Confidential License Agreement [Amendment] - LodgeNet Entertainment Corp. and Nintendo of America Inc.
Nintendo of America Inc.
4820 150th Avenue N.E.
Redmond, WA 98052 U.S.A.
February 6, 2004
Mr. Scott Petersen, Chief Executive Officer
LodgeNet Entertainment Corporation
3900 West Innovations Street
Sioux Falls, South Dakota 57107-7200
Via Fax: 605-988-1648
Re: Amendment to Nintendo License Agreement
We have prepared the following amendment to the Confidential License Agreement for Use of Nintendo Video Game Systems with Hotel Guest Entertainment System dated May 18, 1998, between Nintendo of America Inc. (Nintendo), and LodgeNet Entertainment Corporation (LodgeNet), as amended by the letters dated December 12, 2001, October 11, 2002, and April 28, 2003 (hereinafter, the Agreement). The capitalized terms used herein shall have the same meanings as those ascribed to them in the Agreement unless otherwise set forth herein.
1 Actual Costs: The parties agree that the Actual Costs to date associated with the Nintendo GameCube version of the Nintendo System (Gateway GameCube) that are payable by LodgeNet to Nintendo are *** (GameCube Costs). In accordance with Paragraph 8.1 of the Agreement, such GameCube Costs shall be paid by LodgeNet with each order of Gateway GameCube product it places, provided that the GameCube Costs must be paid in full no later than October 1, 2005. If the GameCube Costs are not paid in full by October 1, 2005, then Nintendo shall provide an invoice to LodgeNet for the shortfall, and LodgeNet shall pay such shortfall within thirty (30) days from the invoice date. Any Actual Costs incurred by Nintendo subsequent to the date of this amendment that relate to any current or future Nintendo System, including without limitation the Gateway GameCube and Game Boy Player, shall be paid in the full amounts by LodgeNet in accordance with Paragraph 8.1 of the Agreement.
2. Revised Royalty Rate: Paragraphs 8.3.1 and 8.3.3 of the Agreement shall be deleted. Paragraph 8.3.2 of the Agreement shall be deleted in its entirety and replaced with the following:
|Royalty Payable to Nintendo. LODGENET shall pay NINTENDO a royalty equal to ***, without deductions of any kind (New Royalty).|
Since the New Royalty will be retroactively effective as of October 1, 2003, Nintendo agrees that any overpayment of royalties during the period commencing on October 1, 2003, through the date of this amendment shall be credited toward future royalty payments. The Licensee Monthly Royalty Report set forth at Schedule 5 of the Agreement shall be deemed modified to the extent necessary for LodgeNets reporting of the New Royalty.
3. Minimum Guarantee: Paragraph 8.3.4 of the Agreement shall be deleted in its entirety and replaced with the following:
|Minimum Guarantee. LODGENETs payment of the New Royalty to NINTENDO shall equal at least *** per Month (Minimum Guarantee). In the event that the New Royalty for any Month equals less than the Minimum Guarantee, LODGENET shall pay NINTENDO the difference and shall not be entitled to recoup such difference from any future payments due NINTENDO.|
4. Term: The Term of the Agreement shall be extended for an additional five (5) years. The definition of Term as set forth in Paragraph 2.31 of the Agreement shall be deleted in its entirety and replaced with the following:
|Term shall mean fifteen (15) years from the Effective Date, together with any extension of the Term under Paragraph 13.6 herein.|
5. Minimum Installation Requirements: Paragraph 5.2 of the Agreement shall be deleted in its entirety and replaced with the following:
|Minimum Installation Requirements for the Nintendo System. LODGENET agrees to maintain an installed Nintendo Systems (which includes the Super NES, N64, and Gateway GameCube systems) base Room count in its Licensed Hotels of not less than *** Rooms during each Month during the Term. L0DGENET shall use reasonable commercial efforts to have no less than *** Rooms equipped with Gateway GameCube systems by October 1, 2007.|
6. Monthly Board Reconciliation Report: The Monthly Board Reconciliation Report is no longer required of LodgeNet. Accordingly, Paragraph 10.4 and all references to the Monthly Board Reconciliation Reports (including Schedule 7) shall be deleted from the Agreement.
7. Non-Assignability: Paragraph 15.3 of the Agreement shall be deleted in its entirety and replaced with the following:
|Non-Assignability/Minimum Guarantee Adjustment Right.|
(a) This Agreement is personal to both parties and may not, except as permitted below, be sold, assigned, delegated, sublicensed or otherwise transferred by either party, in whole or in part, including, without limitation, by operation of law, without the prior written
consent of the other party. An assignment by a party shall include, but not be limited to: (i) approval by a partys shareholders of a complete liquidation or dissolution of such party; or (ii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of a party (a Business Combination), unless, following such Business Combination, (A) the partys shareholders immediately prior to the Business Combination continue to own more than 60% of the voting stock of the company that results from the Business Combination, (B) no single shareholder after the Business Combination owns 20% or more of the voting stock of the company that results from the Business Combination unless such shareholder already held that percentage prior to the Business Combination, and (C) the members of the board of directors prior to the Business Combination make up a majority of the board of directors of the company that results from such Business Combination.
(b) Any attempted sale, assignment, delegation, sublicense or other transfer by either party in violation of this Paragraph 15.3 shall be deemed null and void and of no force or effect, and shall constitute a breach of this Agreement.
(c) Upon the occurrence of any of the following events, NINTENDO may, at its sole discretion, increase the Minimum Guarantee set forth in Paragraph 3 of this amendment to ***, and LODGENET shall be obligated to pay such increased Minimum Guarantee payments, effective immediately upon written notice from NINTENDO to LODGENET: (i) more than 40% of the members of LODGENETs board of directors are replaced in any twelve (12) month consecutive period: or (ii) any single shareholder acquires 20% or more of LODGENETs voting stock, except for: (A) repurchases of stock by LODGENET, (B) any acquisition by a LODGENET or LODGENET subsidiary employee benefit plan or related trust, or (C) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (a) of this Paragraph 15.3.
8. Future Discussions: If and to the extent LodgeNet experiences a significant decline in its Gross Revenue because of circumstances not within its control, Nintendo agrees to engage in good faith discussions with LodgeNet regarding potential modification of the financial terms of the Agreement, provided, however, it is ultimately within Nintendos sole discretion whether any change or modification would be made to those financial terms.
I believe these changes reflect our mutual agreement and understanding. Except as otherwise provided herein, all other terms and conditions of the Agreement shall remain unchanged. If you have any questions, please contact me. If this proposal is in order, please sign as indicated below and return a copy of this letter to me at your earliest convenience.
|/s/ Jacqualee Story|
|Jacqualee Story, Executive V.P., Business Affairs|
NINTENDO OF AMERICA INC.
AGREED TO AND ACCEPTED BY:
LODGENET ENTERTAINMENT CORPORATION
|By:||/s/ Scott Petersen|
|Date:||February 17, 2004|
|cc:||Peter Eck, Nintendo of America Inc.|
|Tracy Kristensen, Nintendo of America Inc.|