Master Option and License Agreement for Atari Home Video Games - WMS Industries Inc. and GT Interactive Software Corp.
MASTER OPTION AND LICENSE AGREEMENT
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FOR ATARI HOME VIDEO GAMES
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This Master Option and License Agreement ("Agreement") is made and
entered into the 27th day of March, 1996, by and between WMS INDUSTRIES INC.
("WMS"), a Delaware corporation with offices at 3401 North California Avenue,
Chicago, Illinois 60618, and GT INTERACTIVE SOFTWARE CORP. ("GTIS"), a Delaware
corporation with offices at 16 East 40th Street, New York, New York 10016.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Williams Inter-active Inc. ("WII") a wholly-owned subsidiary
of WMS, has entered into an agreement with Warner Communications Inc. for the
acquisition of the stock of Atari Games Corporation, a California corporation
("AGC"); and
WHEREAS, AGC is engaged in the business of designing, manufacturing
and selling coin-operated amusement games and software products for dedicated
home video game systems and multipurpose home computers; and
WHEREAS, GTIS is engaged in the business of publishing, manufacturing
and distributing entertainment software products; and
WHEREAS, GTIS desires to acquire certain rights from WMS and AGC and
other subsidiaries of AGC with respect to Games, as such term is defined herein,
and WMS desires to grant and to cause AGC to grant such rights to GTIS;
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NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
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1.1. "Accepted Game" shall mean any Game with respect to which
GTIS has received a license or has exercised an option to acquire a license
provided for in Section 2 hereof.
1.2. "AGC" shall have the meaning ascribed in the first recital
of this Agreement.
1.3. "Alternative Royalty" shall have the meaning ascribed in
Schedule "B" of the Atari Home Video Game Distribution and License Agreement.
1.4. "Atari Game" shall mean (i) any game developed or
acquired by or on behalf of AGC or entities which were affiliates of AGC prior
to AGC being acquired by WII pursuant to the Stock Purchase Agreement,
including, without limitation, those games listed on Schedule 1 hereto, and any
adaptations of such games for other platforms, and (ii) any game currently in
development or developed subsequent to such acquisition by or on behalf of AGC
or a member of the Atari Group, or developed, in whole or in substantial part,
by any person or persons who were employees of AGC or a member of the Atari
Group as of the closing date of such acquisition and who are employees of any
member of the WMS Group at the time of such development, and any adaptations of
such games for other platforms. For purposes of this Section, employees shall be
deemed to include independent contractors who work a substantial portion of
their time at the facilities of any member of the WMS Group.
1.5. "Atari Group" shall mean AGC, or any entity, a majority
of whose capital stock is owned directly or indirectly by AGC or with respect to
which during the term
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of this Agreement, AGC, 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 Consumer Game Platforms.
1.6. "Atari Home Video Game Distribution and License
Agreement" shall mean an agreement for the license of an Accepted Game for use
solely on a specific Designated Consumer Game Platform in the form of Exhibit A
annexed hereto, as the same may be amended from time to time by written
agreement of the parties thereto.
1.7. "Delivery Date" shall have the meaning ascribed in
Section 2.7 hereof.
1.8. "Designated Consumer Game Platforms" shall mean any of
the Sony(R), Nintendo(R) or Sega(R) dedicated home video game hardware platforms
or other dedicated home video game hardware platforms having a microprocessor
with a 32 bit or higher capacity (excluding SNES and Sega Genesis), on which
Game software can be played utilizing cartridges, CD-ROM disks or other devices
which may hereafter replace or supplement cartridges or CD-ROM disks in
operating systems now known or hereafter developed for use on dedicated home
video game hardware platforms. Designated Consumer Game Platforms shall not,
for purposes of this Agreement, include (a) any of the Atari Jaguar(R) system,
the 3D-06(R) system, or their respective successors (including any enhancements,
improvements or updates), except only to the extent that the Atari Group shall
itself (and not through any licensee or sublicensee) actually release for
commercial shipment in the normal course of business any Games on such hardware
platforms in the United States, or (b) any hand held games, or any multipurpose
home or
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THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
personal computer system or any electronic distribution or on-line interactive
computer game systems or platforms.
1.9. "Early Termination Event" shall mean AGC ceasing to be at
least 50.1% owned by a member of the WMS Group, or the Atari Group transferring
a majority of its intellectual property assets and licenses to a person or
entity who is not a member of the WMS Group.
1.10. "Effective Date" shall mean the date WII closes the
acquisition of AGC pursuant to the Stock Purchase Agreement.
1.11. "First Release" or "First Released" shall mean the
date of the first commercial shipment of a Game in the normal course of business
(and not merely for test purposes).
1.12. "Full Price" shall mean the price of Games which
have not been marked down or discounted by more than * from the original
list price of the Game. Markdowns or discounts shall include rebates
or credits (other than the cooperative advertising allowances which are
unrelated to price protection) granted within one year of the date of
the First Release of the Game).
1.13. "Game" shall mean any home video game designed for
play on a specific Designated Consumer Game Platform which is an Atari Game and
which has been released for commercial shipment in the normal course of business
by (i) any member of the WMS Group, or (ii) by any licensee of the WMS Group on
such Designated Consumer Game Platform in each case for sale in commercial
quantities in the United States in the normal course of business, but excluding
any such home video game with respect to which the Atari Group
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shall, prior to the date hereof, have granted rights (or any option, right of
first refusal or negotiation or other ability to obtain rights which may be
subsequently exercised) to any third party, including without limitation any
sublicensee of the Atari Group, to manufacture, distribute or sell such home
video game on such specific Designated Consumer Game Platform within the
Licensed Territory, including any renewals or extensions thereof resulting from
the exercise of previously granted rights. For purposes of this section,
employees shall be deemed to include independent contractors who work a
substantial portion of their time at the facilities of any member of the WMS
Group. Set forth on a schedule to a letter dated the date hereof and signed by
WMS and GTIS is a list of all material agreements known to WMS pursuant to
which the Atari Group has, prior to the date hereof, granted rights to
manufacture, distribute and sell such home video games on Designated Consumer
Game Platforms within the Licensed Territory, but excluding any agreements
pursuant to which the Atari Group has granted rights to home video games based
on games which have heretofore been released for commercial shipment in the
normal course of business by the Atari Group or by any sublicensee of the Atari
Group as coin-operated video or pinball games or on any dedicated home video
game platform or agreements pursuant to which the Atari Group has granted rights
to any derivative or sequel to any such previously released coin-operated video,
pinball or home video game. A home video game shall be deemed a separate Game
with reference to the specific Designated Consumer Game Platform on which it has
been designed for play.
1.14. "Game Version", or version of a Game, or any similar
phrase, whether or not capitalized, shall mean the version of a Game designed to
play on a specific Designated Consumer Platform.
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1.15. "GTIS" shall mean GTIS or any affiliate of GTIS to whom
any rights to exploit any Games granted hereunder may be sublicensed. An
affiliate of GTIS shall refer to an entity, a majority of whose capital stock is
owned directly or indirectly by GTIS or with respect to which during the term of
this Agreement, GTIS, directly or indirectly, has the legal power without the
consent of any third party to direct the manufacture, distribution or sale of
Games.
1.16. "GTIS Master Home Video Agreement" shall mean the GTIS
Master Option and License Agreement (Home Video Games) dated March 31, 1995, as
amended, among WMS, Williams Electronics Games, Inc., Midway Manufacturing
Company, Williams Entertainment Inc. and GTIS.
1.17. "GTIS Master PC Agreement" shall mean the GTIS Master
Option and License Agreement dated December 28, 1994, as amended, among WMS,
Williams Electronics Games, Inc., Midway Manufacturing Company, Williams
Entertainment Inc. and GTIS.
1.18. "Licensed Territory" shall have the meaning ascribed
in Section 3.1 of the Atari Home Video Game Distribution and License Agreement.
1.19. "Marketing Area" shall have the meaning ascribed in
Section 3.3 of the Atari Home Video Game Distribution and License Agreement.
1.20. "Master Atari PC Agreement" shall mean the Master
Option and License Agreement for Atari PC Games being executed simultaneously
herewith.
1.21. "Master Disk" shall mean a CD-ROM disk or floppy disk,
or any other stand alone device which may hereafter replace or supplant CD-ROM
or floppy disks,
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containing the source code utilized by the Atari Group for an Accepted Game
released or intended to be released in the United States.
1.22. "Minimum Guaranteed Advance Royalty" shall have the
meaning ascribed in Section 3 hereof.
1.23. "New Game Acceptance Notice" shall have the meaning
ascribed in Section 2.3 hereof.
1.24. "New Game Option Notice" shall have the meaning
ascribed in Section 2.3 hereof.
1.25. "New Game Option Notice Date" shall have the meaning
ascribed in Section 2.3 hereof.
1.26. "North America" shall mean (a) the United States of
America, its territories, possessions, and United States military installations
worldwide, (b) Canada and (c) Mexico.
1.27. "Notice of Election" shall have the meaning ascribed in
Section 9 hereof.
1.28. "Option Period" shall mean the period commencing on the
Effective Date and ending on the earlier to occur of (i) the expiration date,
including any extensions thereof, of GTIS' first option to acquire licenses
pursuant to Section 2.1 of the GTIS Master Home Video Agreement, or (ii) the
first date after the Effective Date on which an Early Termination Event occurs.
1.29. "Pirate" shall mean an individual or entity which
counterfeits a game or sells counterfeit games.
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1.30. "Proposed Game" shall have the meaning ascribed in
Section 2.3 hereof.
1.31. "Renewal Option Period" shall have the meaning ascribed
in Section 2.1 hereof.
1.32. "Renewal Option Year" shall have the meaning ascribed in
Section 2.1 hereof.
1.33. "Stock Purchase Agreement" shall mean the Stock
Purchase Agreement dated February 23, 1996 between Warner Communications Inc.
and WII pursuant to which Warner Communications Inc. has agreed to sell and WII
has agreed to purchase all of the outstanding stock of AGC.
1.34. "Weighted Average Gross Profits" shall have the meaning
ascribed in Schedule "B" of the Atari Home Video Game Distribution and License
Agreement.
1.35. "WII" shall have the meaning ascribed in the first
recital of this Agreement.
1.36. "WMS Group" shall mean WMS, or any subsidiary, affiliate
or other entity, a majority of whose capital stock is owned directly or
indirectly by WMS or with respect to which during the term of this Agreement,
WMS, 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 Consumer Game Platforms.
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2. GRANT AND TERMINATION OF OPTION; Exercise of OPTION.
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2.1. Effective from and after the Effective Date, the Atari
Group hereby grants to GTIS a first option to acquire a license, in the form of
the Atari Home Video Game Distribution and License Agreement, to manufacture,
distribute, sell, sublicense and subdistribute versions of the Games for use
solely on specific Designated Consumer Game Platforms, with respect to Games
which become Accepted Games during the Option Period, provided that such Games
are actually released by the Atari Group or its licensees in the United States
within twelve (12) months following the expiration of the Option Period.
Royalties payable on sales of Accepted Games with respect to which GTIS
has received a license or exercised an option to acquire a license during the
Renewal Option Period shall be subject to increase, as of the commencement of
the Renewal Option Period or any subsequent Renewal Option Year, to reflect
increases in GTIS' Weighted Average Gross Profits as a percentage of GTIS' sales
of Accepted Games during the Option Period or during the prior Renewal Option
Year as provided in Schedule "B" to the Atari Home Video Game Distribution and
License Agreement. Renewal Option Period and Renewal Option Year shall have the
meanings ascribed to such terms in Section 2.1 of the GTIS Master Home Video
Agreement.
2.2. The Atari Group shall not grant a license to any third
parties to manufacture, distribute and sell versions of a Game for use on any
Designated Consumer Game Platform if such Game would be subject to GTIS' first
option right to manufacture, distribute and sell versions of such Game on such
Designated Consumer Game Platform, as specified in Section 2.1 hereof, until
such time as GTIS shall have declined to acquire a license, or the option period
specified in Sections 2.3 and 2.4 hereof, whichever is applicable, shall have
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expired, or the applicable Atari Home Video Game Distribution and License
Agreement shall otherwise permit. GTIS understands, acknowledges and agrees
that (a) on the Effective Date, the Atari Group's library of Games, projects in
development and subsequent versions of Games may be subject to rights held by
third parties, including affiliates of Warner Communications Inc. who are not
members of the Atari Group; any license acquired by GTIS hereunder shall be
subject to such third party rights, and the form of Atari Home Video
Distribution and License Agreement will be deemed modified to the extent so
required; (b) with respect to Games manufactured by the Atari Group under
license 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 Games,
(ii) will be limited to the Licensed Territory, and (iii) are subject to all
limitations imposed on the Atari Group by such third party licensors, including
limitations on the Atari Group's right to sublicense or subdistribute, and the
form of Atari Home Video Game Distribution and License Agreement will be deemed
modified to the extent so required, (c) under certain circumstances the
ownership of the Atari Group may revert to Warner Communications Inc. pursuant
to the Stock Purchase Agreement and documents executed in connection therewith;
and (d) 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 this Agreement. GTIS shall be
provided the opportunity to review all third party agreements existing on the
Effective Date relating to Games with respect to which GTIS may acquire rights
hereunder, subject to any applicable confidentiality provisions in such
agreements.
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2.3. If the Atari Group has determined or shall determine to
develop or acquire rights in a Game for play on a Designated Consumer Game
Platform which the Atari Group intends to release in the United States during
the Option Period or within twelve (12) months thereafter, including Games which
were in the Atari Group library on the Effective Date but which are re-released
with new copyright notices or other changes after the Effective Date, (a
"Proposed Game"), the Atari Group shall notify GTIS in writing, as soon as
practicable, with respect to such determination and shall furnish to GTIS any
tentative development schedule for such Proposed Game. Such tentative
development schedule shall be subject to change at any time and from time to
time and the Atari Group reserves the right to abandon, suspend, or otherwise
delay the development of such Proposed Game in its sole and absolute discretion,
provided, however, that the Atari Group shall use reasonable efforts to keep
GTIS apprised of material scheduling changes and/or the achievement of
milestones in connection with the development of such Proposed Game. The Atari
Group shall, as soon as practicable, notify GTIS in writing with respect to (a)
the characteristics and method of play of such Proposed Game, (b) any material
limitations or other terms and conditions which may affect the scope of the
license which may be granted to GTIS (including copies of relevant contractual
provisions where permitted), (c) the amount or method of determining third party
fees and royalties payable in connection therewith, and (d) the date on which
the Atari Group proposes to First Release the Proposed Game in the United States
(the "New Game Option Notice"). The Atari Group shall use reasonable efforts to
advise GTIS with respect to all of the information required to be included in
the New Game Option Notice, as provided above, at least one hundred and twenty
(120) days prior to the proposed release date of the Proposed Game by the Atari
Group in the
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United States, provided, however, that GTIS acknowledges and agrees that such
information may not then be available to the Atari Group and the Atari Group may
not have fully determined or negotiated all material limitations or other terms
and conditions which may affect the scope of the license or Third Party Fees and
Royalties payable with respect thereto. The date of such New Game Option Notice
is hereinafter referred to as the "New Game Option Notice Date." With respect to
each Proposed Game as to which GTIS receives a New Game Option Notice, as
hereinabove provided, GTIS shall have a period of sixty (60) days in which to
notify AGC in writing that it either elects or declines to exercise its option
to license the Proposed Game. A notice that GTIS elects to exercise its option
to have the Proposed Game is referred to as a "New Game Acceptance Notice." Any
New Game Acceptance Notice given by GTIS shall in all events be conditioned upon
and subject to (i) the actual release of the Game by the Atari Group in the
United States within twelve (12) months following the end of the Initial Option
Period or any Renewal Option Year as those terms are defined in the GTIS Master
Home Video Agreement and (ii) the prior release of coin-operated versions of the
Game, if any, by the Atari Group no later than the end of the corresponding
Initial Option Period or Renewal Option Year. As soon as practicable following
receipt of (a) the New Game Acceptance Notice, and (b) notice from the
Designated Consumer Game Platform manufacturer of its acceptance of the Proposed
Game for sale in the United States, the Atari Group shall promptly furnish to
GTIS a Master Disk with respect to such Game as well as one NTSC and one PAL
version of such Master Disk. The Atari Group shall also furnish to GTIS, as
soon as reasonably available, (i) the beta version of the Game, (ii) text files
and the text that appears in bit map files, and printed copies of scripts used
for audio components of CD-ROM versions of the Proposed Game, for purposes
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THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
of translating the Proposed Games into languages other than English (as
contemplated in the Atari Home Video Game Distribution and License Agreement),
and (iii) copies of artwork, instruction manuals, and other packaging, labeling
and promotional materials to be used by the Atari Group with respect to such
Proposed Game substantially in commercially reproducible form. Except as
otherwise specifically provided below, GTIS shall be solely responsible for all
costs and out of pocket expenses required to reprogram a Master Disk for use in
connection with the sale of Accepted Games, including, without limitation,
editorial changes or adaptions to local markets, changes required by all
manufacturers of Designated Consumer Game Platforms and local rating boards or
similar governmental agencies in the Licensed Territory. The Atari Group shall
bear costs up to * Dollars for editorial changes per Accepted Game required by
any German or European approval boards for modifications to Accepted Games,
subject in all events to a maximum total required expenditure by the Atari Group
during the Initial Option Period of * Dollars and * Dollars during each Renewal
Option Year. GTIS and the Atari Group shall otherwise discuss in good faith any
sharing of costs of other editorial changes, but the Atari Group shall in no
event have any obligation to bear any additional costs of such editorial changes
unless it shall specifically agree in writing with respect thereto. Although the
Atari Group shall make reasonable efforts to advise GTIS with respect to the
development schedule of a Proposed Game and the intended First Release date of
such Proposed Game by the Atari Group in the United States, nothing herein shall
be deemed to require the Atari Group to alter, amend, delay, or suspend its
development schedule with respect to such Proposed Game, or its First Release
date in the United States.
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2.4. Any Proposed Game or Game as to which GTIS has exercised
its option and furnished to the Atari Group a New Game Acceptance Notice within
the notice period specified in Section 2.3 above shall become an "Accepted Game"
for purposes of this Agreement, provided that such Game shall have actually been
released by the Atari Group in the United States within twelve (12) months
following expiration of the Option Period, and provided further that coin-
operated versions of the Game, if any, shall have previously been released by
the Atari Group during the Option Period. With respect to each Accepted Game,
GTIS and the member of the Atari Group which has released such Game shall enter
into an Atari Home Video Game Distribution and License Agreement which shall be
dated as of the date of the New Game Acceptance Notice. If either of such
parties shall delay or wrongfully refuse to enter into an Atari Home Video Game
Distribution and License Agreement with respect to any Accepted Game, then, in
addition to any other rights of the non-defaulting party hereunder, at the
option of the non-defaulting party, such Atari Home Video Game Distribution and
License Agreement shall be deemed to have been entered into as of the date on
which GTIS shall have exercised its option to acquire the license of such
Accepted Game as provided herein. GTIS understands and agrees that it will have
no rights whatsoever in respect of any Game which does not become an Accepted
Game in accordance with the terms of this Agreement and for which an Atari Home
Video Game Distribution and License Agreement is not duly executed (or deemed
executed as provided above), and the Atari Group may exploit its rights in any
Game which does not become an Accepted Game in any manner it sees fit, free and
clear of this Agreement provided, however, that if GTIS shall fail or decline to
accept a Proposed Game as provided in Section 2.3 above, and the Atari Group
shall thereafter make material changes in
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the programming of the Game or in the amount of any Third Party Fees and
Royalties payable with respect thereto, then the Atari Group shall furnish to
GIIS a new New Game Option Notice with respect to such Game as so changed and
GTIS shall thereafter have the right to accept such Game as changed in the
manner provided in Section 2.3 above. The Atari Group shall also be entitled to
exploit its rights with respect to any Game and to sell and distribute such
Game, free and clear of this Agreement, in any Marketing Area with respect to
which GTIS' right to sell and distribute such Game has been suspended or revoked
(or has become non-exclusive) as provided in Section 2.7 below and Section 3.3
of any Atari Home Video Game Distribution and License Agreement, provided
however, that if the Atari Group shall thereafter make material changes in the
programming of such Game or in the amount of any Third Party Fees and Royalties
payable with respect thereto, then the Atari Group shall furnish to GTIS a new
New Game Option Notice with respect to such Game as so changed and GTIS shall
thereafter have the right to accept such Game as changed in the manner provided
in Section 2.3 above.
2.5. GTIS acknowledges that the Atari Group manufactures and
sells Games for many different entertainment platforms, including coin-operated
games and home games of all types, and that any Games in respect of which GTIS
obtains rights hereunder for exploitation on a specific Designated Consumer Game
Platform may be developed by the Atari Group for other entertainment platforms,
including other Designated Consumer Game Platforms, or for territories not
included in the Licensed Territory and GTIS will have no rights therein.
2.6. The Atari Group agrees to use commercial efforts, in its
reasonable judgment, to acquire rights to exploit Games on Designated Consumer
Game Platforms throughout the Licensed Territory when it acquires rights to
exploit such Games in the United
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States. Except to the extent that the Atari Group has heretofore granted rights
(or any option, right of first refusal or negotiations or other ability to
obtain rights which may be subsequently exercised) to manufacture, distribute or
sell home video games on Designated Consumer Game Platforms within the Licensed
Territory to any third party (including any renewals or extensions thereof
resulting from the exercise of previously granted rights), if the Atari Group
develops internally any coin-operated or home video game, then the Atari Group
shall not license the right to use its computer software source code or object
code for such coin-operated or home video game to any third party for the
purpose of developing and/or marketing a Game for play on a Designated Consumer
Game Platform in the Licensed Territory, unless the Atari Group shall have first
offered to license such Game to GTIS as provided in this Agreement. With
respect to Games in which the Atari Group acquires or intends to acquire from a
third party rights to exploit such Games on Designated Consumer Game Platforms
in the United States, but with respect to which the Atari Group is unable or
unwilling to acquire rights to exploit such Games on Designated Consumer Game
Platforms in the Licensed Territory based on the Atari Group's reasonable
judgment that such rights are not available on commercially acceptable terms, or
on terms which, in the Atari Group's judgment, would make it uneconomical for
the Atari Group to acquire and license such rights to GTIS on the terms and
conditions set forth herein and in the Atari Home Video Game Distribution and
License Agreement, the Atari Group shall so advise GTIS and GTIS shall have the
reasonable opportunity to consult with the Atari Group (and, in GTIS'
discretion, to propose other licensing or cost sharing arrangements with respect
to such Game) prior to the Atari Group's determination whether to accept or
decline to accept such rights which shall be made in good faith.
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2.7. GTIS or its sublicensees shall actively commence
marketing and selling an Accepted Game in reasonable commercial quantities in
all Marketing Areas within the Licensed Territory within six (6) months
following the date upon which the Atari Group shall have First Released such
Accepted Game in the United States (the "Delivery Date"), provided however, that
such six (6) month period shall be extended for a period of sixty (60) days in
Marketing Areas, other than those designated as "Key Marketing Areas" on
Schedule C annexed to the Atari Home Video Game Distribution and License
Agreement, if GTIS shall have proposed a sublicensee to distribute Licensed
Products in such Marketing Area and the Atari Group shall have withheld its
approval of the sublicensee. If GTIS or its sublicensees shall have failed to
commence actively marketing and selling an Accepted Game in any Marketing Area
within the Licensed Territory within six (6) months following the Delivery Date
with respect thereto, 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 Video Game Distribution and License Agreement, upon thirty (30) days
written notice to GTIS, to suspend and revoke GTIS' or its sublicensees' right
to sell such Accepted Game in such Marketing Area or to declare such right
henceforth to be non-exclusive, as the Atari Group shall determine. If GTIS or
its sublicensees shall have failed to commence actively marketing and selling
three (3) or more Accepted Games which have been designed for play on the same
Designated Consumer Game Platform, in each case within six (6) months following
the Delivery Date with respect thereto, in any Marketing Area within the
Licensed Territory, then the Atari Group shall have the right, upon thirty (30)
days written notice to GTIS, permanently to suspend and revoke GTIS' right to
distribute and sell all future Accepted Games which have been designed for play
on the same Designated
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Consumer Game Platform in such Marketing Area and to exclude such Marketing Area
from the Licensed Territory under all future Atari Home Video Game Distribution
and License Agreements for Games which have been designed for play on such
Designated Consumer Game Platforms. Notwithstanding the foregoing, however,
GTIS or its sublicensees shall not be required to have actively commenced
marketing and selling an Accepted Game in any Marketing Area if the specific
Designated Consumer Game Platform on which such Accepted Game has been designed
for play shall not regularly be sold at retail or otherwise not be generally
available to consumers in such Marketing Area or if such Accepted Game is banned
in the entire Marketing Area.
For purposes of documenting compliance with this Section 2.7, GTIS
shall submit a report, as of the date six (6) months following the Delivery
Date, listing the Marketing Areas in which GTIS has not commenced actively
marketing and selling an Accepted 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 Marketing Area listed (indicating the
date of expected 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.
2.8. Royalties payable to AGC pursuant to Schedule B of the
Atari Home Video Game Distribution and License Agreement are measured by the
wholesale prices of Licensed Product. Accordingly, reasonably in advance of
AGC's decision to enter into a developer contract and reasonably in advance of
GTIS' initial release of the Licensed Product, GTIS shall advise AGC, at AGC's
request, of GTIS' expected pricing strategy and the reasons
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therefor. Nothing herein shall be deemed to restrict GTIS' freedom in selecting
wholesale sales prices it considers appropriate, which shall be in GTIS' sole
discretion.
2.9. Anything in this Agreement to the contrary
notwithstanding, with respect to any Games currently under development by the
Atari Group for which the Atari Group has heretofore made development advances
and as to which the Atari Group has the right to grant licenses to GTIS to
manufacture, distribute and sell versions of the Game for use on one or more
Designated Consumer Game Platforms, if GTIS does not exercise its first option
within the time periods or in the manner set forth in Section 2.3 of this
Agreement, GTIS shall not have any subsequent rights with respect to such Game,
including rights under Section 2.4, even if the Atari Group makes material
changes in programming of the Game or in the amount of any Third Parties Fees
and Royalties.
2.10. If, under Section 2.1 of any Atari Home Video Game
Distribution and License Agreement entered into under this Agreement, Licensor
has granted written approval (which shall not be unreasonably withheld) to
Licensee of a sublicensee for the Licensed Property, such approval shall apply
to the sublicensing by that sublicensee of all Licensed Properties licensed to
Licensee under Atari Home Video Game Distribution and License Agreements entered
into under this Agreement, subject to the following: (i) the sublicense
agreements shall contain provisions with respect to quality of Licensed Product,
trademarks, copyrights, materials, other intellectual property rights, rights of
additional sublicensing or assignment, termination rights, confidentiality,
accounting, auditing, reporting and payment procedures in form agreed to by GTIS
and WMS, and the form as so agreed to may be used by all approved sublicensees
described in clause (iii) below; provided that if such
19
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
form is not so used, any other form to be used shall be subject to prior
approval as provided in this subsection (i); (ii) no such blanket approval shall
be deemed given with respect to Licensed Properties as to which approval
requirements imposed by third parties, such as the NFL and NBA, apply, (iii) if
the sublicense is for a Marketing Area other than those designated as Key
Marketing Areas in such Atari Home Video Game Distribution and License Agreement
and if the expected sales volume in such Marketing Area, in GTIS, good
faith judgment, is an average of * units or less per SKU per year, Licensee will
not be required to obtain Licensor's prior written approval of the terms of such
license but Licensee will be required to provide a copy of each sublicense to
Licensor within ten (10) Business Days after GTIS enters into such sublicense;
and (iv) if the Marketing Area is designated as a Key Marketing Area or if, in
GTIS' good faith judgment, the expected sales volume for such Marketing Area is
more than an average of * units per SKU per year, Licensee will be required to
obtain Licensor's prior written approval, which Licensor will not unreasonably
withhold, of the terms of a sublicense for such Marketing Area even if the
identity of the sublicensee has been previously approved; provided, however, if
a sublicense is for multiple platforms and multiple games, the approval of the
sublicense will be deemed to be approval for all Games distributed under that
sublicense (subject to clause (ii)). Anything to the contrary notwithstanding,
(x) if a previously approved sublicensee becomes an Exporter (as such term is
defined in Exhibit A to the Atari Home Video Game Distribution Agreement) or a
Pirate, Licensee will immediately upon becoming aware thereof notify Licensor of
the identity of such Exporter or Pirate and as soon as practicable terminate the
sublicense upon request by Licensor, and (y) Licensor and Licensee will review
every two years the identity of sublicensees, and those sublicensees who
previously received
20
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
blanket approval as provided in the first sentence of this Section and who are
no longer considered acceptable by Licensor, in the exercise of Licensors'
reasonable judgment, will no longer have such blanket approval and will be
subject to Licensor's prior approval with respect to all future sublicenses in
accordance with the approval procedures set forth above. Licensee shall use all
reasonable efforts to cause each agreement with its sublicensees to permit
Licensee to terminate such agreement immediately if such sublicensee shall be or
become an Exporter or a Pirate.
3. MINIMUM GUARANTEED ADVANCE ROYALTY. In consideration for both the
----------------------------------
option granted herein and in the Master Atari PC Agreement and as a guaranteed
advance royalty, GTIS is paying to WMS the aggregate sum of * Dollars ("Minimum
Guaranteed Advance Royalty") in the manner provided in the Master Atari PC
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF WMS. WMS represents and
-------------------------------------
warrants that this Agreement has been duly authorized, executed and delivered by
WMS; WMS has the full power and authority to enter into this Agreement and to
perform its obligations hereunder and this Agreement constitutes the valid and
binding obligation of WMS, enforceable in accordance with its terms, and the
making of this Agreement by WMS does not violate or conflict with any agreement,
right or obligation existing between WMS and any other person, firm or
corporation.
5. REPRESENTATIONS-AND WARRANTIES OF GTIS. GTIS represents and
--------------------------------------
warrants that this Agreement has been duly authorized, executed and delivered by
GIIS; GTIS has the full power and authority to enter into this Agreement and to
perform its obligations
21
<PAGE>
hereunder and this Agreement constitutes the valid and binding obligation of
GTIS enforceable in accordance with its terms; and the making of this Agreement
by GTIS does not violate or conflict with any agreement, right or obligation
existing between GTIS and any other person, firm or corporation.
6. CONFIDENTIAL INFORMATION. GTIS shall keep in confidence and not
------------------------
disclose or make available to any third party, without the written permission of
AGC, the terms of this Agreement and the proprietary information of the Atari
Group made known to it under this Agreement, including without limitation any
information with respect to Proposed Games prior to the date on which they are
First Released and any Master Disk or version thereof. Likewise, WMS and the
Atari Group shall keep in confidence and not disclose to any third party,
without the written permission of GTIS, the terms of this Agreement and the
proprietary information of GTIS made known to it under this Agreement. This
requirement of confidentiality shall not apply to information that is (a)
permitted to be disclosed under an Atari Home Video Game Distribution and
License Agreement; (b) in the public domain through no wrongful act of the
receiving party; (c) rightfully received by the receiving party from a third
party who is not bound by a restriction of nondisclosure; (d) already in the
receiving party's possession without restriction as to disclosure; or (e) is
required to be disclosed by applicable rules and regulations of government
agencies or judicial bodies. WMS or GTIS shall not issue any press release or
other public or trade announcement with respect to the transactions contemplated
by this Agreement unless the issuing party shall have first consulted with the
other with respect thereto and obtained the other's prior written approval
therefor, which approval will not be unreasonably withheld or delayed. The
obligations of confidentiality under this Section 6 shall survive
22
<PAGE>
termination of this Agreement and either party 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. With
respect to this Agreement and all Atari Home Computer Software Distribution and
License Agreements entered into in connection therewith, each of the AGC Group
and GTIS agree to use reasonable efforts to ensure that either of them may
disclose the proprietary information of the other (including, without
limitation, the software source code and tools relating to any Game) only to
those persons within their organizations who have a need to know such
information in order to perform its obligations under this Agreement and the
Home Video Game Distribution and License Agreements and any such disclosure
shall be limited to the information which needs to be known. Further, neither
the AGC Group nor GTIS shall use any such proprietary information for purposes
other than the performance of its obligations under this Agreement and the Home
Video Game Distribution and License Agreements.
7. 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 (a) by its delivery personally or by
express mail; or (b) 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 GTIS:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz, President
Telephone Number: (212) 726-6508
Facsimile Number: (212) 679-6850
23
<PAGE>
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 726-6523
Facsimile Number: (212) 679-6850
With a copy to:
GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 726-6500
Facsimile Number: (212) 679-6850
To WMS:
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
With a copy to:
Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
24
<PAGE>
With a copy to:
Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 730-1964
or such other address as either party may designate by notice given as
aforesaid.
8. DEFAULT. In the event that GTIS shall default in any of its
-------
material obligations hereunder or under any Atari Home Video Game Distribution
and License Agreement and the Atari Group or WMS has provided notice of such
default in accordance with the provisions of Section 7 hereof, if GTIS has not
cured such default within fifteen (15) days of such notice, or within the grace
periods provided in the Atari Home Video Game Distribution and License Agreement
in respect of payments thereunder, then, in addition to all other rights and
remedies of the Atari Group or WMS at law or in equity, at the option of the
Atari Group or WMS, all rights granted to GTIS under Section 2 of this Agreement
shall be deemed terminated and shall revert to the Atari Group, provided it is
understood that notwithstanding such termination, the Atari Home Video Game
Distribution and License Agreements with respect to Accepted Games which were
deemed entered into prior to such termination, and which are not in default,
shall remain in full force and effect. No such termination shall in any way
affect or diminish WMS' rights hereunder, including the right of WMS to receive
the Minimum Guaranteed Advance Royalty. Anything herein to the contrary
notwithstanding, the rights granted to GTIS under Section 2 of this Agreement
shall not be affected by an alleged default by Licensee under an Atari Home
Video Game Distribution and License Agreement resulting
25
<PAGE>
from a bona fide dispute between Licensor and Licensee provided that Licensee
pays all undisputed amounts to Licensor and all disputed amounts are paid into a
bona fide third party escrow account.
9. OTHER TERMINATION. Anything in this Agreement to the contrary
-----------------
notwithstanding, if pursuant to Section 10 of the GTIS Master Home Video
Agreement, WMS elects to terminate all rights granted to GIIS under Section 2 of
the GTIS Master Home Video Agreement (a "Notice of Election"), WMS must also
terminate all rights granted to GTIS under Section 2 of this Agreement; provided
that, notwithstanding such termination, all Atari Home Video Game Distribution
and License Agreements with respect to Accepted Games which were deemed entered
into prior to such termination, and which are not in default, shall remain in
full force and effect. Within thirty (30) days following the date on which WMS
shall issue a Notice of Election, WMS shall pay to GTIS an amount equal to any
then unrecouped portion of the Minimum Guaranteed Advance Royalty which has
theretofore been paid to WMS under this Agreement and the Master Atari PC
Agreement, together with interest thereon at the prime rate designated by
Citibank, N.A. calculated from the date paid. No termination by WMS of GTIS'
rights to continue to acquire licenses with respect to Games pursuant to the
provisions hereof shall in any way affect or diminish any rights of WMS or the
Atari Group hereunder, or the Atari Group's right to continue to receive
Royalties under any Atari Home Video Game Distribution and License Agreement
which remains in effect, except that GTIS shall not be entitled to any further
recoupment of the Minimum Guaranteed Advance Royalty.
10. NON-SOLICITATION.
----------------
26
<PAGE>
During the Option Period and for a further period of two (2) years thereafter,
neither GTIS nor the Atari Group shall, for itself or on behalf of any other
person, partnership, corporation or entity, directly or indirectly, or by action
in concert with others (a) solicit, induce, or encourage any person to terminate
his or her employment or other contractual relationship with the other party or
any of its affiliates, or (b) solicit, induce, or encourage any designer,
developer, salesperson or other person known to have a contractual relationship
with the other party to discontinue, terminate, cancel or refrain from entering
into any design, development, sales or other contractual relationship with the
other party or any of its affiliates. Each party agrees that the parties hereto
shall be entitled to injunctive or other equitable relief to prevent the breach
or threatened breach by it of the provisions of this section and to secure its
enforcement.
11. STOCK PURCHASE AGREEMENT CONDITIONS. This Agreement shall
-----------------------------------
become effective on the Effective Date and shall be null and void and of no
force and effect if the Effective Date shall not have occurred by June 30, 1996.
On the Effective Date, WMS shall cause AGC to execute an instrument of
assumption, whereby AGC shall assume all of the obligations of AGC and the Atari
Group referred to in this Agreement. Notwithstanding such assumption by AGC,
WMS shall remain liable for the obligations of AGC under this Agreement so long
as an Early Termination Event shall not have occurred.
12. MISCELLANEOUS.
-------------
12.1. This Agreement is personal to GTIS as one party and
WMS as the other party. Neither this Agreement nor any party's rights under it
may be assigned, in whole or in part, nor may its obligations be delegated, in
whole or in part, to any person or party
27
<PAGE>
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 both the assignee and the assignor remain fully liable for
assignor's obligations hereunder. After the Effective Date, in connection with
any Early Termination Event, WMS and AGC shall obtain the assumption by the
purchaser or transferee of all covenants, obligations and duties undertaken by
the seller pursuant to the terms of this Agreement, including its obligations
with respect to Games and the intellectual property from which they are derived.
This Agreement shall bind the parties, their successors and permitted assignees
and delegees. WMS, as one party, and GTIS, as the other party, are each jointly
and severally liable for their respective obligations under the terms of this
Agreement.
12.2. 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.
12.3. 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.
12.4. This Agreement does not constitute and shall not be
construed as constituting a partnership or joint venture between WMS and GTIS,
and neither WMS nor GTIS
28
<PAGE>
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.
12.5. 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.
12.6. 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.
12.7. 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.
12.8. In the event of conflicts between the provisions of
this Agreement and the Atari Home Video Game Distribution and License Agreement,
the provisions of this Agreement shall prevail.
IN WITNESS OF, the parties have executed this Agreement as of the day
and year first above written.
WMS INDUSTRIES INC.
By: /s/ NEIL NICASTRO
---------------------------------
Neil Nicastro
GT INTERACTIVE SOFTWARE CORP.
By: /s/ RONALD CHAIMOWITZ
---------------------------------
Ronald Chaimowitz
29
<PAGE>
EXHIBIT A
---------
HOME VIDEO GAME
---------------
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
16 East 40th Street, New York, New York 10016 (herein called "Licensee") and
ATARI GAMES CORPORATION, a California corporation with offices at _____________
(herein called "Licensor").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Licensor owns or controls the right to manufacture, sell and
distribute Home Video Games (as hereinafter defined) containing the Licensed
Property (as hereinafter defined) in the Licensed Territory (as hereinafter
defined); and
WHEREAS, WMS industries Inc., the parent of Licensor, and Licensee are
parties to the Master Atari Home Video Agreement (as hereinafter defined)
pursuant to which Licensee has exercised its right and option to acquire a
license to manufacture, distribute and sell Home Video Games embodying the
Licensed Property in the Licensed Territory;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
------------
1.1. "Alternative Royalty" shall have the meaning ascribed in
Schedule "B" annexed hereto.
1.2. "Cartridge-Based Product" shall have the meaning
ascribed in Schedule "B" annexed hereto.
1.3. "Cartridge Margin" shall have the meaning ascribed in
Schedule "B" annexed hereto.
<PAGE>
1.4. "Computer Software" or "Software" shall mean computer
software in the form of a cartridge, CD-ROM disk or other device 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
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 Designated Consumer Game Platform.
1.5. "Delivery Date" shall have the meaning ascribed in
Section 1.7 of the Master Atari Home Video Agreement.
1.6. "Designated Consumer Game Platform" shall have the
meaning ascribed in Section 1.8 of the Master Atari Home Video Agreement.
1.7. "Exporter" shall have the meaning ascribed in Section 3.3
hereof.
1.8. "First Foreign Sale" shall have the meaning ascribed in
Schedule "B" annexed hereto.
1.9. "First Release" or "First Released" shall have the
meaning ascribed in Section 1.11 of the Master Atari Home Video Agreement.
1.10. "Front-line" shall have the meaning ascribed in Schedule
"B" annexed hereto.
1.11. "Full Price" shall have the meaning ascribed in Section
1.12 of the Master Atari Home Video Agreement.
1.12. "Game" shall have the meaning ascribed in Section 1.13
of the Master Atari Home Video Agreement.
1.13. "Home Video Game" shall mean Computer Software
designed to operate solely on a specific Designated Consumer Game Platform.
1.14. "Late Charge" shall have the meaning ascribed in
Section 6.5 hereof.
2
<PAGE>
1.15. "Late Report" shall have the meaning ascribed in
Section 6.5 hereof.
1.16. "Licensed Products" shall mean Home Video Games
embodying the Licensed Property.
1.17. "Licensed Property" shall mean the intellectual
property, game concepts, descriptions, characteristics and method of play
described in the New Game Option Notice and/or on Schedule A and embodied in the
"Licensed Products."
1.18. "Licensed Territory" shall have the meaning ascribed in
Section 3.1 hereof.
1.19. "Marketing Area" shall have the meaning ascribed in
Section 3.4 hereof.
1.20. "Master Atari Home Video Agreement" shall mean the
Master Option and License Agreement for Atari Home Video Games dated March 27,
1996, between Licensee and WMS Industries Inc.
1.21. "Master Disk" shall have the meaning ascribed in
Section 1.21 of the Master Atari Home Video Agreement.
1.22. "Minimum Guaranteed Advance Royalty" shall have the
meaning ascribed in Section 3 of the Master Atari Home Video Agreement.
1.23. "Net Wholesale Sales Price" shall have the meaning
ascribed in Schedule "B" annexed hereto.
1.24. "New Game Option Notice" shall have the meaning
ascribed in Section 2.3 of the Master Atari Home Video Agreement.
1.25. "Option Period" shall have the meaning ascribed in
Section 1.28 of the Master Atari Home Video Agreement.
3
<PAGE>
1.26. "Other Atari Home Video Game Distribution and License
Agreements" shall have the meaning ascribed in Schedule "B" annexed hereto.
1.27. "Recoupable Amount" shall have the meaning ascribed
in Schedule "B" annexed hereto.
1.28. "Renewal Option Period" shall have the meaning ascribed
in Section 2.1 of the Master Atari Home Video Agreement.
1.29. "Renewal Option Year" shall have the meaning ascribed in
Section 2.1 of the Master, Atari Home Video Agreement.
1.30. "Royalty" shall have the meaning ascribed in Schedule "B"
annexed hereto.
1.31. "Royalty Period" shall have the meaning ascribed in Section
6.1 hereof.
1.32. "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.
1.33. "Third Party Fees and Royalties" shall mean all
fees, royalties and other participations of any kind or nature payable by
Licensor to any third party, including developers, licensors and others having
rights in connection with the exploitation of the Licensed Products. There
shall be excluded from the term "Third Party Fees and Royalties" as used herein
(a) any fees or royalties payable to employees or consultants by Licensor or its
affiliates with respect to the development of the Licensed Product in house; and
(b) advances paid to any third party having rights in connection with the
exploitation of the Licensed Products (other than persons referred to in clause
(a)), 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
4
<PAGE>
and Royalties shall include such royalties which would otherwise be payable to
such third party were it not for such right of recoupment.
1.34. "Weighted Average Gross Profits" shall have the meaning
ascribed in Schedule "B" annexed hereto.
Capitalized terms used, but not defined herein, shall have the meaning
ascribed to such terms in the Master Atari Home Video 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 manufacture, distribute, subdistribute and sell the
Licensed Products in the Licensed Territory. Licensee shall have the right to
sublicense any of the rights granted to Licensee hereunder to affiliates of
GTIS, as such term is defined in Section 1.15 of the Master Atari Home Video
Agreement, and, with Licensor's prior written consent, which consent shall not
be unreasonably withheld or delayed, to unaffiliated third parties. Without
limiting the generality of the foregoing, Licensor shall not unreasonably
withhold or delay its consent to proposals by Licensee to sublicense its rights
hereunder to third party dedicated home video game hardware platform
manufacturers for the purpose of "bundling" the Licensed Products together with
such hardware products for distribution only within the Licensed Territory.
Licensee shall not have the right to sublicense its rights hereunder (and
Licensor may withhold its consent to any proposed sublicense) to any third party
for the purpose of distributing, or to any third party who Licensee knows or
could reasonably expect intends to sell or distribute, the Licensed Products
outside of the Licensed Territory. Licensor may also withhold its consent to
any proposed sublicense arrangement, if as a result thereof, it can be
reasonably anticipated that Royalties which may become payable to Licensor on
account of sales of Licensed Products in the Marketing Areas designated as "Key
Marketing Areas" on Schedule C will be less than if such
5
<PAGE>
Licensed Products were sold directly by Licensee. It is understood that the
term "Licensed Products" does not include Computer Software designed for play on
(a) the Atari Jaguar(R) system, the 3D-08(R) system, and their respective
successors (including any enhancements, improvements or updates), except only to
the extent that Licensor or any of its affiliates shall itself (and not through
any Licensee or sublicensee) actually release the Licensed Products for
commercial sale in the ordinary course of business on such hardware platforms in
the United States; (b) any multipurpose home or personal computer systems; or
(c) any other medium of exploitation, including handheld games, Computer
Software playable on dedicated home video game hardware having a microprocessor
of less than 32 bit capacity (excluding SNES and Sega Genesis), over the air,
cable or fiber optic transmission, other than Designated Consumer Game
Platforms; 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
(i) subject to Licensor's consent, which shall not unreasonably be withheld or
delayed, in connection with the sale and distribution of other Home Video Games
licensed to Licensee by Licensor or its affiliates under Other Atari Home Video
Game Distribution and License Agreements, and (ii) with respect to free or
promotional goods in the quantities set forth on Schedule "B" annexed hereto.
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 Home Video Agreement.
6
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
3. Licensed Territory.
------------------
3.1. Licensee shall be entitled to manufacture, distribute
and sell the Licensed Products in all countries throughout the world, except (a)
the United States of America, its territories, possessions and United States
military installations worldwide; Canada; Mexico; and Japan; and (b) 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."
[If this is a game license for T-Mek for Sony PSX; Primal Rage for
Sega Saturn; or Return Fire for Sony PSX or Sega Saturn, then Licensee shall
have rights to a share of the profits from the distribution of these games in
Market Areas excluded under (b) above, but for which Licensor will receive
income under distribution agreements existing as of the Effective Date. For
these agreements, Licensor shall pay to Licensee an amount equal to * of the
proceeds received by Licensor from such sublicensee after deducting (i) an
amount equal to all Third Party Fees and Royalties, (ii) an amount equal to the
payment required to Warner Communications Inc. as a result of this income, and
(iii) in the case of sublicencees to whom Licensor supplies the Licensed
Product, Licensor's direct manufacturing and shipping costs. The remaining
income shall remain with Licensor and not be paid to Licensee as Recoupable
Amounts.]
3.2. After the end of the Japan Territory Period, as defined
in the letter between WMS Industries Inc. and Licensee dated March 27, 1996
captioned, "Japan Territory," Licensor shall have the exclusive right to
license any of its rights in Japan to third parties, subject to Licensee's prior
written consent, which consent shall not be unreasonably withheld or delayed.
With respect to the exploitation by Licensor of the Licensed Property in Japan,
Licensee shall be entitled to share in * of the net profits (as calculated in
Section 2.1 of
7
<PAGE>
Exhibit A attached to the Master Option and License Agreement for Atari PC Games
dated March 27, 1996) derived by Licensor from its sale of Licensed Products in
Japan. Licensor shall account and pay over to Licensee, not less frequently
than quarterly, Licensee's share of net profits from the sale by Licensor of
Licensed Products in Japan.
3.3. Licensor shall have the exclusive right to license to
third parties or otherwise exploit for its own account any of its rights with
respect to the Licensed Property outside of the Licensed Territory (and in any
portion of the Licensed Territory in which Licensee's right to distribute
Licensed Products have been revoked, suspended, or declared nonexclusive in
accordance with Section 3.4 below), 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. Licensor shall similarly 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. A licensee, sublicensee, distributor or customer who wrongfully
resells or exports Licensed Products from the Licensed Territory to North
America or Japan, or from North America or Japan to the Licensed Territory, 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 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
8
<PAGE>
introduction of any new Licensed Products into any country in which such
Exporter may be located or is operating.
3.4. Licensee shall actively commence marketing and selling
the Licensed Products within the Licensed Territory in reasonable commercial
quantities within six (6) months following the Delivery Date, provided however,
that such six (6) month period shall be extended for a period of sixty (60) days
in Marketing Areas, other than those designated as "Key Marketing Areas" on
Schedule C annexed hereto if (a) Licensee shall have proposed a sublicensee to
distribute Licensed Products in such Marketing Area and the Licensor shall have
withheld its approval of the sublicensee or (b) if Licensee shall have exercised
its right, pursuant to Section 3.3 above, to delay the introduction of new
Licensed Products into any country within the Marketing Area by reason of the
location or operation of an Exporter in such Marketing Area. If Licensee shall
fail to have commenced actively marketing and selling the Licensed Products in
any country or in any related group of countries as described on Schedule "C"
annexed hereto, (a "Marketing Area") within the Licensed Territory within six
(6) months following the Delivery Date with respect thereto, then the Licensor
shall have the right, in addition to any other rights which Licensor may have
hereunder, upon thirty (30) days prior written notice to Licensee, to suspend or
revoke Licensee's right to sell the Licensed Products in such Marketing Area or
to declare such right henceforth to be nonexclusive, as Licensor shall
determine. Notwithstanding the foregoing, however, Licensee shall not be
required to have actively commenced marketing and selling a Licensed Product in
any Marketing Area if the specific Designated Consumer Game Platform on which
such Licensed Product has been designed for play shall not regularly be sold at
retail or otherwise not be generally available to consumers in such Marketing
Area or if the Licensed Product is banned in the entire Marketing Area.
9
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
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 Marketing Areas in which Licensee has not
commenced actively marketing and selling an Accepted Game. Such report shall be
sent to Licensor within forty-five (45) days after the end of said six (6) month
period, and shall indicate the status for each 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.
4. TERM.
-----
The license granted hereunder shall be effective on the date
hereof and shall terminate on the earlier of (a) five (5) years from the date
hereof, or (b) upon termination of Licensor's rights obtained from third
parties, unless sooner terminated in accordance with the terms and conditions
hereof; provided, however, that subject to the earlier termination of Licensor's
-------- -------
rights obtained from third parties, the license term shall be deemed extended
for up to two (2) additional one (1) year renewal terms, if during the
immediately preceding year, sales of Licensed Products in the Licensed Territory
shall have amounted to at least * units. If Licensee's sales of Licensed
Products in the Licensed Territory during the first of such additional one-year
renewal term shall be less than * units, Licensee may pay to Licensor an amount
equal to * Dollars per unit multiplied by the number of units less than * sold
by Licensee during such year to make up the shortfall and the license term shall
then be extended for the remaining renewal year.
5. CONSIDERATION.
-------------
Licensee shall pay Licensor, with respect to sales throughout the
Licensed Territory of the Licensed Products, a Royalty as specified in Schedule
"B" annexed hereto on each unit of Licensed Product sold.
10
<PAGE>
6. ACCOUNTINGS.
-----------
6.1. Licensee agrees to forward to Licensor at Licensor's
address set forth in Section 17, within forty-five (45) days after the end of
each calendar quarter (a "Royalty Period"), commencing with the first calendar
quarter during which any unit of the Licensed Product is sold, a report of the
number of units of the Licensed Products sold within such Royalty Period and a
calculation, in reasonable detail and reported separately by Marketing Area, of
the Royalty, including any Alternative Royalty, due on account of the sale of
such units in accordance with Section 6.3 below and Schedule "B" annexed hereto,
and any recoupment of the Minimum Guaranteed Advance Royalty claimed in
accordance with Schedule "B" annexed hereto and Section 3 of the Master Atari
Home Video 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. Licensee agrees that accompanying each such
report shall be payment, in United States funds, of the Royalties 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
United States 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 Royalties 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
(3) weeks of a calendar quarter), upon
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<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
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 Home Video Games
licensed to Licensee by Licensor or its affiliates under Other Atari Home Video
Game 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 ten (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.
6.3. Royalties shall be paid on * of products sold by Licensee's
point of sale ("POS") customers, less actual returns. With respect to shipments
to non-POS customers, not less than * of the shipment shall be
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<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
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. As
used herein, POS customers mean those customers who report actual sales by
selection number to Licensee via computer and scan their sales by UPC codes at
cash registers.
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 and Licensor shall
otherwise have substantially the same rights as provided to the other under
Section 6.2 above.
6.5. 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. Therefore, in
addition to any other rights and remedies of Licensor, if Licensee shall be late
by more than five (5) business days with respect to any report and/or Royalty
payment required to be submitted to Licensor pursuant to Section 6.1 hereof (a
"Late Report"), then Licensee shall pay to Licensor 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
13
<PAGE>
are actually payable to Licensor 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.
Licensor may elect to waive payment of any such Late Charge if Licensee shall
have provided a reasonable estimate of Royalties due within fifteen
(15) days following the end of the calendar quarter covered by such Late Report.
6.6. 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 Home Video 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
14
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT
or distribution (whichever first occurs) and the Licensed Product shall not be
sold or distributed by Licensee without such written approval.
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 received 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 given 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 two (2) copies of each language version) without payment of any Royalty
hereunder to Licensor to 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 Royalties hereunder), but not
more than * units of each Licensed Product.
8. ADVERTISING.
-----------
Licensee, at its own cost and expense, shall be solely responsible
for all advertising costs, including all in store and institutional advertising
costs, associated with the sale of Licensed Products in the Licensed Territory.
15
<PAGE>
9. TRADEMARK AND COPYRIGHT, ETC.
-----------------------------
9.1. "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:
_ _ _ _ /TM/ or /(R)/
All Rights Reserved
C _ _ _ _ Licensed from [Atari/(R)/ Games Corporation]
or such other copyright notices and notices of registration as may be required
by any third party licensors. Licensor shall advise Licensee prior to use
whether /TM/ or /(R)/ shall follow the words "_ _ _ _ ."
9.2. Licensee shall furnish to Licensor samples of all
packaging in which the Licensed Products are sold by Licensee and Licensor shall
cause the copyright in the packaging to be registered with the United States
Copyright Office and recorded with the United States Customs Department at
Licensor's expense. Licensee shall print, stamp or mold the Notice on all
Licensed Products and on the front 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
16
<PAGE>
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.
9.3. 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 9 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 mark 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 mark, 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.
9.4. 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 right 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
17
<PAGE>
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. 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.
9.5. 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;
18
<PAGE>
(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.
10. MATERIALS.
---------
10.1. Notwithstanding anything contained herein to the
contrary and subject to the terms of this Agreement, all artwork, designs and
computer software embodying the Licensed Property, or any reproduction thereof,
or any packaging or advertising materials, which are designed, developed and/or
created by Licensee hereunder (or any of its sublicencees, affiliates or
subsidiaries), shall be, and remain Licensor's sole and exclusive property,
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 right, license and privilege (without any
compensation to Licensor except as provided in Section 5) to use all
19
<PAGE>
such above described materials in connection with its exploitation, sale and
distribution of the Licensed Products.
10.2. 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.
11. TRANSLATIONS.
------------
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 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 CD-ROM and cartridge versions only of the Licensed Product
and Licensee shall produce, at its own expense, a translation text thereof and
audio track therefor. Licensor shall then cause a new Master Disk containing
such translation and audio track to be encoded and delivered to Licensee, at
Licensor's own expense with respect to the CD-ROM version only and at Licensee's
expense with respect to the cartridge version, provided, however, that Licensee
shall bear the cost of encoding new Master Disks containing translations into
languages other than French, German, Chinese, Portuguese, Spanish and Italian.
Licensee shall also bear the cost of inserting audio tracks on Home Video Game
cartridges.
12. REPRESENTATIONS AND WARRANTIES.
------------------------------
12.1. 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
20
<PAGE>
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-
12.2. 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; its manufacture, advertisement,
distribution and sale of the Licensed Products will be in accordance with the
terms of this Agreement and will not infringe upon or violate any rights of any
third party. Licensee shall have obtained all necessary licenses for the sale
of the Licensed Products within the Licensed Territory from Nintendo(R),
Sega(R), Sony(R) or any other manufacturer of Designated Consumer Game
Platforms.
13. INDEMNIFICATION.
---------------
13.1. 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
21
<PAGE>
warranty or representation set forth in Section 12 above. Each party shall
promptly inform the other of any such claim, demand, suit or judgment.
13.2. 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 amount
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.
13.3. Neither Licensor nor Licensee shall be liable for any
incidental, consequential or punitive damages to the other.
14. EVENTS OF DEFAULT AND TERMINATION.
---------------------------------
Licensee shall be deemed to be in default of this Agreement in the
event either of the following occurs:
22
<PAGE>
(a) Licensee fails to make any payment or furnish any
statement in accordance herewith, provided that Licensee shall have been given a
first written notice of such default and a period of at least fifteen (15) days
in which to cure such default and, if such default shall not have been cured
within such period, Licensee shall have been given a second written notice of
such default and a further period of at least ten (10) days in which to cure
such default; or
(b) Licensee fails after thirty (30) days' written notice
to Licensee to comply with any other of Licensee's obligations hereunder.
15. 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.
(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.
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<PAGE>
16. CONFIDENTIAL INFORMATION.
------------------------
Each of the parties shall keep in confidence and not disclose or
make available 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, including without limitation any
information with respect to proposed Games prior to the date on which they are
First Released and any Master Disk or version thereof. 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.
17. 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 United States Post Office addressed as follows:
24
<PAGE>
TO LICENSEE: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Ron Chaimowitz,
Telephone Number: (212) 726-6508
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Mr. Harry Rubin
Telephone Number: (212) 726-6523
Facsimile Number: (212) 679-6850
WITH A COPY TO: GT Interactive Software Corp.
16 East 40th Street
New York, New York 10016
Attention: Alan Behr, Esq.
Telephone Number: (212) 726-6500
Facsimile Number: (212) 679-6850
TO LICENSOR: Atari Games Corporation
c/o WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Mr. Neil D. Nicastro, President
Telephone Number: (312) 728-2300
Facsimile Number: (312) 539-2099
WITH A COPY TO: Williams Entertainment Inc.
1800 South Business 45
Corsicana, Texas 75110
Attention: Mr. Byron Cook
Telephone Number: (903) 874-2683
Facsimile Number: (903) 872-8000
WITH A COPY TO: Jeffrey N. Siegel, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telephone Number: (212) 782-0700
Facsimile Number: (212) 730-1964
or such other address as either party may designate by notice given as
aforesaid.
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<PAGE>
18. MISCELLANEOUS.
-------------
18.1. 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 all or substantially all of the assets or stock of
Licensor shall include a requirement for the assumption by the purchaser of all
covenants, obligations and duties undertaken by the seller pursuant to the terms
of this Agreement, including its obligations with respect to Games 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.
18.2. 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.
18.3. 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
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<PAGE>
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.
18.4. 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.
18.5. 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.
18.6. 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.
18.7. 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.
27
<PAGE>
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:
-------------------------------
28
<PAGE>
SCHEDULE A
----------
[Description of Licensed Property as Set Forth in New Game Option Notice]
29
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
SCHEDULE B
----------
ROYALTIES
---------
Licensee shall pay to Licensor royalties ("Royalties") computed as follows:
(a) with respect to Licensed Products which are subject to any Third Party Fees
---
and Royalties, an amount equal to the greater of (i) * of the actual Net
Wholesale Sales Price for each unit sold and not returned, or (ii) * of
Licensee's average Net Wholesale Sales Price for Front-line Home Video Games
designed for play on the same Designated Consumer Game Platform sold at Full
Price and not returned during the relevant Royalty Period; and (b) with respect
to Licensed Products which are not subject to any Third Party Fees and
-------
Royalties, an amount equal to the greater of (i) * of the actual Net Wholesale
Sales Price for each unit sold and not returned, or (ii) * of Licensee's average
Net Wholesale Sales Price for Front-line Home Video Games designed for play on
the same Designated Consumer Game Platform sold at Full Price and not returned
during the relevant Royalty Period. The Royalty computed in accordance with
clauses (a)(ii) and (b)(ii) of the preceding sentence shall apply (A) for a
period of one year from the date of First Release of the Licensed Product by
Licensee or its affiliates in each Marketing Area with respect to Home Video
Games released during the first two (2) years of the Option Period, and (B) for
a period of six (6) months from the date of First Release of the Licensed
Product by Licensee or its affiliates in each Marketing Area with respect to
Home Video Games released after the first two (2) years of the Option Period.
For purposes of this paragraph, a Licensed Product shall be deemed "Front-line"
if it is substantially equivalent to a Home Video Game which has been released
at a premium price by Licensor or its licensees in the United States. Royalties
for Licensed Products which are not deemed Front-line products shall be
calculated as provided in clauses (a)(i) or (b)(i) of the first sentence of this
paragraph. Solely for purposes of computing Royalties in accordance with the
first sentence of this paragraph, Licensed Products shall not be deemed to be
subject to any Third Party Fees and Royalties if they are subject only to (x) de
minimis Third Party Fees and Royalties excluding developer royalties amounting
to less than * in the aggregate of the Net Wholesale Sales Price, or (y)
royalties and other participations payable to developers for services rendered
in connection with the Licensed Product. In no event shall the Royalty with
respect to the sale of a Licensed Product at any time be less than the Third
Party Fees and Royalties (including royalties and other participations payable
to developers) payable with respect to such Licensed Product.
Notwithstanding the foregoing, if at least twelve (12) months after the date
of the initial release by Licensee (the "First Foreign Sale") of a Licensed
Product subject to Third Party Fees and Royalties in each Marketing Area, the
Net Wholesale Sales Price of such Licensed Product has been reduced from the
original list price to the equivalent of (U.S.) $ * or less, then Licensee may
elect to pay to Licensor in lieu of the Royalty payable in accordance with the
first sentence of this Schedule B, an alternative royalty (the "Alternative
Royalty") equal to the greater of (i) * of the Net Wholesale Sales Price of such
Licensed Product, plus
30
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A PURSUANT FOR CONFIDENTIAL
TREATMENT.
an amount equal to * of all Third Party Fees and Royalties payable with respect
to the sale of such Licensed Product or (ii) * of the Net Wholesale Sales Price
of such Licensed Product.
If at any time after March 31, 1996 or, with respect to new Designated
Consumer Game Platforms which are introduced subsequent to the date hereof, the
date on which such new Designated Consumer Game Platform is introduced, there
shall occur (a) a reduction in the standard platform royalties payable by
Licensee to Nintendo(R), Sega(R), Sony(R), or any other Designated Consumer Game
Platform manufacturer with respect to the Licensed Products, or (b) a reduction
in landed unit manufacturing costs payable by Licensee to any Game manufacturer,
including, without limitation, any such reductions in platform royalties or unit
manufacturing costs which may result from reaching applicable volume discount
levels established by the Designated Consumer Game Platform manufacturer or
other Game manufacturer, then, in either or both such cases, Licensee shall pay
to Licensor, in addition to any Royalty otherwise payable hereunder, an amount
equal to * of the amount by which such platform royalty and landed manufacturing
costs have been reduced for each unit of Licensed Product sold by Licensee. Such
additional amounts shall be payable by Licensee to Licensor at the time and in
the manner specified in Section 6 above. Notwithstanding the foregoing, however,
Licensee shall not be required to pay to Licensor any such additional amounts
based on reductions in platform royalties and landed unit manufacturing costs
payable in respect of Licensed Products for the Sega Saturn and Sony PSX
Platforms unless and until such platform royalties and landed unit manufacturing
costs shall fall below * per unit, and, in such cases, Licensee shall only be
required to pay * of the reduction in costs below * Dollars, as provided above.
All payments of Royalties by Licensee to Licensor hereunder shall either
be paid from Licensee's office in the United States or from Licensee's office in
the United Kingdom. Licensee shall be solely responsible for payment of, and
shall timely file and remit, any foreign taxes (including any foreign taxes on
Royalties required to be withheld at the source) related to this Agreement.
Licensee shall promptly assist Licensor as necessary in obtaining a United
Kingdom royalty tax withholding exemption, or with any other documentation
required concerning Licensee's operations outside the United States. If taxes on
Royalties payable hereunder imposed by any foreign jurisdiction are required to
be withheld at the source, Licensee shall remit such Royalties net of any
withholding taxes together with ALL appropriate documentation and reporting
forms.
The "Net Wholesale Sales Price" of Licensed Products shall be the price
invoiced to customers, less any price discounts, rebates or credits granted at
the time of sale and taxes invoiced to customers (including VAT). 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.
31
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
ADJUSTMENTS TO ROYALTIES
------------------------
Anything above to the contrary notwithstanding:
1. 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 Home Video Agreement, Royalties shall be payable
by Licensee to Licensor hereunder equal to the sum of (a) an amount equal to all
Third Party Fees and Royalties payable with respect to the sale of such Licensed
Products, plus (b) * of the proceeds received by Licensee from such sublicensee
after deducting (i) a fee to Licensee equal to * of such net proceeds, (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. In no event shall
the Royalty per unit be less than * of such Third Party Fees and Royalties.
2. If Licensee's Weighted Average Gross Profits as a percentage of
sales of Accepted Games under this Agreement and all Other Atari Home Video Game
Distribution and License Agreements other than Games with respect to which an
Alternative Royalty is payable, for the twelve (12) months ending June 30, 1997
are less than Licensee's Weighted Average Gross Profits as a percentage of sales
of Accepted Games under this Agreement and all Other Atari Home Video Game
Distribution and License Agreements other than Games with respect to which an
Alternative Royalty is payable, for the twelve (12) months ending December 31,
2000, then the Royalties otherwise payable by Licensee under this Agreement and
all Other Atari Home Video Game Distribution and License Agreements for the
first Renewal Option Year (ending June 30, 2002), if any, shall be increased, as
a percentage of Net Wholesale Sales Price, for each unit sold and not returned,
by an amount equal to one-half of the difference. If Licensee's Weighted
Average Gross Profits as a percentage of sales of Accepted Games under this
Agreement and all Other Atari Home Video Game Distribution and License
Agreements during the 12 months ended December 31, 2001, or any subsequent 12-
month period during the Renewal Option Period, shall be greater or less than
Licensee's Weighted Average Gross Profits as a percentage of sales of Accepted
Games during the preceding 12-month period, then the Royalties otherwise payable
by Licensee under this Agreement and all Other Atari Home Video Game
Distribution and License Agreements shall be similarly increased or decreased
for the next Renewal Option Year by an amount equal to * of the difference, but
in no event shall Royalties payable by Licensor under this Agreement and all
Other Atari Home Video Game Distribution and License Agreements be reduced at
any time to an amount less than the amounts set forth in the first sentence of
this Schedule B. For purposes hereof, Licensee's "Weighted Average Gross
Profits" with respect to the sale of Accepted Games under this Agreement and all
Other Atari Home Video Game License Agreements shall mean the weighted average,
computed on a platform by platform basis, of (a) aggregate sales of Accepted
Games other than Games with respect to which an Alternative Royalty is payable,
less (b) landed manufacturing costs and platform royalties paid or payable with
respect to such Accepted Games. Any amounts actually paid or payable to Licensor
by Licensee as additional Royalties hereunder by reason of a reduction in
platform royalties or landed unit manufacturing costs, as provided above
32
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
(including without limitation any such amounts paid or payable by reason of a
reduction in platform royalties or landed unit manufacturing costs of Licensed
Products for the Sega Saturn or Sony PSX platforms below * Dollars per unit),
shall be added back in determining Weighted Average Gross Profits hereunder. For
example, if Licensee's Weighted Average Gross Profits as a percentage of sales
of Accepted Games during the twelve (12) months ended by June 30, 1997 are *
percent, and Licensee's Weighted Average Gross Profits during the twelve months
ending December 31, 2000 are * of sales of Accepted Games, then the Royalty
otherwise payable by Licensee to Licensor as a percentage of Net Wholesale Sales
Price during the first Renewal Option Year (ending June 30, 2002) shall be
increased by * of the difference, or
3. If the Licensed Product shall incorporate Computer Software in the
form of a cartridge, as opposed to a CD-ROM disk or other device containing the
computer game code (a "Cartridge-Based Product"), Licensee may elect to adjust
the Royalties otherwise payable with respect to sales of such Cartridge-Based
Product in a Marketing Area as follows: The "Cartridge Margin" for such
Cartridge-Based Product shall be calculated by subtracting from * the sum of (i)
the applicable percentage Royalty with respect to sales of such Cartridge-Based
Product, determined in accordance with the first sentence of this Schedule B
above, and (ii) the landed unit cost of such Cartridge-Based Product, stated as
a percentage of the Net Wholesale Sales Price therefor. If the Cartridge Margin
is less than the applicable percentage Royalty otherwise payable on sales of
such Cartridge-Based Products, the applicable percentage Royalty shall be
reduced by an amount equal to * of the difference between such percentage
Royalty and the Cartridge Margin, provided, however, that in no event shall the
Royalty payable with respect to sales of Cartridge-Based Products be less than
the Third Party Fees and Royalties payable with respect thereto.
For example, if the Royalty percentage rate determined in
accordance with the first sentence of this Schedule B is * for a Cartridge-Based
Product having a Net Wholesale Sales Price in a given Marketing Area of *
Dollars and a landed unit cost of * Dollars (i.e., * of Net Wholesale Sales
Price), the Cartridge Margin for such Cartridge-Based Product would be * . Since
the Cartridge Margin * is less than the applicable percentage Royalty * , the
applicable percentage Royalty shall be reduced by * of the difference, or *
( * %), such that the adjusted Royalty percentage payable on sales of such
Cartridge-Based Product in the Marketing Area will be * .
RECOUPMENT
----------
1. Licensee shall be entitled to apply the Royalties applied or
accrued under this Agreement (the "Recoupable Amount"), to recoup the * Dollar
Minimum Guaranteed Advance Royalty paid by Licensee to WMS Industries Inc.
pursuant to Section 3 of the Master Atari Home Video Agreement and the Master
Atari PC Agreement (as that term is defined in the Master Atari Home Video
Agreement), until such Recoupable Amount
33
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT.
together with the Recoupable Amounts applied or accrued by Licensee under any
other Atari Home Video Game Distribution and License Agreement entered into by
Licensee pursuant to the Master Atari Home Video Agreement ("Other Atari Home
Video Game Distribution and License Agreements") and under any Atari Home
Computer Software License Agreement entered into by Licensee pursuant to the
Master Atari PC 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; provided, however, that (i) to the extent that the aggregate of all
Recoupable Amounts applied or accrued under this Agreement and the Other Atari
Home Video Game Distribution and License Agreements and under any Atari Home
Computer Software License Agreement entered into pursuant to the Master Atari PC
Agreement between the Effective Date and one year after the Effective Date
exceed the installment of the Minimum Guaranteed Advance Royalty paid on the
Effective Date, such excess shall be paid to WMS Industries Inc. and applied in
reduction of the installment of the Minimum Guaranteed Advance Royalty payable
one year after the Effective Date under the Master Atari Home Video Agreement
and the Master Atari PC Agreement.
2. Until Licensee shall have fully recouped the * Minimum
Guaranteed Advanced Royalty, Licensor shall pay over to Licensee,
Licensor's share of net profits from the exploitation of the Licensed Products
in Japan, and all amounts so paid over to Licensee shall be deemed to constitute
additional Recoupable Amounts (as that term is used above) under this Agreement.
LIMITATIONS ON FREE AND PROMOTIONAL GOODS: CLOSE-OUTS.
-----------------------------------------------------
Licensee shall be permitted to distribute free and promotional
goods without the payment of any 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, and
Australia: * units per country
Other Countries: * units per 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 platform royalties and any Third Party
Fees and Royalties.
34
<PAGE>
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
---------------
* Denotes Key Marketing Area
35
<PAGE>
ANNEX
WMS Industries Inc.
3401 North California Avenue
Chicago, EL 60618
March 27, 1996
GT Interactive Software Corp.
16 East 40th Street
New York, NY 10016
Re: Japan Territory
---------------
Gentlemen:
Reference is made to the GTIS Master Option and License Agreement dated
December 28, 1994, as amended (the "GTIS Master PC Agreement"), the GTIS Master
Option and License Agreement (Home Video Games) dated March 31, 1995, as amended
(the "GTIS Master Home Video Agreement"), the Master Option and License
Agreement for Atari PC Games dated March 27, 1996 (the "Master Atari PC
Agreement") and the Master Option and License Agreement for Atari Home Video
Games dated March 27, 1996)(the "Master Atari Home Video Agreement"). The GTIS
Master PC Agreement, the GTIS Master Home Video Agreement, the Master Atari PC
Agreement and the Master Atari Home Video Agreement are collectively referred to
herein as the "Master Agreements."
This will confirm our agreement that during the "Japan Territory
Period," as that term is defined below, the Licensed Territory, as that term is
defined in the license and distribution agreements annexed as Exhibit A to the
Master Agreements, shall not exclude Japan. The Japan Territory Period shall
mean the period beginning on the Effective Date, as that term is defined in the
Master Atari Home Video Agreement, and ending on the date which is the later to
occur of (i) two years after the Effective Date, or (ii) one year after either
GTIS or WMS gives written notice to the other of its decision to terminate the
Japan Territory Period; provided, however, that if such notice is given by WMS,
the termination shall not be effective unless on the designated termination date
WMS directly or indirectly owns not less than 49% of an entity which (i) is or
intends to become a distributor of home video or personal computer games in
Japan, and (ii) conducts or intends to conduct meaningful business in Japan. If
such entity does not intend to distribute both home video and personal computer
games in Japan, then the aforesaid termination shall be effective only as to the
category of games (home video games or
<PAGE>
GT Interactive Software Corp. -2-
March 27, 1996
personal computer games) which such entity does intend to distribute. During
the Japan Territory Period, Japan shall be deemed added to Schedule C to the
Master Atari Home Video Agreement and the GTIS Master Home Video Agreement and
shall be deemed designated as a Key Marketing Area as such term is defined
therein. In addition, anything in this letter, the Master Agreements or
licenses issued pursuant to the Master Agreements to the contrary
notwithstanding, GTIS shall pay to the WMS Group and shall have no right to
recoup any Royalties attributable to Licensed Products sold in Japan during the
Japan Territory Period pursuant to the licenses issued under the GTIS Master
Home Video Agreement.
After termination of the Japan Territory Period, (i) licenses entered
into during the Japan Territory Period and still in effect on the date of
termination of such period shall continue for their term, and (ii) with respect
to licenses entered into after the Japan Territory Period, the Licensed
Territory shall exclude Japan, and the terms of applicable Master Agreements and
related license agreements shall apply.
Please indicate your agreement to the foregoing by signing this letter
in the place provided below.
Very truly yours,
WMS INDUSTRIES INC.
By: /s/ NEIL NICASTRO
--------------------------------
Neil Nicastro
Accepted and Agreed To:
GT INTERACTIVE SOFTWARE CORP.
By: /s/ RONALD CHAIMOWITZ
------------------------------
Ronald Chaimowitz