Master Option and License Agreement for Atari PC Games - WMS Industries Inc. and GT Interactive Software Corp.
MASTER OPTION AND LICENSE AGREEMENT FOR ATARI PC GAMES
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This Master Option and License Agreement (the "Agreement") is made and
entered into the 27th day of March, 1996, by and among 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.
WITNESSETH:
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WHEREAS, Williams Interactive 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 ("AGC"); and
WHEREAS, AGC is engaged in the business of designing, manufacturing and
selling coin-operated amusement games and software products for dedicated home
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;
NOW, THEREFORE, the parties hereto agree as follows:
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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. "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 I 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.
1.4. "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 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 Multipurpose Computer
Platforms.
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1.5. "Atari Home Computer Software Distribution and License Agreement"
shall mean an agreement for the license of an Accepted Game for use solely on
Designated Multipurpose Computer Platforms in the form of Exhibit A annexed
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hereto, as the same may be amended from time to time by written agreement of the
parties thereto.
1.6. "Designated Multipurpose Computer Platforms" shall mean IBM PC or
Apple Macintosh or other compatible multipurpose home computers which utilize
floppy disks or CD-ROMs or other stand alone devices which may hereafter replace
or supplement floppy disks or CD-ROMs in all operating systems now known or
hereafter developed or designed for use on the aforesaid multipurpose home
computers. Designated Multipurpose Computer Platforms shall not for purposes of
this Agreement include dedicated home game systems, such as those marketed by
Nintendo(R), Sega(R), Atari(R), Sony(R), etc.
1.7. "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.
1.8. "Effective Date" shall mean the date WII closes the acquisition
of AGC pursuant to the Stock Purchase Agreement.
1.9. "First Release" or "First Released" shall have the meaning
ascribed in Section 2.4 hereof.
1.10. "Game" shall mean any coin-operated video game (including kits),
any home video game and any on-line game which is an Atari Game and which is
released or intended to be released, by any member of the WMS Group for sale in
commercial quantities
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in the normal course of business. Home video games shall include games designed
for play on dedicated home game systems, such as those marketed by Nintendo,
Sega, Atari, Sony, etc. as well as on multipurpose home computers, such as those
marketed by IBM and Apple.
1.11. "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 Multipurpose Computer Platform.
1.12. "GTIS" shall mean GTIS or any affiliate of GTIS to whom any
rights to exploit any Accepted 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
Accepted Games.
1.13. "GTIS Master Home Video Agreement" shall mean the GTIS Master
Option and License Agreement (Home Video) dated March 31, 1995, as amended,
among WMS, Williams Electronics Games, Inc., Midway Manufacturing Company,
Williams Entertainment Inc. and GTIS.
1.14. "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.
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1.15. "Master Atari Home Video Agreement" shall mean the Master
Option and License Agreement for Atari Home Video Games being executed
simultaneously herewith.
1.16. "Master Disk" shall mean a CD-ROM disk or floppy disk or any
other stand alone devices which may hereafter replace or supplant CD-ROM or
floppy disks, containing the source code utilized by the Atari Group for an
Accepted Game.
1.17. "Milestones" shall mean the defined tasks in the process of the
development of a Technically Acceptable Master Disk as are deemed sufficiently
important such that the achievement of such tasks will entitle the developer to
receive a payment, the amount of such payment, the standards for approval which
will entitle that developer to receive such payment and the circumstances under
which the development arrangement may be terminated prior to completion.
1.18. "Minimum Guaranteed Advance Royalty" shall have the meaning
ascribed in Section 3 hereof.
1.19. "New Game Option Notice Date" shall have the meaning ascribed
in Section 2.4 hereof.
1.20. "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 PC Agreement, or (ii) the first date
after the Effective Date on which an Early Termination Event occurs.
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1.21. "Pirate" shall mean an individual or entity which counterfeits a
game or sells counterfeit games.
1.22. "Projects in Process" shall have the meaning ascribed in Section
2.3 hereof.
1.23. "Stock Purchase Agreement" shall mean the Stock Purchase
Agreement dated February 23, 1996 between Warner Communications Inc. and WII
pursuant to which Warner Communications has agreed to sell and WII has agreed
to purchase all of the outstanding stock of AGC.
1.24. "Technically Acceptable Master Disk" shall mean a completed and
functioning Master Disk for the Accepted Game in a format substantially ready to
be reproduced and manufactured for retail distribution and the instruction
manual therefor. The Accepted Game contained in the Technically Acceptable
Master Disk will have been alpha and beta tested and all known material bugs and
defects will have been corrected.
1.25. "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
Multipurpose Computer Platforms.
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 Computer Software Distribution and License Agreement, to manufacture,
distribute and sell versions of the
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Games for use solely on Designated Multipurpose Computer Platforms, with respect
to (i) Projects in Process and (ii) other new Games First Released by the Atari
Group during the Option Period.
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
Multipurpose Computer Platforms if such Game would be subject to GTIS' first
option right to manufacture, distribute and sell versions of such Game on
Designated Multipurpose Computer Platforms, as specified in Section 2.1 hereof,
until such time as GTIS shall have declined to acquire a license, or the option
periods specified in Sections 2.3, 2.4 and 2.5 hereof, whichever is applicable,
shall have expired, or the applicable Atari Home Computer Software License
Agreement shall otherwise permit. GTIS understands, acknowledges and agrees that
(i) on the Effective Date the Atari Group's library of Games, as well as
Projects in Process 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 or rights acquired by GTIS
hereunder shall be subject to such third party rights and the form of Atari Home
Computer Software and License Agreement will be deemed modified to the extent so
required; (ii) with respect to Games manufactured by the Atari Group under
license from third parties, the rights granted by the Atari Group to GTIS cannot
exceed the rights obtained by and will be subject to the limitations imposed on
the Atari Group from such third party and the form of Atari Home Computer
Software Distribution and License Agreement will be deemed modified to the
extent so required; (iii) 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
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minimum number of Games to GTIS under this Agreement; (iv) under certain
circumstances the ownership of the Atari Group may revert to Warner
Communications Inc. pursuant to the Stock Purchase Agreement and the documents
executed in connection therewith; and (iv) Williams/Nintendo, Inc. (a joint
venture company in formation owned by a wholly owned subsidiary of WMS and
Nintendo of America Inc.) has been granted a first right of negotiation with
respect to the exclusive right to produce and distribute certain coin-operated
games for all formats, including home computers, if those games are implemented
for play upon certain coin-operated hardware systems proprietary to Nintendo and
its licensors.
2.3. Schedule 2 hereto sets forth the titles of multipurpose
home computer 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 may have the right to grant licenses to GTIS to manufacture, distribute
and sell versions of the Game for use on one or more Designated Multipurpose
Computer Platforms ("Projects in Process"). Upon request of GTIS, GTIS shall be
provided the opportunity to review all existing third party agreements relating
to Projects in Process, as well as other games in the Atari Group library in
respect of which GTIS may have rights hereunder, subject to any applicable
confidentiality provisions in such agreements. Subject to rights of
distribution and other agreements existing on the date hereof, GTIS shall have a
period of sixty (60) days from the Effective Date to notify AGC in writing that
it elects to exercise its option to license one or more Projects in Process
under this Agreement. The Game versions included in GTIS' notice of election
shall become Accepted Games under this Agreement, except that the Atari Group
shall be under no obligations with respect to the time or method of development
of a Technically Acceptable Master Disk and GTIS
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
shall not be required to fund * % of the development costs upon receipt of a
Technically Acceptable Master Disk. GTIS shall be required to pay AGC * % of all
developer royalties payable with respect to sales of such Games without right of
recoupment. GTIS shall have no further rights with respect to Projects in
Process not accepted within said 60 day period. The Atari Group shall have the
right to terminate the development of any Projects in Process at any time for
any reason.
2.4. With respect to Games other than Projects in Process which are
First Released by the Atari Group for the coin-operated, home video or on-line
markets after the Effective Date, 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, the Atari Group shall notify
GTIS in writing as to the existence of a Game within thirty (30) days after the
Atari Group has begun to ship the Game for use commercially in the ordinary
course of business (and not merely for the Atari Group's test purposes). The
date of such notice is hereinafter referred to as the "New Game Option Notice
Date." A Game shall be deemed First Released by the Atari Group on the date of
the first commercial shipment in the normal course of business and with respect
to on-line Games when such Games are first commercially sold to subscribers to
the on-line service. If the Atari Group does not actually make a commercial
shipment of a Game notwithstanding its original intention to do so, then the
Atari Group shall notify GTIS of its decision not to make such shipments and the
New Game Option Notice Date for such Game shall be deemed to be the date of such
notice. Each notice given in accordance with this Section 2.4, (i) shall
identify the Game, (ii) shall describe in reasonable detail its characteristics
and method of play, and (iii) shall set forth a proposed budget and time
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
frame for developing Technically Acceptable Master Disks for such game for play
on Designated Multipurpose Computer Platforms, and the identity of the proposed
developer or developers. GTIS shall have a reasonable opportunity to consult
with the Atari Group prior to the Atari Group determining the proposed budget,
time frame and developers, but the final decision shall be made by the Atari
Group. Each such notice relating to a Game manufactured by the Atari Group
pursuant to a license from or subject to other agreement with any third party
shall set forth a summary of any material limitations upon the scope of the
license in respect thereof which may be granted to GTIS hereunder, the amount or
method of determining third party royalties payable thereunder and the material
terms of such license or other agreement applicable to platforms other than
Designated Multipurpose Computer Platforms. With respect to each Game as to
which GTIS receives written notice as hereinabove provided, GTIS shall have a
period of ninety (90) days from the New Game Option Notice Date to notify AGC in
writing that it elects to exercise its option to license the Game. Upon receipt
of such notice from GTIS, the Atari Group will proceed to develop or retain a
third party to develop a Technically Acceptable Master Disk for such Game for
play on one or more Designated Multipurpose Computer Platforms as identified in
the budget and will use reasonable efforts to complete or cause the completion
of such development within twelve (12) months of receipt of such notice from
GTIS. In addition to any other payments made hereunder or under any Atari Home
Computer Software Distribution and License Agreement, subject to the provision
of Paragraph 2.7 and Paragraph 2.11 below, GTIS shall pay to AGC * % of the
actual costs of such code development simultaneously with receipt of a
Technically Acceptable Master Disk and a reasonably detailed written summary of
the development costs, none of which payment shall be
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
recoupable by GTIS or repayable to GTIS in any manner or for any reason. It is
understood that the development budget shall include a compensation expense of
up to $ * for each Game version if the Atari Group employs a dedicated in-house
producer for the purpose of such development.
2.5. If, by itself, or through use of a third party developer, the
Atari Group determines to develop or acquire a Game for play on multipurpose
home computers that it has not theretofore developed or acquired for the coin-
operated or dedicated home game player market, it shall notify GTIS in writing
as to its intention, which notice shall describe in reasonable detail the
proposed characteristics of the Game and shall set forth an estimated budget and
time frame for developing Technically Acceptable Master Disks for such Game for
play on one or more Designated Multipurpose Computer Platforms and the identity
of the proposed developers. Each such notice relating to a Game the rights to
which are derived from a license or other agreement with a third party shall set
forth a summary of any material limitations upon the scope of the license in
respect thereof which may be granted to GTIS hereunder, the amount or method of
determining third party royalties payable thereunder and the material terms of
such license or other agreement applicable to platforms other than Designated
Multipurpose Computer Platforms. GTIS shall have an opportunity to consult with
the Atari Group prior to the Atari Group determining the proposed budget, time
frame and developers, but the final decision shall be made by AGC. GTIS shall
have a period of fifteen (15) days from the date of such notice to notify AGC in
writing that it elects to exercise its option to license the Game. Upon receipt
of such notice from GTIS, the Atari Group will proceed to develop or retain a
third party to develop a Technically Acceptable Master Disk for such Game for
play on one or more
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
Designated Multipurpose Computer Platforms as identified in the budget and will
use reasonable efforts to complete or cause the completion of such development
within the estimated time frame set forth in the notice. In addition to any
other payments made hereunder or under any Atari Home Computer Software
Distribution and License Agreement, subject to the provisions of Paragraphs 2.7
and 2.11 below, GTIS shall pay to AGC * % of the actual costs of such code
development simultaneously with receipt of a Technically Acceptable Master Disk
and a reasonably detailed written summary of the development costs, none of
which payment shall be recoupable by GTIS or repayable to GTIS in any manner or
for any reason. It is understood that the development budget shall include a
compensation expense of up to $ * for each Game version if the Atari Group
employs a dedicated in-house producer for the purpose of such development.
2.6. Any Game as to which GTIS has exercised its option within the
notice periods specified in Sections 2.3, 2.4 and 2.5 above shall become an
Accepted Game for all purposes of this Agreement. With respect to each Accepted
Game, GTIS and the member of the Atari Group which is manufacturing such Game
shall enter into an Atari Home Computer Software Distribution and License
Agreement which shall be dated the earlier of: the date GTIS shall have given
notice of its acceptance thereof, or the date which is sixty (60) days following
the date of the option notice. If either of such parties shall wrongfully refuse
to enter into an Atari Home Computer Software 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 Computer Software Distribution and License Agreement shall be deemed
to have been entered into as of the date on which GTIS shall
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
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 Computer
Software 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.
2.7. The parties hereto acknowledge that notwithstanding efforts to
produce reliable development budgets under Sections 2.4 and 2.5 hereof, in
certain instances the actual costs of development may exceed the budgeted costs.
In those instances, AGC shall notify GTIS of the projected budget overrun (the
"Overrun Notice") promptly after AGC becomes aware of such overrun.
2.7.1. The following provisions shall apply to budget overruns in
respect of Games which became Accepted Games under Section 2.4 hereof ("Section
2.4 Games"); provided, that this Section 2.7.1 shall not apply to Accepted Games
as to which GTIS has exercised its rights of review and approval under Section
2.11 hereof. If the actual cost of development of a Section 2.4 Game being
developed by a third party developer is not more than * % of the budget approved
by GTIS, GTIS will pay AGC * % of such actual costs as provided in Section 2.4
hereof. If the actual costs of development of a Section 2.4 Game exceed * % of
the budget with respect to a Game being developed by a third party developer or
* % of the budget with respect to a Game being developed in-house by the Atari
Group, whichever is applicable, GTIS shall have the right, by notice to AGC
given within ten (10) days of receipt
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
by GTIS of the Overrun Notice, to elect to bear * % of the cost of such overrun
or to decline to do so. A failure by GTIS to give such notice within such ten
(10) days shall be deemed an election to decline to bear such costs. If GTIS so
declines, AGC shall be entitled to elect to (i) abandon the development, in
which event AGC shall bear the entire cost of the development, or (ii) proceed
with the development with GTIS, in which case GTIS shall pay * % of (A) the
actual costs of the development up to * % of the budget with respect to a Game
being developed by a third party developer or (B) * % of the budget with respect
to a Game being developed in-house by the Atari Group, whichever is applicable,
as provided in Section 2.4 and AGC shall bear the balance of the costs of such
development.
2.7.2. The following provisions shall apply to budget overruns in
respect of Games which become Accepted Games under Section 2.5 hereof ("Section
2.5 Games"); provided, that this Section 2.7.2 shall not apply to Accepted Games
as to which GTIS has exercised its rights of review and approval under Section
2. 11 hereof. If the actual cost of development of a Section 2.5 Game being
developed by a third party developer is not more than * % of the budget approved
by GTIS, GTIS will pay AGC * % of such actual costs as provided in Section 2.5
hereof. If the actual costs of development of a Section 2.5 Game exceed * % of
the budget with respect to a Game being developed by a third party developer or
* % of the budget with respect to a Game being developed in-house by the Atari
Group, whichever is applicable, GTIS shall have the right, by notice to AGC
given within ten (10) days of receipt by GTIS of the Overrun Notice, to elect to
bear * % of the cost of such overrun or to decline to do so. A failure by GTIS
to give such notice within such ten (10) days shall be deemed an election to
decline to bear such costs. If GTIS so declines, AGC shall have the right to
abandon
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
the development, in which event AGC shall bear the entire cost of the
development, or to elect the options provided below in this Section 2.7.2. AGC
may elect (i) to proceed with the development with GTIS in which case GTIS shall
pay * % of (A) the actual costs of the development up to * % of the budget with
respect to Games being developed by a third party developer or (B) * % of the
budget with respect to Games being developed in-house, whichever is applicable,
and AGC shall bear the balance of the costs of such development; or (ii) in the
case of a Section 2.5 Game being developed by a third party developer who is not
contemporaneously developing the Game for AGC for other platforms, such as coin-
operated or dedicated home games systems, AGC may elect to proceed with the
development without GTIS involvement, in which case AGC shall bear the entire
costs of development, and the Game shall no longer be deemed an Accepted Game
and GTIS shall have no further rights in such Game.
2.7.3. Subject to the provisions of Section 2.11 hereof, GTIS shall
bear * % of the actual costs of development of any Section 2.4 Game or Section
2.5 Game as to which GTIS has exercised its rights of review and approval under
Section 2. 1 1.
2.7.4. Anything herein to the contrary notwithstanding, on notice to
GTIS and with consent of GTIS, which consent may not be unreasonably withheld,
AGC may elect to terminate development at any time prior to delivery to GTIS of
a Technically Acceptable Master Disk, at no cost to GTIS, if AGC determines that
further development work is not technically or economically desirable. If GTIS
fails to respond in writing to WMS' notice within ten (10) Business Days after
receipt thereof by GTIS, GTIS shall be deemed to have consented to AGC's
election to terminate development. If AGC should thereafter determine to
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
recommence development work, it will promptly notify GTIS which will have the
option on fifteen (15) days' notice to AGC to participate in such renewed
development on the same terms and conditions as if the original development had
continued uninterrupted. If GTIS withholds its consent to such termination of
development pursuant to this Section 2.7.4, GTIS shall (i) promptly pay to AGC
* % of the costs of development to the date of AGC notice of intent to terminate
(excluding the budgeted compensation expense of the Atari Group's dedicated in-
house producer, if any); (ii) take over responsibility for development of a
Technically Acceptable Master Disk with the developer; and (iii) bear the costs
of development in excess of * % of the budget. Upon receipt by AGC of a notice
from GTIS that GTIS has received a Technically Acceptable Master Disk with
respect to the Game, AGC shall pay to GTIS the amount, if any, by which * % of
the actual costs of development up to * % of the budget exceeds the development
costs theretofore paid by the Atari Group.
2.8. If GTIS has not exercised its option under Sections 2.4
or 2.5 above with respect to a Game and if, before a member of the Atari Group
enters into a binding agreement with a third party for Designated Multipurpose
Computer Platform rights in such Game, there shall be a material change in
design, a material decrease in the development budget or a change in the
identity of the developer from those presented to GTIS before its declination to
exercise its option, the Atari Group will present such changed information to
GTIS who shall have thirty (30) days after receipt of such information to
determine to elect to exercise its option.
2.9. 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
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exploitation on Designated Multipurpose Computer Platforms, including rights
under Section 2.5 hereof, may be developed by the Atari Group for other
entertainment platforms and GTIS will have no rights therein.
2.10. AGC agrees to use commercial efforts in its reasonable judgment,
to acquire rights to exploit Games in Designated Multipurpose Computer Platforms
when it acquires rights in Games from third parties or develops rights in Games
internally or through joint ventures. It is understood that with respect to on-
line Games, third parties may require such games to be exclusively offered on-
line, and GTIS shall have no rights hereunder with respect to such exclusive on-
line games.
2.11. Anything in Sections 2.4 or 2.5 to the contrary notwithstanding,
in the event that after March 31, 1996 the WMS Group desires to hire a third
party developer to develop a Technically Acceptable Master Disk for an Accepted
Game, GTIS shall have the right to review and approve (such approval not to be
unreasonably withheld) the proposed Milestones prior to the WMS Group entering
into a binding agreement with such developer (such right of review and approval
shall not extend to any terms of the developer agreement other than the
Milestones). The WMS Group shall notify GTIS in writing of its intention to hire
such third party developer and GTIS shall notify WMS in writing within five (5)
Business Days after receipt of the WMS Group notice that GTIS desires to
exercise its right of review and approval of Milestones. GTIS' failure to timely
notify WMS shall be deemed its election not to exercise such right of review and
approval. If GTIS shall exercise such right, GTIS and WMS shall negotiate in
good faith to reach agreement with respect to the proposed Milestones as
promptly as practicable. If such agreement is not reached within ten (10)
Business Days after receipt by
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THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
WMS of GTIS' aforesaid notice, then WMS may notify GTIS of Milestones which are
acceptable to WMS and GTIS shall have three (3) Business Days after receipt of
such notice to accept such Milestones. If GTIS does not accept such Milestones
within such three (3) Business Day period, WMS may proceed to enter into an
agreement with such developer as if GTIS had elected not to exercise its right
of review and approval. If a developer agreement is signed following acceptance
by GTIS of the Milestones as aforesaid, upon approval by GTIS and WMS of the
material delivered and other requirements of each of such Milestones, GTIS shall
pay to WMS * % of the Milestone payments within five (5) Business Days after
GTIS receives WMS' invoice therefor. Such payment shall be credited against the
obligations of GTIS to pay WMS * % of the actual costs of code development
simultaneously with the receipt of a Technically Acceptable Master Disk set
forth in Sections 2.4 and 2.5. With respect to any Technically Acceptable Master
Disk for which GTIS is obligated to fund * % of the Milestone payments, if WMS
exercises its rights in Section 2.7.4 to terminate development, the following
shall apply: (1) if GTIS consents to such termination, neither WMS nor GTIS
shall be entitled to any reimbursement of the Milestone payments previously made
by the other, or (2) if GTIS withholds its consent to such termination, if
permitted by the developer agreement, GTIS may take over the responsibility for
development of a Technically Acceptable Master Disk with the developer and fund
the balance of the development costs. Upon receipt by WMS of a notice from GTIS
that GTIS has received a Technically Acceptable Master Disk with respect to the
Game, WMS shall pay to GTIS, the amount, if any, by which * % of the original
development budget approved by WMS exceeds the Milestone payments previously
made by WMS. If GTIS has fully funded its obligations to make Milestone payments
theretofore due, GTIS may elect to
18
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
terminate its obligations to make Milestone payments with respect to future
Milestones on which the developer has not yet commenced work; provided that GTIS
may not so elect unless the agreement with the developer permits WMS to
terminate its obligations to the developer by making payments only for
Milestones previously achieved or in work or GTIS agrees to pay * % of any costs
of terminating the developer agreement. If GTIS properly elects to terminate its
obligation to make Milestone payments, (i) if WMS agrees to such termination and
also terminates the developer agreement, neither WMS nor GIIS shall be entitled
to any reimbursement of the Milestone payments previously made by the other, or
(ii) if WMS elects to continue development of the Technically Acceptable Master
Disk, GTIS shall be entitled to reimbursement of the Milestone payments
previously made by it upon completion by WMS of the Technically Acceptable
Master Disk, but GIIS shall be deemed to have waived any future rights to
distribute or license the version of the Game embodied in the Technically
Acceptable Master Disk. GTIS shall hold WMS harmless for any claims by
developers against the WMS Group by reason of GTIS' failures to make Milestone
payments under this Section. WMS shall use its best efforts to cause agreements
with developers entered into after March 31, 1996 which relate to Technically
Acceptable Master Disks for which GTIS is making * % of the Milestone payments
to provide for GTIS to have the right to assume the rights and obligations under
that agreement should WMS elect to terminate the agreement and GTIS elect to
continue it. If both WMS and GTIS elect to terminate a developer agreement and
any proceeds are subsequently generated from the abandoned project, the proceeds
shall be shared by WMS and GTIS in proportion to their Milestone payments made
with respect to such abandoned project. All ownership and rights in software,
artwork, literary text, designs and other works, and all
19
<PAGE>
intellectual property relating thereto, which would have vested in a member of
the WMS Group but for such termination shall vest in such member of the WMS
Group, not GTIS, even if GTIS assumes the developer agreement, and the WMS Group
shall remain entitled to all of the benefits of the representations and
warranties, indemnifications, confidentiality provisions, restrictions,
covenants and other obligations of the developer which would survive termination
of such agreement. The provisions of this Section 2.11 are in all cases
subject to the provisions of Section 2.12. For developer agreements in respect
of which GTIS has agreed to make Milestone payments, the WMS Group shall provide
GTIS a copy of the final version of the developer agreement within ten (10)
Business Days after the same is signed; provided, however, that the WMS Group
shall have the right to redact any information in that agreement relating to
third parties which does not affect GTIS' rights or obligations.
2.12. If permitted under existing agreements with third
parties, AGC agrees to submit its choice of each proposed third party developer
to be selected under Sections 2.4 and 2.5 of this Agreement to GTIS for GTIS'
approval, such approval not to be unreasonably withheld, and GTIS shall notify
AGC of its decision with respect to such developers within five (5) Business
Days after receipt by GTIS of AGC's notice. If the Technically Acceptable
Master Disk being developed is based upon a coin-operated Game which has been
released within the 24 month period preceding AGC's request for GTIS' approval
of the developer, or is released after such request for approval but prior to
the release of the home version of such Game, AGC shall have the final decision
in selecting the developer if a representative of AGC's coin-operated game
development group advises GTIS in writing that the selection of a particular
developer is important to such group. In all other circumstances, if
20
<PAGE>
GTIS reasonably disapproves of the developer suggested by AGC, then that
developer shall not be used and a new developer shall be selected by AGC,
subject to GTIS' right of approval as provided above in this Section 2.12.
2.13. Royalties payable to AGC pursuant to Schedule B of the
Atari Home Computer Software Distribution and License Agreement are measured by
the wholesale price of Licensed Product. Accordingly, reasonably in advance of
WMS' decision to enter into a developer contract and reasonably in advance of
GTIS' initial release of the Licensed Product, GTIS shall advise WMS, at WMS'
request, of GTIS' expected pricing strategy and the reasons 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.
2.14. If, under Section 2.1 of any Atari Home Computer Software
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 Computer Software 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 form is not so used, any
other form to be used shall be subject to prior approval as provided in
21
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
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 Computer Software 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
GTIS Master Home Video 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 blanket approval
as provided in the first sentence of this Section and who are no longer
22
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
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 subucensees to permit Licensee to
terminate such agreement immediately if such sublicensee shall be or become an
Exporter or a Pirate.
2.15. Within 60 days from the Effective Date, GUS shall have
the right to propose to AGC five multipurpose home computer game projects
involving up to a maximum of 13 titles from the existing library of Atari Group
games listed on Schedule 2 hereto. AGC shall have the right to veto up to three
of the titles selected and GTIS may replace any title so vetoed by selecting
another available title from the aforesaid library. If GTIS has not proposed
all five game projects within such 60 days, it may propose the remaining
projects thereafter, but such later projects may involve only such titles as AGC
has not exploited itself or through third parties. GTIS will pay all costs of
such projects, including Third Party Fees and Royalties, advertising and all
manufacturing and development costs. AGC will own all copyrights, trademarks,
intellectual property and code developed in connection with such projects. GTIS
will pay AGC a royalty of * % of Net Wholesale Sales Price, as such term is
defined in Schedule B to the Atari Home Computer Software Distribution and
License Agreement, of such games. Sublicensing revenues shall be treated in the
same manner as sublicensing revenues from Accepted Games except that AGC's share
shall be * % of such revenues instead of * %. Bundling revenues will be treated
the same as sublicensing revenues. Royalties payable to AGC will be recoupable
against the Minimum Guaranteed Advance Royalty. AGC will have rights
23
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
to approve product and packaging quality and advertising and promotional
materials as provided in the distribution and license agreements to be entered
into with respect to each such project. Such distribution and licensing
agreement shall be substantially in the form of the Atari Home Computer
Distribution and License Agreement, with such changes therein as are required to
reflect the provisions of this Section 2.15.
3. MINIMUN GUARANTEED ADVANCE ROYALTY. In consideration for both the
------------------------------------
option granted herein and in the Master Atari Home Video Agreement and as a
guaranteed advance royalty, GTIS is paying to WMS the aggregate sum of * Dollars
("Minimum Guaranteed Advance Royalty") in installments as follows:
* Dollars shall be paid by wire transfer to WMS in immediately available funds
on the Effective Date and * Dollars shall be paid in immediately available
funds on or before one year after the Effective Date. It is understood that
under no circumstances shall the WMS Group or the Atari Group be required to
repay any portion of such amounts nor shall GTIS be entitled to any set off or
to claim the right not to pay any portion of such amounts for any reason;
provided that GTIS shall be entitled to recoup such payments out of royalties,
to the extent provided in the Atari Home Computer Software Distribution and
License Agreements entered into pursuant to this Agreement and the Atari Home
Video Distribution and License Agreements entered into pursuant to the Master
Atari Home Video Agreement, and to the extent not so recouped from those
agreements, GTIS shall be entitled to recoup such payments out of royalties to
the extent provided in the GTIS Master PC Agreement and GTIS Master Home Video
Agreement and related license agreements.
24
<PAGE>
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
GTIS; GTIS 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 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 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. 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 them under this Agreement. This requirement of confidentiality
shall not apply to information that is (a) permitted to be disclosed under an
Atari Home Computer Software Distribution and License Agreement; (b) in the
public domain through no wrongful act
25
<PAGE>
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 termination of
this Agreement. 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 Atari Home Computer Software 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 Atari Home Computer Software 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 (i) by its delivery personally or by
express mail; or (ii) five (5) days after its
26
<PAGE>
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,
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 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
27
<PAGE>
With a copy to:
Williams Entertainment Inc.
1800 South Business 45
Corsicana, TX 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) 782-1964
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
---------
obligations to make payment in full hereunder or under any Atari Home Computer
Software 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 in making payments hereunder within
fifteen (15) days of such notice, or within the grace periods provided in the
Atari Home Computer Software 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 Computer Software Distribution
and License Agreements entered or deemed entered into prior to such termination
which are not in default shall remain in full force and effect. No such
28
<PAGE>
termination shall in any way affect or diminish WMS' or AGC's 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 Computer Software Distribution and License
Agreement resulting 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. STOCK PURCHASE AGREEMENT CONDITIONS. This Agreement shall
-------------------------------------
become effective on the Effective Date and shall be null and void and of no
further 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 agreement 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.
10. MISCELLANEOUS.
--------------
10.1. 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 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
29
<PAGE>
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.
10.2. 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.
10.3. 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.
10.4. 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 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.
10.5. 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.
30
<PAGE>
10.6. 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.
10.7. 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.
10.8. In the event of conflicts between the provisions of
this Agreement and the Atari Home Computer Software Distribution and License
Agreement, the provisions of this Agreement shall prevail.
IN WITNESS WHEREOF, 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
31
<PAGE>
SCHEDULE 1
----------
PROJECTS IN PROCESS
-------------------
(ATARI PC GAMES)
----------------
TITLE PLATFORM
----- --------
Area 51 CD-ROM
Constructor Win '95/Mac-CD
Crisis Win '95
Dark Hermetic Order PC CD-ROM
Gretzky Hockey PC CD-ROM
Gretzky II Win '95
Primal Rage Mac-CD
RBI 96 IBM PC; CD-ROM
Return Fire CD-ROM
T-Mek PC; CD-ROM
<PAGE>
EXHIBIT A
---------
HOME COMPUTER SOFTWARE
----------------------
DISTRIBUTION AND LICENSE AGREEMENT FOR ATARI GAMES
--------------------------------------------------
AGREEMENT made this _____________ day of ______________ , 199 __ , by
and between GT INTERACTIVE SOFTWARE CORP., a Delaware corporation with offices
at 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").
WITNESSETH:
-----------
WHEREAS, Licensor owns or controls the rights in and to the Licensed
Property (which Licensed Property is hereinafter defined on Schedule "A"
attached hereto);
WHEREAS, Licensee is engaged in the business of manufacturing, distributing
and selling Computer Games (as hereinafter defined; such Computer Games
embodying the Licensed Property shall be hereinafter referred to as the
"Licensed Product"); and
WHEREAS, Licensee desires to use the Licensed Property in connection with
the manufacture, distribution and sale of the Licensed Product;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS.
------------
1.1. The term "Computer Game" is herein defined as any Computer
Software designed to operate on IBM PC or Apple Macintosh or other compatible
multipurpose home computers, using floppy disks or CD-ROM or other stand alone
devices in all operating
<PAGE>
systems now known or hereafter developed or designated for use on the aforesaid
multipurpose home computers. Computer Games shall not include, among other
things, Computer Software designed to operate on dedicated home game systems
(e.g. Nintendo, Sega, Atari, Sony, etc. game platforms).
1.2. The term "Computer Software" or "Software" shall mean
any computer software containing substantially full and complete computer game
code, including the source code, the assembly code, the object code and such
data files and other files as are deemed necessary for the Licensed Product to
achieve its functional purpose, whereby data and visual images, with or without
sound, can be manipulated, communicated, reproduced or perceived with the aid of
a computer.
1.3. The term "Master Atari PC Agreement" shall mean the
Master Option and License Agreement for Atari PC Games dated March 27, 1996,
between Licensee and WMS Industries Inc.
1.4. The term "Licensed Product" shall have the meaning
ascribed in the second Whereas clause of this Agreement and, as the context may
require, shall also include books which communicate game playing tactics and/or
strategies ("hint books") specifically prepared for Computer Games which shall
also be deemed Licensed Products hereunder and shall be subject to all of the
terms and conditions, including without limitation the royalty provisions,
hereof.
1.5. The term "Licensed Territory" shall have the meaning
ascribed in Section 3 of this Agreement.
2
<PAGE>
1.6. The term "Other Atari Home Computer Software Distribution and
License Agreements" shall have the meaning ascribed in Schedule B.
1.7. The term "Projects in Process" shall have the meaning ascribed
in Section 1. 18 of the Master Atari PC Agreement.
1.8. The words "term of this Agreement" or "period of this Agreement"
or "term hereof" or "so long as this Agreement remains in force" or words of
similar connotation shall include the initial period of this Agreement and the
period of all renewals, extensions, substitutions or replacements of this
Agreement.
1.9. The term "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 (1) any
recoupable advances which have already been included in any development budget
or acquisition costs with respect to the Licensed Product which are to be shared
by Licensor and Licensee, in accordance with the terms of the Master Atari PC
Agreement and which have not yet been recouped; and (2) any fees or royalties
payable to employees or consultants by Licensor or its affiliates with respect
to the development of Licensed Product in house. If, with respect to Games other
than Projects in Process, Licensor or its affiliates acquires from a third party
in one transaction the rights to exploit a Game on multiple platforms, unless
Licensee shall otherwise agree, Licensor shall fund advances, if any, paid to
such third party, and any such advances shall be excluded from the term Third
Party Fees and Royalties; provided, however, that if such advances are
recoupable by Licensor or its
3
<PAGE>
affiliates from future royalties payable to such third party, then Third Party
Fees and Royalties shall include such royalties which would otherwise be payable
to such third party were it not for such right of recoupment.
Capitalized terms used, but not defined herein, shall have the meaning
ascribed to such terms in the Master Atari PC Agreement.
2. GRANT OF LICENSE.
-----------------
2.1. Licensor hereby grants and Licensee hereby accepts, for
the term of this Agreement and subject to the terms hereinafter set forth, the
exclusive license to utilize the Licensed Property solely in connection with the
manufacture, distribution and sale of the Licensed Products in the Licensed
Territory. Licensee shall have the right to sublicense any of the rights
granted to Licensee hereunder with Licensor's prior written consent, which
consent shall not be unreasonably withheld or delayed. Without limiting the
generality of the foregoing, (a) Licensor shall not unreasonably withhold or
delay its consent to proposals by Licensee to sublicense its rights hereunder to
third party personal computer hardware or computer peripheral device
manufacturers for the purpose of bundling the Licensed Products together with
such hardware products for distribution only within the Licensed Territory and
(b) 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 Licensed Products to mass market retailers in
the United States. It is understood that the term Licensed Products does not
include Computer Software designed for play on dedicated home video game
systems, such as those manufactured by Nintendo, Sega, Sony or Atari, or any
other medium of exploitation, including handheld games, over the air, cable or
fiber-optic transmission or any ancillary rights
4
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
related thereto, all of which remain the sole property of Licensor except as
otherwise specifically provided below. No license is granted hereunder for the
manufacture, sale or distribution of Licensed Products to be used as premiums,
in combination sales, as giveaways or to be disposed of under similar methods of
merchandising, except only that Licensee shall have the right, subject to rights
of third parties in the Licensed Property, to distribute Licensed Products as
premiums, combination sales or giveaways solely (a) subject to Licensor's
consent, which shall not unreasonably be withheld or delayed, in connection with
the sale and distribution of other Computer Games licensed to Licensee by
Licensor or its affiliates under Other Atari Home Computer Software Distribution
and License Agreements, and (b) with respect to free or promotional goods in the
quantities set forth on Schedule B. [If Licensee's rights in Licensed Products
are derived under Section 2.5 of the Master Atari PC Agreement and relate to
rights acquired from third parties (as compared to rights to product developed
in-house by Licensor or its affiliates), add the following: Upon payment of the
* % of the costs of the development as provided in Section 2.5 of the Master
Atari PC Agreement, Licensee shall be entitled to share in * % of the net
profits derived by Licensee from the exploitation of ancillary merchandising
rights to the Licensed Product and Licensee shall be entitled to direct the
exploitation of such ancillary merchandising rights (but not hand held games)
after consultation and subject to Licensor's consent, which shall not
unreasonably be withheld or delayed. Licensee shall not be entitled to exploit
or share in the profits derived from any exploitation of games whether or not
having the same or similar title or play characteristics or using similar
Computer Software, in other game platforms, such as coin-operated games or
dedicated home game systems, or in any ancillary rights relating thereto. If
ancillary merchandising rights apply to or are derived from
5
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
the exploitation of games which are designed to operate on multiple platforms
(irrespective of the chronological order in which such games are released for
such platforms), then the Licensor and Licensee will consult with each other to
determine a fair and appropriate method of exploiting the ancillary
merchandising rights and the respective participations of Licensor and Licensee
therein. For the purposes hereof, "net profits" shall be calculated by
subtracting from the actual monies received by Licensor or Licensee, as the case
may be, from the exploitation of the ancillary merchandising rights to the
Licensed Product (i) an amount equal to * % of such receipts, representing
Licensor's or Licensee's allocation of overhead expenses, and (ii) all Third
Party Fees and Royalties payable by Licensor in connection therewith. Licensor
shall account to Licensee not less frequently than quarterly with respect to the
calculation and payment of its share of net profits as provided above.]
2.2. This license does not include any rights to subsequent
versions of the Licensed Property (so-called "sequels" or "derivatives"), such
rights being retained by Licensor, except as the same are otherwise required to
be offered to Licensee under the Master Atari PC Agreement or as provided in the
following sentence. If any member of the Atari Group, as that term is defined
in the Master Atari PC Agreement, shall, within a period beginning not later
than six (6) months after Licensee has ceased selling a Licensed Product
acquired under Section 2.5 of the Master Atari PC Agreement in reasonable
commercial quantities, begin the development, in-house or through third-party
developers, of a sequel or derivative of such Licensed Product which utilizes
more than * % of the same source code as such Licensed Product or substantially
the same name as such Licensed Product, then such sequel or derivative shall be
offered to Licensee on the same terms and conditions as a Game
6
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
would have been offered to Licensee during the Option Period as that term is
defined in the Master Atari PC Agreement.
3. Territory.
---------
3.1. Licensee shall be entitled to manufacture, distribute and sell
the Licensed Products in all countries throughout the world, except (a) 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 PC; or Return Fire for PC; or
Constructor for PC and Mac, 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 sublicensees 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,"
7
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
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 above) 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.
4. Term.
----
[Note: For Licenses granted under Section 2.3 of the Master Atari
PC Agreement, insert the following:
The license granted hereunder shall be effective on the date hereof
[which date, for Projects in Process, shall be the earlier of the actual release
date or 60 days after delivery of the Technically Acceptable Master Disk, as
that term is defined in the Master Atari PC Agreement, to Licensee] and shall
terminate on the earlier of (a) three 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 (a) the license term shall be deemed extended for an additional
one year if Licensee has paid royalties hereunder amounting to $ * or more
in excess of * % of the amount of all Third Party Fees and Royalties
payable
8
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
in respect of the exploitation of Licensed Products during the third license
year, and (b) the license term shall be deemed further extended for a final
additional one year if Licensee has paid royalties hereunder amounting to $ *
or more in excess of * % of the amount of all Third Party Fees and Royalties
payable in respect of the sale or other exploitation of Licensed Products during
the fourth license year. For purposes hereof, royalties and Third Party Fees
and Royalties payable in respect of the sale or other exploitation of Licensed
Products during a license year shall include amounts paid subsequent to the
license year on account of Licensed Products sold or otherwise exploited during
such license year, and shall not include amounts paid during a license year on
account of the sale or other exploitation of Licensed Products during the prior
license year. Licensee shall be entitled, one time only, to make a voluntary
payment to Licensor in order to reach either (but not both) of the $ *
thresholds referred to above.]
[Note: For licenses granted under Section 2.4 of the Master Atari
PC Agreement, insert the following:
The license granted hereunder shall be effective on the date hereof
and terminate on the termination of Licensor's rights obtained from third
parties, provided however, that at any time prior to five years from the earlier
of the actual release date or 60
9
<PAGE>
days after delivery of the Technically Acceptable Master Disk, as that term is
defined in the Master Atari PC Agreement, to Licensee, Licensor may notify
Licensee of its election to terminate the license, effective on expiration of
such five-year period, and in such event Licensor shall pay to Licensee the
portion of the development costs paid by Licensee under Section 2.4 of the
Master Atari PC Agreement.]
[Note: For licenses granted under Section 2.5 of the Master Atari PC
Agreement, insert the following:
The license granted hereunder shall be effective on the date hereof
and terminate on the termination of Licensor's rights obtained from third
parties.]
5. CONSIDERATION.
--------------
Licensee shall pay Licensor, with respect to the sale throughout the
Licensed Territory of the Licensed Products, a royalty as specified in Schedule
"B" annexed hereto on each unit of Licensed Product sold.
6. ACCOUNTINGS.
-------------
6.1. Licensee agrees to forward to Licensor, within forty-five
(45) days after the end of each calendar quarter ("Royalty Period"), commencing
with the first calendar quarter during which any unit of the Licensed Product is
sold, a report, in reasonable detail and reported separately, by Marketing Area,
of the number of units and average wholesale price (by sales bracket, as
provided in Schedule B hereof) of the Licensed Products sold within such
10
<PAGE>
Royalty Period and the royalty amount due for the sale of such units calculated
in accordance with Section 6.3 below and any recoupment claimed in accordance
with Schedule B annexed hereto, and Section 3 of the Master Atari PC Agreement.
For purposes hereof, the term "Marketing Area" shall include North America (as
such term is defined in the Master Option and License Agreement for Atari Home
Video Games between WMS Industries Inc. and Licensee, dated March 27, 1996 (the
"Master Atari Home Video Agreement"), and each of the other Marketing Areas
designated on Schedule C to Exhibit A 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 U.S.
funds, of the amounts due to Licensor, if any, in respect of such Royalty Period
in excess of any permitted recoupment. Royalties calculated in foreign
currencies shall be converted to U.S. currency at the spot rate of exchange
published in the Wall Street Journal as of the last day of the Royalty Period.
-------------------
Such reports shall be required to be submitted with respect to sales and
distributions of the Licensed Product whether or not any amounts are due under
the terms hereof.
6.2. Licensee agrees to keep accurate books of account and
records with respect to the Licensed Products, covering all sales, purchases and
inventories of Licensed Products and all royalty fees due under this Agreement
at Licensee's offices (or the offices of Licensee's affiliates) and to permit
(or procure the right for) Licensor at its own expense to have accounting
professionals (which may include Licensor's employees who have accounting
degrees) inspect such books of account and records of Licensee or its
sublicensees during reasonable business hours (but not during the first three
weeks of a calendar quarter), upon prior
11
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
reasonable written notice, for the sole purpose of verifying the reports to be
provided hereunder. Such inspections, together with inspections of Licensee's
books of account and records pertaining to other Computer Games licensed to
Licensee by Licensor or its affiliates under Other Atari Home Computer Software
Distribution and License Agreements, shall occur no more frequently than twice
during any twelve (12) month period for each of the Licensee's offices.
Licensor's inspectors shall not be physically present in a specific office of
Licensee for more than 10 consecutive business days in connection with any such
inspection, provided that Licensee shall have supplied all requested information
and documentation and responded to questions on a reasonably prompt basis.
Licensee shall promptly furnish to Licensor copies of any report which Licensee
may produce as the result of any audit by Licensee of the books of account and
records of any sublicensee of Licensee. Licensor shall keep any information
obtained from any such inspections in confidence and shall require that its
accounting professionals do so as well. Licensee's books relating to any
particular royalty statement may be examined as aforesaid only within two (2)
years after the date rendered and Licensee shall have no obligation to permit
Licensor to so examine such books relating to any particular royalty statement
more than once for any one statement, unless in connection with a civil action
filed by Licensor against Licensee in connection with such statement. In the
event that any audit by Licensor's accounting professionals reveals that
Licensee has underpaid Licensor by an aggregate of * or more with respect to the
specific royalty statements which are the subject of such audit, Licensee agrees
that it shall also reimburse Licensor for the reasonable documented costs for
any such audit (including traveling costs) up to the amount of the shortfall.
12
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
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 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,
point of sale 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 Party Fees and Royalties. Licensor's books and
records may be examined by Licensee's representatives not more frequently than
twice in any twelve-month period and Licensee shall otherwise have substantially
the same rights as provided to Licensor under Section 6.2 above.
6.5. In circumstances where either party is obligated under
this Agreement to account to the other party in respect of any entitlement to
the other party's share in net profits from the exploitation of the Licensed
Product, such party shall account
13
<PAGE>
substantially in the same manner and in the same time frame as provided in this
Paragraph 6 above. The party to which such accounting is made shall also have
substantially the same rights as provided to Licensor in Section 6.2.
6.6. Licensee recognizes that the timely submission of all
reports required to be submitted to Licensor pursuant to Section 6.1 hereof is
critical for Licensor to maintain good relations with its third party licensors
as well as for Licensor's own financial reporting requirements. 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 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.
6.7 At the time that the Licensor shall provide to Licensee
notice of availability of a Game pursuant to Section 2.4 or 2.5 of the Master
Atari PC Agreement, Licensor shall provide to Licensee sufficient data to enable
Licensee to calculate Third Party Fees and Royalties payable with respect to
each Licensed Product (without regard to any advances which may have been made
by Licensor). If Licensee is unable to calculate specific Third Party Fees and
Royalties from the data provided, Licensee may request assistance from
14
<PAGE>
Licensor with respect thereto, and Licensor shall use its best efforts to
respond within seven (7) days from the date of such request, but Licensee shall
provide all sales and other data in its possession which are necessary for such
calculations.
7. QUALITY OF LICENSED PRODUCT.
----------------------------
7.1. The Licensed Products as manufactured, advertised, sold,
distributed or otherwise disposed of by Licensee under this Agreement shall be
of a high quality and shall be sold and distributed in packaging prescribed by
Licensor bearing Licensor's trademarks and trade names. Such packaging may
indicate that the Licensed Products are distributed by Licensee. Licensor shall
have the right to determine in its reasonable discretion whether the Licensed
Product meets Licensor's high standards of merchantability. Licensee agrees to
furnish Licensor free of cost for Licensor's written approval as to quality and
style (which approval shall not be unreasonably withheld), samples of the
Licensed Product, together with its proposed advertising, packaging and wrapping
materials, before its manufacture, sale or distribution (whichever first occurs)
and the Licensed Product shall not be sold or distributed by Licensee without
such written approval.
7.2. If Licensor shall disapprove of any item submitted by
Licensee for approval hereunder, Licensor shall furnish at the time notice of
disapproval is given to Licensee an explanation of the reason(s) for such
disapproval and recommendations for suggested changes and Licensee shall
resubmit such item after changes have been made for Licensor's approval. 7.3. In
the event that the quality of any Licensed Product approved by Licensor shall
become less than that approved by Licensor and Licensee shall fail to raise the
quality to the approved level within thirty (30) days after receiving written
notice from Licensor,
15
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
the license granted under this Agreement for such Licensed Product shall
automatically terminate and shall remain terminated until Licensor shall
subsequently renew its approval of the Licensed product.
7.4. If disapproval is not received by Licensee within five
(5) business days after Licensor's receipt of the item submitted for approval,
Licensor's approval shall be deemed to have been given. Subsequent to final
approval, Licensor may request the Licensee once each quarter to send, without
charge, a reasonable number of production samples (but in any event not less
than 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 Third Party Fees and Royalties
or other royalty hereunder), but not more than * units of each Licensed Product.
8. TRADEMARK AND COPYRIGHT, ETC.
-----------------------------
8.1. "Notice" as used in this Section shall mean the following
statutory copyright notice and notice of registration or application for
registration of the licensed trademark:
_ _ _ _ (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 _ _ _ _."
16
<PAGE>
8.2. 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 U.S. Copyright Office and
recorded with the U.S. Customs Dept. 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 appoints Licensor Licensee's attorney-in-fact to do
so on Licensee's behalf. Licensee shall also furnish Licensor samples of all
advertising or promotional materials bearing the Notice for Licensor's approval.
8.3. Subject to the terms of this Agreement, Licensee
acknowledges and agrees that: All copyrights, trademarks and service marks and
rights to same referred to in this Section 8 in the name of and/or owned by
Licensor shall be and remain the sole and complete property of Licensor; that
all such copyrights, trademarks and service marks and rights to same in the name
of or owned by any copyright proprietor other than Licensor or Licensee shall be
and remain the sole and complete property of such copyright proprietor; that all
trademarks and
17
<PAGE>
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.
8.4. Licensee agrees to assist Licensor at Licensor's expense
to the extent necessary in the procurement of any protection or to protect any
of Licensor's rights to the Licensed Property. Licensee shall notify Licensor
in writing of any infringements or imitations by others of the Licensed Property
on articles similar to those covered in this Agreement which may come to the
Licensee's attention. Licensor shall have the right to commence action to
enforce its proprietary rights and prosecute any such infringements, and
Licensee agrees to fully cooperate, at Licensor's expense, in any such action.
However, Licensee shall not incur any such expense reimbursable by Licensor
without Licensor's express written approval and all recoveries resulting from
any such action shall belong solely to Licensor. In the event Licensor declines
to pursue any such action, Licensee may, with Licensor's written permission, and
subject to the consent of any third party having rights in the Licensed
Property, institute such an action, and Licensor, at Licensee's expense, shall
cooperate in such action instituted by Licensee and all recoveries resulting
from any such action shall belong solely to Licensee. Licensor shall not
unreasonably withhold or delay its permission to
18
<PAGE>
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.
8.5. During the term of this Agreement and thereafter, Licensee:
(a) will not challenge the ownership or rights of Licensor in and to
the Licensed Property or any copyright or trademark pertaining thereto developed
by or for Licensor, nor attack the validity of the license granted hereunder or
participate in any challenge thereto;
(b) will manufacture, sell and distribute the Licensed Products in
compliance with all applicable laws and governmental regulations in accordance
with the terms of this Agreement;
(c) will not except as set forth in this Agreement, either directly or
indirectly, use or display or authorize others to use or display, the
trademarks, copyrights or proprietary rights of Licensor in connection with any
advertising, assembly, manufacture, distribution, use, sale or lease of any
goods, other than in connection with the manufacture and sale of the Licensed
Products; and
(d) subject to Licensee's best business judgment Licensee will
exercise reasonable efforts to: (i) manufacture sufficient quantities of the
Licensed Product to meet the market demand for same; (ii) conduct advertising
activities to promote the sale of
19
<PAGE>
Licensed Product; and (iii) make any and all arrangements necessary to
accomplish such undertakings.
9. Materials.
---------
9.1. Notwithstanding anything contained herein to the contrary
and subject to the terms of this Agreement, all artwork, designs and computer
software embodying the Licensed Property, or any reproduction thereof, which are
designed, developed and/or created by Licensee hereunder (or any of its
sublicensees, affiliates 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 such above described materials in connection with its exploitation,
sale and distribution of the Licensed Products.
9.2. Licensor shall make available to Licensee, at Licensor's
actual out of pocket cost, any artwork relating to the Licensed Property which
Licensor owns and which is reasonably available to Licensor for Licensee's use
in connection with the exploitation of the Licensed Property.
10. TRANSLATIONS.
-------------
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 the Licensed Product and Licensee shall furnish, at its own
expense, to Licensor a translation text thereof. Licensor shall then cause a
20
<PAGE>
new Technically Acceptable Master Disk (as that term is defined in the Master
Atari PC Agreement) containing such translation to be encoded, at Licensor's own
expense, and delivered to Licensee.
11. REPRESENTATIONS AND WARRANTIES.
-------------------------------
11.1. Licensor hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered by Licensor; Licensor
has the full power and authority to enter into this Agreement and perform its
obligations hereunder; this Agreement constitutes the valid and binding
obligation of Licensor, enforceable in accordance with its terms; the making of
this Agreement does not violate any agreement, right or obligation existing
between Licensor and any other person, firm or corporation; and the Licensed
Property, if used pursuant to the license granted herein, will not infringe upon
or violate any rights of any third party.
11.2. Licensee hereby represents and warrants that this
Agreement has been duly authorized, executed and delivered by Licensee; Licensee
has the full power and authority to enter into and perform its obligations
hereunder; this Agreement constitutes the valid and binding obligation of
Licensee, enforceable in accordance with its terms; the making of this Agreement
does not violate any agreement, right or obligation existing between Licensee
and any other person, firm or corporation; and its manufacture, advertisement,
distribution and sale of the Licensed Products will be in accordance with the
terms of this Agreement so as not to infringe upon or violate any rights of any
third party.
21
<PAGE>
12. INDEMNIFICATION.
----------------
12.1. Each party agrees to indemnify and hold the other
(including officers, directors, agents and employees of such party or its
subsidiaries, affiliates and sublicensees) harmless against any loss, damage,
expense or cost (including reasonable attorneys' fees) arising out of any claim,
demand or suit or judgment resulting from any breach of any warranty or
representation set forth in Section 11 above. Each party shall promptly inform
the other of any such claim, demand, suit or judgment.
12.2. In connection with any such claim, demand or suit
referred to above, the party so indemnifying (the "Indemnitor") agrees to
defend, contest or otherwise protect the indemnified party (the "Indemnitee")
against any such suit, action, investigation, claim or proceeding at the
Indemnitor's own cost and expense. The Indemnitee shall have the right, but not
the obligation to participate, at its own expense, in the defense thereof by
counsel of its own choice. In the event that the Indemnitor fails timely to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding, the Indemnitee shall have the right to
defend, contest or otherwise protect against the same, and, upon ten (10) days'
written notice to the Indemnitor, make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnitor, including without
limitation, reasonable attorneys' fees, disbursements and all reasonable amounts
applied as a result of such suit, action, investigation, claim or proceeding or
compromise or settlement thereof. The obligations hereunder shall survive the
termination or expiration of this Agreement.
12.3. Neither Licensor nor Licensee shall be liable for any
incidental, consequential or punitive damages to the other.
22
<PAGE>
13. EVENTS OF DEFAULT AND TERMINATION.
----------------------------------
Licensee shall be deemed to be in default of this Agreement in the event
either of the following occurs:
(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 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 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.
14. EXPIRATION OR TERMINATION OF AGREEMENT.
---------------------------------------
Upon expiration or termination of this Agreement, all rights granted to Licensee
herein shall forthwith revert to Licensor with the following consequences:
(a) All unpaid royalties shall be due and payable in accordance
with Section 6.1 hereof.
(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
23
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
effective date of termination all approved copies of the units of the Licensed
Product produced
prior thereto.
Notwithstanding the expiration or termination of this Agreement,
Licensor will continue to account and pay over to Licensee, on a periodic basis
not less frequently than quarterly, * % of the net profits (as calculated in
Section 2. 1 above) derived by Licensor from the exploitation of any ancillary
merchandising rights to the Licensed Products (as provided in Section 2.1 above)
and * % of the net profits derived by Licensor from the exploitation of Licensed
Products in Japan, as provided in Section 3.2 above.
15. Confidential Information.
------------------------
Each of the parties shall keep in confidence and not disclose to any third
party, without the written permission of the other party, the terms of this
Agreement and the proprietary information of the other party made known to it
under this Agreement. This requirement of confidentiality shall not apply to
information that is (a) in the public domain through no wrongful act of the
disclosing party; (b) rightfully received by the disclosing party from a third
party who is not bound by a restriction of nondisclosure; (c) already in the
disclosing party's possession without restriction as to disclosure; or (d) is
required to be disclosed by applicable rules and regulations of government
agencies or judicial bodies. This obligation of confidentiality: (i) shall
survive termination of this Agreement and (ii) shall extend to any subcontractor
of either party and each party agrees to obtain from each such subcontractor a
written agreement to abide by the foregoing confidentiality requirements. Each
of the parties
24
<PAGE>
shall be entitled to seek injunctive or equitable relief to prevent the breach
or threatened breach by the other of the provisions of this Section and to
secure its enforcement.
16. NOTICES.
--------
Any notice, consent, approval, request, waiver or statement to be given,
made or provided for under this Agreement shall be in writing and deemed to have
been duly given (i) by its delivery personally or by express mail; or (ii) five
(5) days after its being mailed, air express, registered or certified, return
receipt requested in a U.S. Post Office addressed as follows:
TO LICENSEE: GT Interactive Software Corp.
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
25
<PAGE>
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) 782-1964
or such other address as either party may designate by notice given as
aforesaid.
17. MISCELLANEOUS.
--------------
17.1. This Agreement is personal to Licensee as one party and Licensor
as the other party. Neither this Agreement nor any party's rights under it may
be assigned, in whole or in part, nor may Licensee's or Licensor's rights or
obligations hereunder be delegated, in whole or in part, to any person or party
without the prior written consent of the other party, except that any party may
assign its rights and delegate obligations to any of its direct or indirect
26
<PAGE>
wholly-owned subsidiaries or affiliates or to any person, firm or corporation
owning or acquiring all or substantially all of the stock or assets of that
party, as long as that party remains fully liable for its obligations hereunder.
Any sale of not less than 50.1% of the stock or assets of Licensor shall
include a requirement for the assumption by the purchaser of all covenants,
obligations and duties undertaken by 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.
17.2. The entire understanding between the parties hereto relating to
the subject matter hereof is contained herein. This Agreement cannot be
changed, modified, amended or terminated except by an instrument in writing
executed by the parties hereto.
17.3. No waiver, modification or cancellation of any term or condition
of this Agreement shall be effective unless executed in writing by the party
charged therewith. No written waiver shall excuse the performance of any act
other than those specifically referred to therein and no waiver shall be deemed
or construed to be a waiver of such terms or conditions for the future or any
subsequent breach thereof.
17.4. This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between Licensor and Licensee, and
neither Licensor nor Licensee shall have any right to obligate or bind the other
in any manner whatsoever, and nothing herein contained shall give or is intended
to give any rights of any kind to any third persons.
27
<PAGE>
17.5. This Agreement shall be governed by the laws of the
State of Illinois applicable to contracts made and to be wholly performed in the
State of Illinois.
17.6. If any provision of this Agreement is or becomes or is
deemed invalid, illegal or unenforceable under the applicable laws or
regulations of any jurisdiction, either such provision will be deemed amended to
conform to such laws or regulations without materially altering the intention of
the parties or it shall be stricken and the remainder of this Agreement shall
remain in full force and effect.
17.7. This Agreement may be executed in counterparts each of
which shall be deemed an original and when taken together shall be deemed one
and the same document.
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
----------
[Insert description of Licensed Property]
29
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
SCHEDULE B
----------
ROYALTIES
---------
Licensee shall pay royalties in an amount equal to the following
percentages of the net wholesale sales price of a Unit sold and not returned:
Net Wholesale Sales Price Royalty %
------------------------- ---------
$ * or greater * %
* * %
* * %
* * %
* * %
* * %
* * %
* * %
At Net Wholesale Sales Prices, as hereafter defined, between $0.01 and $ *
the above percentages shall be prorated based upon the next highest and next
lowest royalty percentage. For example, at a Net Wholesale Sales Price of
$26.00, the royalty percentage shall be * %. Notwithstanding the above, if the
Licensed Products cost $ * or more to develop or acquire ("Premium Products"),
the minimum per unit royalty for such Premium Products shall be calculated as
follows: the minimum per unit royalty during the six-month period commencing on
the date on which the Premium Product was First Released shall be an amount
equal to * % of the product of (1) the Net Wholesale Sales Price of such Premium
Product as of the date of release multiplied by (2) the royalty percentage which
corresponds to such Net Wholesale Sales Price on the table set forth above
(prorated as appropriate). Thereafter, there shall be no further minimum per
unit royalty. The foregoing minimum per unit royalty provision shall not apply
to so-called "hint books" as to which there shall be no minimum royalty.
"Net Wholesale Sales Price" shall be that price invoiced by Licensee to its
customers, less any price discounts, rebates or credits granted at the time of
sale and taxes invoiced to customers (including VAT). No deduction shall be
made for bad debts or other uncollected amounts, advertising allowances,
including cooperative advertising, or any other costs incurred in manufacturing,
selling or distributing the Licensed Products. In the event that Licensee's
experience with respect to bad debts and uncollectible amounts during any
calendar year in
30
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
respect of sales of Licensed Products under this Agreement and all Other Atari
Home Computer Software Distribution and License Agreements entered into between
Licensor and its affiliates and Licensee under the Master Atari PC Agreement,
shall exceed * % of Licensee's aggregate net sales of Licensed Products under
this Agreement and all such Other Atari Home Computer Software Distribution and
License Agreements during such calendar year ("Excess Bad Debts"), then Licensee
shall be entitled to receive a credit against royalties payable under this
Agreement or any Other Atari Home Computer Software Distribution and License
Agreement determined as follows: the average of the weighted Net Wholesale Sales
Prices of all Licensed Products sold under this Agreement and all Other Atari
Home Computer Software Distribution and License Agreements during such calendar
year shall be determined, and the royalty percentage which corresponds thereto
in the table above (prorated as appropriate) shall be multiplied by the amount
of Excess Bad Debts for such calendar year to determine the amount of such
credit.
Royalties for "direct response sales" shall be calculated by multiplying * of
the royalty percentages set forth above (prorated as appropriate) times
Licensor's net receipts from such sales and, for purposes of determining the
applicable royalty percentages in the table set forth above, the amount of such
net receipts shall be * substituted for "Net Wholesale Sales Price. The minimum
per unit royalty shall be of the minimum per unit royalty applicable to sales
other than "direct response sales." Direct response sales shall refer to sales
made directly to consumers other than from a fixed retail location and shall
include catalogue sales, direct mail, print and television sales. Licensee's
net receipts from direct response sales shall be based upon actual monies
received, less amounts separately paid by purchasers as sales taxes and shipping
and handling charges.
Where Licensor has acquired from a third party a Licensed Property in connection
with which Third Party Fees and Royalties amounting to * % or more of Licensee's
estimated Net Wholesale Sales Price are payable, Licensee may elect, at the time
it elects to accept the Licensed Product under the Master Atari PC Agreement, to
pay a substitute royalty ("Substitute Royalty") therefor, which will reduce only
the highest royalty based upon the Net Wholesale Sales Price of the Licensed
Product otherwise payable pursuant to the royalty table included in this
Schedule "B." For example, if the Substitute Royalty for a Licensed Product is
* % , this would apply to units sold at Net Wholesale Sales Prices of $ * and
above; for lower Net Wholesale Sales Prices, the royalty percentages and
corresponding Net Wholesale Sales Prices reflected in the royalty table would
not be changed, except that the royalty percentage may not exceed the amount of
the Substitute Royalty.
The Substitute Royalty shall be computed by comparing the gross profit of
Licensor (i. e., royalty earned, less * Third Party Fees and Royalties, less *
of Shared Institutional Advertising, as such term is hereinafter defined) to the
gross profit of Licensee (i.e., Net Wholesale Sales Price, less royalty payable
to Licensor, less * Third Party Fees and Royalties, less product manufacturing
cost, less * of Shared Institutional Advertising, less * % of Net Wholesale
Sales Price (equivalent to Licensee's operating costs, excluding overhead)); and
determining the royalty percentage that would yield the same gross profit for
both Licensor and Licensee. The computation of the Substitute Royalty for any
year shall be adjusted following the end of such
31
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
year for the prior year to reflect changes in all of the components set forth
above, except for the * % figure referenced above, during such prior year and
any increase or decrease in the Substitute Royalty resulting from such
adjustment shall be reflected on the royalty statement for the first Royalty
Period of the following year.
Where the Licensed Property (whether acquired from a third party or developed by
Licensor or any of its affiliates in house) has not been embodied in a coin-
operated video or pinball game, whether distributed by Licensor or any entity
which at any time was an affiliate or a member of the Atari Group, or will not
be embodied in a coin-operated video or pinball game distributed within 60 days
from the release of the Licensed Product, institutional advertising costs (i.e.,
radio, television and print advertising to the general public), will be shared
equally ("Shared Institutional Advertising") by Licensee and Licensor, provided
that (a) the portion of the Shared Institutional Advertising costs to be borne
by Licensor shall not exceed * % of the Net Wholesale Sales Price of the
Licensed Product, and shall only be payable in that portion of the Licensed
Territory in which Licensee itself (and not its sublicensees) actually pays for
institutional advertising costs and (b) all such Shared Institutional
Advertising costs and budgets therefor shall have been previously approved in
writing by Licensor. Licensee at its own cost and expense shall be solely
responsible for all in-store and cooperative advertising costs associated with
the sale of Licensed Products in the Licensed Territory.
Anything in the foregoing paragraphs to the contrary notwithstanding, where the
Licensed Property has not been embodied in a coin-operated video or pinball
game, whether distributed by Licensor or any entity which at any time was or is
an affiliate of any member of the WMS Group or the Atari Group, Licensee may
elect to pay an alternative royalty therefor. The alternative royalty shall
equal the sum of the royalty percentage payable in accordance with the table set
forth in Schedule B plus the Licensee's share of Third Party Fees and Royalties,
but in no event shall the alternative royalty exceed * % of the actual Net
Wholesale Sales Price of the Licensed Product; provided, however, that anything
in the foregoing paragraphs or this paragraph to the contrary notwithstanding,
under no circumstances shall royalties, whether regular royalties, Substitute
Royalties or alternative royalties, be less than * % of the Third Party Fees and
Royalties payable with respect to the sale of Licensed Products.
See Section 2.15 of the Master Atari PC Agreement with respect to the amounts of
royalties payable for Licensed Products described therein.
ADJUSTMENTS TO ROYALTIES
------------------------
Anything above to the contrary notwithstanding:
1. If Licensor is obligated to pay any Third Party Fees and Royalties
with respect to the sale of Licensed Products, the per unit royalties to be paid
by Licensee to Licensor with respect to such Licensed Products shall be equal to
* % of all such Third Party Fees and Royalties, plus the greater of (a) the
royalty otherwise payable to Licensor as provided above and (b) the other * % of
such Third Party Fees and Royalties. In no event shall the per unit
32
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS
BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
royalty on the sale of Licensed Products be less than * % of such Third Party
Fees and Royalties.
2. In cases where Licensed Products are sold by sublicensees under
sublicensees granted by Licensee in accordance with the provisions of the Master
Atari PC 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
net proceeds received by Licensee from such non-affiliated third party
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.
Revenues from bundling shall be shared in the same manner as revenues from
sublicenses; provided, however, that if Licensee is also the manufacturer of
products for bundling, the fee to Licensee shall equal * % rather than * % of
net proceeds. In no event shall the per unit royalty be less than * % of such
Third Party Fees and Royalties.
3. Until Licensee shall have fully recouped the $ * Minimum Guaranteed
Advance Royalty, as provided below, Licensor shall pay over to Licensee
Licensor's share of net profits from the exploitation of the Licensed Product in
Japan and in any other territories in which Licensor is entitled to exploit the
* Licensed Products or ancillary merchandising rights thereto under this
Agreement except for territories not available to Licensee by reason of third
party agreements existing on the Effective Date, and all amounts so paid over to
Licensee shall be deemed to constitute additional Recoupable Amounts (as that
term is used below) under this Agreement.
RECOUPMENT.
-----------
Licensee shall be entitled to apply the aggregate amount by which (a) Royalties
applied or accrued under this Agreement exceed (b) * % of the amount of any
Third Party Fees and Royalties payable by Licensor to parties having rights with
respect to the sale of Licensed Products (the "Recoupable Amount") to recoup the
* Dollars Minimum Guaranteed Advance Royalty paid by Licensee to WMS Industries
Inc. pursuant to Section 3 of the Master Atari PC Agreement and the Master Atari
Home Video Agreement (as that term is defined in the Master Atari PC Agreement),
until such Recoupable Amount together with Recoupable Amounts applied or accrued
by Licensee under any Other Atari Home Computer Software Distribution and
License Agreement entered into by Licensee pursuant to the Master Atari PC
Agreement ("Other Home Software Distribution and License Agreements") and under
any Atari Home Video Distribution and License Agreement entered into by Licensee
pursuant to the Master Atari Home Video Agreement (and to the extent applicable
amounts which may be recouped against such Minimum Guaranteed Advance Royalty
pursuant to the GTIS Master Home Video Agreement and the GTIS Master PC
Agreement) equal * Dollars; provided, however, that (a) to the extent that the
aggregate of all Recoupable Amounts applied or accrued under this Agreement and
the Other Atari Home Computer Software Distribution and License Agreements and
under any Atari Home Video Distribution and License
33
<PAGE>
THE INFORMATION BELOW MARKED BY * HAS BEEN
OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.
Agreement entered into pursuant to the Master Atari Home Video 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 on one year after
the Effective Date under the Master Atari PC Agreement and Master Atari Home
Video Agreement.
LIMITATIONS ON FREE AND PROMOTIONAL GOODS; CLOSE-OUTS.
------------------------------------------------------
Licensee shall be permitted to distribute free and promotional goods without the
payment of any Third Party Fees and Royalties or other royalties thereon,
subject to the provisions of Section I above and within the following
territorial and quantity limits:
United States and Canada: * units in the aggregate
United Kingdom,
Germany, Scandanavia,
Benelux, Italy, Spain,
Australia, and Japan: * 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 any Third Party Fees and Royalties.
34
<PAGE>
ANNEX
WMS Industries Inc.
3401 North California Avenue
Chicago, IL 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 INDUSTIRES INC.
By:/s/ NEIL NICASTRO
________________________
Neil Nicastro
Accepted and Agreed To:
GT INTERACTIVE SOFTWARE CORP.
By:/s/ RONALD CHAIMOWITZ
_______________________________
Ronald Chaimowitz