Distribution Agreement - BAM! Entertainment Ltd. and Acclaim Entertainment Ltd.
[Confidential Portions Omitted]
Acclaim Entertainment, Ltd.
Moreau House
112-120 Brompton Road
London SW3 1JJ
July 17, 2003
BAM Entertainment Limited
Upper Borough Court
Borough Wells
Bath BAl 1Rg
RE: ACCLAIM ENTERTAINMENT, INC. -W- BAM ENTERTAINMENT LIMITED
Gentlemen:
Set forth below are the principal terms and conditions agreed by you
and us regarding our exclusive distribution of certain of your videogame titles:
1. GAME TITLES : The term "Game Titles" means the videogames
listed on Schedule "A" attached hereto in the formats listed on Schedule "A"
(collectively the "Game Titles").
2. EXCLUSIVE DISTRIBUTION: We shall act as your sole and
exclusive seller and distributor of the Game Titles throughout the PAL
territories as such territories are defined in the Sony Computer Entertainment
Limited publisher agreement (the "Territory") during the Exploitation Period (as
defined below) through any and all means of distribution, whether now known or
hereafter devised, including, without limitation, through normal retail
channels, through "bundling"sales, through budget sales and compilations,
shareware, or to end-users by direct mail or other direct response marketing,
and over the air, and by telephone, satellite, cable, and by electronic and
digital delivery systems. As the distributor of the Game Titles, we shall
undertake the manufacture, sale, distribution and marketing of the Game Titles,
In that regard we shall use commercially reasonable efforts to market the
Software Products (as defined below) exercised in our good faith business
judgement; provided that we have not heretofore made and do not hereby make any
representation or warranty with respect to the quantity of sales (if any) of
Software Products which we may sell. You recognize and acknowledge that the sale
of Software Products is speculative and agree that our judgment and the judgment
of our subsidiaries and affiliated companies with regard to the sales of any of
the Software Products and with regard to the marketing, promotion, advertising
and exploitation of the Software Products shall be binding and conclusive on
you.
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(a) Notwithstanding the foregoing to the contrary:
(i) You shall not exploit or allow the exploitation or
distribution of any of the Game Titles through OEM type sales for at least 9
months following our release of such Game Title in the Territory.
3. DEVELOPMENT: You shall complete the development of the Game
Titles at your sole expense. The Game Title "Ice 9" shall be subject to our
approval as complying with the approved Game Design Document and Technical
Design Documents for such Game Title. Each Game Title shall be , developed to
operate on the appropriate television formats in the Territory (i.e. PAL, etc.).
Each Game Title shall be localized for the country in which it is being
released, however the extent of the localization for each Game Title shall be
hereafter discussed, provided that each Game Title shall be shall have "in text"
localizations for the following languages: English, French, German, Spanish. You
shall be responsible for obtaining the approval by the applicable hardware
manufacturer of each Game Title, including, without limitation, concept
approval, and, upon request, you shall provide us with documentation thereof. We
shall have the right to approve the PC skus prior to manufacture.
4. EXPLOITATION PERIOD: The Exploitation Period for each Game
Title, other than the Game Titles Samurai Jack, Dexter's Laboratory and Power
Puff Girls, shall be for a period of 3 years from the release of each such Game
Title. The Exploitation Period for the Game Title Samurai Jack, Dexter's
Laboratory and Power Puff Girls shall be as follows: Samurai Jack shall be
through June 30, 2004, Dexter's Laboratory shall be through April 30, 2005 and
Power Puff Girls through November 30, 2005.
5. DELIVERY DATE: The gold master for each completed version of
each Game Title shall be delivered to us at least 4 weeks prior to the release
date for such version of the Game Title as reflected on Schedule "A" attached
hereto (the "Delivery Date"). The terms "Delivery" and "Delivered" shall mean
the physical transfer to us of the fully debugged software for each version of
each Game Title as such software is ultimately approved by the applicable
hardware manufacturer without any need for resubmission due to any bug or bugs
and ready for manufacture. Notwithstanding the foregoing, the PC Game Titles and
the Game Title "Ice 9" are to be approved by us as provided herein. For purposes
of clarification it is understood that if you deliver the software for a Game
Title which software is thereafter not approved by us or the applicable
manufacturer, then such version of such Game Title shall not be deemed
Delivered.
6. MINIMUM GUARANTEE, ADVANCE AND NET MONIES:
(a)Minimum Guarantee: We shall guarantee to pay you a minimum
of [*] the sale and exploitation of the Game Titles. We
shall pay you advances ("Advances") against such Minimum
guarantee as follows:
(i) $[*] on execution of this letter of intent
('LOI");
(ii) $[*] not later than August 8, 2003;
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*Confidential portion omitted and filed separately with the Commission.
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(iii) $[*] not later than August 29, 2003;
(iv) $[*] not later than September 5, 2003;
(v) $[*] within 2 days following the Delivery to
us of the gold masters for all versions of the Wallace & Gromit Game Title;
(vi) $[*] within 7 days following our shipment of
all versions of the Wallace & Gromit Game Title in the United Kingdom;
(vii) $[*] per month commencing October, 2003 and
ending February, 2004; provided that at such point in time as the Minimum
Guarantee as set forth in paragraph 6(a) has been paid through Advances and Net
Monies, the payments pursuant to this paragraph 6(a)(vii) shall cease;
(viii) Within 7 days following the shipment of any
version of a Game Title to us, other than Wallace & Gromit, we will pay to you
as an Advance against the Minimum Guarantee [*] of the estimated Net Receipts
to be payable to you from the initial shipment of the Game Title in the
Territory, less any Advances previously paid to you pursuant to paragraphs
6(a)(i) through (vii). Within 7 days following the shipment of all versions of
the Wallace & Gromit Game Title, we will pay to you as an Advance against the
Minimum Guarantee [*] of the estimated Net Receipts to be payable to you
from the initial shipment of the Game Title in the Territory in excess of
[*] units of such Game Title, less any Advances previously paid to you
pursuant to paragraphs 6(a)(i) through (vii).
(b) Each guarantee payment set forth above, shall be
recoupable on a fully cross-collateralized basis against all Net Monies payable
to you hereunder.
(c) Notwithstanding anything contained herein to the
contrary:
(i) In the event that a version of a Game Title is
canceled, then the Minimum Guarantee shall be reduced by the guarantee payment
opposite such version of such Game Title on Schedule "A" and the guarantee
payment for such canceled version of such Game Title, if paid, shall be
recoupable from subsequent payments of the Minimum Guarantee or returned to us
at our election.
(ii) In the event that the concept for a version of a
Game Title is not approved by the applicable hardware manufacturer, then we
shall have right to terminate the agreement with respect to such version of such
Game Title and reduce the Minimum Guarantee by the amount set forth on Schedule
"A" opposite such version of such Game Title as the guarantee payment for such
version of such Game Title, provided if at such point we have, after taking into
consideration such reduction, paid you the full Guarantee, you shall return to
us any overpayment for such terminated Game Title.
(iii) In the event that a Game Title, or version
thereof, is not delivered to us by the Delivery Date, then we shall have the
right to terminate such Game Title, or version thereof, at our election, which
it may exercise at any time following your failure to timely Deliver such Game
Title or version thereof. If we terminate the Game Title or version thereof,
then the Minimum Guarantee shall be reduced by the amount set forth on Schedule
"A" opposite such version of such Game Title (or for all
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*Confidential portion omitted and filed separately with the Commission.
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versions if we cancel the Game Title) as the guarantee payment for such version
of such Game Title, provided if at such point we have, after taking into
consideration such reduction, paid you the full Guarantee, you shall return to
us any overpayment for such terminated Game Title.
(iv) In the event that you fail to Deliver any
version of any Game Title to us by the Delivery Date therefor, then the
guarantee payment opposite such version of such Game Title on Schedule "A"
otherwise payable to you shall be reduced by [*] percent for each thirty
day period (or portion thereof) thereafter in which you are late in Delivery to
us of such version of such Game Title or we may terminate our obligation to
release such version of such Game Title and the Minimum Guarantee shall be
reduced by the amount set forth on Schedule A opposite such version of the Game
Title as the guarantee payment for such version of such Game Title. All such
amounts as described above may be deducted from payments to be made to you
hereunder. Notwithstanding the foregoing to the contrary, we shall have no right
to reduce the guarantee on any Game Title as provided in this paragraph 6 (c)
(iv), if at the time of such reduction the Minimum Guarantee, as provided in
paragraph 6(a), has already been paid to you.
(d) (i) On sales of Software Products we shall pay you
the following:
(A) Console: [*]% of Net Receipts.
(B) Handheld cartridge: [*]% of Net Receipts.
(C) PC: [*]% of Net Receipts.
(ii) We shall hereafter mutually agree a royalty with
respect to our exploitation of a Game Title by electronic distribution.
(iv) Notwithstanding any of the foregoing to the
contrary:
(A) you shall be paid [*]% of Net Receipts
on Software Products sold in the form of Console or Handheld products for less
than an amount equal to the cost of goods, plus royalties to the hardware
vendors and freight and handling charges plus [*]% of such amount but more than
an amount equal to the cost of goods plus freight and handling charges plus
royalties to the hardware vendor.
(B) you shall be paid [*]% of Net Receipts
on Software Products sold in the form of CD Roms for PCs for less than an amount
equal to the cost of goods and freight and handling charges plus [*]% of such
amount but more than an amount equal to the cost of goods plus freight and
handling charges.
(iv) Notwithstanding any of the foregoing to the
contrary, no monies shall be payable to you on Software Products which are:
(A) furnished on a so-called "no charge
basis" or sold as "cut-outs" or
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*Confidential portion omitted and filed separately with the Commission.
<PAGE>
"scrap";
(B) sold in the form of Console or Handheld
products for less than our cost of goods (manufacture and royalty payments to
the hardware vendors) plus freight and handling charges.
(C) sold in the form of PC products for less
than our cost of goods plus freight and handling costs.
7. ACCOUNTINGS: We shall send statements as to Net Monies payable
to you hereunder to you within sixty (60) days following the end of each
quarterly calendar period for such preceding quarterly period together with
payment of accrued Net Monies, if any, earned by you hereunder during such
quarterly period less all advances and/or guarantee payments previously made to
you hereunder. We shall have the right to retain, as a reserve against charges,
credits, or returns, such portion of accrued Net Monies as shall be reasonable
in our best business judgment, provided that such reserve shall not exceed
[*] percent [*] of such accrued Net Monies and, further, that each such
reserve shall be liquidated within four (4) accounting periods after such
reserve is first established.
8. MARKETING: You and we shall coordinate marketing and public
relations relating to the Game Titles. You shall assist us in relationships with
your licensors. You will communicate all co-op marketing activities relating to
the Games Titles to us. You shall provide us with details with respect to
marketing support provided with respect to the Game Titles by the applicable
hardware manufacturers, and pass on to us all financial marketing commitments
with respect to the Game Titles paid to you by such hardware manufacturers.
9. CURRENT SALES: You will communicate all current sales
activities relating to the Game Titles to us.
10. Not used.
11. ADDITIONAL VIDEOGAME TITLES: You and we may mutually agree to
add additional videogame titles to the agreement without increasing the Minimum
Guarantee.
12. SUBSTITUTION OF X-BOX DEVELOPMENT FOR GAMECUBE: You and we
shall discuss the cessation of the development of GameCube versions of Game
Titles and the substitution of X-Box versions therefor.
13. CURE CLUASE: Neither party shall be deemed to be in breach of
any of its obligations hereunder unless and until it shall have been given
specific written notice (delivered in the manner permitted pursuant to Paragraph
14 below) of the nature of such breach and it shall have failed to cure such
breach within thirty (30) days except 5 days with respect to money breaches)
after receipt of such written notice.
14. NOTICES: All notices, statements and/or payments to be given
to the parties hereunder shall be addressed to the parties at the addresses set
forth on the first page hereof or at such other address as the parties shall
designate in writing from time to time. All notices shall be in writing and
shall either be served by personal delivery (to an officer of each company),
mail, or facsimile (if confirmed, by mail or
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personal delivery of the hard copy), all charges prepaid. Except as otherwise
provided herein, such notices shall be deemed given when personally delivered,
all charges prepaid, or on the date five (5) days following the date of mailing,
except that notices of change of address shall be effective only after the
actual receipt thereof. Copies of all notices to Acclaim should be sent to
Acclaim at its address set forth above, attention: Office of the President, and
to Fischbach, Perlstein & Lieberman, LLP, 1875 Century Park East, Suite 850, Los
Angeles, CA 90067, Attention: Bernard J. Fischbach.
16. PARENT GUARANTEES: It is a condition of this agreement that
Acclaim Entertainment, Inc. execute a guarantee in favor of BAM Entertainment
Limited in the form attached hereto as Exhibit A-l and that BAM Entertainment,
Inc. execute a guarantee in favor of Acclaim Entertainment, Ltd in the form
attached hereto as Exhibit A-2.
15. DEFINITIONS:
(a) "Net Monies" shall mean monies payable to you, other than
Advances, in connection with our sale and exploitation of Software Products.
(b) "Net Receipts" shall mean all monies actually received by
us from its customers on sales of Software Products embodying the Game Titles
less (i) any and all excise, sales, value added or comparable or similar taxes;
and (ii) freight and similar third party handling charges paid or payable by us
(but no more $1.50 per unit); (iii) returns, discounts, allowances or credits
(inclusive of discounts and allowances);.
(c)The term "Software" means the fully-debugged computer
software embodying a Game Title containing full and complete computer code,
including source code, assembly code, object code and all data files and other
files as are necessary for such computer software to achieve its functional
purpose whereby data and visual images, with or without sound, can be
manipulated, communicated, reproduced and/or perceived directly or with the aid
of a machine or device, whether now known or hereafter developed.
(d) The term "Software Device" means any device, whether now
known or unknown, on or by which computer software and its associated visual
images, with or without sound, may be embodied or recorded for later operation,
manipulation or communication to users, including without limitation
semiconductor devices, magnetic discs (whether floppy or otherwise) of any size,
tapes, cartridges, compact discs, boards, cassettes, or other prerecorded
devices whatsoever existing now or later developed by which a computer or video
game can be perceived, reproduced or, otherwise communicated directly or with
the aid of a machine or device.
(e) The term "Software Product(s)" means Software Devices
embodying the Software.
END OF PAGE
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The balance of the agreement would be on our standard form distribution
agreement, embodying the above terms and conditions as well as customary
provisions regarding accounting and audit matters, approvals, warranties and
representations, indemnification, etc., subject to such changes as the parties
may agree after good faith negotiation. The parties agree that they will use
their commercially reasonable efforts to conclude the formal distribution
agreement by no later than August 8, 2003 but until such date this agreement
shall be deemed a binding agreement provided that that this agreement shall be
deemed to include normal and customary accounting provisions, warranties and
representations, indemnification provisions and other usual and customary terms
contained in a distribution agreement.
Sincerely,
Acclaim Entertainment, Limited
By /s/ Simon Hosken
--------------------------
Agreed and Accepted
BAM Entertainment Limited
By /s/ Anthony Williams
-----------------------
<PAGE>
SCHEDULE "A"
<TABLE>
<CAPTION>
Title Format Release Date Guarantee
<S> <C> <C> <C>
The Powerpuff Girls: Relish GC 26th September $ [*]
Rampage 2003
Ed, Edd n Eddy: Jawbreakers! GBA 26th September $ [*]
2003
Ice Nine GBA 12th March 2004 $ [*]
Ice Nine Xbox 12th March 2004 $ [*]
Ice Nine PS2 12th March 2004 $ [*]
Wallace & Gromit in Project Zoo PS2 26th September $ [*]
2003
Wallace & Gromit in Project Zoo PC 17th October 2003 $ [*]
Wallace & Gromit in Project Zoo Xbox 26th September $ [*]
2003
Wallace & Gromit in Project Zoo GC 26th September $ [*]
2003
Carmen San Diego PS2 28th November 2003 $ [*]
Carmen San Diego GC 28th November 2003 $ [*]
Samurai Jack GBA 26th September $ [*]
2003
Dexter's Laboratory PS2 28th November 2003 $ [*]
Dexter's Laboratory GC 28th November 2003 $ [*]
Sound of Thunder PS2 26th March 2004 $ [*]
Sound of Thunder Xbox 26th March 2004 $ [*]
Sound of Thunder GBA 26th March 2004 $ [*]
Total $ [*]
</TABLE>
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*Confidential portion omitted and filed separately with the Commission.