution, display, performance,
licensing and other exploitation of the Game version and sequels, conversions or
adaptations (e.g., to other game platforms), or other software derivative works
of the Game version or Game, and any agreement between GTIS and any third party
developer shall contain any provisions necessary for GTIS to grant such license.
With respect to any generally available commercial software which is used in
developing the Section 4 Game version, GTIS shall identify such commercially
available software and the means by which it was used in connection with the
Section 4 Game version at the time that GTIS delivers the Technically Acceptable
Master Disc to the Atari Group as provided above, rather
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* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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than providing the source code of such software (or the executable form of such
software other than as found in the Technically Acceptable Master Disc).
5. Development of Foreign Rights Only Games.
5.1 Sections 2.4 and 2.5 of the Master Atari PC
Agreement are amended to provide that, except as provided above with respect to
Section 4 Games, GTIS shall not be required to pay to the Atari Group [*]
portion of the Atari Group's costs of code development for Foreign Rights Only
Games. GTIS shall be solely responsible for contracting with third party
developers (including, without limitation, the Atari Group) and language
translation providers which it elects to engage to translate and localize
Foreign Rights Only Games and, subject to the obligations of the Atari Group to
encode language translations on a new Technically Acceptable Master Disc
pursuant to Section 10 of the Home Computer Software Distribution and License
Agreement, GTIS shall bear [*] of the costs and out-of-pocket expenses incurred
in connection therewith, none of which costs shall be recoupable or repayable to
GTIS in any manner or for any reason. Any third party developer designated by
GTIS to translate and/or localize the Game for play on the Designated
Multipurpose Computer Platform shall be subject to the consent of the Atari
Group, which consent shall not unreasonably be withheld or delayed.
5.2 Anything to the contrary in Sections 2.4 or 2.5
of the Master Atari PC Agreement notwithstanding, all New Game Option Notices
given by the Atari Group to GTIS with respect to Foreign Rights Only Games need
not set forth a proposed budget for developing a Technically Acceptable Master
Disc for such Game for play on Designated Multipurpose Computer Platforms or the
identity of the Atari Group's proposed developer or developers. The Atari Group
shall not be required to afford GTIS an opportunity to consult with the Atari
Group prior to the Atari Group determining the proposed budget, time frame and
developers.
5.3 If the Atari Group shall notify GTIS in writing
that the Atari Group has determined to develop or acquire a Game for play on
Designated Multipurpose Computer Platforms that it has not theretofore developed
or acquired for the coin-operated or dedicated home game player market pursuant
to Section 2.5 of the Master Atari PC Agreement, such notice shall describe in
reasonable detail the proposed characteristics of the Game and shall set forth
an estimated time frame for developing Technically Acceptable Master Discs for
such Game for play on one or more Designated Multipurpose Computer Platforms. No
estimated budgetary information need be given and GTIS shall have no
responsibility to pay to the Atari Group [*] portion of the costs of code
development with respect to the North American version of such Game. Each such
notice given by the Atari Group to GTIS pursuant to Section 2.4 or 2.5 of the
Master Atari PC Agreement relating to a Game the rights to which are derived
from a license or other agreement with a third party shall set forth a summary
of any material limitations upon the scope of the license in respect thereof
which may be granted to GTIS hereunder, and the amount or method of determining
third party royalties payable thereunder, but such notice need not include any
terms of such license or other agreement to the extent that such terms are
applicable only to platforms other than Designated Multipurpose Computer
Platforms or territories outside of the Licensed Territory.
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* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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5.4 Sections 2.7, 2.8, 2.11, 2.12, and 2.14 of the
Master Atari PC Agreement shall not apply to Foreign Rights Only Games and are
hereby deleted. Notwithstanding the foregoing, however, nothing herein or in the
Master Atari PC Agreement shall be deemed to prevent the Atari Group from
electing to terminate development of a Game or a version of a Game designed for
play on a specific Designated Multipurpose Computer Platform, including a
Foreign Rights Game which has theretofore been the subject of a New Game Option
Notice, at any time prior to the First Release of such Game or Game version if
the Atari Group determines in its sole discretion that further development work
is not technically feasible or economically desirable, provided that, the Atari
Group shall not terminate the development by GTIS of a Section 4 Game. Anything
herein or in the Master Atari PC Agreement to the contrary notwithstanding, if
the Atari Group does not actually First Release a Game on any platform
notwithstanding its original intention to do so (and whether or not the Atari
Group shall theretofore have furnished a New Game Option Notice to GTIS with
respect to such Game), then any option to license the Game shall terminate and
if GTIS has returned a New Game Option Notice electing to accept such Game, the
Atari Group shall notify GTIS of its decision not to release the Game.
5.5 Anything herein (including without limitation
anything in Section 5.4 above) to the contrary notwithstanding, if the Atari
Group elects to terminate development of a Foreign Rights Only Game version for
a Designated Multipurpose Computer Platform which has therefore been the subject
of a New Game Option Notice and if the Atari Group has theretofore commenced and
is then continuing to develop a version of such Foreign Rights Only Game for
release on another home video game platform in North America, then (unless GTIS
shall theretofore have declined to accept such Foreign Rights Only Game or the
period during which GTIS had the right, pursuant to Sections 2.4 and 2.5 of the
Master Atari PC Agreement to accept such Foreign Rights Only Game, has expired)
the Atari Group shall so notify GTIS in writing (a "Termination Notice"). GTIS
shall then have the right upon written notice to the Atari Group (a "Notice of
Assumption"), given within 30 days following its receipt of such Termination
Notice, to assume the continued development of such Foreign Rights Only Game for
the Designated Multipurpose Computer Platform (provided that such Foreign Rights
Only Game version is being developed by the Atari Group internally and not under
any license or other agreement with a third party, unless the Atari Group shall
otherwise have the right to permit GTIS to assume the development of such
Foreign Rights Only Game version) which shall thereupon be deemed and shall
become a Section 4 Game. Nothing herein shall be deemed to require the Atari
Group, when it acquires intellectual property or other rights from any third
party in connection with a Foreign Rights Only Game, to also obtain the right to
permit GTIS to assume the continued development of any Foreign Rights Only Game
version for the Designated Multipurpose Computer Platform pursuant to this
Section 5.5. If GTIS shall elect to assume the development of a Foreign Rights
Only Game version for the Designated Multipurpose Computer Platform pursuant to
a Notice of Assumption, the Atari Group shall offer to make available to GTIS
all materials and work in process to date relating to the development of such
Foreign Rights Only Game version for the Designated Multipurpose Computer
Platform, provided that GTIS shall have paid to the Atari Group the amount
specified in the Termination Notice which shall represent [*] of the costs of
development of the Foreign Rights Only Game version for the Designated
Multipurpose Computer Platform and any advances of Third Party Fees and
Royalties incurred or paid to the date of such Notice of Assumption. If GTIS
shall be unwilling or fail to pay [*]
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* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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development costs and advances of Third Party Fees and Royalties assumed by the
Atari Group as specified in the Termination Notice, the Atari Group shall not be
required to make available to GTIS any materials or work in process relating the
development of the Foreign Rights Only Game version for the Designated
Multipurpose Computer Platform. If GTIS shall have assumed the development of a
Foreign Rights Only Game version for the Designated Multipurpose Computer
Platform as provided in this Section 5.5 above, GTIS shall thereafter be solely
responsible for payment of [*] Third Party Fees and Royalties with respect to
such Game version.
5.6 A game project which GTIS may hereafter propose
for development pursuant to Section 2.15 of the Master Atari PC Agreement from
the existing library of Atari Group games set forth in Schedule 2 to the Master
Atari PC Agreement is referred to as a "Section 5.6 Game."
Section 2.15 of the Master Atari PC Agreement shall be
amended to provide that: (a) royalties payable to AGC which are applicable to
the exploitation of a Section 5.6 Game in North America shall not be recoupable
by GTIS; (b) upon completion of a Technically Acceptable Master Disc containing
a Section 5.6 Game, GTIS shall submit such Technically Acceptable Master Disc,
together with all related materials to AGC for approval pursuant to Section 7.1
of the Home Computer Software Distribution and License Agreement for Atari
Games. Within 30 business days following receipt by AGC of a playable demo
comprising at least ninety (90%) percent of the complete game, together with the
following information: (i) applicable per unit third party developer royalties;
(ii) the configuration of the media on which the Section 5.6 Game will be sold
to the consumer; (iii) the required and recommended configurations of the
Designated Multipurpose Computer Platform on which the Section 5.6 Game is to be
played and (iv) a list of all original equipment manufacturer hardware with
which the Section 5.6 Game is compatible, AGC will notify GTIS whether or not
AGC elects to distribute such Section 5.6 Game in North America and Japan; (c)
if AGC shall elect to distribute the Section 5.6 Games in North America or
Japan, (x) AGC will pay applicable unaffiliated third party developer royalties
to GTIS for each unit sold (pursuant to Section 6 of the Home Computer Software
Distribution and License Agreement for Atari Games), provided that such
unaffiliated third party developer royalties shall not exceed GTIS' own
developer royalties paid for units of the Section 5.6 Game which are sold by
GTIS or its affiliates outside North America at the same Net Wholesale Sales
Price; and (y) GTIS will not be required to pay Third Party Fees and Royalties,
advertising or manufacturing costs with respect to exploitation of the Section
5.6 Game in North America or Japan (except as otherwise provided with respect to
Japan).
6. Marketing.
6.1 The Atari Group shall promptly notify GTIS in
writing with respect to the date upon which the Atari Group shall have First
Released an Accepted Game which is a Foreign Rights Only Game in North America
for play on Designated Multipurpose Computer Platforms (the "Delivery Date").
Within ninety (90) days following its receipt of such notice and a Technically
Acceptable Master Disc with respect to such Foreign Rights Only Game, GTIS shall
notify the Atari Group whether it intends to release such Foreign Rights Only
Game for play on Designated Multipurpose Home Computer Platforms in any or all
of the following countries: Germany, France, the United Kingdom and Australia
("Special Marketing Areas"). Unless GTIS shall have advised the Atari
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
9
10
Group that it does not intend to release such Foreign Rights Only Game in any of
such Special Marketing Areas, GTIS shall commence actively marketing and selling
such Foreign Rights Only Game in reasonable commercial quantities in such
Special Marketing Areas and in all other Marketing Areas within six (6) months
following such Delivery Date. If GTIS shall have notified the Atari Group that
it does not intend to release an Accepted Game which is a Foreign Rights Only
Game in any Special Marketing Areas or other Marketing Areas, or if GTIS or its
sublicensees shall have failed to commence actively marketing and selling an
Accepted Game which is a Foreign Rights Only Game in any Special Marketing Area
or other Marketing Areas as of a date which is not later than six (6) months
following the Delivery Date with respect to such Accepted Game (the "Required
Foreign Release Date"), then the Atari Group shall have the right, in addition
to any other rights which the Atari Group may have hereunder or under any Atari
Home Computer Software Distribution and License Agreement, upon thirty (30) days
written notice to GTIS, to terminate GTIS' or its sublicensee's right to sell
and distribute such Accepted Game in such Special Marketing Area or other
Marketing Area. Notwithstanding the foregoing, if GTIS shall not have obtained
from the Atari Group all key materials (i.e., the Technically Acceptable Master
Disc, previously requested artwork for U.S. advertising, promotional materials
and packaging) and all necessary approvals from third parties with respect to
such Foreign Rights Only Game (despite GTIS' reasonable efforts to obtain or
assist the Atari Group to obtain on GTIS' behalf such approvals) at least ninety
(90) days prior to the Required Foreign Release Date, then such Required Foreign
Release Date shall be extended until ninety (90) days following the date on
which GTIS has obtained all such necessary key materials and third party
approvals with respect to such Foreign Rights Only Game. If the Atari Group
shall terminate GTIS' right to distribute an Accepted Game in a Special
Marketing Area or other Marketing Area as provided above, then such Special
Marketing Area or other Marketing Area shall be deemed excluded from the
Licensed Territory with respect to such Accepted Game and the Atari Group shall
(a) have the right to sell and distribute or enter into a sublicense agreement
with a third party to sell and distribute such Accepted Game in such Special
Marketing Area or other Marketing Area and (b) have no obligation to pay over or
to account to GTIS with respect to any portion of the proceeds of sale of such
Accepted Game by the Atari Group or its sublicensees in such Special Marketing
Area or other Marketing Area.
For purposes of documenting compliance with this Section 6,
GTIS shall submit a report, as of a date six (6) months following the Delivery
Date, listing the Special Marketing Areas and any other Marketing Area in which
GTIS has not commenced actively marketing and selling an Accepted Game which is
a Foreign Rights Only Game. Such report shall be sent to the Atari Group within
forty-five (45) days after the end of said six (6) month period, and shall
indicate the status for each Special Marketing Area and any other Marketing Area
(indicating the date of the Atari Group's First Release and whether a
sublicensee has been appointed). Such summary report shall be made in good
faith, using the best available information as of the date the report is
submitted.
6.2 The Atari Group shall notify GTIS within 90 days
following the Delivery Date if the Atari Group does not intend to release an
Accepted Game which is a Foreign Rights Only Game for play on Designated
Multipurpose Home Computer Platforms in Japan. If the Atari Group shall not have
so notified GTIS, but the Atari Group or its licensee shall nonetheless fail to
release and commence actively selling and distributing such a Foreign Rights
Only Game version in Japan within six (6) months following its Delivery Date,
then the Atari Group shall so notify GTIS within 45 days following the
expiration of such six-month period. If the Atari Group shall have notified GTIS
that it does not intend to release an Accepted Game which is a Foreign Rights
Only Game for play on Designated Multipurpose Home Computer Platforms or that it
has failed to release such Foreign Rights Only Game version in Japan as
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
10
11
provided above (in either case, a "Notice"), then GTIS shall have the right,
upon written notice given within 30 days following its receipt of such Notice
from the Atari Group to elect to sell and distribute, or to enter into
sublicensing arrangements to sell and distribute, such Foreign Rights Only Game
for play on Designated Multipurpose Home Computer Platforms in Japan. Any
distribution by GTIS of such a Foreign Rights Only Game version in Japan shall
be in accordance with all of the terms and conditions of the applicable Atari
Home Computer Software Distribution and License Agreement, except that GTIS
shall be solely responsible for payment of all Third Party Fees and Royalties
allocable to the sale of the Game version in Japan and the costs of localizing
the Game version in a new Technically Acceptable Master Disc. (GTIS shall not be
required to pay costs of encoding which are Midway's responsibility under
Section 10 of the Home Computer Software Distribution and License Agreement for
Atari Games.) GTIS' or its sublicensee's right to elect to manufacture, sell and
distribute a Foreign Rights Only Game for play on Designated Multipurpose Home
Computer Platforms in Japan in accordance with this Section shall terminate (and
the Licensed Territory shall cease to include Japan) if GTIS or its sublicensee
shall not have commenced actively marketing such Foreign Rights Only Game
version in Japan within six (6) months following its receipt of the Notice from
the Atari Group referred to above.
7. Reduction in Minimum Guaranteed Advance Royalty. In
consideration for the termination of GTIS' first option to acquire licenses to
manufacture, distribute and sell versions of the Foreign Rights Only Games in
North America and Japan, the Midway Group is paying to GTIS the sum of [*]
Dollars (the "Reduction Amount") by wire transfer of immediately available
funds, which sum shall constitute a reduction of the Minimum Guaranteed Advance
Royalty heretofore paid by GTIS to WMS pursuant to the Master Atari PC
Agreement. The amount which GTIS shall be entitled to recoup out of royalties as
provided in (a) the Atari Home Computer Software Distribution and License
Agreements entered into pursuant to the Master Atari PC Agreement, (b) the Atari
Home Video Distribution and License Agreements entered into pursuant to the
Master Atari Home Video Agreement, as amended, and (c) to the extent not so
recouped from those agreements, out of royalties to the extent provided in the
GTIS Master PC Agreement (as amended) and the GTIS Master Home Video Agreement
(as amended) and related license agreements shall be reduced by the Reduction
Amount being paid concurrently herewith.
8. Representations and Warranties. The representations set
forth in Section 4 and 5 of the Master Atari PC Agreement shall be deemed
confirmed with respect to the Master Atari PC Agreement as amended by this
agreement and made again as of the date hereof by Midway and GTIS, respectively.
9. Confidential Information. The provisions of Section 6
of the Master Atari PC Agreement (as heretofore amended) shall remain in full
force and effect and shall continue to apply to such agreement as amended
hereby.
10. Notices. Notices to the Midway Group shall be sent in
the manner set forth in Section 7 of the Master Atari PC Agreement to:
Atari Games Corporation
c/o Midway Games Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
11
12
Xxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxxxxx, President
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
With copies to:
Midway Home Entertainment Inc.
0000 Xxxxx Xxxxxxxx Xxxxxxx 00
Xxxxxxxxx, Xxxxx 00000
Attention: Mr. Xxxxx Xxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
Midway Home Entertainment Inc.
0000 Xxxxx Xxxxxxxx Xxxxxxx 00
Xxxxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Shack & Xxxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
Notices to GTIS shall also be sent with a copy to:
GT Interactive Software Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxxxxx, Esq.
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
11. Miscellaneous. The third sentence of Section 10.1 of
the Master Atari PC Agreement is hereby deleted.
12. Assumption of Obligations. The parties and WMS hereby
confirm the assumption by Midway of all rights, obligations and liabilities of
WMS under the Master Atari PC Agreement, provided, however, that WMS shall
continue to remain liable for its obligations under the Master Atari PC
Agreement or under any Atari Home Computer Software Distribution and License
Agreement entered into pursuant thereto.
13. Other Provisions. Except as otherwise set forth
herein, the Master Atari PC Agreement shall remain in effect in accordance with
its terms.
12
13
14. Counterparts. This amendment agreement may be
executed in counterparts each of which shall be deemed an original and when
taken together shall be deemed one and the same document.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
MIDWAY GAMES INC.
By:/s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
Vice President & Secretary
GT INTERACTIVE SOFTWARE CORP.
By:/s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx
President, International Division
Business Affairs
Agreed as to Section 12 above:
WMS INDUSTRIES INC.
By:/s/ Xxxxx X. Xxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
Vice President & Secretary
13
14
Schedule 1
Worldwide Rights Games
Title Platform
----- --------
T-MEK IBM PC/DOS(1)
Return Fire IBM PC/Windows 95(2)
Area 51 IBM PC/Windows 95(2)
-------------------
(1) License agreement provided to GTIS; never signed.
(2) License agreement executed.
14
15
Schedule 2
AGC New Games First Released Since March 29, 1996(1)
Title Platform of First Release
----- -------------------------
The NHLPA & NHL Present Xxxxx Xxxxxxx'x 3D Hockey Nintendo 64 or Coin-op
San Xxxxxxxxx Xxxx: Extreme Racing Coin-op
Maximum Force Coin-op
Xxxx: The Dark Age Coin-op
San Xxxxxxxxx Xxxx: The Rock Coin-op
Surf Planet Coin-op
California Speed Coin-op
The NHL & NHLPA Present Xxxxx Xxxxxxx'x 3D Hockey '98 Nintendo 64
Olympic Hockey Nagano '98 Nintendo 64
Arcade's Greatest Hits - Atari Collection 1 PlayStation
Ms. Pac-Man SNES
Arcade's Greatest Hits - Atari Collection 2 PlayStation
--------
(1)Also includes Games included in the Atari Group library on March 29,
1996 but which are re-released with new copyright notices or other changes after
March 29, 1996. Excludes Projects in Process (on any platform - e.g., Area 51
for Saturn is not included because it corresponds to Area 51 for PC CD-ROM).
15
16
CERTAIN INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
PURSUANT TO RULE 24B-2 UNDER THE SECURITIES AND EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT A
HOME COMPUTER SOFTWARE
DISTRIBUTION AND LICENSE AGREEMENT FOR ATARI GAMES
AGREEMENT made this ___ day of __________, 199__, by and between GT
INTERACTIVE SOFTWARE CORP., a Delaware corporation with offices at 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (herein called "Licensee") and ATARI GAMES
CORPORATION, a California corporation with offices at c/o Midway Games Inc.,
0000 Xxxxx Xxxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (herein called
"Licensor").
W I T N E S S E T H:
WHEREAS, Licensor owns or controls the rights in and to the Licensed
Property (which Licensed Property is hereinafter defined on Schedule A attached
hereto);
WHEREAS, Licensee is engaged in the business of manufacturing,
distributing and selling Computer Games (as hereinafter defined; such Computer
Games embodying the Licensed Property shall be hereinafter referred to as the
"Licensed Product");
WHEREAS, Licensee desires to use the Licensed Property in connection
with the manufacture, distribution and sale of the Licensed Product;
WHEREAS, Licensor has obtained rights in and to the Licensed Property
from the following third parties: [insert list](the "Third Parties");
WHEREAS, pursuant to the Master Atari PC Agreement (as defined below)
this Agreement, which is in a form agreed upon by the parties for their
transactions under the Master Atari PC Agreement generally, is to be modified as
required to comply with Licensor's contracts with the Third Parties relating to
the Licensed Property (the "Third Party Contracts"); and
WHEREAS, SCHEDULE A ATTACHED HERETO CONTAINS MATERIAL LIMITATIONS ON
LICENSEE'S LICENSE TO THE LICENSED PROPERTY UNDER THIS AGREEMENT IMPOSED BY THE
THIRD PARTY CONTRACTS, WHICH CONTRACTS CONTROL OVER THE BODY OF THIS AGREEMENT.
THE BODY OF THIS AGREEMENT HAS BEEN LEFT SUBSTANTIALLY IN THE FORM FOUND
ATTACHED TO THE MASTER ATARI PC AGREEMENT.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
1.1. The term "Computer Game" is herein defined as any
Computer Software designed to operate on IBM PC or Apple Macintosh or other
compatible multipurpose home computers, which utilize floppy disks or CD-ROMs or
other stand alone devices which may hereafter replace or supplement floppy disks
or CD-ROMS in all operating systems now known or hereafter developed or designed
for use on the aforesaid multipurpose home computers. Computer Games shall not
include, among other things, (a) Computer Software designed to operate on
dedicated home game systems, such as those marketed by Nintendo(R), Sega(R),
Atari(R), Sony(R), etc. or (b) On-Line Games.
1
17
1.2. The term "Computer Software" or "Software" shall mean
any computer software containing substantially full and complete computer game
code, including the source code, the assembly code, the object code and such
data files and other files as are deemed necessary for the Licensed Product to
achieve its functional purpose, whereby data and visual images, with or without
sound, can be manipulated, communicated, reproduced or perceived with the aid of
a computer.
1.3. The term "Delivery Date" shall have the meaning ascribed
in Section 6.1 of the First Amendment to the Master Atari PC Agreement.
1.4. The term "Exporter" shall have the meaning ascribed in
Section 3.3 hereof.
1.5. The term "Japan Territory Agreement" shall mean the
letter from WMS Industries Inc. to Licensee dated Xxxxx 00, 0000 xxxxxxxxx
"Xxxxx Xxxxxxxxx".
1.6. The term "Japan Territory Period" shall have the meaning
ascribed in the Japan Territory Agreement.
1.7. The term "Licensed Product" shall have the meaning
ascribed in the second Whereas clause of this Agreement, but shall not include
books which communicate game playing tactics and/or strategies ("hint books")
specifically prepared for Computer Games and such hint books shall not be deemed
Licensed Products hereunder.
1.8. The term "Licensed Property" shall have the meaning
ascribed in the first Whereas clause of this Agreement.
1.9. The term "Licensed Territory" shall have the meaning
ascribed in Section 3.1 of this Agreement, subject to the provisions of Sections
3.4 and 3.6 hereof.
1.10. The term "Marketing Area" shall mean the areas set
forth on Schedule C hereto.
1.11. The term "Master Atari PC Agreement" shall mean the
Master Option and License Agreement for Atari PC Games dated March 27, 1996, as
amended, between Licensee and Midway Games Inc.
1.12. The term "North America" shall mean (a) the United
States of America, its territories and possessions, including United States
military installations worldwide, (b) Canada and (c) Mexico.
1.13. The term "On-Line Games" shall have the meaning
ascribed in Section 1.10 of the First Amendment to the Master Atari PC
Agreement.
1.14. The term "Other Atari Home Computer Software
Distribution and License Agreements" shall have the meaning ascribed in Schedule
B.
1.15. The term "Required Foreign Release Date" shall have the
meaning ascribed in Section 3.4 hereof.
1.16. The term "Section 4 Game" shall have the meaning
ascribed in Section 4 of the First Amendment to the Master Atari PC Agreement.
2
18
1.17. The term "Section 5.6 Game" shall have the meaning
ascribed in Section 5.6 of the First Amendment to the Master Atari PC Agreement.
1.18. The term "Special Marketing Area" shall mean the
meaning ascribed in Section 3.4 hereof.
1.19. The words "term of this Agreement" or "period of this
Agreement" or "term hereof" or "so long as this Agreement remains in force" or
words of similar connotation shall include the initial period of this Agreement
and the period of all renewals, extensions, substitutions or replacements of
this Agreement.
1.20. The term "Third Party Fees and Royalties" shall mean
all fees, royalties and other participations of any kind or nature payable by
Licensor or its affiliates to any third party, including licensors and others
having intellectual property rights, in connection with the exploitation of the
Licensed Product. There shall be excluded from the term "Third Party Fees and
Royalties" as used herein any fees or royalties payable by Licensor or its
affiliates to "third party developers" or to employees of Licensor or its
affiliates with respect to the development of Licensed Product. For purposes
hereof, a "third party developer" shall refer to a person or an entity who
develops the Licensed Product for or on behalf of Licensor or its affiliates
based substantially upon an intellectual property which Licensor or its
affiliates did not license or otherwise acquire from such third party, or which
Licensor did not otherwise obtain from such third party as a work made for hire.
The term "third party developer" does not include, among other things, any
person or entity (a) who developed materials used in the Licensed Product, but
did not develop the Licensed Product itself (e.g., any person or entity which
developed materials for the coin-operated video game on which the Licensed
Product is based, but who did not perform the development services involved in
the conversion of such coin-operated video game into the Licensed Product) or
(b) from whom Licensor or its affiliates license any trademark or service xxxx
used in the Licensed Property or any portion of the audiovisual work which is
included in the Licensed Product (e.g., the person or entity develops the
Licensed Product and licenses it to Licensor or its affiliates). If Licensor or
its affiliates acquire from a third party in one transaction the rights to
exploit a Game on multiple platforms, unless Licensee shall otherwise agree,
Licensor shall fund advances, if any, paid to such third party, and any such
advances shall be excluded from the term Third Party Fees and Royalties;
provided, however, that if such advances are recoupable by Licensor or its
affiliates from future royalties payable to such third party, then Third Party
Fees and Royalties shall include such royalties which would otherwise be payable
to such third party were it not for such right of recoupment.
Capitalized terms used, but not defined herein, shall have the
meaning ascribed to such terms in the Master Atari PC Agreement.
2. GRANT OF LICENSE.
2.1. Licensor hereby grants and Licensee hereby accepts, for
the term of this Agreement and subject to the terms hereinafter set forth, the
exclusive license to utilize the Licensed Property solely in connection with the
manufacture, distribution and sale of the Licensed Products in the Licensed
Territory. Licensee shall have the right to sublicense any of the rights granted
to Licensee hereunder with Licensor's prior written consent, which consent shall
not be unreasonably withheld or delayed. It is understood that the term Licensed
Products does not include Computer Software designed for play on dedicated home
video game systems, such as those manufactured by
3
19
Nintendo, Sega, Sony or Atari, or any other medium of exploitation, including
On-Line Games, handheld games, over the air, cable or fiber-optic transmission
or any ancillary rights related thereto, all of which remain the sole property
of Licensor. No license is granted hereunder for the manufacture, sale or
distribution of Licensed Products to be used as premiums, in combination sales,
as giveaways or to be disposed of under similar methods of merchandising, except
only that Licensee shall have the right, subject to rights of third parties in
the Licensed Property, to distribute Licensed Products as premiums, combination
sales or giveaways solely (a) subject to Licensor's prior written consent, which
shall not unreasonably be withheld or delayed, in connection with the sale and
distribution of other Computer Games licensed to Licensee by Licensor or its
affiliates under Other Atari Home Computer Software Distribution and License
Agreements, and (b) with respect to free or promotional goods in the quantities
set forth on Schedule B. No license is granted hereunder for the exploitation of
ancillary merchandising rights to the Licensed Product; Licensor shall be
entitled to exploit such ancillary merchandising rights for its own account and
Licensee shall have no right or interest therein. Licensee shall not be entitled
to exploit or share in profits derived from any exploitation of games whether or
not having the same or similar title or play characteristics or using similar
Computer Software, in other game platforms, such as coin-operated games or
dedicated home game systems, or in any ancillary rights relating thereto.
2.2. This license does not include any rights to subsequent
versions of the Licensed Property (so-called "sequels" or "derivatives"), such
rights being retained by Licensor, except as the same are otherwise required to
be offered to Licensee under the Master Atari PC Agreement.
2.3. Notwithstanding the foregoing, Licensor reserves the
exclusive right to license the Licensed Property to third party personal
computer hardware or computer peripheral device (or components thereof)
manufacturers ("Bundlers") who are based or whose principal operations are
located in North America (whether or not license arrangements are also made with
such manufacturers" local or regional affiliates for this purpose) for the
purpose of bundling the Licensed Products together with hardware products,
peripheral devices (or components thereof) for distribution in any country
throughout the world (including, without limitation, in the Licensed Territory).
Licensor also reserves the exclusive right to license the Licensed Property to
Bundlers who are based or whose principal operations are located outside North
America for the purpose of bundling the Licensed Products together with hardware
products, peripheral devices (or components thereof) for distribution within and
without the Licensed Territory, provided that [*] of the revenue from such
license is reasonably expected to be derived from distribution of the bundled
Licensed Products outside of the Licensed Territory. Licensee shall have the
sole right to enter into arrangements with Bundlers who are based and whose
principal operations are located in the Licensed Territory for the distribution
of bundled Licensed Products on a non-exclusive basis within the Licensed
Territory, provided that (a) such arrangements shall, in each case, be subject
to Licensor's written consent, which consent shall not unreasonably be withheld
and (b) Licensor shall have the right to withhold its consent to any such
proposed bundling arrangements within the Licensed Territory which conflict with
Licensor's existing or contemplated exclusive worldwide bundling arrangements.
If any Bundler which is based or whose principal operations are located in the
Licensed Territory
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
4
20
proposes to Licensee an arrangement for the distribution of bundled Licensed
Products outside of the Licensed Territory, such Bundler shall be referred by
Licensee to Licensor and Licensor shall have the sole right to negotiate
separate arrangements with such Bundler for the distribution of bundled Licensed
Products outside of the Licensed Territory. Licensor shall consult with and
advise Licensee, to the extent practicable, reasonably in advance, if Licensor
proposes to enter into bundling arrangements for distribution of Licensed
Products within the Licensed Territory and shall, in this connection, advise
Licensee of Licensor's proposed pricing strategy for the sale of such Licensed
Products to Bundlers. Nothing herein shall however be deemed to limit or
restrict Licensor in establishing such pricing and such other terms and
conditions of sale of Licensed Products on an exclusive or non-exclusive basis
to Bundlers as it deems appropriate in its absolute discretion.
3. TERRITORY.
3.1. Licensee shall be entitled to manufacture, distribute
and sell the Licensed Products in all countries outside of North America, except
[(a) in Japan and (b)]* in countries or locations which are excluded under the
terms of any license agreement between Licensor and any third party having
rights to the Licensed Property. [If the Licensed Products are Section 4 Games,
the foregoing sentence shall read "Licensee shall be entitled to manufacture,
distribute and sell the Licensed Products in all countries except countries or
locations which are excluded under the terms of any license agreement between
Licensor and any third party having rights to the Licensed Property.] [If the
Licensed Products are Section 5.6 Games, the foregoing sentence shall read
"Licensee shall be entitled to manufacture, distribute and sell the Licensed
Products in all countries except (a) North America and Japan, if Licensor shall
have elected to distribute such Section 5.6 Game in those territories pursuant
to Section 5.6 of the First Amendment to the Master Atari PC Agreement and (b)
in countries or locations which are excluded under the terms of any license
agreement between Licensor and any third party having rights to the Licensed
Property.] The territory in which Licensee shall be entitled to manufacture,
sell and distribute the Licensed Products as specified above is herein referred
to as the "Licensed Territory".
*[3.2. With respect to the exploitation by Licensor of the
Licensed Property in Japan, Licensee shall be entitled to share in [*] of the
net profits derived by Licensor from its sale of Licensed Products in Japan. For
purposes hereof, "net profits" shall be calculated as follows:
(a) If Licensor shall exploit the Licensed Property in Japan other than
through its own direct operations (as defined below) (e.g., pursuant to
a sublicense arrangement), "net profits" shall be calculated by
subtracting from the actual monies received by Licensor from the sale
of Licensed Products in Japan (i) an amount equal to [*] of such
receipts (or [*] if Licensor supplies finished goods), representing
Licensor's allocation of overhead expenses, and (ii) all Third Party
Fees and Royalties payable by Licensor in connection therewith, and
(iii) if Licensor supplies finished goods, all of Licensor's direct
--------
* Include bracketed language if Japan is excluded from the
Licensed Territory pursuant to Section 3 of the First
Amendment to the Master Atari PC Agreement.
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
5
21
manufacturing and shipping costs. If Licensor is required to localize
the Licensed Products for sale in Japan, Licensor shall also deduct
costs of localization up to [*] of net sales from Licensee's share of
net profits.
(b) If Licensor shall exploit the Licensed Property in Japan through
its own direct operations (i.e., distribution directly by Licensor or
any affiliate of Licensor), "net profits" shall be calculated by
subtracting from the actual monies received by Licensor from the sale
of Licensed Products in Japan (i) an amount equal to [*] of such
receipts, representing Licensor's allocation of overhead expenses, (ii)
all Third Party Fees and Royalties payable by Licensor in connection
therewith, (iii) all of Licensor's direct manufacturing and shipping
costs. If Licensor is required to localize the Licensed Products for
sale in Japan, Licensor shall also deduct actual costs of localization
up to [*] of net sales from Licensee?s share of net profits. Licensor
shall also be entitled to deduct actual advertising costs up to [*] of
net sales from Licensee's share of net profits. Additional advertising
costs in excess of [*] of net sales up to [*] of net sales shall be
shared equally by Licensor and Licensee (and Licensee's share of such
additional advertising costs shall be deducted from Licensee's share of
net profits).
In all cases described above, expenses incurred by an affiliate of Licensor in
connection with the exploitation of the Licensed Product in Japan shall be
deemed to have been incurred by Licensor. Licensor shall account and pay over to
Licensee, not less frequently than quarterly, Licensee's remaining share of net
profits from the sale by Licensor of Licensed Products in Japan. Licensor shall
also inform Licensee of the economic terms of all sublicensing arrangements
under (a) above relating to the exploitation of Licensed Property in Japan.]
3.3. Licensor shall have the exclusive right to license to
third parties or otherwise exploit any of its rights with respect to the
Licensed Property outside of the Licensed Territory (for the sake of clarity,
Licensee acknowledges that any portion of the Licensed Territory in which
Licensee's right to distribute Licensed Products has been terminated in
accordance with Section 3.4 below shall then be deemed outside of the Licensed
Territory), and Licensee shall not manufacture, distribute or sell any Licensed
Products or otherwise exploit the Licensed Property directly or indirectly in
any area other than the Licensed Territory. Without limiting the generality of
the foregoing, Licensee shall not at any time sublicense, distribute or sell any
Licensed Products to any distributor or customer who Licensee knows or could
reasonably expect, based on objective evidence, intends to resell or export the
Licensed Products outside of the Licensed Territory. Except as provided in
Section 2.3 above, Licensor shall not at any time license, distribute or sell
any Licensed Products to any licensee, distributor or customer who Licensor
knows or could reasonably expect, based on objective evidence, intends to resell
or export the Licensed Products within the Licensed Territory (for the sake of
clarity, Licensee acknowledges that Licensor may at any time license, distribute
or sell Licensed Products to any licensee, distributor or customer for
distribution in any portion of the Licensed Territory in which Licensee's right
to distribute Licensed Products has been terminated in accordance with Section
3.4 below). A licensee, sublicensee, distributor or customer who wrongfully
resells or exports
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
6
22
Licensed Products from the Licensed Territory to territories outside the
Licensed Territory, or from territories outside the Licensed Territory to the
Licensed Territory, or from a country outside of the Licensed Territory to
Japan, is referred to as an "Exporter." Licensor and Licensee shall have the
right, in addition to any other rights which they may have hereunder, to require
the other to terminate or cause the termination of any license, distribution
agreement or arrangement with any such Exporter who is wrongfully distributing
Licensed Products in violation of the rights of the other party. Licensor shall
also have the right to delay for a period up to three (3) months the
introduction of any new Licensed Products into any country (other than the
United Kingdom) in which such Exporter may be located or is operating.
3.4. Within 90 days following its receipt from Licensor of
notice of the Delivery Date and a Technically Acceptable Master Disc with
respect to the Licensed Product, Licensee shall notify Licensor whether it
intends to release the Licensed Product in any or all of the following
countries: Germany, France, the United Kingdom and Australia ("Special Marketing
Areas"). Unless Licensee shall have advised Licensor that it does not intend to
release the Licensed Product in any of the Special Marketing Areas, Licensee
shall commence actively marketing and selling the Licensed Product in reasonable
commercial quantities in such Special Marketing Areas and in all other Marketing
Areas within six (6) months following the Delivery Date. If Licensee shall have
notified Licensor that it does not intend to release the Licensed Product in any
one or more of the Special Marketing Areas or other Marketing Areas, or if
Licensee or its sublicensees shall have failed to commence actively marketing
and selling the Licensed Product in any one or more of the Special Marketing
Areas or other Marketing Areas on or before a date which is not later than six
(6) months following the Delivery Date with respect to such Licensed Product
(the "Required Foreign Release Date"), then Licensor shall have the right, in
addition to any other rights which the Licensor may have hereunder or under the
Master Atari PC Agreement, upon thirty (30) days written notice to Licensee, to
terminate Licensee's and its sublicensee's right to manufacture, sell and
distribute the Licensed Product in such Special Marketing Area or other
Marketing Area. Notwithstanding the foregoing, if Licensee shall not have
obtained from the Atari Group all key materials (i.e., the Technically
Acceptable Master Disc, previously requested artwork for U.S. advertising,
promotional materials and packaging) and all necessary third party approvals
with respect to such Licensed Product (despite Licensee's reasonable efforts to
obtain or assist Licensor to obtain the same on Licensee's behalf) at least
ninety (90) days prior to the Required Foreign Release Date, then such Required
Foreign Release Date shall be extended until ninety (90) days following the date
on which Licensee has obtained all such necessary key materials and third party
approvals with respect to such Licensed Product. If Licensor shall terminate
Licensee's right to distribute the Licensed Product in a Special Marketing Area
or other Marketing Area, as provided above, then such Special Marketing Area or
other Marketing Area shall be deemed excluded from the Licensed Territory and
Licensor and its affiliates shall (a) have the right to manufacture, sell and
distribute or enter into a license agreement with a third party to manufacture,
sell and distribute the Licensed Product in such Special Marketing Area or other
Marketing Area and (b) have no obligation to pay over or to account to Licensee
with respect to any portion of the proceeds of sale of the Licensed Product by
Licensor or its affiliates or licensees in such Special Marketing Area or other
Marketing Area.
3.5. For purposes of documenting compliance with Section 3.4
above, Licensee shall submit a report, as of the date six (6) months following
the Delivery Date, listing the Special Marketing Areas or other Marketing Areas
in which Licensee has not commenced actively marketing and
7
23
selling an Accepted Game. Such report shall be sent to Licensor within
forty-five (45) days after the expiration of said six (6) month period, and
shall indicate the status for each Special Marketing Area or other Marketing
Area listed (indicating the date that marketing and selling is expected to begin
and whether a sublicensee has been appointed or will be replaced). Such summary
report shall be made in good faith, using the best available information as of
the date the report is submitted.
3.6. Licensor shall notify Licensee within ninety (90) days
following the Delivery Date if Licensor does not intend to release the Licensed
Product in Japan. If Licensor shall not have so notified Licensee, but Licensor
or its licensees shall nonetheless fail to release and commence actively selling
and distributing the Licensed Product in Japan within six (6) months following
its Delivery Date, then Licensor shall so notify Licensee within 45 days after
the end of such six-month period. If Licensor shall have notified Licensee that
it does not intend to release the Licensed Product in Japan or that it has
failed to release the Licensed Product in Japan within six months following its
Delivery Date, as provided above (in either case, a "Notice"), then Licensee
shall have the right, upon written notice given within thirty (30) days
following its receipt of such Notice from Licensor, to elect to sell and
distribute, or to enter into sublicensing arrangements to sell and distribute,
the Licensed Product in Japan. Any distribution by Licensee of the Licensed
Product in Japan shall be in accordance with all of the terms and conditions of
this Agreement, except that Licensee shall be solely responsible for payment of
all Third Party Fees and Royalties allocable to the sale of the Licensed Product
in Japan and the costs of localizing the Licensed Product in a new Technically
Acceptable Master Disc. (Licensee shall not be required to pay costs of encoding
which are Licensor's responsibility as provided under Section 10 below.)
Licensee's and its sublicensee's right to elect to manufacture, sell and
distribute the Licensed Product in Japan in accordance with this Section shall
terminate (and the Licensed Territory shall cease to include Japan) if Licensee
or its sublicensee shall not have commenced to actively sell and distribute the
Licensed Product in Japan within six (6) months following its receipt of the
Notice from Licensor referred to above.
4. TERM.
The license granted hereunder shall be effective on the date hereof and
terminate on the earliest to occur of (a) termination of Licensor's rights
obtained from third parties, (b) five (5) years from the effective date hereof
[for Section 4 Games: five (5) years from the date of Licensor's approval of the
Technically Acceptable Master Disc] or (c) two years from the effective date
hereof if the license granted hereunder shall apply to a Section 4 Game and
Licensee has not delivered to Licensor a completed and functioning Technically
Acceptable Master Disc which shall have been approved by Licensor within such
two-year period.
5. CONSIDERATION.
Licensee shall pay Licensor, with respect to the sale throughout the
Licensed Territory of the Licensed Products, a royalty as specified in Schedule
B annexed hereto on each unit of Licensed Product sold.
6. ACCOUNTINGS.
6.1. Licensee agrees to forward to Licensor, within forty-five
(45) days after the end of each calendar quarter ("Royalty Period"), commencing
with the first calendar quarter during which any unit of
8
24
the Licensed Product is sold, a report, in reasonable detail and reported
separately, by Marketing Area, of the number of units and average wholesale
price (by sales bracket, as provided in Schedule B hereof) of the Licensed
Products sold within such Royalty Period and the royalty amount due for the sale
of such units calculated in accordance with Sections 5 and 6.3 hereof and any
recoupment claimed in accordance with Schedule B annexed hereto, and Section 3
of the Master Atari PC Agreement. Such report shall also include a cumulative
reconciliation of the number of units of Licensed Products produced by Licensee
to the number of units on hand. For clarification purposes, such cumulative
reconciliation of units shall be reported separately by Marketing Area to
support sales information and facilitate auditing. Licensee agrees that
accompanying each such report shall be payment, in U. S. funds, of the amounts
due to Licensor, if any, in respect of such Royalty Period in excess of any
permitted recoupment. Royalties calculated in foreign currencies shall be
converted to U. S. currency at the spot rate of exchange published in the Wall
Street Journal as of the last day of the Royalty Period. Such reports shall be
required to be submitted with respect to sales and distributions of the Licensed
Product whether or not any amounts are due under the terms hereof.
6.2. Licensee agrees to keep accurate books of account and records
with respect to the Licensed Products, covering all sales, purchases and
inventories of Licensed Products and all royalty fees due under this Agreement
at Licensee's offices (or the offices of Licensee's affiliates) and to permit
(or procure the right for) Licensor at its own expense to have accounting
professionals (which may include Licensor's employees who have accounting
degrees) inspect such books of account and records of Licensee or its
sublicensees during reasonable business hours (but not during the first three
weeks of a calendar quarter), upon prior reasonable written notice, for the sole
purpose of verifying the reports to be provided hereunder. Such inspections,
together with inspections of Licensee's books of account and records pertaining
to other Computer Games licensed to Licensee by Licensor or its affiliates under
Other Atari Home Computer Software Distribution and License Agreements, shall
occur no more frequently than twice during any twelve (12) month period for each
of the Licensee's offices. Licensor's inspectors shall not be physically present
in a specific office of Licensee for more than 10 consecutive business days in
connection with any such inspection, provided that Licensee shall have supplied
all requested information and documentation and responded to questions on a
reasonably prompt basis. Licensee shall promptly furnish to Licensor copies of
any report which Licensee may produce as the result of any audit by Licensee of
the books of account and records of any sublicensee of Licensee. Licensor shall
keep any information obtained from any such inspections in confidence and shall
require that its accounting professionals do so as well. Licensee's books
relating to any particular royalty statement may be examined as aforesaid only
within two (2) years after the date rendered and Licensee shall have no
obligation to permit Licensor to so examine such books relating to any
particular royalty statement more than once for any one statement, unless in
connection with a civil action filed by Licensor against Licensee in connection
with such statement. In the event that any audit by Licensor's accounting
professionals reveals that Licensee has underpaid Licensor by an aggregate of
[*] or more with respect to the specific royalty statements which are the
subject of such audit, Licensee agrees that it shall also reimburse Licensor for
the reasonable documented costs for any such audit (including traveling costs)
up to the amount of the shortfall.
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
9
25
6.3. Not less than [*] of a shipment to a customer shall be deemed
a sale for royalty purposes on the date of shipment. Not less than [*] of the
balance of the shipment, less actual returns, shall be deemed a sale for royalty
purposes six (6) months following the date of shipment, and the balance of such
shipment, less actual returns not already counted, shall be deemed a sale for
royalty purposes twelve (12) months following the date of shipment.
6.4. Licensor shall permit Licensee, at Licensee's own expense, to
have an independent certified public accountant inspect Licensor's books and
records with respect to the payment by Licensor of Third Party Fees and
Royalties in connection with the Licensed Products, during reasonable hours,
upon prior reasonable written notice and subject to such confidentiality
requirements (including the execution of appropriate confidentiality agreements)
as Licensor may require, for the sole purpose of verifying payment and
calculation by Licensor of such Third Party Fees and Royalties. Licensor's books
and records may be examined by Licensee's representatives not more frequently
than twice in any twelve-month period and Licensee shall otherwise have
substantially the same rights as provided to Licensor under Section 6.2 above.
6.5. In circumstances where Licensor is obligated under this
Agreement to account to Licensee in respect of any entitlement to Licensor's
share of net profits or net proceeds from the exploitation of the Licensed
Product, Licensor shall account substantially in the same manner and in the same
time frame as provided in this Paragraph 6 above. Licensee shall also have
substantially the same rights as provided to Licensor in Section 6.2, provided,
however, that (a) any audit of Licensor's books of account and records shall be
restricted to the areas which are directly applicable to the report(s) being
verified and (b) Licensee shall not have the right to audit the books and
records of any Bundler or licensee of Licensor, provided that any audit by
Licensor of the books and records of its licensee in Japan shall be made by
Licensor's independent certified public accountants and Licensor shall make
available to Licensee the results of such audit as it pertains to Licensee.
6.6. Licensee recognizes that the timely submission of all reports
required to be submitted to Licensor pursuant to Section 6.1 hereof is critical
for Licensor to maintain good relations with its third party licensors as well
as for Licensor's own financial reporting requirements. Licensor recognizes that
its failure to submit timely reports may also affect Licensee's financial
reporting requirements. Therefore, in addition to any other rights and remedies
of Licensor or Licensee, if either party shall be late by more than five (5)
business days with respect to any report and/or royalty payment required to be
submitted to the other party pursuant to Section 6.1 hereof (a "Late Report"),
then the delinquent party shall pay to the other party a late charge ("Late
Charge") at a rate equal to the prime rate designated by Citibank N.A. on any
royalties covered by such Late Report that are actually payable to the other
party or recoupable as provided in Schedule B. Such Late Charge shall be
computed from the 46th day following the last day of the calendar quarter for
which such Late Report is due until the date actually paid. The party entitled
to such report and/or royalty payment may elect to waive payment of any such
Late Charge if the delinquent party shall have provided a reasonable estimate of
royalties due within fifteen (15) days following the end of the calendar quarter
covered by
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
10
26
such Late Report.
6.7. At the time that the Licensor shall provide to Licensee
notice of availability of a Game pursuant to Section 2.4 or 2.5 of the Master
Atari PC Agreement, Licensor shall provide to Licensee sufficient data to enable
Licensee to calculate Third Party Fees and Royalties payable with respect to
each Licensed Product (without regard to any advances which may have been made
by Licensor). If Licensee is unable to calculate specific Third Party Fees and
Royalties from the data provided, Licensee may request assistance from Licensor
with respect thereto, and Licensor shall use its best efforts to respond within
seven (7) days from the date of such request, but Licensee shall provide all
sales and other data in its possession which are necessary for such
calculations.
7. QUALITY OF LICENSED PRODUCT.
7.1. The Licensed Products as manufactured, advertised, sold,
distributed or otherwise disposed of by Licensee under this Agreement shall be
of a high quality and shall be sold and distributed in packaging prescribed by
Licensor bearing Licensor's trademarks and trade names. Such packaging may
indicate that the Licensed Products are distributed by Licensee. Licensor shall
have the right to determine in its reasonable discretion whether the Licensed
Product meets Licensor's high standards of merchantability. Licensee agrees to
furnish Licensor free of cost for Licensor's written approval as to quality and
style (which approval shall not be unreasonably withheld), samples of the
Licensed Product, together with its proposed advertising, packaging and wrapping
materials, before its manufacture, sale or distribution (whichever first occurs)
and the Licensed Product shall not be sold or distributed by Licensee without
such written approval. Without limiting the generality of the foregoing,
Licensee shall be required to obtain the prior written approval of Licensor with
respect to all proposed advertising, packaging and wrapping materials, even if
materials for such purposes were furnished, in whole or in part, by Licensor.
7.2. If Licensor shall disapprove of any item submitted by
Licensee for approval hereunder, Licensor shall furnish at the time notice of
disapproval is given to Licensee an explanation of the reason(s) for such
disapproval and recommendations for suggested changes and Licensee shall
resubmit such item after changes have been made for Licensor's approval.
7.3. In the event that the quality of any Licensed Product
approved by Licensor shall become less than that approved by Licensor and
Licensee shall fail to raise the quality to the approved level within thirty
(30) days after receiving written notice from Licensor, the license granted
under this Agreement for such Licensed Product shall automatically terminate and
shall remain terminated until Licensor shall subsequently renew its approval of
the Licensed product.
7.4. If disapproval is not received by Licensee within five (5)
business days after Licensor's receipt of the item submitted for approval,
Licensor's approval shall be deemed to have been given. Subsequent to final
approval, Licensor may request the Licensee once each quarter to send, without
charge, a reasonable number of production samples (but in any event not less
than [*] copies of each language version) without payment of any Third Party
Fees and Royalties or other royalty hereunder to Licensor to
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
11
27
ensure quality control. Should Licensor require additional samples for any
reason other than resale or any other commercial exploitation by Licensor,
Licensee shall be required to sell such samples to Licensor at its cost (but
without payment of any Third Party Fees and Royalties or other royalty
hereunder), but not more than [*] units of each Licensed Product.
8. TRADEMARK AND COPYRIGHT, ETC.
8.1. "Notice" as used in this Section shall mean the following
statutory copyright notice and notice of registration or application for
registration of the licensed trademark:
[Insert Game specific notice]
or such other copyright notices and notices of registration as may be required
by any third party licensors. Licensee shall use the "(TM)" or "(TM)" with the
trademarks of Licensor and its licensors and affiliates, as Licensor may
specify.
8.2. Licensee shall furnish to Licensor samples of all packaging
in which the Licensed Products are sold by Licensee. Licensee shall print, stamp
or mold the Notice on all Licensed Products and on the back of each package or
container used in connection therewith, and Licensee shall print the Notice on
each label, advertisement and promotional release concerning any Licensed
Products, all in accordance with instructions from Licensor, providing, however,
that such notice shall be imprinted on the back of the package or container used
in connection therewith, displayed on the title screen of the Licensed Product,
and in the instruction booklet, if any, packaged with the Licensed Product.
Licensee agrees to execute and deliver to Licensor in such form as Licensor may
reasonably request all instruments necessary to effectuate trademark protection
or to record Licensee as a registered user of any trademarks or to cancel such
registration and if Licensee fails to execute such instruments, Licensee hereby
appoints Licensor Licensee's attorney-in-fact to do so on Licensee's behalf.
Licensee shall also furnish Licensor samples of all advertising or promotional
materials bearing the Notice for Licensor's approval.
8.3. Subject to the terms of this Agreement, Licensee acknowledges
and agrees that: All copyrights, trademarks and service marks and rights to same
referred to in this Section 8 in the name of and/or owned by Licensor shall be
and remain the sole and complete property of Licensor; that all such copyrights,
trademarks and service marks and rights to same in the name of or owned by any
copyright proprietor other than Licensor or Licensee shall be and remain the
sole and complete property of such copyright proprietor; that all trademarks and
service marks which, and/or the right to use which, arise out of the license
hereby granted to use the Licensed Property shall be and remain the sole and
complete property of Licensor; that Licensee shall not at any time acquire or
claim any right, title or interest of any nature whatsoever in any such
trademark or service xxxx by virtue of this Agreement or of Licensee's uses
thereof in connection with the Licensed Products; and that any right, title or
interest in or relating to any such trademark or service xxxx, which comes into
existence as a result of, or during the term of, the exercise by Licensee of any
right granted to it hereunder shall immediately vest in Licensor.
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
12
28
8.4. Licensee agrees to assist Licensor at Licensor's expense to
the extent necessary in the procurement of any protection or to protect any of
Licensor's rights to the Licensed Property. Licensee shall notify Licensor in
writing of any infringements or imitations by others of the Licensed Property on
articles similar to those covered in this Agreement which may come to the
Licensee's attention. Licensor shall have the right to commence action to
enforce its proprietary rights and prosecute any such infringements, and
Licensee agrees to fully cooperate, at Licensor's expense, in any such action.
However, Licensee shall not incur any such expense reimbursable by Licensor
without Licensor's express written approval and all recoveries resulting from
any such action shall belong solely to Licensor. In the event Licensor declines
to pursue any such action, Licensee may, with Licensor's written permission, and
subject to the consent of any third party having rights in the Licensed
Property, institute such an action, and Licensor, at Licensee's expense, shall
cooperate in such action instituted by Licensee and all recoveries resulting
from any such action shall belong solely to Licensee. Licensor shall not
unreasonably withhold or delay its permission to enable Licensee to pursue an
action (if Licensor shall decline to pursue such action) against persons or
entities reasonably believed by Licensee to be counterfeiting or pirating
Licensee's Licensed Products in the Licensed Territory. Licensor shall not
unreasonably withhold or delay its permission to grant to any sublicensee who
requires it, at the time of entering into a sublicense, reasonable rights
(without Licensor's prior consent in each instance) to pursue persons reasonably
believed to be engaged in counterfeiting or piracy of the Licensee Product in
the Licensed Territory.
8.5. During the term of this Agreement and thereafter, Licensee:
(a) will not challenge the ownership or rights of Licensor in
and to the Licensed Property or any copyright or trademark pertaining thereto
developed by or for Licensor, nor attack the validity of the license granted
hereunder or participate in any challenge thereto;
(b) will manufacture, sell and distribute the Licensed
Products in compliance with all applicable laws and governmental regulations in
accordance with the terms of this Agreement;
(c) will not except as set forth in this Agreement, either
directly or indirectly, use or display or authorize others to use or display,
the trademarks, copyrights or proprietary rights of Licensor in connection with
any advertising, assembly, manufacture, distribution, use, sale or lease of any
goods, other than in connection with the manufacture and sale of the Licensed
Products; and
(d) subject to Licensee's best business judgment Licensee
will exercise reasonable efforts to: (i) manufacture sufficient quantities of
the Licensed Product to meet the market demand for same; (ii) conduct
advertising activities to promote the sale of Licensed Product; and (iii) make
any and all arrangements necessary to accomplish such undertakings.
9. MATERIALS.
9.1. Notwithstanding anything contained herein to the contrary,
but subject to Section 4 of the First Amendment to the Master Atari PC Agreement
regarding Pre-Existing Third Party Materials, all artwork, designs and computer
software embodying the Licensed Property, or any reproduction thereof, which are
designed, developed and/or created by Licensee hereunder (or any of its
sublicensees, affiliates, subsidiaries or third party contractors), shall be,
and remain Licensor's sole and exclusive property,
13
29
inclusive of all copyrights and right to copyright therein and thereto for the
life of the copyright therein; provided that during the term of this Agreement,
Licensee shall have the exclusive (except as otherwise provided in this
agreement) right, license and privilege (without any compensation to Licensor
except as provided in Section 5) to use all such above described materials in
connection with its manufacture, sale and distribution of the Licensed Products
in the Licensed Territory.
9.2. Licensor shall make available to Licensee, at Licensor's
actual out of pocket cost, any artwork relating to the Licensed Property which
Licensor owns and which is reasonably available to Licensor for Licensee's use
in connection with the exploitation of the Licensed Property.
10. TRANSLATIONS.
[Note: This section shall be omitted for Section 4 Games.]
In the event that Licensee shall reasonably require the text
associated with any Licensed Product to be translated into a language other than
English, Licensor shall, upon Licensee's written request, provide to Licensee
the text files and the text that appears in bit map files and printed copies of
the script used for audio components of the Licensed Product (the "Text
Materials") and Licensee shall furnish, at its own expense, to Licensor a
translation text thereof. Licensor shall then cause a new Technically Acceptable
Master Disc (as that term is defined in the Master Atari PC Agreement)
containing such translation to be encoded, at Licensor's own expense, and
delivered to Licensee. Notwithstanding the foregoing, Licensor shall not be
required to encode Licensee's translation text in a new Technically Acceptable
Master Disc if Licensee shall not have furnished its translation text to
Licensor within ten (10) business days following its receipt from Licensor of
complete Text Materials. Text Materials delivered by Licensor to Licensee shall
be deemed complete unless Licensee shall have notified Licensor in writing that
such Text Materials as delivered are incomplete, specifying in detail the
reasons therefor, within five (5) business days following Licensee's receipt
thereof. In such case Licensor shall furnish any additional required Text
Materials as promptly as possible and Licensee shall have ten (10) additional
business days from its receipt of such additional Text Materials in which to
furnish its translation text to Licensor.
11. REPRESENTATIONS AND WARRANTIES.
11.1. Licensor hereby represents and warrants that this Agreement
has been duly authorized, executed and delivered by Licensor; Licensor has the
full power and authority to enter into this Agreement and perform its
obligations hereunder; this Agreement constitutes the valid and binding
obligation of Licensor, enforceable in accordance with its terms; the making of
this Agreement does not violate any agreement, right or obligation existing
between Licensor and any other person, firm or corporation; and the Licensed
Property, if used pursuant to the license granted herein, will not infringe upon
or violate any rights of any third party.
11.2. Licensee hereby represents and warrants that this Agreement
has been duly authorized, executed and delivered by Licensee; Licensee has the
full power and authority to enter into and perform its obligations hereunder;
this Agreement constitutes the valid and binding obligation of Licensee,
enforceable in accordance with its terms; the making of this Agreement does not
violate any agreement, right or obligation existing between Licensee and any
other person, firm or corporation; and its manufacture, advertisement,
distribution and sale of the Licensed Products
14
30
will be in accordance with the terms of this Agreement so as not to infringe
upon or violate any rights of any third party.
12. INDEMNIFICATION.
12.1. Each party agrees to indemnify and hold the other (including
officers, directors, agents and employees of such party or its subsidiaries,
affiliates and sublicensees) harmless against any loss, damage, expense or cost
(including reasonable attorneys' fees) arising out of any claim, demand or suit
or judgment resulting from any breach of any warranty or representation set
forth in Section 11 above. Each party shall promptly inform the other of any
such claim, demand, suit or judgment.
12.2. In connection with any such claim, demand or suit referred
to above, the party so indemnifying (the "Indemnitor") agrees to defend, contest
or otherwise protect the indemnified party (the "Indemnitee") against any such
suit, action, investigation, claim or proceeding at the Indemnitor's own cost
and expense. The Indemnitee shall have the right, but not the obligation to
participate, at its own expense, in the defense thereof by counsel of its own
choice. In the event that the Indemnitor fails timely to defend, contest or
otherwise protect against any such suit, action, investigation, claim or
proceeding, the Indemnitee shall have the right to defend, contest or otherwise
protect against the same, and, upon ten (10) days' written notice to the
Indemnitor, make any compromise or settlement thereof and recover the entire
cost thereof from the Indemnitor, including without limitation, reasonable
attorneys' fees, disbursements and all reasonable amounts applied as a result of
such suit, action, investigation, claim or proceeding or compromise or
settlement thereof. The obligations hereunder shall survive the termination or
expiration of this Agreement.
12.3. Neither Licensor nor Licensee shall be liable for any
incidental, consequential or punitive damages to the other.
13. EVENTS OF DEFAULT AND TERMINATION.
Either party shall be deemed to be in default of this Agreement in
the event either of the following occurs:
(a) Such party fails to make any payment or furnish any
statement in accordance herewith, provided that the defaulting party shall have
been given a first written notice of such default and a period of at least 15
days in which to cure such default and, if such default shall not have been
cured within such period, the defaulting party shall have been given a second
written notice of such default and a further period of at least 10 days in which
to cure such default; or
(b) Such party fails after thirty (30) days' written notice
to the other party to comply with any other of the defaulting party's
obligations hereunder.
14. EXPIRATION OR TERMINATION OF AGREEMENT.
Upon expiration or termination of this Agreement, all rights
granted to Licensee herein shall forthwith revert to Licensor with the following
consequences:
(a) All unpaid royalties shall be due and payable in
accordance with Section 6.1 hereof.
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(b) Licensor shall thereafter be free to license others to
use the Licensed Property in connection with the manufacture, advertisement,
distribution and sale of items identical or similar to the Licensed Products in
the Licensed Territory.
(c) In the event of termination or expiration of this
Agreement, other than a termination by Licensor as a result of a material breach
of this Agreement by Licensee, Licensee may continue to sell for a period of one
hundred eighty (180) days after the effective date of termination all approved
copies of the units of the Licensed Product produced prior thereto.
15. CONFIDENTIAL INFORMATION.
Each of the parties shall keep in confidence and shall not
disclose to any third party, without the written permission of the other party,
the terms of this Agreement and the proprietary information of the other party
made known to it under this Agreement. This requirement of confidentiality shall
not apply to information that is (a) in the public domain through no wrongful
act of the disclosing party; (b) rightfully received by the disclosing party
from a third party who is not bound by a restriction of nondisclosure; (c)
already in the disclosing party's possession without restriction as to
disclosure; or (d) is required to be disclosed by applicable rules and
regulations of government agencies or judicial bodies. This obligation of
confidentiality: (i) shall survive termination of this Agreement and (ii) shall
extend to any subcontractor of either party and each party agrees to obtain from
each such subcontractor a written agreement to abide by the foregoing
confidentiality requirements. Each of the parties shall be entitled to seek
injunctive or equitable relief to prevent the breach or threatened breach by the
other of the provisions of this Section and to secure its enforcement.
16. NOTICES.
Any notice, consent, approval, request, waiver or statement to be
given, made or provided for under this Agreement shall be in writing and deemed
to have been duly given (i) by its delivery personally or by express mail; or
(ii) five (5) days after its being mailed, air express, registered or certified,
return receipt requested in a U.S. Post Office addressed as follows:
TO LICENSEE: GT Interactive Software Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxx Xxxxxxxxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
WITH A COPY TO: GT Interactive Software Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. Xxxxx Xxxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
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32
WITH A COPY TO: GT Interactive Software Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx, Esq.
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
WITH A COPY TO: GT Interactive Software Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx Xxxxxxxx, Esq.
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
TO LICENSOR: Atari Games Corporation
c/o Midway Games Inc.
0000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxxxxx, President
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
WITH A COPY TO: Midway Home Entertainment Inc.
0000 Xxxxx Xxxxxxxx 00
Xxxxxxxxx, Xxxxx 00000
Attention: Mr. Xxxxx Xxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
WITH A COPY TO: Midway Home Entertainment Inc.
0000 Xxxxx Xxxxxxxx 00
Xxxxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx Xxxxxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
WITH A COPY TO: Xxxxxxx X. Xxxxxx, Esq.
Shack & Xxxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
or such other address as either party may designate by notice given as
aforesaid.
17. MISCELLANEOUS.
17.1. This Agreement is personal to Licensee as one party and
Licensor as the other party. Neither this Agreement nor any party's rights under
it may be assigned, in whole or in part, nor may Licensee's or Licensor's rights
or obligations hereunder be delegated, in whole or in part, to any person or
party without the prior written consent of the other party, except that any
party may assign its rights and delegate obligations to any of its direct or
indirect wholly-owned subsidiaries or affiliates or to any person, firm or
corporation owning or acquiring all or substantially all of the stock or assets
of that party, as long as that party remains fully liable for its obligations
hereunder. Any sale of not less than 50.1% of the stock or assets of Licensor
shall include a requirement for the assumption by the purchaser of all
covenants, obligations and duties undertaken by Licensor pursuant to the terms
of this Agreement, including its obligations with
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33
respect to Licensed Products and the intellectual property from which they are
derived. This Agreement shall bind the parties, their successors and permitted
assignees and delegees. Licensor, as one party, and Licensee as the other party,
are each liable for their respective obligations under the terms of this
Agreement.
17.2. The entire understanding between the parties hereto relating
to the subject matter hereof is contained herein. This Agreement cannot be
changed, modified, amended or terminated except by an instrument in writing
executed by the parties hereto.
17.3. 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 no waiver shall be
deemed or construed to be a waiver of such terms or conditions for the future or
any subsequent breach thereof.
17.4. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between Licensor and
Licensee, and neither Licensor nor Licensee 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.
17.5. This Agreement shall be governed by the laws of the State of
Illinois applicable to contracts made and to be wholly performed in the State of
Illinois.
17.6. 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, either such provision will be deemed amended to
conform to such laws or regulations without materially altering the intention of
the parties or it shall be stricken and the remainder of this Agreement shall
remain in full force and effect.
17.7. This Agreement may be executed in counterparts each of which
shall be deemed an original and when taken together shall be deemed one and the
same document.
17.8. Notwithstanding anything to the contrary in this Agreement,
the parties agree that this Agreement is deemed amended wherever and however
necessary to conform to the requirements and limitations of the [insert list of
third party contracts]. Material limitations thereof, as well as information
necessary to calculate Third Party Fees and Royalties are set forth in Schedule
A.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ATARI GAMES CORPORATION
By:_____________________________
GT INTERACTIVE SOFTWARE CORP.
By:_____________________________
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SCHEDULE A
[Insert description of Licensed Property]
19
35
SCHEDULE B
ROYALTIES
Licensee shall pay royalties in an amount equal to the following
percentages of the Net Wholesale Sales Price of a Unit sold and not returned:
Net Wholesale Sales Price Royalty %
$[*] or greater [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
At Net Wholesale Sales Prices, as hereafter defined, between $0.01 and [*] the
above percentages shall be prorated based upon the next highest and next lowest
royalty percentage. For example, at a Net Wholesale Sales Price of [*], the
royalty percentage shall be [*]. Notwithstanding the above, if the Licensed
Products cost [*] or more to develop or acquire ("Premium Products"), the
minimum per unit royalty for such Premium Products shall be calculated as
follows: the minimum per unit royalty during the six-month period commencing on
the date on which the Premium Product was First Released shall be an amount
equal to [*] of the product of (1) the Net Wholesale Sales Price of such
Premium Product as of the date of release multiplied by (2) the royalty
percentage which corresponds to such Net Wholesale Sales Price on the table set
forth above (prorated as appropriate). Thereafter, there shall be no further
minimum per unit royalty.
"Net Wholesale Sales Price" shall be that price invoiced by Licensee to its
customers, less any price discounts, rebates or credits granted at the time of
sale and taxes invoiced to customers (including VAT). Sales made other than at
arm's length to a bona fide unaffiliated third party purchaser shall be deemed
to have been made at the Net Wholesale Sales Price which would have been
charged by Licensee to a bona fide unaffiliated third party purchaser in an
arm's length transaction. No deduction shall be made for bad debts or other
uncollected amounts, advertising allowances, including cooperative advertising,
or any other costs incurred in manufacturing, selling or distributing the
Licensed Products. In the event that Licensee's experience with respect to bad
debts and uncollectible amounts during any calendar year in respect of sales of
Licensed Products under this Agreement and all Other Atari Home Computer
Software Distribution and License Agreements entered into between Licensor and
its affiliates and Licensee under the Master Atari PC Agreement, shall exceed
[*] of Licensee's aggregate net sales of Licensed Products under this Agreement
and all such Other Atari Home Computer Software Distribution and License
Agreements during such calendar year ("Excess Bad
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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36
Debts"), then Licensee shall be entitled to receive a credit against royalties
payable under this Agreement or any Other Atari Home Computer Software
Distribution and License Agreement determined as follows: the average of the
weighted Net Wholesale Sales Prices of all Licensed Products sold under this
Agreement and all Other Atari Home Computer Software Distribution and License
Agreements during such calendar year shall be determined, and the royalty
percentage which corresponds thereto in the table above (prorated as
appropriate) shall be multiplied by the amount of Excess Bad Debts for such
calendar year to determine the amount of such credit.
Royalties for "direct response sales" shall be calculated by multiplying [*] of
the royalty percentages set forth above (prorated as appropriate) times
Licensor's net receipts from such sales and, for purposes of determining the
applicable royalty percentages in the table set forth above, the amount of such
net receipts shall be substituted for "Net Wholesale Sales Price." The minimum
per unit royalty shall be [*] of the minimum per unit royalty applicable to
sales other than "direct response sales" as set forth in the first paragraph of
this Schedule B. Direct response sales shall refer to sales made directly to
consumers other than from a fixed retail location and shall include catalogue
sales, direct mail, print and television sales. Licensee's net receipts from
direct response sales shall be based upon actual monies received, less amounts
separately paid by purchasers as sales taxes and shipping and handling charges.
Where the Licensed Property (whether acquired from a third party or developed by
Licensor or any entity which at any time was or is an affiliate of Licensor) has
not been embodied in a coin-operated video or pinball game, whether distributed
by Licensor or any entity which at any time was an affiliate or a member of the
Atari Group, or will not be embodied in a coin-operated video or pinball game
distributed within 60 days from the release of the Licensed Product,
institutional advertising costs (i.e., radio, television and print advertising
to the general public), will be shared equally ("Shared Institutional
Advertising") by Licensee and Licensor, provided that (a) the portion of the
Shared Institutional Advertising costs to be borne by Licensor shall not exceed
[*] of the Net Wholesale Sales Price of the Licensed Product, and shall only be
payable in that portion of the Licensed Territory in which Licensee itself (and
not its sublicensees) actually pays for institutional advertising costs and (b)
all such Shared Institutional Advertising costs and budgets therefor shall have
been previously approved in writing by Licensor. Licensee at its own cost and
expense shall be solely responsible for all in store and cooperative advertising
costs associated with the sale of Licensed Products in the Licensed Territory.
ADJUSTMENTS TO ROYALTIES
Anything above to the contrary notwithstanding:
1. If Licensor is obligated to pay any Third Party Fees and Royalties
with respect to the sale of Licensed Products, the per unit royalties to be paid
by Licensee to Licensor with respect to such Licensed Products shall be equal to
[*] of all such Third Party Fees and Royalties, plus the greater of (a) the
royalty otherwise payable to Licensor as provided above and (b) the other [*] of
such Third Party Fees and Royalties. In no event shall the per unit royalty on
the sale of Licensed Products be less than [*] of such Third Party Fees and
Royalties.
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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2. In cases where Licensor has acquired substantially all of the
Licensed Property from a third party, the per unit royalty on the sale of
Licensed Products shall not be less than (a) [*] of Third Party Fees and
Royalties plus (b) [*] of the Net Wholesale Sales Price, provided that the total
Third Party Fees and Royalties set forth in clause (a) above do not exceed
Licensor's Third Party Fees and Royalties in the United States for the same Net
Wholesale Sales Price.
3. In cases where Licensed Products are sold by non-affiliated third
party sublicensees under sublicenses granted by Licensee in accordance with the
provisions of the Master Atari PC Agreement (including any sales under any
bundling arrangement with a non-affiliated third party), royalties shall be
payable by Licensee to Licensor hereunder shall be equal to the sum of (a) all
Third Party Fees and Royalties payable with respect to the sale of such Licensed
Products, plus (b) [*] of the net proceeds received by Licensee from such
non-affiliated third party sublicensee after deducting (i) a fee (the
"Management Fee") equal to [*] of such net proceeds (or [*] in the event of a
bundling arrangement in which Licensee is providing finished goods) to Licensee,
(ii) an amount equal to all Third Party Fees and Royalties, and, (iii) in the
case of non-affiliated third party sublicensees to whom Licensee supplies the
Licensed Product, Licensee's direct manufacturing and shipping costs. Net
proceeds received by Licensor from bundling which are allocable to the Licensed
Territory shall be shared [*] by Licensor and [*] by Licensee after deducting
(q) an amount equal to all Third Party Fees and Royalties, (r) Licensor's direct
manufacturing and shipping costs, (s) a Management Fee of [*] of such net
proceeds which shall be payable to Licensor, and (t) an additional fee equal to
[*] of such net proceeds which shall be payable to the one of Licensee or
Licensor as is arranging for the manufacture of the Licensed Products to be
bundled. In no event shall the per unit royalty payable by Licensee to Licensor
be less than [*] of such Third Party Fees and Royalties.
4. Notwithstanding item 3 above, however, in cases where Licensed
Products are sold in the following Marketing Areas: Africa, Middle East,
India/Pakistan, China, Rest of Asia, Brazil, Rest of South America, Central
America and the Caribbean, royalties payable by Licensee to Licensor hereunder
shall be equal to the sum of (A) all Third Party Fees and Royalties payable with
respect to the sale of such Licensed Products, plus (B) [*] of the net proceeds
received by Licensee from such non-affiliated third party sublicensees, after
deducting (x) a Management Fee equal to [*] of such net proceeds to Licensee,
(y) an amount equal to all Third Party Fees and Royalties, and (z) in the case
of non-affiliated third party sublicensees to whom Licensee supplies the
Licensed Product, Licensee's direct manufacturing and shipping costs. In no
event shall the per unit royalty payable by Licensee to Licensor be less than
[*] of such Third Party Fees and Royalties.
Solely with reference to the Marketing Areas set forth in this item 4,
a "sublicensee" is defined as an entity which Licensee authorizes (whether by
express grant of license or otherwise) to exercise any of the rights in respect
of the intellectual property and/or proprietary rights in the Licensed Property
which are licensed to Licensee under this Agreement (e.g., the right under
copyright to reproduce the Licensed Property, the right under trademark law to
apply the trademarks included in the Licensed Property to goods) and which the
law would not otherwise permit an ordinary purchaser of
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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the Licensed Products for resale to consumers to exercise (e.g.,creating an
advertisement to customers which does not use the Licensed Property or Licensed
Product other than a statement that the goods are available for sale, their
price and an (unaltered) image of the goods). The fact that an entity is
authorized by Licensee to assemble Licensed Products into their packaging and
wrapping materials (including any box, manuals, inserts, etc.) for sale to
consumers shall not cause the entity to be considered a "sublicensee" if all
copies of the Licensed Product to be so assembled are sold by Licensee to such
entity in the form which will be sold to consumers and such entity does not
modify the same, and all of the packaging and wrapping materials (including any
box, manuals, inserts, etc.) into or with which such copies are assembled fall
under one or more of the following categories: (i) materials which are purchased
from Licensee, (ii) materials which are manufactured by such entity solely and
without modification from a master which may have been localized or translated,
and which has been approved by Licensor and all third parties having approval
rights in the Licensed Property, or (iii) materials which do not embody in any
way the Licensed Product, Licensed Property or any other property of any party
(e.g., a blank white cardboard retainer intended to hold a CD-ROM in place
inside of a box). The fact that an entity is authorized by Licensee to reproduce
advertising or promotional materials for the Licensed Product shall not cause
the entity to be considered a "sublicensee" if such reproduction is made without
modification from a master which may have been localized and translated and
which has been approved by Licensor and all third parties having approval rights
in the Licensed Property. No implication shall be drawn from the foregoing
definition of sublicensee with respect to other uses of the term "sublicensee"
in other sections of this Agreement.
5. For Licensed Products developed by Licensee pursuant Section 4 or
Section 5.5 (which are deemed to be developed pursuant to Section 4) of the
First Amendment to the Master Atari PC Agreement, the per unit royalty shall be
(a) [*] of the Net Wholesale Sales Price, plus (b) [*] of any Third Party Fees
and Royalties, plus [*] of any developer royalties, payable by Licensor in
connection with the sale of such unit. Sublicensing revenues shall be treated in
the same manner as stated in items 3 and 4 above, however, Licensor's share
shall be (x) [*] of such revenues (instead of [*]) plus (y) [*] of any Third
Party Fees and Royalties, plus [*] of any developer royalties, payable by
Licensor in connection with the sale of such unit.
6. Until Licensee shall have recouped fully the [*] Minimum Guaranteed
Advance Royalty, as provided below, Licensor shall pay over to Licensee
Licensor's share of (a) net profits from the exploitation of the Licensed
Product in Japan, and (b) net proceeds (after deduction of the costs and fees
described in clauses (q) through (t) of the penultimate sentence of item 3
above) from bundling allocable to Japan and the Licensed Territory, and all
amounts so paid over to Licensee shall be deemed to constitute additional
Recoupable Amounts (as such term is hereinafter defined) under this Agreement.
RECOUPMENT.
Licensee shall be entitled to apply the aggregate amount by which (a) Royalties
applied or accrued under this Agreement (except as provided below with respect
to Royalties on sales of Licensed Products which are Section 4 Games or Section
5.6 Games) exceed (b) [*] of the amount of any Third Party Fees and Royalties
payable by Licensor to parties having rights with respect to the sale of
Licensed Products (the "Recoupable Amount") to recoup the
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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Minimum Guaranteed Advance Royalty paid by Licensee to WMS Industries Inc.
pursuant to Section 3 of the Master Atari PC Agreement (as reduced by the
Reduction Amount in accordance with Section 7 of the First Amendment to the
Master Atari PC Agreement) and the Master Atari Home Video Agreement (as that
term is defined in the Master Atari PC Agreement), until such Recoupable Amount
together with Recoupable Amounts applied or accrued by Licensee under any Other
Atari Home Computer Software Distribution and License Agreement entered into by
Licensee pursuant to the Master Atari PC Agreement ("Other Home Software
Distribution and License Agreements") and under any Atari Home Video
Distribution and License Agreement entered into by Licensee pursuant to the
Master Atari Home Video Agreement (and, to the extent applicable, amounts which
may be recouped against such Minimum Guaranteed Advance Royalty pursuant to the
GTIS Master Home Video Agreement and the GTIS Master PC Agreement) equal [*]
Dollars. Notwithstanding the foregoing, however, the Recoupable Amount shall not
include any royalties payable by Licensee to Licensor with respect to the sale
of Licensed Products which are Section 4 Games or Section 5.6 Games in North
America.
LIMITATIONS ON FREE AND PROMOTIONAL GOODS; CLOSE-OUTS.
Licensee shall be permitted to distribute free and promotional goods without the
payment of any Third Party Fees and Royalties or other royalties thereon,
subject to the provisions of Section 1 above and within the following
territorial and quantity limits:
United Kingdom,
Germany, Scandinavia,
Benelux, Italy, Spain,
Australia, and Japan: [*] units per country
Other Countries: [*] units per country
From and after March 27, 1998, the limit stated above for Japan shall apply to
the distribution of free and promotional goods by Licensor in such country.
No royalties shall be payable by Licensee to Licensor in excess of any Third
Party Fees and Royalties in connection with the sale by Licensee of
"close-outs." For purposes hereof, "close-outs" shall mean any Licensed Products
that are sold for a price no greater than the sum of direct manufacturing and
shipping costs plus any Third Party Fees and Royalties.
--------
* Certain information has been omitted and filed separately with the Securities
and Exchange Commission pursuant to a request for confidential treatment
pursuant to Rule 24b-2 under the Securities and Exchange Act of 1934, as
amended.
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SCHEDULE C
MARKETING AREAS
The following countries or related groups of countries shall each be
deemed a single Marketing Area:
United Kingdom* and Ireland
France*
Germany*, Switzerland and Austria
Benelux
Spain and Portugal
Italy
Scandinavia
Former Eastern Bloc and the Baltic States (Latvia, Lithuania, Estonia)
Russia and Rest of the CIS
Rest of Europe (including Turkey)
Africa
Middle East
India and Pakistan
China (PRC excluding Hong Kong and Macao)
Rest of Asia
Australia* and New Zealand
Brazil
Rest of South and Central America and the Caribbean
North America - Section 4 Games or Section 5.6 Games only, if
applicable
Japan - Section 4 Games or Section 5.6 Games or Licensed
Products pursuant to Section 3.6 of this Agreement
only, if applicable
--------
* Denotes Special Marketing Area
25
