PlayStation(R)2 CD-ROM/DVD-ROM Licensed Publisher Agreement - Sony Computer Entertainment America Inc. and Bay Area Multimedia Inc.
SONY COMPUTER ENTERTAINMENT AMERICA INC.
[PLAYSTATION(R) LOGO]
PLAYSTATION(R)2
CD-ROM/DVD-ROM
LICENSED PUBLISHER AGREEMENT
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TABLE OF CONTENTS
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1. DEFINITION OF TERMS............................................... 1
2. LICENSE GRANT..................................................... 3
3. DEVELOPMENT OF LICENSED PRODUCTS.................................. 3
4. LIMITATIONS ON LICENSES; RESERVATION OF RIGHTS.................... 4
5. QUALITY STANDARDS FOR THE LICENSED PRODUCTS....................... 5
6. MANUFACTURE OF THE LICENSED PRODUCTS.............................. 7
7. MARKETING AND DISTRIBUTION........................................ 10
8. ROYALTIES......................................................... 12
9. REPRESENTATIONS AND WARRANTIES.................................... 15
10. INDEMNITIES; LIMITED LIABILITY.................................... 16
11. SCEA INTELLECTUAL PROPERTY RIGHTS................................. 17
12. INFRINGEMENT OF SCEA INTELLECTUAL PROPERTY RIGHTS
BY THIRD PARTIES.................................................. 18
13. CONFIDENTIALITY................................................... 18
14. TERM AND TERMINATION.............................................. 20
15. EFFECT OF EXPIRATION OR TERMINATION............................... 22
16. MISCELLANEOUS PROVISIONS.......................................... 23
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PLAYSTATION(R)2
CD-ROM/DVD-ROM
LICENSED PUBLISHER AGREEMENT
This LICENSED PUBLISHER AGREEMENT (the "Agreement" or "LPA"), entered into as of
the 1st day of April, 2000 (the "Effective Date"), by and between SONY COMPUTER
ENTERTAINMENT AMERICA INC., with offices at 919 E. Hillsdale Boulevard, Foster
City, CA 94404 (hereinafter "SCEA"), and Bag Area Multimedia, with offices at
333 West Santa Clara St. Suite 930 San Jose, CA 95113 (hereinafter "Publisher").
WHEREAS, SCEA, its parent company, Sony Computer Entertainment Inc., and/or
certain of their affiliates and companies within the group of companies of which
any of them form a part (collectively referred to herein as "Sony") are
designing and developing, and licensing core components of, a computer
entertainment system known as the PlayStation(R)2 computer entertainment system
(hereinafter referred to as the "System").
WHEREAS, SCEA has the right to grant licenses to certain SCEA Intellectual
Property Rights (as defined below) in connection with the System.
WHEREAS, Publisher desired to be granted a non-exclusive license to publish,
develop, have manufactured, market, distribute and sell Licensed Products (as
defined below) pursuant to the terms and conditions set forth in this Agreement;
and SCEA is willing, on the terms and subject to the conditions of this
Agreement, to grant Publisher such a license.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Publisher and SCEA
hereby agree as follows:
1. DEFINITION OF TERMS.
1.1 "Advertising Materials" means any advertising, marketing,
merchandising, promotional, public relations (including press releases) and
display materials relating to or concerning Licensed Products or proposed
Licensed Products, or any other advertising, merchandising, promotional, public
relations (including press releases) and display materials depicting any of the
Licensed Trademarks. For purposes of this Agreement, Advertising Materials
include any advertisements in which the System is referred to or used in any
way, including but not limited to giving the System away as prizes in contests
or sweepstakes and the public display of the System in product placement
opportunities.
1.2 "Affiliate of SCEA" means, as applicable, either Sony Computer
Entertainment Inc. in Japan, Sony Computer Entertainment Europe Ltd. in the
United Kingdom or such other Sony Computer Entertainment entity as may be
established from time to time.
1.3 "Designated Manufacturing Facility" means a manufacturing facility or
facilities which is designated by SCEA in its sole discretion to manufacture
Licensed Products and/or their component parts, which may include manufacturing
facilities owned and operated by affiliated companies of SCEA.
1.4 "Development System Agreement" means an agreement entered into between
SCEA and a Licensed Publisher, Licensed Developer or other licensee for the sale
or license of Development Tools.
1.5 "Development Tools" means the PlayStation 2 development tools sold or
licensed by SCEA to a Licensed Publisher or Licensed Developer for use in the
development of Executable Software for the System.
1.6 "Executable Software" means software which includes Product Software
and any software provided directly or indirectly by SCEA or an Affiliate of SCEA
designed for execution exclusively on the System and which has the ability to
communicate with the software resident in the System.
1.7 "Fiscal Year" means a year measured from April 1 to March 31.
1.8 "Generic Line" means the generic legal attribution line used on SCEA
marketing or other materials, which shall be or be substantially similar to the
following: "Product copyright and trademarks are the property of the respective
publisher or their licensors".
1.9 "Guidelines" shall mean any guidelines of SCEA or an Affiliate of SCEA
with respect to SCEA Intellectual Property Rights, which may be set forth in the
SourceBook 2 or in other documentation provided by SCEA or an Affiliate of SCEA
to Publisher.
1.10 "Legal Copy" means any legal or contractual information required to be
used in connection with a Licensed Product or Product Information, including but
not limited to copyright and trademark attributions, contractual credits and
developer or distribution credits.
1.11 "Level 1 Rebate" shall have the meaning set forth in Section 8.4
hereto.
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1.12 "Level 2 Rebate" shall have the meaning set forth in Section 8.4
hereto.
1.13 "Licensed Developer" means any developer that has signed a valid and
then current Licensed Developer Agreement.
1.14 "Licensed Developer Agreement" or "LDA" means a valid and current
license agreement for the development of Licensed Products for the System,
fully executed between a Licensed Developer and SCEA or an Affiliate of SCEA.
1.15 "Licensed Products" means the Executable Software (which may be
combined with Executable Software of other Licensed Publishers or Licensed
Developers), which shall consist of one product developed for the System or
for the original PlayStation game console per Unit, in final form developed
exclusively for the System. Publisher shall have no right to package or bundle
more than one product developed for the System or for the original PlayStation
game console in a single Unit unless separately agreed with SCEA.
1.16 "Licensed Publisher" means any publisher that has signed a valid and
then current Licensed Publisher Agreement.
1.17 "Licensed Publisher Agreement" or "LPA" means a valid and current
license agreement for the publication, development, manufacture, marketing,
distribution and sale of Licensed Products for the System, fully executed
between a Licensed Publisher and SCEA or an Affiliate of SCEA.
1.18 "Licensed Territory" means the United States (including its
possessions and territories) and Canada. The Licensed Territory may be modified
and/or supplemented by SCEA from time to time pursuant to Section 4.4 below.
1.19 "Licensed Trademarks" means the trademarks, service marks, trade
dress, logos and other icons or indicia designed by SCEA in the SourceBook 2 or
other Guidelines for use on or in connection with Licensed Products. Nothing
contained in this Agreement shall in any way grant Publisher the right to use
the trademark "Sony" in any manner. SCEA may amend such Licensed Trademarks
from time to time in the SourceBook 2 or other Guidelines or upon written
notice to Publisher.
1.20 "Manufacturing Specifications" means specifications setting forth
terms relating to the manufacture and assembly of PlayStation 2 Format Discs,
Packaging, Printed Materials and each of their component parts, which shall be
set forth in the SourceBook 2 or other documentation provided by SCEA or a
Designated Manufacturing Facility to Publisher and which may be amended from
time to time upon reasonable notice to Publisher.
1.21 "Master Disc" means a recordable CD-ROM or DVD-ROM disc in the form
requested by SCEA containing final pre-production Executable Software for a
Licensed Product.
1.22 "Packaging" means, with respect to each Licensed Product, the carton,
containers, packaging, edge labels and other proprietary labels, trade dress and
wrapping materials, including any jewel case (or other CD-ROM or DVD-ROM
container) or parts thereof, but excluding Printed Materials and PlayStation 2
Format Discs.
1.23 "PlayStation 2 Format Discs" means the uniquely marked or colored
CD-ROM or DVD-ROM discs formatted for use with the System which, for purposes
of this Agreement, are manufactured on behalf of Publisher and contain Licensed
Products of SCEA Demo Discs.
1.24 "Printed Materials means all artwork and mechanicals set forth on the
disc label of the PlayStation Disc relating to any of the Licensed Products and
on or inside any Packaging for the Licensed Product, and all instructional
manuals, liners, inserts, trade dress and other user information to be inserted
into the Packaging.
1.25 "Product Information" means any information owned or licensed by
Publisher relating in any way to Licensed Products, including but not limited
to demos, videos, hints and tips, artwork, depictions of Licensed Product cover
art and videotaped interviews.
1.26 "Product Proposal" shall have the meaning set forth in Section 5.2.1
hereto.
1.27 "Product Software" means any software including audio and video
material developed by a Licensed Publisher or Licensed Developer, which,
either by itself or combined with Product Software of other licensees, when
integrated with software provided by SCEA or an Affiliate of SCEA, creates
Executable Software. It is understood that Product Software contains no
proprietary information of Sony or any other rights of SCEA.
1.28 "Publisher Intellectual Property Rights" means those intellectual
property rights, including but not limited to patents and other patent rights,
copyrights, trademarks, service marks, trade names, trade dress, mask work
rights, utility model rights, trade secret rights, technical information,
know-how, and the equivalents of the foregoing under the laws of any
jurisdiction, and all other proprietary or intellectual property rights
throughout the universe, which pertain to Product Software, Product
Information, Printed Materials, Advertising Materials or other rights of
Publisher required or necessary under this Agreement.
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1.29 "Purchase Order" means a written purchase order processed in
accordance with the terms of Section 6.2.2 hereto, the Manufacturing
Specifications or other terms provided separately by SCEA or a Designated
Manufacturing Facility to Publisher.
1.30 "SCEA Demo Disc" means any demonstration disc developed and
distributed by SCEA.
1.31 "SCEA Established Third Party Demo Disc Programs" means (i) any
consumer or trade demonstration disc program specified in the SourceBook 2, and
(ii) any other third party demo disc program established by SCEA for Licensed
Publishers.
1.32 "SCEA" Intellectual Property Rights" means those intellectual
property rights, including but not limited to patents and other patent rights,
copyrights, trademarks, service marks, trade names, trade dress, mask work
rights, utility model rights, trade secret rights, technical information,
know-how, and the equivalents of the foregoing under the laws of any
jurisdiction, and all other proprietary or intellectual property rights
throughout the universe, which are required to ensure compatibility with the
System or which pertain to the Licensed Trademarks.
1.33 "SCEA Product Code" means the product identification number assigned
to each Licensed Product, which shall consist of separate product
identification numbers for multiple disc sets (i.e., SLUS-xxxxx). This SCEA
Product Code is used on the Packaging and PlayStation Disc relating to each
Licensed Product, as well as on most communications between SCEA and Publisher
as a mode of identifying the Licensed Product other than by title.
1.34 "Sony Materials" means any data, object code, source code, firmware,
documentation (or any part(s) of any of the foregoing), related to the System,
selected in the sole judgment of SCEA, which are provided or supplied by SCEA
or an Affiliate of SCEA to Publisher or any Licensed Developer and/or other
Licensed Publisher. For purposes of this Agreement, Sony Materials shall not
include any hardware portions of the Development Tools, but shall include
firmware in such hardware.
1.35 "SourceBook 2" means the PlayStation 2 SourceBook (or any other
reference guide containing information similar to the SourceBook 2 but
designated with a different name) prepared by SCEA, which is provided
separately to Publisher. The Source Book2 is designed to serve as the first
point of reference by Publisher in every phase of the development, approval,
manufacture and marketing of Licensed Products.
1.36 "Standard Rebate" shall mean the rebate offered by SCEA on titles of
Licensed Products that achieve specified sales volumes as set forth in Section
8.4 of this Agreement.
1.37 "Third Party Demo Disc" means any demo disc developed and marketed by
a Licensed Publisher, which complies with the terms of an SCEA Established Third
Party Demo Disc Program.
1.38 "Unit" means an individual copy of a Licensed Product title regardless
of the number of PlayStation2 Format Discs constituting such Licensed Product
title.
1.39 "Wholesale Price" or "WSP" shall mean the greater of (i) the first
published price of the Licensed Product offered to retailers by Publisher as
evidenced by a sell sheet or price list issued by Publisher, or (ii) the actual
price paid by retailers upon the first commercial shipment of a Licensed Product
without offsets, rebates or deduction from invoices of any kind.
2. LICENSE.
2.1 LICENSE GRANT. SCEA grants to Publisher, and Publisher hereby accepts,
for the term of this Agreement, within the Licensed Territory, under SCEA
Intellectual Property Rights owned, controlled or licensed by SCEA, a
non-exclusive, non-transferable license, without the right to sublicense (except
as specifically provided herein), to publish Licensed Products using Sony
Materials, which right shall be limited to the following rights and other rights
set forth in, and in accordance with the terms of, this LPA: (i) to produce or
develop Licensed Products and to enter into agreements with Licensed Developers
and other third parties to develop Licensed Products; (ii) to have such Licensed
Products manufactured; (iii) to market, distribute and sell such Licensed
Products and to authorize others to do so; (iv) to use the Licensed Trademarks
strictly and only in connection with the development, manufacturing, marketing,
packaging, advertising and promotion of the Licensed Products, and subject to
SCEA's right of approval as provided herein; and (v) to sublicense to end users
the right to use the Licensed Products for noncommercial purposes in conjunction
with the System only, and not with other devices or for public performance.
2.2 SEPARATE PLAYSTATION AGREEMENTS. Unless specifically set forth in this
Agreement, all terms used herein are specific to the System and the third party
licensing program related thereto and not to the original PlayStation game
console or third party licensing program related thereto. Licenses relating to
the original PlayStation game console are subject to separate agreements with
SCEA, and any license of rights to Publisher under such separate agreements
shall not confer on Publisher any rights under the System and vice versa.
3. DEVELOPMENT OF LICENSED PRODUCTS.
3.1 RIGHT TO DEVELOP. This LPA grants Publisher the right to develop
Licensed Products. It also gives Publisher the right to purchase and/or license
Development
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Tools, as is appropriate, from SCEA or its designated agent, pursuant to a
separate Development System Agreement with SCEA, to assist in such development.
In developing Executable Software (or portions thereof), Publisher and its
agents shall fully comply in all respects with any and all technical
specifications which may from time to time be issued by SCEA. In the event that
Publisher uses third party tools to develop Executable Software, Publisher
shall be responsible for ensuring that it has obtained appropriate licenses for
such use.
3.2 DEVELOPMENT BY THIRD PARTIES. Except as otherwise set forth herein,
Publisher shall not provide Sony Materials or SCEA's Confidential Information
to any third party. Publisher shall be responsible for determining that third
parties meet the criteria set forth herein. Publisher may contract with a third
party for development of Licensed Products, provided that such third party is:
(i) a Licensed Publisher, (ii) a Licensed Developer, or (iii) an
SCEA-authorized subcontractor in compliance with the provisions of Section
16.6. Publisher shall notify SCEA in writing of the identity of any such third
party within thirty (30) days of entering into an agreement or other
arrangement with the third party.
4. LIMITATIONS ON LICENSES; RESERVATION OF RIGHTS.
4.1 REVERSE ENGINEERING PROHIBITED. Other than as expressly permitted by
SCEA in writing, Publisher shall not directly or indirectly disassemble,
decrypt, electronically scan, peel semiconductor components, decompile, or
otherwise reverse engineer in any manner or attempt to reverse engineer or
derive source code from, all or any portion of the Sony Materials, or permit,
assist or encourage any third party to do so. Other than as expressly permitted
by SCEA in writing, Publisher shall not use, modify, reproduce, sublicense,
distribute, create derivative works from, or otherwise provide to third
parties, the Sony Materials, in whole or in part, other than as expressly
permitted by SCEA. SCEA shall permit Publisher to study the performance, design
and operation of the Development Tools solely for the limited purposes of
developing and testing Publisher's software applications, or to build tools to
assist Publisher with the development and testing of software applications for
Licensed Products. Any tools developed or derived by Publisher resulting from
the study of the performance, design or operation of the Development Tools
shall be considered as derivative products of the Sony Materials for copyright
purposes, but may be treated as trade secrets of Publisher. In no event shall
Publisher patent any tools created, developed or derived from Sony Materials.
Publisher shall not make available to any third party any tools developed or
derived from the study of the Development Tools without the express written
permission of SCEA. Use of such tools shall be strictly limited to the creation
or testing of Licensed Products and any other use, direct or indirect of such
tools is strictly prohibited. Publisher shall be required in all cases to pay
royalties in accordance with Section 8 hereto to SCEA on any of Publisher's
products utilizing any Sony Materials or derivative works made therefrom.
Moreover, Publisher shall bear all risks arising from incompatibility of its
Licensed Product and the System resulting from use of Publisher-created tools.
The burden of proof under this Section shall be on Publisher, and SCEA reserves
the right to require Publisher to furnish evidence satisfactory to SCEA that
Publisher has complied with this Section.
4.2 RESERVATION OF SCEA'S RIGHTS.
4.2.1 LIMITATION OF RIGHTS TO LICENSES GRANTED. The licenses
granted in this Agreement extend only to the publication, development,
manufacture, marketing, distribution and sale of Licensed Products for use on
the System, in such formats as may be designated by SCEA. Without limiting the
generality of the foregoing and except as otherwise provided herein, Publisher
shall not distribute or transmit the Executable Software or the Licensed
Products via electronic means or any other means now known or hereafter
devised, including without limitation, via wireless, cable, fiber optic means,
telephone lines, microwave and/or radio waves, or over a network of computers
or other devices. Notwithstanding this limitation, Publisher may electronically
transmit Executable Software from site to site, or from machine to machine over
a computer network, for the sole purpose of facilitating development; provided
that no right of retransmission shall attach to any such transmission, and
provided further that Publisher shall use reasonable security measures
customary within the high technology industry to reduce the risk of
unauthorized interception or retransmission of such transmissions. This
Agreement does not grant any right or license, under any SCEA Intellectual
Property Rights or otherwise, except as expressly provided herein, and no other
right or license is to be implied by or inferred from any provision of this
Agreement or the conduct of the parties hereunder.
4.2.2 OTHER USE OF SONY MATERIALS AND SCEA INTELLECTUAL PROPERTY
RIGHTS. Publisher shall not make use of any Sony Materials or any SCEA
Intellectual Property Rights (or any portion thereof) except as authorized by
and in compliance with the provisions of this Agreement. Publisher shall not
use the Executable Software, Sony Materials or SCEA's Confidential Information
in connection with the development of any software for any emulator or other
computer hardware or software system. No right, license or privilege has been
granted to Publisher hereunder concerning the development of any collateral
product or other use or purpose of any kind whatsoever which displays or
depicts any of the Licensed Trademarks. The rights set forth in Section 2.1(v)
hereto are limited to the right to sublicense such rights to end users for
non-commercial use; any public performance relating to the Licensed Product or
the System is prohibited unless expressly authorized in writing by SCEA.
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4.3 RESERVATION OF PUBLISHER'S RIGHTS. Separate and apart from Sony
Materials and other rights licensed to Publisher by SCEA hereunder, as between
Publisher and SCEA, Publisher retains all rights, title and interest in and to
the Product Software, and the Product Proposals and Product Information related
thereto, including without limitation Publisher Intellectual Property Rights
therein, as well as Publisher rights in any source code and other underlying
material such as artwork and music related thereto and any names used as titles
for Licensed Products and other trademarks used by Publisher. Nothing in this
Agreement shall be construed to restrict the right of Publisher to develop,
distribute or transmit products incorporating the Product Software and such
underlying material (separate and apart from the Sony Materials) for any
hardware platform or service other than the System, or to use Printed Materials
or Advertising Materials approved by SCEA as provided herein (provided that
such Printed Materials and/or Advertising Materials do not contain any Licensed
Trademarks) as Publisher determines for such other platforms. SCEA shall not do
or cause to be done any act or thing in any way impairing or tending to impair
or dilute any of Publisher's rights, title or interests hereunder.
Notwithstanding the foregoing, Publisher shall not distribute or transmit
Product Software which is intended to be used with the System via electronic
means or any other means now known or hereafter devised, including without
limitation, via wireless, cable, fiber optic means, telephone lines, microwave
and/or radio waves, or other a network of computers or other devices, except as
otherwise permitted in Section 4.2.1 hereto.
4.4 ADDITIONS TO AND DELETIONS FROM LICENSED TERRITORY. SCEA may, from
time to time, add one or more countries to the Licensed Territory by providing
written notice of such addition to Publisher. SCEA shall also have the right to
delete, and intends to delete any countries from the Licensed Territory if, in
SCEA's reasonable judgment, the laws or enforcement of such laws in such
countries do not protect SCEA Intellectual Property Rights. In the event a
country is deleted from the Licensed Territory, SCEA shall deliver to Publisher
a notice stating the number of days within which Publisher shall cease
distributing Licensed Products, and retrieve any Development Tools located, in
any such deleted country. Publisher shall cease distributing Licensed Products,
and retrieve any Development Tools, directly or through subcontractors, by the
end of the period stated in such notice.
4.5 SOURCEBOOK 2 REQUIREMENT. Publisher shall be required to comply with
all the provisions of the SourceBook 2, including without limitation the
Technical Requirements Checklist therein, when published, or within a
commercially reasonable time following its publication to incorporate such
provisions, as if such provisions were set forth in this Agreement.
5. QUALITY STANDARDS FOR THE LICENSED PRODUCTS.
5.1 QUALITY ASSURANCE GENERALLY. The Licensed Products (and all portions
thereof) and Publisher's use of any Licensed Trademarks shall be subject to
SCEA's prior written approval, which shall not be unreasonably withheld or
delayed and which shall be within SCEA's sole discretion as to acceptable
standards of quality. SCEA shall have the right at any stage of the development
of a Licensed Product to review such Licensed Product to ensure that it meets
SCEA's quality assurance standards. All Licensed Products will be developed to
substantially utilize the particular capabilities of the System's proprietary
hardware, software and graphics. No approval by SCEA of any element or stage of
development of any Licensed Product shall be deemed an approval of any other
element or stage of such Licensed Product, nor shall any such approval be
deemed to constitute a waiver of any of SCEA's rights under this Agreement. In
addition, SCEA's approval of any element or any stage of development of any
Licensed Product shall not release Publisher from any of its representations
and warranties in Section 9.2 hereunder.
5.2 PRODUCT PROPOSALS.
5.2.1 SUBMISSION OF PRODUCT PROPOSAL. Publisher shall submit to SCEA
for SCEA's written approval or disapproval, which shall not be unreasonably
withheld or delayed, a written proposal (the "Product Proposal"). Such Product
Proposal must contain all information specified in the SourceBook 2, as well as
any additional information that SCEA may deem to be useful in evaluating the
proposed Licensed Product.
5.2.2 APPROVAL OF PRODUCT PROPOSAL. After SCEA's review of Publisher's
Product Proposal, Publisher will receive written notice from SCEA of the status
of the Product Proposal, which may range from "Approved" to "Not Approved." Such
conditions shall have the meanings ascribed to them in the SourceBook 2, and
may be changed from time to time by SCEA. If a Product Proposal is "Not
Approved", then neither Publisher nor any other Licensed Developer or Licensed
Publisher may re-submit such Product Proposal without significant, substantive
revisions. SCEA shall have no obligation to approve any Product Proposal
submitted by Publisher. Any development conducted by or at the direction of
Publisher and any legal commitment relating to development work shall be at
Publisher's own financial and commercial risk. Publisher shall not construe
approval of a Product Proposal as a commitment by SCEA to grant final approval
to such Licensed Product. Nothing herein shall restrict SCEA from commercially
exploiting any coincidentally similar concept(s) and/or product(s), which have
been independently developed by SCEA, an Affiliate of SCEA or any third party.
5.2.3 CHANGES TO PRODUCT PROPOSAL. Publisher shall notify SCEA promptly in
writing in the event of any material proposed change in any portion of
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the Product Proposal. SCEA's approval of a Product Proposal shall not obligate
Publisher to continue with development or production of the proposed Licensed
Product, provided that Publisher must immediately notify SCEA in writing if it
discontinues, cancels or otherwise delays past the original scheduled delivery
date the development of any proposed Licensed Product. In the event that
Publisher licenses a proposed Licensed Product from another Licensed Publisher
or a Licensed Developer, it shall immediately notify SCEA of such change and
must re-submit such Licensed Product to SCEA for approval in accordance with the
provisions of Section 5.2.1 above.
5.3 WORK-IN-PROGRESS.
5.3.1 SUBMISSION AND REVIEW OF WORK-IN-PROGRESS. SCEA shall require
Publisher to submit to SCEA work-in-progress on Licensed Products at certain
intervals throughout their development and, upon written notice to Publisher, at
any time during the development process. Upon approval of the Product Proposal,
Publisher must, within the time frame indicated in the approval letter,
communicate with SCEA and mutually agree on a framework for the review of such
Licensed Product throughout the development process ("Review Process"). Once the
Review Process has begun, Publisher shall be responsible for submitting
work-in-progress to SCEA in accordance with such Review Process. FAILURE TO
SUBMIT WORK-IN-PROGRESS IN ACCORDANCE WITH ANY STAGE OF THE REVIEW PROCESS MAY,
AT SCEA'S DISCRETION, RESULT IN REVOCATION OF APPROVAL OF SUCH PRODUCT PROPOSAL.
5.3.2 APPROVAL OF WORK IN PROGRESS. SCEA shall have the right to
approve, reject or require additional information with respect to each stage of
the Review Process. SCEA shall specify in writing the reasons for any such
rejection or request for additional information and shall state what corrections
and/or improvements are necessary. If any stage of the Review Process is not
provided to SCEA or is not successfully met after a reasonable cure period
agreed to between SCEA and Publisher, SCEA shall have the right to revoke the
approval of Publisher's Product Proposal.
5.3.3 CANCELLATION OR DELAY; CONDITIONS OF APPROVAL. Licensed
Products which are canceled by Publisher or are late in meeting the final
Executable Software delivery date by more than three (3) months (without
agreeing with SCEA on a modified final delivery date) shall be subject to the
termination provisions set forth in Section 14.3 hereto. In addition, failure
to make changes required by SCEA to the Licensed Product at any stage of the
Review Process, or making material changes to the Licensed Product without
SCEA's approval, may subject Publisher to the termination provisions set forth
in Section 14.3 hereto.
5.4 APPROVAL OF EXECUTABLE SOFTWARE. On or before the date specified in
the Product Proposal or as determined by SCEA pursuant to the Review Process,
Publisher shall deliver to SCEA for its inspection and evaluation, a final
version of the Executable Software for the proposed Licensed Product. SCEA will
evaluate such Executable Software and notify Publisher in writing of its
approval or disapproval, which shall not be unreasonably withheld or delayed.
If such Executable Software is disapproved, SCEA shall specify in writing the
reasons for such disapproval and state what corrections and improvements are
necessary. After making the necessary corrections and improvements, Publisher
shall submit a new version of such Executable Software for SCEA's approval.
SCEA shall have the right to disapprove Executable Software if it fails to
comply with SCEA's corrections or improvements or one or more conditions as set
forth in the SourceBook 2 with no obligation to review all elements of any
version of Executable Software. All final versions of Executable Software shall
be submitted in the format prescribed by SCEA and shall include such number of
Master Discs as SCEA may require from time to time. Publisher hereby (i)
warrants that all final versions of Executable Software are fully tested; (ii)
shall use its best efforts to ensure such Executable Software is fully debugged
prior to submission to SCEA; and (iii) warrants that all versions of Executable
Software comply or will comply with standards set forth in the SourceBook 2 or
other documentation provided by SCEA to Publisher. In addition, prior to
manufacture of Executable Software, Publisher must sign an accountability form
stating that (x) Publisher approves the release of such Executable Software for
manufacture in its current form and (y) Publisher shall be fully responsible
for any problems related to such Executable Software.
5.5 PRINTED MATERIALS.
5.5.1 COMPLIANCE WITH GUIDELINES. For each proposed Licensed
Product, Publisher shall be responsible, at Publisher's expense, for creating
and developing Printed Materials. All Printed Materials shall comply with the
Guidelines, which may be amended from time to time, provided that Publisher
shall, except as otherwise provided herein, only be required to implement
amended Guidelines in subsequent orders of Printed Materials and shall not be
required to recall or destroy previously manufactured Printed Materials, unless
such Printed Materials do not comply with the original requirements in the
Guidelines or unless explicitly required to do so in writing by SCEA.
5.5.2 SUBMISSION AND APPROVAL OF PRINTED MATERIALS. No later than
submission of final Executable Software for a proposed Licensed Product.
Publisher shall also deliver to SCEA, for review and evaluation, the proposed
final Printed Materials and a form of limited warranty for the proposed
Licensed Product. Failure to meet any scheduled release dates for a Licensed
Product is solely the risk and responsibility of Publisher, and SCEA assumes no
responsibility for Publisher failing to meet such scheduled release dates due
to this submission process. The
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quality of such Printed Materials shall be of the same quality as that
associated with other commercially available high quality software products. If
any of the Printed Materials are disapproved, SCEA shall specify the reasons for
such disapproval and state what corrections are necessary. SCEA shall have no
liability to Publisher for costs incurred or irrevocably committed to by
Publisher for production of Printed Materials that are disapproved by SCEA.
After making the necessary corrections to any disapproved Printed Materials,
Publisher must submit new Printed Materials for approval by SCEA. SCEA shall not
unreasonably withhold or delay its review of Printed Materials.
5.6 ADVERTISING MATERIALS.
5.6.1 SUBMISSION AND APPROVAL OF ADVERTISING MATERIALS.
Pre-production samples of all Advertising Materials shall be submitted by
Publisher to SCEA, at Publisher's expense, prior to any actual production, use
or distribution of any such items by Publisher or on its behalf. SCEA shall
evaluate and approve such Advertising Materials, which approval shall not be
unreasonably withheld or delayed, as to the following standards: (i) the
content, quality, and style of the overall advertisement; (ii) the quality,
style, appearance and usage of any of the Licensed Trademarks; (iii) appropriate
references of any required notices; and (iv) compliance with the Guidelines. If
any of the Advertising Materials are disapproved, SCEA shall specify the reasons
for such disapproval and state what corrections are necessary. SCEA may require
Publisher to immediately withdraw and reprint any Advertising Materials that
have been published but have not received the written approval of SCEA. SCEA
shall have no liability to Publisher for costs incurred or irrevocably committed
to by Publisher for production of Advertising Materials that are disapproved by
SCEA. For each Licensed Product, Publisher shall be required to deliver to SCEA
an accountability form stating that all Advertising Materials for such Licensed
Product comply or will comply with the Guidelines for use of the Licensed
Trademarks. After making the necessary corrections to any disapproved
Advertising Materials, Publisher must submit new proposed Advertising Materials
for approval by SCEA.
5.6.2 FAILURE TO COMPLY; THREE STRIKES PROGRAM. PUBLISHERS WHO FAIL
TO OBTAIN SCEA'S APPROVAL OF ADVERTISING MATERIALS PRIOR TO BROADCAST OR
PUBLICATION SHALL BE SUBJECT TO THE PROVISIONS OF THE "THREE STRIKES" PROGRAM
OUTLINED IN THE SOURCEBOOK 2. FAILURE TO OBTAIN SCEA'S APPROVAL OF ADVERTISING
MATERIALS COULD RESULT IN TERMINATION OF THIS LPA OR TERMINATION OF APPROVAL OF
THE LICENSED PRODUCT, OR COULD SUBJECT PUBLISHER TO THE PROVISIONS OF SECTION
14.4 HERETO. Failure to meet any scheduled release dates for Advertising
Materials is solely the risk and responsibility of Publisher, and SCEA assumes
no responsibility for Publisher failing to meet such scheduled release dates due
to approval requirements as set forth in this Section.
5.6.3 SCEA MATERIALS. Subject in each instance to the prior written
approval of SCEA, Publisher may use advertising materials owned by SCEA
pertaining to the System or to the Licensed Trademarks on such Advertising
Materials as may, in the Publisher's judgment, promote the sale of Licensed
Products.
5.7 RATING REQUIREMENTS. If required by SCEA or any governmental entity,
Publisher shall submit each Licensed Product to a consumer advisory ratings
system designated by SCEA and/or such governmental entity for the purpose of
obtaining rating code(s) for each Licensed Product. Any and all costs and
expenses incurred in connection with obtaining such rating code(s) shall be
borne solely by Publisher. Any required consumer advisory rating code(s)
procured hereby shall be displayed on the Licensed Product and in the associated
Printed Materials and Advertising Materials, at Publisher's cost and expense, in
accordance with the SourceBook 2 or other documentation provided by SCEA to
Publisher.
5.8 PUBLISHER'S ADDITIONAL QUALITY ASSURANCE OBLIGATIONS. If at any time
or times subsequent to the approval of Executable Software and Printed
Materials, SCEA identifies any material defects (such materiality to be
determined by SCEA in its sole discretion) with respect to the Licensed Product,
or in the event that SCEA identifies any improper use of its Licensed Trademarks
or Sony Materials with respect to the Licensed Product, or any such material
defects or improper use are brought to the attention of SCEA, Publisher shall,
at no cost to SCEA, promptly correct any such material defects, or improper use
of Licensed Trademarks or Sony Materials, to SCEA's commercially reasonable
satisfaction, which may include, if necessary in SCEA's judgment, the recall
and re-release of such Licensed Product. In the event any Units of Licensed
Products create any risk of loss or damage to any property or injury to any
person, Publisher shall immediately take effective steps, at Publisher's sole
liability and expense, to recall and/or remove such defective Units from any
affected channels of distribution, provided, however, that if Publisher is not
acting as the distributor and/or seller for the Licensed Products, its
obligation hereunder shall be to use its best efforts to arrange removal of
such Licensed Product from channels of distribution. Publisher shall provide
all end-user support for the Licensed Products and SCEA expressly disclaims any
obligation to provide end-user support on Publisher's Licensed Products.
6. MANUFACTURE OF THE LICENSED PRODUCTS.
6.1 MANUFACTURE OF UNITS. Upon approval of Executable Software and
associated Printed Materials pursuant to Section 5, and subject to Sections
6.1.2, 6.1.3 and 6.1.4 below, the Designated Manufacturing Facility
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will, in accordance with the terms and conditions set forth in this Section 6,
and at Publisher's expense (a) manufacture PlayStation 2 Format Discs for
Publisher; (b) manufacture Publisher's Packaging and/or Printed Materials;
and/or (c) assemble the PlayStation 2 Format Discs with the Printed Materials
and the Packaging. Publisher shall comply with all Manufacturing Specifications
related to the particular terms set forth herein. SCEA reserves the right to
insert or require the Publisher to insert certain Printed Materials relating to
the System or Licensed Trademarks into each Unit.
6.1.1 MANUFACTURE OF PLAYSTATION 2 FORMAT DISCS.
6.1.1.1 DESIGNATED MANUFACTURING FACILITIES. To insure
compatibility of the PlayStation 2 Format Discs with the System, consistent
quality of the Licensed Product and incorporation of anti-piracy security
systems, SCEA shall designate and license a Designated Manufacturing Facility to
reproduce PlayStation 2 Format Discs. Publisher shall purchase [*] of its
requirements for PlayStation 2 Format Discs from such Designated Manufacturing
Facility during the term of the Agreement. Any Designated Manufacturing Facility
shall be a third party beneficiary of this Agreement.
6.1.1.2 CREATION OF MASTER CD-ROM OR DVD-ROM. Pursuant to
Section 5.4 in connection with final testing of Executable Software, Publisher
shall provide SCEA with the number of Master Discs specified in the
SourceBook 2. A Designated Manufacturing Facility shall create from one of the
fully approved Master Discs provided by Publisher the original master CD-ROM or
DVD-ROM, from which all other copies of the Licensed Product are to be
replicated. Publisher shall be responsible for the costs, as determined by the
Designated Manufacturing Facility, of producing such original master. In order
to insure against loss or damage to the copies of the Executable Software
furnished to SCEA, Publisher will retain duplicates of all Master Discs, and
neither SCEA nor any Designated Manufacturing Facility shall be liable for loss
of or damage to any Master Discs or Executable Software.
6.1.2 MANUFACTURE OF PRINTED MATERIALS.
6.1.2.1 MANUFACTURE BY DESIGNATED MANUFACTURING FACILITY. If
Publisher elects to obtain Printed Materials from a Designated Manufacturing
Facility, Publisher shall deliver all SCEA-approved Printed Materials to that
Designated Manufacturing Facility, at Publisher's sole risk and expense, and
the Designated Manufacturing Facility will manufacture such Printed Materials
in accordance with this Section 6. In order to insure against loss or damage to
the copies of the Printed Materials furnished to SCEA, Publisher will retain
duplicates of all Printed Materials, and neither SCEA nor any Designated
Manufacturing Facility shall be liable for loss of or damage to any such
Printed Materials.
6.1.2.2 MANUFACTURE BY ALTERNATE SOURCE. Subject to SCEA's approval
as provided in Section 5.5.2 hereto and in this Section, Publisher may elect to
be responsible for manufacturing its own Printed Materials (other than any
Artwork which may be placed directly upon the PlayStation Disc, which Publisher
will supply to the Designated Manufacturing Facility for placement), at
Publisher's sole risk and expense. Prior to production of each order, Publisher
shall be required to supply SCEA with samples of any Printed Materials not
produced or supplied by a Designated Manufacturing Facility, at no charge to
SCEA or Designated Manufacturing Facility, for SCEA's approval with respect to
the quality thereof. SCEA shall have the right to disapprove any Printed
Materials that do not comply with the Manufacturing Specifications.
Manufacturing Specifications for Printed Materials shall be comparable to
manufacturing specifications applied by SCEA to its own software products for
the System. If Publisher elects to supply its own Printed Materials, neither
SCEA nor any Designated Manufacturing Facility shall be responsible for any
delays arising from use of Publisher's own Printed Materials.
6.1.3 MANUFACTURE OF PACKAGING.
6.1.3.1 MANUFACTURE BY DESIGNATED MANUFACTURING FACILITY. To
ensure consistent quality of the Licensed Products, SCEA may designate and
license a Designated Manufacturing Facility to reproduce proprietary Packaging
for the System. If SCEA creates proprietary Packaging for the System, then
Publisher shall purchase all of its requirements for such proprietary Packaging
from a Designated Manufacturing Facility during the term of the Agreement, and
the Designated Manufacturing Facility will manufacture such Packaging in
accordance with this Section 6.
6.1.3.2 MANUFACTURE BY ALTERNATE SOURCE. If SCEA elects to use
standard, non-proprietary Packaging for the System, then Publisher may elect to
be responsible for manufacturing its own Packaging (other than any proprietary
labels and any portion of a container containing Licensed Trademarks, which
Publisher must purchase from a Designated Manufacturing Facility). Publisher
shall assume all responsibility for the creation of such Packaging at
Publisher's sole risk and expense. Publisher shall be responsible for encoding
and printing proprietary edge labels provided by a Designated Manufacturing
Facility with information reasonably specified by SCEA from time to time and
will apply such labels to each Unit of the Licensed Product as reasonably
specified by SCEA. Prior to production of each order, Publisher shall be
required to supply SCEA with samples of any Packaging not produced or supplied
by a Designated Manufacturing Facility, at no charge to SCEA or Designated
Manufacturing Facility, for SCEA's approval with respect to the quality
thereof. SCEA
* Confidential portion omitted and filed separately with the Commission.
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shall have the right to disapprove any Packaging that does not comply with the
Manufacturing Specifications. Manufacturing Specifications for Packaging shall
be comparable to manufacturing specifications applied by SCEA to its own
software products for the System. If Publisher procures Packaging from an
alternate source, then it must also procure assembly services from an alternate
source. If Publisher elects to supply its own Packaging, neither SCEA nor any
Designated Manufacturing Facility shall be responsible for any delays arising
from use of Publisher's own Packaging.
6.1.4 ASSEMBLY SERVICES. Publisher may either procure assembly
services from a Designated Manufacturing Facility or from an alternate source.
If Publisher elects to be responsible for assembling the Licensed Products, then
the Designated Manufacturing Facility shall ship the component parts of the
Licensed Product to a destination provided by Publisher, at Publisher's sole
risk and expense. SCEA shall have the right to inspect any assembly facilities
utilized by Publisher in order to determine if the component parts of the
Licensed Products are being assembled in accordance with SCEA's quality
standards. SCEA may require that Publisher recall any Licensed Products that do
not contain proprietary labels or other material component parts or that
otherwise fail to comply with the Manufacturing Specifications. If Publisher
elects to use alternate assembly facilities, neither SCEA nor any Designated
Manufacturing Facility shall be responsible for any delays or missing component
parts arising from use of alternate assembly facilities.
6.2 PRICE, PAYMENT AND TERMS.
6.2.1 PRICE. The applicable price for manufacture of any Units of
Licensed Products ordered hereunder shall be provided to Publisher by the
Designated Manufacturing Facility. Purchase shall be subject to the terms and
conditions set out in any purchase order form supplied to Publisher by the
Designated Manufacturing Facility.
6.2.2 ORDERS. Publisher shall issue to a Designated Manufacturing
Facility a written Purchase Order(s) in the form set forth and containing the
information required in the Manufacturing Specifications, with a copy to SCEA.
All orders shall be subject to approval by SCEA, which shall not be
unreasonably withheld or delayed. Purchase Orders issued by Publisher to a
Designated Manufacturing Facility for each Licensed Product approved by SCEA
shall be non-cancelable and be subject to the order requirements of the
Designated Manufacturing Facility.
6.2.3 PAYMENT TERMS. Purchase Orders will be invoiced as soon as
reasonably practical after receipt, and such invoice will include both
manufacturing price and royalties payable pursuant to Section 8.1 or 8.2 hereto
for each Unit of Licensed Products ordered. Each invoice will be payable either
on a cash-in-advance basis or pursuant to a letter of credit, or, at SCEA's
sole discretion, on credit terms. Terms for cash-in-advance and letter of
credit payments shall be as set forth in the SourceBook 2. All amounts
hereunder shall be payable in United States dollars. All associated banking
charges with respect to payments of manufacturing costs and royalties shall be
borne solely by Publisher.
6.2.3.1 CREDIT TERMS. SCEA may at its sole discretion extend
credit terms and limits to Publisher. SCEA may also revoke such credit terms
and limits at its sole discretion. If Publisher qualifies for credit terms,
then orders will be invoiced upon shipment of Licensed Products and each
invoice will be payable within thirty (30) days of the date of the invoice. Any
overdue sums shall bear interest at the rate of one and one-half (1-1/2%)
percent per month, or such lower rate as may be the maximum rate permitted
under applicable law, from the date when payment first became due to and
including the date of payment thereof. Publisher shall be additionally liable
for all costs and expenses of collection, including without limitation,
reasonable fees for attorneys and court costs.
6.2.3.2 GENERAL TERMS. No deduction may be made from
remittances unless an approved credit memo has been issued by a Designated
Manufacturing Facility. Neither SCEA nor a Designated Manufacturing Facility
shall be responsible for shortage or breakage with respect to any order if
component parts and/or assembly services are obtained from alternate sources.
Each shipment to Publisher shall constitute a separate sale, whether said
shipment be whole or partial fulfillment of any order. Nothing in this
Agreement shall excuse or be construed as a waiver of Publisher's obligation to
timely provide any and all payments owed to SCEA and Designated Manufacturing
Facility.
6.3 DELIVERY OF LICENSED PRODUCTS. Neither SCEA nor any Designated
Manufacturing Facility shall have an obligation to store completed Units of
Licensed Products. Publisher may either specify a mode of delivery or allow
Designated Manufacturing Facility to select a mode of delivery.
6.4 OWNERSHIP OF MASTER DISCS. Due to the proprietary nature of the
mastering process, neither SCEA nor a Designated Manufacturing Facility shall
under any circumstances release any original master CD-ROM, Master Discs or
other in-process materials to Publisher. All such materials shall be and remain
the sole property of SCEA or Designated Manufacturing Facility. Notwithstanding
the foregoing, Publisher Intellectual Property Rights contained in Product
Software that is contained in such in-process materials is, as between SCEA and
Publisher, the sole and exclusive property of Publisher or its licensors (other
than SCEA and/or it affiliates).
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7. MARKETING AND DISTRIBUTION.
7.1 MARKETING GENERALLY. In accordance with the provisions of this
Agreement and at no expense to SCEA, Publisher shall, and shall direct its
distributors to, diligently market, sell and distribute the Licensed Products,
and shall use commercially reasonable efforts to stimulate demand for such
Licensed Products in the Licensed Territory and to supply any resulting demand.
Publisher shall use its reasonable best efforts to protect the Licensed Products
from and against illegal reproduction and/or copying by end users or by any
other persons or entities.
7.2 SAMPLES. Publisher shall provide to SCEA, at no additional cost, for
SCEA's internal use, [*] sample copies of each Licensed Product. Publisher shall
pay any manufacturing costs to the Designated Manufacturing Facility in
accordance with Section 6.2, but shall not be obligated to pay royalties, in
connection with such sample Units. In the event that Publisher assembles any
Licensed Product using an alternate source, Publisher shall be responsible for
shipping such sample Units to SCEA at Publisher's cost and expense. SCEA shall
not directly or indirectly resell any such sample copies of the Licensed
Products without Publisher's prior written consent. SCEA may give sample copies
to its employees, provided that it uses its reasonable efforts to ensure that
such copies are not sold into the retail market. In addition, subject to
availability, Publisher shall sell to SCEA additional quantities of Licensed
Products at the Wholesale Price for such Licensed Product. Any changes to SCEA's
policy regarding sample Units shall be set forth in the SourceBook 2.
7.3 MARKETING PROGRAMS OF SCEA. From time to time, SCEA may invite
Publisher to participate in promotional or advertising opportunities that may
feature one or more Licensed Products from one or more Licensed Publishers.
Participation shall be voluntary and subject to terms to be determined at the
time of the opportunity. In the event Publisher elects to participate, all
materials submitted by Publisher to SCEA shall be submitted subject to Section
10.2 hereunder and delivery of such materials to SCEA shall constitute
acceptance by Publisher of the terms of the offer. Moreover, SCEA may use the
Generic Line on all multi-product marketing materials, unless otherwise agreed
in writing.
7.4 DEMONSTRATION DISC PROGRAMS. SCEA may from time to time, provide
opportunities for Publisher to participate in SCEA Demo Disc programs. In
addition, SCEA may, from time to time, grant to Publisher the right to create
Third Party Demo Discs pursuant to SCEA Established Third Party Demo Disc
Programs. The specifications with respect to the approval, creation,
manufacture, marketing, distribution and sale of any such demo disc programs
shall be set forth in the SourceBook 2 or in other documentation to be provided
by SCEA to Publisher. Except as otherwise specifically set forth herein, in the
SourceBook 2 or in other documentation, Third Party Demo Discs shall be
considered "Licensed Products" and shall be subject in all respects to the
terms and conditions of this Agreement pertaining to Licensed Products. In
addition, the following procedures shall also apply to SCEA Demo Discs and
Third Party Demo Discs:
7.4.1 SCEA DEMO DISCS.
7.4.1.1 LICENSE. SCEA may, but shall not be obligated to,
invite Licensed Publishers to participate in any SCEA Demo Disc program.
Participation by Publisher in an SCEA Demo Disc program shall be optional. If
Publisher elects to participate in an SCEA Demo Disc program and provides
Product Information to SCEA in connection thereto, Publisher shall thereby
grant to SCEA a royalty-free license during the term of this Agreement in the
Licensed Territory to manufacture, use, sell, distribute, market, advertise and
otherwise promote Publisher's Product Information as part of such SCEA Demo
Disc program. In addition, Publisher shall grant SCEA the right to feature
Publisher and Licensed Product names in SCEA Demo Disc Advertising Materials
and to use copies of screen displays generated by the code, representative
video samples or other Product Information in such SCEA Demo Disc Advertising
Materials. All decisions relating to the selection of first and third party
Product Information and all other aspects of SCEA Demo Discs shall be in the
sole discretion of SCEA.
7.4.1.2 SUBMISSION AND APPROVAL OF PRODUCT INFORMATION. Upon
receipt of written notice that SCEA has tentatively chosen Publisher's Product
Information for inclusion in an SCEA Demo Disc, Publisher shall deliver to SCEA
such requested Product Information by no later than the deadline set forth in
such notice. Separate notice will be sent for each SCEA Demo Disc, and
Publisher must sign each notice prior to inclusion in such SCEA Demo Disc.
Publisher shall include its own Legal Copy on the title screen or elsewhere in
the Product Information submitted to SCEA. SCEA shall only provide the Generic
Line on the SCEA Demo Disc title screen and packaging. Publisher's Product
Information shall comply with SCEA's technical specifications provided to
Publisher. SCEA reserves the right to review and test the Product Information
provided and request revisions prior to inclusion on the SCEA Demo Disc. If
SCEA requests changes to the Product Information and Publisher elects to
continue to participate in such Demo Disc, Publisher shall make such changes as
soon as possible after receipt of written notice of such requested changes from
SCEA, but not later than the deadline for receipt of Product Information.
Failure to make such changes and provide the modified Product Information to
SCEA by the deadline shall result in the Product Information to SCEA by the
deadline shall result in the Product Information being removed from the SCEA
Demo Disc. Costs associated with preparation of Product Information supplied to
SCEA shall be borne solely by Publisher. Except as otherwise provided in this
Section, SCEA shall not edit or modify Product
* Confidential portion omitted and filed separately with the Commission.
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Information provided to SCEA by Publisher without Publisher's consent, not to
be unreasonably withheld. SCEA shall have the right to use subcontractors to
assist in the development of any SCEA Demo Disc. With respect to Product
Information provided by Publisher in demo form, the demo delivered to SCEA
shall not constitute the complete Licensed Product and shall be, at a minimum,
an amount sufficient to demonstrate the Licensed Product's core features and
value, without providing too much information so as to give consumers a
disincentive to purchase the complete Licensed Product.
7.4.1.3 NO OBLIGATION TO PUBLISH. Acceptance of Product
Information for test and review shall not be deemed confirmation that SCEA shall
include the Product Information on an SCEA Demo Disc, nor shall it constitute
approval of any other element of the Licensed Product. SCEA reserves the right
to choose from products submitted from other Licensed Publishers and first party
products to determine the products to be included in SCEA Demo Discs, and
Publisher's Licensed Products will not be guaranteed prominence or preferential
treatment on any SCEA Demo Disc. Nothing herein shall be construed as creating
an obligation of SCEA to publish Product Information submitted by Publisher in
any SCEA Demo Disc, nor shall SCEA be obligated to publish, advertise or promote
any SCEA Demo Disc.
7.4.1.4 SCEA DEMO DISCS SOLD AT RETAIL. Publisher is aware and
acknowledges that certain SCEA Demo Discs may be distributed and sold by SCEA in
the retail market. If Publisher elects to participate in any SCEA Demo Disc
program which is sold in the retail market, as notified by SCEA to Publisher,
Publisher acknowledges prior to participation in any such SCEA Demo Disc that it
is aware of no limitations regarding Product Information provided to SCEA
pursuant to the terms of this Agreement which would in any way restrict SCEA's
ability to distribute or sell such SCEA Demo Disc at retail, nor does Publisher
or it licensors (other than SCEA and/or its affiliates) have any participation
of receiving any compensation from such retail sales. In the event that SCEA
institutes a SCEA Demo Disc in which a fee and/or royalty is charged to
Publisher, SCEA and Publisher will enter into a separate agreement regarding
such SCEA Demo Disc.
7.4.2 THIRD PARTY DEMO DISCS.
7.4.2.1 LICENSE. Publisher may participate in any SCEA
Established Third Party Demo Disc Program. Publisher shall notify SCEA of its
intention to participate in any such program and upon receipt of such notice,
SCEA shall grant to Publisher the right and license to use Licensed Products in
Third Party Demo Discs and to use, distribute, market, advertise and otherwise
promote (and, if permitted in accordance with the terms of any SCEA Established
Third Party Program or otherwise permitted by SCEA, to sell) such Third Party
Demo Discs in accordance with the SourceBook 2, which may be modified from time
to time at the sole discretion of SCEA. Unless separately agreed in writing with
SCEA. Third Party Demo Discs shall not be used, distributed, promoted, bundled
or sold in conjunction with other products. In addition, SCEA hereby consents to
the use of the Licensed Trademarks in connection with Third Party Demo Discs,
subject to the approval procedures set forth in this Agreement. If any SCEA
Established Third Party Demo Disc Program is specified by SCEA to be for
promotional use only and not for resale, and such Third Party Demo Disc is
subsequently discovered to be for sale, Publisher's right to produce Third Party
Demo Discs shall thereupon be automatically revoked, and SCEA shall have the
right to terminate any related Third Party Demo Discs in accordance with the
terms of Section 14.3 or 14.4 hereto.
7.4.2.2 SUBMISSION AND APPROVAL OF THIRD PARTY DEMO DISCS.
Publisher shall deliver to SCEA, fir SCEA's prior approval, a final version of
each Third Party Demo Disc in a format prescribed by SCEA. Such Third Party Demo
Disc shall comply with all requirements provided to Publisher by SCEA in the
SourceBook 2 or otherwise. In addition, SCEA shall evaluate the Third Party Demo
Disc in accordance with the approval provisions for Executable Software and
Printed Materials set forth in Sections 5.4 and 5.5, respectively. Furthermore,
Publisher shall obtain the approval of SCEA in connection with any Advertising
Materials relating to the Third Party Demo Discs in accordance with the approval
provisions set forth in Section 5.6. Costs associated with Third Party Demo Disc
shall be borne solely by Publisher. No approval by SCEA of any element of any
Third Party Demo Disc shall be deemed an approval of any other element thereto,
nor does any such approval constitute final approval for the related Licensed
Product. Unless otherwise permitted by SCEA, Publisher shall clearly and
conspicuously state on all Third Party Demo Disc Packaging and Printed Materials
that the Third Party Demo Disc is for promotional purposes only and not for
resale.
7.4.2.3 MANUFACTURE AND ROYALTY OF THIRD PARTY DEMO DISCS.
Publisher shall comply with all Manufacturing Specifications with respect to the
manufacture and payment for manufacturing costs of Third Party Demo Discs, and
Publisher shall also comply with all terms and conditions of Section 6 hereto.
No costs incurred in the development, manufacture, licensing, production,
marketing and/or distribution (and if permitted by SCEA, sale) of the Third
Party Demo Disc shall be deducted from any amounts payable to SCEA hereunder.
Royalties on Third Party Demo Disc shall be as provided in Section 8.2.
7.5 CONTESTS AND SWEEPSTAKES OF PUBLISHER. SCEA acknowledges that, from
time to time, Publisher may conduct contests and sweepstakes to promote
Licensed Products. SCEA shall permit Publisher to include contest or
sweepstakes materials in Printed
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Materials and Advertising Materials, subject to compliance with the approval
provisions of Section 5.5 and 5.6 hereunder, compliance with the provisions of
Section 9.2 and 10.2 hereunder, and subject to the following additional terms
and conditions:
(i) Publisher represents that it has retained the services of a
fulfillment house to administer the contest or sweepstakes and if it has not
retained the services of a fulfillment house, Publisher represents and warrants
that it has the expertise to conduct such contests or sweepstakes, and in any
event, Publisher shall assume full responsibility for all aspects of such
contest or sweepstakes;
(ii) Publisher warrants that each contest, sweepstakes, and promotion,
comply with local, state and federal laws or regulations;
(iii) Publisher represents and warrants that it has obtained the consent
of all holders of intellectual property rights required to be obtained in
connection with each contest or sweepstakes including, but not limited to, the
consent of any holder of copyrights or trademarks relating to any Advertising
Materials publicizing the contest or sweepstakes, or the prizes being awarded
to winners of the contest or sweepstakes; and
(iv) Publisher shall make available to SCEA all contest and sweepstakes
material prior to publication in accordance with the approval process set forth
in Section 5.5 or 5.6.
Approval by SCEA of contest or sweepstakes materials for use in the Printed
Materials or Advertising Materials (or any use of the System or Licensed
Products as prizes in such contest or sweepstakes) shall not constitute an
endorsement by SCEA of such contest or sweepstakes, nor shall such acceptance
be construed as SCEA having reviewed and approved such materials for compliance
with any federal or state law, statute, regulations, order or the like, which
shall be Publisher's sole responsibility.
7.6 PLAYSTATION WEBSITE. All Licensed Publishers shall be required to
provide Product Information for a web page for each of its Licensed Products for
display on the PlayStation promotional website, or other website or websites as
may be operated by SCEA from time to time in connection with the promotion of
the PlayStation brand. Specifications for Product Information for such web pages
shall be as provided in the SourceBook 2. Publisher shall provide SCEA with such
Product Information for each Licensed Product upon submission of Printed
Materials to SCEA for approval in accordance with Section 5.5.2 hereto.
Publisher shall also provide updates to such web page in a timely manner as
required by SCEA in updates to the SourceBook 2.
7.7 DISTRIBUTION.
7.7.1 DISTRIBUTION CHANNELS. Publisher may use such distribution
channels as Publisher deems appropriate, including the use of third party
distributors, resellers, dealers and sales representatives. In the event that
Publisher elects to have one of its Licensed Products distributed and sold by
another Licensed Publisher, Publisher must provide SCEA with advance written
notice of such election, the name of the Licensed Publisher and any additional
information requested by SCEA regarding the nature of the distribution
services provided by such Licensed Publisher prior to manufacture of such
Licensed Product.
7.7.2 LIMITATIONS ON DISTRIBUTION. Notwithstanding any other
provisions in this Agreement, Publisher shall not, directly or indirectly,
solicit orders from or sell any Units of the Licensed Products to any person or
entity outside of the Licensed Territory. In addition, Publisher shall not
directly or indirectly solicit orders for or sell any Units of the Licensed
Products in any situation where Publisher knows or reasonably should know that
such Licensed Products may be exported or resold outside of the Licensed
Territory.
8. ROYALTIES.
8.1 APPLICABLE ROYALTIES ON LICENSED PRODUCTS.
8.1.1 INITIAL ORDERS. Publisher shall pay SCEA, either directly or
through its designee, a per title royalty in United States dollars for each
Unit of the Licensed Products manufactured based on the initial Wholesale Price
of the Licensed Product, as follows:
<TABLE>
<CAPTION>
Wholesale Price Per Title Royalty
--------------- -----------------
<S> <C> <C>
[*] $[*] to $[*] $[*]
[*] $[*] to $[*] $[*]
[*] $[*] to $[*] $[*]
[*] $[*] to $[*] $[*]
[*] $[*] [*]
</TABLE>
In the absence of satisfactory evidence to support the WSP, the royalty rate
that shall apply will be [*] per Unit.
8.1.2 REORDERS AND OTHER PROGRAMS. Royalties on additional orders to
manufacture a specific Licensed Product shall be the royalty determined by the
initial Wholesale Price as reported by Publisher for that Licensed Product
regardless of the wholesale price of the Licensed Product at the time of
reorder, except in the event that the Wholesale Price increases for such
Licensed Product, in which case the royalty shall be adjusted upwards to
reflect the higher Wholesale Price. Licensed
12
* Confidential portions omitted and filed separately with the Commission.
<PAGE> 15
Products qualifying for SCEA's "Greatest Hits" programs or other programs
offered by SCEA shall be subject to the royalties applicable for such programs.
Publisher acknowledges that as of the date of execution of this Agreement no
"Greatest Hits" program exists for the PlayStation 2 Third Party licensing
program.
8.2 THIRD PARTY DEMO DISC PROGRAM ROYALTIES: Publisher shall pay SCEA a
per Unit royalty in United States dollars of [*] for each Third
Party Demo Disc Unit manufactured. The quantity of Units ordered shall comply
with the terms of such SCEA Established Third Party Demo Disc Program.
8.3 PAYMENT. Payment of royalties under Section 8.1 and 8.2 shall be made
to SCEA through its Designated Manufacturing Facility concurrent with the
placement of an order to manufacture Licensed Product and payment of
manufacturing costs in accordance with the terms and conditions set forth in
Section 6.2.3, unless otherwise agreed in writing with SCEA. At the time of
placing an order to manufacture a Licensed Product, Publisher shall submit to
SCEA an accurate accounting statement setting out the number of units of
Licensed Product to be manufactured, projected initial wholesale price,
applicable royalty, and total amount due SCEA. In addition, Publisher shall
submit to SCEA prior to placing the initial order for each Licensed Product a
separate certification, in the form provided by SCEA in the SourceBook 2, signed
by officers of Publisher that certifies that the Wholesale Price provided to
SCEA is accurate and attaching such documentation supporting the WSP as
requested by SCEA. Payment shall be made prior to manufacture unless SCEA has
agreed to extend credit terms to Publisher in writing pursuant to Section
6.2.3.3. Nothing herein shall be construed as requiring SCEA to extend credit
terms to Publisher. The accounting statement due hereunder shall be subject to
the audit and accounting provisions set forth in paragraph 16.2 below. No costs
incurred in the development, manufacture, marketing, sale and/or distribution of
the Licensed Products shall be deducted from any royalties payable to SCEA
hereunder. Similarly, there shall be no deduction from the royalties otherwise
owed to SCEA hereunder as a result of any uncollectible accounts owed to
Publisher, or for any credits, discounts, allowances or returns which Publisher
may credit or otherwise grant to any third party customer of any Units of the
Licensed Products, or for any taxes, fees, assessments or expenses of any kind
which may be incurred by Publisher in connection with its sale or distribution
of any Units of the Licensed Products or arising with respect to the payment, of
royalties hereunder. In addition to the royalty payments provided to SCEA
hereunder, Publisher shall be solely responsible for and bear any cost relating
to any withholding taxes or other such assessments which may be imposed by any
governmental authority with respect to the royalties paid to SCEA hereunder;
provided, however, that SCEA shall not manufacture Licensed Products outside of
the United States without the prior consent of Publisher. Publisher shall
provide SCEA with official tax receipts by other such documentary evidence
issued by the applicable tax authorities sufficient to substantiate that any
such taxes or assessments have in fact been paid.
8.4 REBATE PROGRAMS. Publisher shall be eligible to participate in one of
three rebate programs offered by SCEA: the Standard Rebate program, the Level 1
Rebate program, or the Level 2 Rebate program. If Publisher qualifies for such
rebates as set forth herein, rebates shall be credited to Publisher's account
as provided below:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Units Ordered Standard Level 1 Level 2
-------------------------------------------------------------------------------
<S> <C> <C> <C>
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
[*] [*] [*] [*]
3MM+ 20% 20% 20%
-------------------------------------------------------------------------------
</TABLE>
8.4.1 STANDARD REBATE PROGRAM. All Publishers qualify for the Standard
Rebate program. Rebates will be offered on an individual title basis. Rebates
will be given to any individual Licensed Product that exceeds the above numbers
of Units during the first year after first commercial shipment of such Licensed
Product. The rebate in effect at the end of such year for the Licensed Product
will remain in effect for as long as Publisher continues to sell such Licensed
Product, but Publisher will not receive further rebates if sales of such
Licensed Product hit additional thresholds as specified above after such year.
The Standard Rebate may not be used in conjunction with a Third Party Demo Disc
program or any promotional program of SCEA, with Licensed Products that qualify
for any "Greatest Hits" program of SCEA or with Licensed Products that qualify
for the [*] .
8.4.2 LEVEL 1 REBATE PROGRAM: To be eligible for the Level 1 Rebate
program, Publisher must ship over [*] Units of certain
Licensed Products in a single Fiscal Year. Level 1 Rebates shall be credited to
Publisher on an individual title basis. Other terms of the Level 1 Rebate are
as follows:
(i) Only Publisher's titles (as determined below) that meet the following
conditions shall count toward the [*] Unit threshold:
Publisher must order at least [*] Units of the
13
* Confidential portion omitted and filed separately with the Commission.
<PAGE> 16
Licensed Product both within the first year of commercial release of such
Licensed Product and during the qualifying Fiscal Year.
(ii) Any Licensed Products, including "Greatest Hits" titles and products
for the original PlayStation game console, but excluding all demo discs, shall
count toward the [*] Unit threshold (provided they meet the conditions set forth
in Section 8.4.2(i) above). For purposes of determining Level 1 Rebate
thresholds and the conditions set forth in Section 8.4.2(i), full priced
Licensed Products and "Greatest Hits" Licensed Products shall be considered
separate Licensed Products, with separate Unit minimums and release dates.
(iii) Level 1 Rebates shall apply only to Licensed Products (not including
"Greatest Hits" titles, Licensed Products qualifying for the [*] and products
for the original PlayStation game console) ordered in the Fiscal Year following
the Fiscal Year in which the [*] Unit threshold is met. Units of Licensed
Products that qualified Publisher for inclusion in the Level 1 Rebate program in
the previous Fiscal Year shall not be entitled to receive the Level 1 Rebate.
(iv) Publisher must re-qualify for the Level 1 Rebate Program each Fiscal
Year. If a Publisher fails to requalify for any Fiscal Year, then the Standard
Rebate shall apply in such Fiscal Year. The first Fiscal Year for which a
Publisher may qualify for the Level 1 Rebate shall be the Fiscal Year ending
March 31, 2000, and if the Publisher qualifies for the Level 1 Rebate, it will
apply to Licensed Products ordered in the Fiscal Year commencing April 1, 2000.
(v) Licensed Products eligible for the Level 1 Rebate program shall not be
eligible for Standard Rebates, and Level 1 Rebates shall supersede Standard
Rebates with respect to any individual Licensed Product. If a Licensed Product
qualifies for the Standard Rebate in one Fiscal Year, and Publisher qualifies
for the Level 1 Rebate in the next Fiscal Year; Units of such Licensed Product
ordered in the next Fiscal Year will receive the Level 1 Rebate commencing on
April 1 of the next Fiscal Year going forward, but such Level 1 Rebate will not
be credited retroactively to Units of the Licensed Product ordered in the
previous Fiscal Year. For example, Publisher orders [*] Units of Product X in
Fiscal Year 2001, receiving a Standard Rebate of [*]. Publisher qualifies for
the Level 1 Rebate in Fiscal Year 2002. Publisher will receive the Level 1
Rebate of [*] commencing with Units ordered on April 1, 2001, but will not
receive a retroactive credit for Units ordered prior to April 1, 2001. When
Publisher reaches the [*] Unit threshold, it will receive a retroactive credit
of [*] on all Level 1 Rebate Units ordered, as well as a retroactive credit of
[*] on Standard Rebate Units ordered in the previous Fiscal Year, and Publisher
will receive the Level 1 Rebate of [*] going forward.
8.4.3 LEVEL 2 REBATE PROGRAM: To be eligible for the Level 2 Rebate
program, Publisher must ship over [*] Units of certain Licensed Products in any
Fiscal Year. Level 2 Rebates shall be credited to Publisher on an individual
title basis. Other terms of the Level 2 Rebate are as follows:
(i) Only Publisher's titles (as determined below) that meet the following
conditions shall count toward the [*] Unit threshold: Publisher must order at
least [*] Units of the Licensed Product both within the first year of commercial
release of such Licensed Product and during the qualifying Fiscal Year.
(ii) Any Licensed Products, including "Greatest Hits" titles and products
for the original PlayStation game console, but excluding all demo discs, shall
count toward the [*] Unit threshold (provided they meet the conditions set forth
in Section 8.4.3(i) above). For purposes of determining Level 2 Rebate
thresholds and the conditions set forth in Section 8.4.2(i), full priced
Licensed Products and "Greatest Hits" Licensed Products shall be considered
separate Licensed Products, with separate Unit minimums and release dates.
(iii) Level 2 Rebates shall apply only to Licensed Products (not including
"Greatest Hits" titles, Licensed Products qualifying for the [*] and products
for the original PlayStation game console) ordered in the Fiscal Year following
the Fiscal Year in which the [*] Unit threshold is met. Units of Licensed
Products that qualified Publisher for inclusion in the Level 2 Rebate program in
the previous. Fiscal Year shall not be entitled to receive the Level 2 Rebate.
(iv) Publisher must re-qualify for the Level 2 Rebate Program each Fiscal
Year. If Publisher fails to requalify for any Fiscal Year then the Standard
Rebate or Level 1 Rebate, as the case may be, shall apply in such Fiscal Year.
The first Fiscal Year for which a Publisher may qualify for the Level 2 Rebate
shall be the Fiscal Year ending March 31, 2000, and if the Publisher qualifies
for the Level 2 Rebate, it will apply to Licensed Products ordered in the Fiscal
Year commencing April 1, 2000.
(v) Licensed Products eligible for the Level 2 Rebate program shall not be
eligible for Standard Rebates or Level 1 Rebates, and Level 2 Rebates shall
supersede Standard Rebates and Level 1 Rebates with respect to any individual
Licensed Product. If a Licensed Product qualifies for the Standard Rebate or
Level 1 Rebate in one Fiscal Year, and Publisher qualifies for the Level 2
Rebate in the next Fiscal Year, Units of such Licensed Product ordered in the
next Fiscal Year will receive the Level 2 Rebate going forward, but such Level 2
Rebate will not be credited retroactively to Units of the Licensed Product
ordered in the previous Fiscal Year. See Section 8.4.2(v) for an example.
* Confidential portions omitted and filed separately with the Commission.
14
<PAGE> 17
8.5 CALCULATION AND USE OF REBATES. Rebate percentages for all rebate
programs shall be credited against royalties owed SCEA and shall have no other
monetary value. All rebates, whether under the Standard Rebate, Level 1 Rebate
or Level 2 Rebate Programs shall be issued by SCEA as a credit to Publisher for
use against future royalty payments. It is Publisher's responsibility to inform
SCEA when it reaches any rebate threshold. In no event shall Publisher take a
deduction off royalties owed SCEA or deduction off an invoice payable to SCEA
on current production unless and until SCEA issues a credit to Publisher in
writing or unless otherwise agreed in writing. From time to time SCEA may allow
Publisher to use credits in other manners on terms and conditions to be
determined by SCEA. Publisher may use rebate credits to procure Development
Tools. Units of Licensed Products shall be considered "ordered" when Units
first begin to ship from a Designated Manufacturing Facility.
8.6 REBATE CREDITS. Subject to Sections 8.4.2(v) and 8.4.3(v), all rebate
programs are [*], such that Publisher receives a credit for each rebate
percentage against [*] Units when it reaches the Unit threshold for the next
rebate percentage. SCEA shall credit Publisher's account with respect to [*]
rebates as follows: (A) if Publisher's initial order for a Licensed Product is
less than any rebate threshold provided above, then SCEA shall [*] credit
Publisher's account sixty (60) days following the date that Publisher notifies
SCEA that orders of a Licensed Product exceed any rebate threshold, subject to
SCEA's right to confirm such information; and (B) if Publisher's initial order
for a Licensed Product reaches or exceeds any rebate threshold provided above,
then Publisher may credit the rebate amount set forth above as a separate line
item on the Purchase Order with respect to such Licensed Product, subject to
SCEA's confirmation right.
9. REPRESENTATIONS AND WARRANTIES.
9.1 REPRESENTATIONS AND WARRANTIES OF SCEA. SCEA represents and warrants
solely for the benefit of Publisher that SCEA has the right, power and
authority to enter into this Agreement and to fully perform its obligations
hereunder.
9.2 REPRESENTATIONS AND WARRANTIES OF PUBLISHER. Publisher represents and
warrants that:
(i) There is no threatened or pending action, suit, claim or proceeding
alleging that the use by Publisher of all or any part of the Product Software,
Product Proposals, Product Information, Printed Materials, Advertising
Materials or any underlying work or content embodied therein, or any name,
designation or trademark used in conjunction with the Licensed Products
infringes or otherwise violates any Intellectual Property Rights or other right
or interest of any kind whatsoever of any third party, or otherwise contesting
any right, title or interest of Publisher in or to the Product Software,
Product Proposals, Product Information, Printed Materials, Advertising
Materials or any underlying work or content embodied therein, or any name,
designation or trademark used in conjunction with the Licensed Products;
(ii) The Product Software, Product Proposals, Product Information, Printed
Materials and Advertising Materials and their contemplated use under this
Agreement do not and shall not infringe any person's or entity's rights
including without limitation, patents, copyrights (including rights in a joint
work), trademarks, trade dress, trade secret, rights of publicity, privacy,
performance, moral rights, literary rights and any other third party right;
(iii) Publisher has the right, power and authority to enter into this
Agreement, to grant SCEA the rights granted hereunder and to fully perform its
obligations hereunder;
(iv) The making of this Agreement by Publisher does not violate any
separate agreement, rights or obligations existing between Publisher and any
other person or entity, and, throughout the term of this Agreement, Publisher
shall not make any separate agreement with any person or entity that is
inconsistent with any of the provisions of this Agreement;
(v) Publisher has not sold, assigned, leased, licensed or in any other
way disposed of or encumbered the rights granted to Publisher hereunder, and
Publisher will not sell, assign, lease, license or in any other way dispose of
or encumber any of such rights except as expressly permitted hereunder or as
consented to by SCEA in writing;
(vi) Publisher has obtained the consent of all holders of intellectual
property rights required to be obtained in connection with use of any Product
Information by SCEA as licensed hereunder, and Product Information when
provided to SCEA in accordance with the terms of this Agreement may be
published, marketed, distributed and sold by SCEA in accordance with the terms
and conditions of this Agreement and without SCEA incurring any royalty,
residual, union, guild or other fees;
(vii) Publisher shall not make any representation or give any warranty to
any person or entity expressly or implicitly on SCEA's behalf, or to the effect
that the Licensed Products are connected in any way with SCEA (other than that
the Executable Software and/or Licensed Products have been developed, marketed,
sold and/or distributed under license from SCEA);
(viii) In the event that Executable Software is delivered to other
Licensed Publishers or Licensed Developers by Publisher in source code form,
Publisher will take all precautions consistent with the protection of
* Confidential portion omitted and filed separately with the Commission.
15
<PAGE> 18
valuable trade secrets by companies in high technology industries to ensure the
confidentiality of such source code;
(ix) The Executable Software and any Product Information delivered to SCEA
shall be in a commercially acceptable form, free of significant bugs, defects,
time bombs or viruses which could disrupt, delay, destroy the Executable
Software or System or render either of them less than fully useful, and shall
be fully compatible with the System and any peripherals listed on the Printed
Materials as compatible with the Licensed Product;
(x) Each of the Licensed Products, Executable Software, Printed Materials
and Advertising Materials shall be developed, marketed, sold and distributed by
or at the direction of Publisher in an ethical manner and in full compliance
with all applicable federal, state, provincial, local and foreign laws and any
regulations and standards promulgated thereunder (including but not limited to
federal and state lottery laws as currently interpreted and enforced) and will
not contain any obscene or defamatory matter;
(xi) Publisher's policies and practices with respect to the development,
marketing, sale, and/or distribution of the Licensed Products shall in no
manner reflect adversely upon the name, reputation or goodwill of SCEA;
(xii) Publisher has, or will contract with a Licensed Developer for, the
technical expertise and resources necessary to fulfill its obligations under
this Agreement; and
(xiii) Publisher shall make no false, misleading or inconsistent
representations or claims with respect to any Licensed Products, the System or
SCEA.
10. INDEMNITIES; LIMITED LIABILITY.
10.1 INDEMNIFICATION BY SCEA. SCEA shall indemnify and hold Publisher
harmless from and against any and all third party claims, losses, liabilities,
damages, expenses and costs, including, without limitation, reasonable fees for
attorneys, expert witnesses and litigation costs, and including costs incurred
in the settlement or avoidance of any such claim which result from or are in
connection with a breach of any of the representations or warranties provided
by SCEA herein; provided, however, that Publisher shall give prompt written
notice to SCEA of the assertion of any such claim, and provided, further, that
SCEA shall have the right to select counsel and control the defense and
settlement thereof. SCEA shall have the exclusive right, at its discretion, to
commence and prosecute at its own expense any lawsuit or to take such other
action with respect to such matters as shall be deemed appropriate by SCEA.
Publisher shall provide SCEA, at no expense to Publisher, reasonable assistance
and cooperation concerning any such matter; and Publisher shall not agree to
the settlement of any such claim, action or proceeding without SCEA's prior
written consent.
10.2 INDEMNIFICATION BY PUBLISHER. Publisher shall indemnify and hold SCEA
harmless from and against any and all claims, losses, liabilities, damages,
expenses and costs, including, without limitation, reasonable fees for
attorneys, expert witnesses and litigation costs, and including costs incurred
in the settlement or avoidance of any such claim, which result from or are in
connection with (i) a breach of any of the provisions of this Agreement; or
(ii) infringement of a third party's intellectual property rights by Publisher;
or (iii) any claims of or in connection with any personal or bodily injury
(including death) or property damage, by whomever such claim is made, arising
out of, in whole or in part, the development, marketing, sale, distribution
and/or use of any of the Licensed Products (or portions thereof) unless due
directly to the breach of SCEA in performing any of the specific duties and/or
providing any of the specific services required of it hereunder; or (iv) any
federal, state or foreign civil or criminal actions relating to the
development, marketing, sale and/or distribution of Licensed Products. SCEA
shall give prompt written notice to Publisher of the assertion of any such
indemnified claim, and, with respect to third party claims, actions or
proceedings against SCEA, SCEA shall have the right to select counsel for SCEA
and reasonably control the defense and/or settlement thereof. Subject to the
above, Publisher shall have the right, at its discretion, to select its own
counsel, to commence and prosecute at its own expense any lawsuit, to
reasonably control the defense and/or settlement thereof or to take such other
action with respect to claims, actions or proceedings by or against Publisher.
SCEA shall retain the right to approve any settlement. SCEA shall provide
Publisher, at no expense to SCEA, reasonable assistance and cooperation
concerning any such matter; and SCEA shall not agree to the settlement of any
such claim, action or proceeding (other than third party claims, actions or
proceedings against SCEA) without Publisher's prior written consent.
10.3 LIMITATION OF LIABILITY.
10.3.1 LIMITATION OF SCEA'S LIABILITY. IN NO EVENT SHALL SCEA OR
OTHER SONY AFFILIATES AND THEIR SUPPLIERS, OFFICERS, DIRECTORS, EMPLOYEES OR
AGENTS BE LIABLE FOR LOSS OF PROFITS, OR ANY SPECIAL, PUNITIVE, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES ARISING OUT OF, RELATING TO OR IN CONNECTION
WITH THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE BREACH OF THIS AGREEMENT
BY SCEA, THE MANUFACTURE OF THE LICENSED PRODUCTS AND THE USE OF THE LICENSED
PRODUCTS, EXECUTABLE SOFTWARE AND/OR THE SYSTEM BY PUBLISHER OR ANY END-USER,
WHETHER UNDER THEORY OF CONTRACT, TORT
16
<PAGE> 19
(INCLUDING NEGLIGENCE), INDEMNITY, PRODUCT LIABILITY OR OTHERWISE. IN NO EVENT
SHALL SCEA'S LIABILITY ARISING UNDER, RELATING TO OR IN CONNECTION WITH THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION ANY LIABILITY FOR DIRECT OR INDIRECT
DAMAGES, AND INCLUDING WITHOUT LIMITATION ANY LIABILITY UNDER SECTION 10.1
HERETO, EXCEED THE TOTAL AMOUNT PAID BY PUBLISHER TO SCEA UNDER THIS AGREEMENT.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER SCEA NOR ANY SONY AFFILIATE, NOR
ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, SHALL BEAR
ANY RISK, OR HAVE ANY RESPONSIBILITY OR LIABILITY, OF ANY KIND TO PUBLISHER OR
TO ANY THIRD PARTIES WITH RESPECT TO THE QUALITY, OPERATION AND/OR PERFORMANCE
OF ANY PORTION OF THE SONY MATERIALS, THE SYSTEM OR ANY LICENSED PRODUCT.
10.3.2 LIMITATION OF PUBLISHER'S LIABILITY. IN NO EVENT SHALL
PUBLISHER OR ITS AFFILIATED COMPANIES AND THEIR SUPPLIERS, OFFICERS, DIRECTORS,
EMPLOYEES OR AGENTS BE LIABLE TO SCEA FOR ANY LOSS OF PROFITS, OR ANY SPECIAL,
PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES ARISING OUT OF, RELATED
TO OR IN CONNECTION WITH (i) THIS AGREEMENT OR (ii) THE USE OR DISTRIBUTION IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT OF ANY CODE PROVIDED
BY SCEA, IN WHOLE OR IN PART, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING
NEGLIGENCE), INDEMNITY, PRODUCT LIABILITY OR OTHERWISE, PROVIDED THAT SUCH
LIMITATIONS SHALL NOT APPLY TO DAMAGES RESULTING FROM PUBLISHER'S BREACH OF
SECTIONS 4, 10.2, 11 OR 13 OF THIS AGREEMENT, AND PROVIDED FURTHER THAT SUCH
LIMITATIONS SHALL NOT APPLY TO AMOUNTS WHICH PUBLISHER MAY BE REQUIRED TO PAY
TO THIRD PARTIES UNDER SECTIONS 10.2 OR 16.10.
10.4 DISCLAIMER OF WARRANTY. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
HEREIN, NEITHER SCEA NOR ITS AFFILIATES AND SUPPLIERS MAKE, NOR DOES PUBLISHER
RECEIVE, ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY,
REGARDING THE SONY MATERIALS, SCEA'S CONFIDENTIAL INFORMATION THE SYSTEM, THE
UNITS OF THE LICENSED PRODUCTS MANUFACTURED HEREUNDER AND/OR PUBLISHER'S
PRODUCT INFORMATION INCLUDED ON SCEA DEMO DISCS. SCEA SHALL NOT BE LIABLE FOR
ANY INJURY, LOSS OR DAMAGE, DIRECT, INDIRECT OR CONSEQUENTIAL, ARISING OUT OF
THE USE OR INABILITY TO USE ANY UNITS AND/OR ANY SOFTWARE ERRORS AND/OR "BUGS"
IN PUBLISHER'S PRODUCT INFORMATION WHICH MAY BE REPRODUCED ON SCEA DEMO DISCS.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SCEA AND ITS AFFILIATES AND
SUPPLIERS EXPRESSLY DISCLAIM THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE AND THEIR EQUIVALENTS UNDER THE LAWS OF ANY
JURISDICTION, REGARDING THE SONY MATERIALS, SCEA'S CONFIDENTIAL INFORMATION,
LICENSED PRODUCTS, SCEA DEMO DISCS AND THE SYSTEM. ANY WARRANTY AGAINST
INFRINGEMENT THAT MAY BE PROVIDED IN SECTION 2-312(3) OF THE UNIFORM COMMERCIAL
CODE AND/OR IN ANY OTHER COMPARABLE STATUTE IS EXPRESSLY DISCLAIMED.
11. SCEA INTELLECTUAL PROPERTY RIGHTS.
11.1 LICENSED TRADEMARKS. The Licensed Trademarks and the goodwill
associated therewith are and shall be the exclusive property of SCEA or
Affiliates of SCEA. Nothing herein shall give Publisher any right, title or
interest in or to any of the Licensed Trademarks or any other trademarks of
SCEA, other than the non-exclusive license provided herein. Publisher shall not
do or cause to be done any act or thing in any way impairing or tending to
impair or dilute any of SCEA's rights, title or interests in or to any of the
Licensed Trademarks or any other trademarks of SCEA, nor shall Publisher
register any trademark in its own name or in the name of any other person or
entity, or obtain rights to employ Internet domain names or addresses, which
are similar to or are likely to be confused with any of the Licensed Trademarks
or any other trademarks of SCEA.
11.2 LICENSE OF SONY MATERIALS AND SYSTEM. All rights with respect to the
Sony Materials and System, including, without limitation, all of SCEA
Intellectual Property Rights therein, are and shall be the exclusive property of
SCEA or Affiliates of SCEA. Nothing herein shall give Publisher any right, title
or interest in or to the Sony Materials or the System (or any portion thereof),
other than the non-exclusive license provided herein. Publisher shall not do or
cause to be done any act or thing in any way impairing or tending to impair any
of SCEA's rights, title or interests in or to the Sony Materials or the System
(or any portion thereof).
17
<PAGE> 20
12. INFRINGEMENT OF SCEA INTELLECTUAL PROPERTY RIGHTS BY THIRD PARTIES.
In the event that Publisher discovers or otherwise becomes aware that any of the
SCEA Intellectual Property Rights have been or are being infringed upon by any
third party, then Publisher shall promptly notify SCEA. SCEA shall have the sole
right, in its discretion, to institute and prosecute lawsuits against third
parties for such infringement of SCEA Intellectual Property Rights. Any lawsuit
shall be prosecuted solely at the cost and expense of SCEA and all sums
recovered in any such lawsuits, whether by judgment, settlement or otherwise
shall belong solely to SCEA. Upon request of SCEA, Publisher shall execute all
papers, testify on all matters and otherwise cooperate in every way necessary
and desirable for the prosecution of any such lawsuit. SCEA shall reimburse
Publisher for the reasonable expenses incurred as a result of such cooperation,
but unless authorized by other provisions of this Agreement, not costs and
expenses attributable to the conduct of a cross-claim or third party action.
13. CONFIDENTIALITY.
13.1 SCEA'S CONFIDENTIAL INFORMATION.
13.1.1 DEFINITION OF SCEA's CONFIDENTIAL INFORMATION. "SCEA's
Confidential Information" shall mean:
(i) the System, Sony Materials and Development Tools;
(ii) other documents and materials developed, owned, licensed or under the
control of Sony, including all processes, data, hardware, software, inventions,
trade secrets, ideas, creations, improvements, designs, discoveries,
developments, research and know-how, including without limitation the SourceBook
2 and SCEA Intellectual Property Rights relating to the System, Sony Materials
or Development Tools; and
(iii) information and documents regarding SCEA's finances, business,
marketing and technical plans, business methods and production plans.
SCEA's Confidential Information may consist of information in any medium,
whether oral, printed, in machine-readable form or otherwise, including
information apprised to Publisher and reduced to tangible or written form at any
time during the term of this Agreement. In addition, the existence of a
relationship between Publisher and SCEA for the purposes set forth herein shall
be deemed to be SCEA's Confidential Information unless otherwise agreed to in
writing by the parties or until publicly announced by SCEA.
13.1.2 TERM OF PROTECTION OF SCEA's CONFIDENTIAL INFORMATION. The term
for the protection of SCEA's Confidential Information shall commence on the
Effective Date first above written and shall continue in full force and effect
as long as any of SCEA's Confidential Information continues to be maintained as
confidential and proprietary by SCEA and/or Sony. During such term, Publisher
shall, pursuant to Section 13.1.3 below, safeguard and hold in trust and
confidence and not disclose or use (except for the purposes herein specified)
any and all of SCEA's Confidential Information.
13.1.3 PRESERVATION OF SCEA's CONFIDENTIAL INFORMATION. Publisher
shall, with respect to SCEA's Confidential Information:
(i) not disclose SCEA's Confidential Information to any person or entity,
other than those employees or directors of the Publisher whose duties justify a
"need-to-know" and who have executed a confidentiality agreement in which such
employees or directors have agreed not to disclose and to hold confidential all
confidential information and materials (inclusive of those of third parties)
which may be disclosed to them or to which they may have access during the
course of their duties. At SCEA's request, Publisher shall provide SCEA with a
copy of such confidentiality agreement between Publisher and its employees or
directors, and shall also provided SCEA with a list of employee and director
signatories. Publisher shall not disclose any of SCEA's Confidential Information
to third parties, including without limitation to consultants or agents. Any
employees or directors who obtain access to SCEA's Confidential Information
shall be advised by Publisher of the confidential nature of SCEA's Confidential
Information, and Publisher shall be responsible for any breach of this Agreement
by its employees or directors.
(ii) take all measures necessary to safeguard SCEA's Confidential
Information in order to avoid disclosure, publication, or dissemination, using
as high a degree of care and scrutiny, but at least reasonable care, as is
consistent with the protection of valuable trade secrets by companies in high
technology industries.
(iii) ensure that all written materials relating to or containing SCEA's
Confidential Information be maintained in a restricted access area and plainly
marked to indicate the secret and confidential nature thereof.
(iv) at SCEA's request, return promptly to SCEA any and all portions of
SCEA's Confidential Information, together with all copies thereof.
(v) not use, modify, reproduce, sublicense, copy, distribute, create
derivative works from, or otherwise provide to third parties, SCEA's
Confidential Information, or any portion thereof, except as provided herein, nor
shall Publisher remove any proprietary legend set forth on or contained within
any of SCEA's Confidential Information.
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13.1.4 EXCEPTIONS. The foregoing restrictions shall not apply to
any portion of SCEA's Confidential Information which:
(i) was previously known to Publisher without restriction on disclosure
or use, as proven by written documentation of Publisher; or
(ii) is or legitimately becomes part of the public domain through no fault
of Publisher or its employees; or
(iii) is independently developed by Publisher's employees who have not had
access to SCEA's Confidential Information, as proven by written documentation
of Publisher; or
(iv) is required to be disclosed by administrative or judicial action;
provided that Publisher must attempt to maintain the confidentiality of SCEA's
Confidential Information by asserting in such action the restrictions set forth
in this Agreement, and, immediately after receiving notice of such action or
any notice of any threatened action, Publisher must notify SCEA to give SCEA
the maximum opportunity to seek any other legal remedies to maintain such
SCEA's Confidential Information in confidence as herein provided; or
(v) is approved for release by written authorization of SCEA.
13.1.5 NO OBLIGATION TO LICENSE. Disclosure of SCEA's Confidential
Information to Publisher shall not constitute any option, grant or license from
SCEA to Publisher under any patent or other SCEA Intellectual Property Rights
now or hereinafter held by SCEA. The disclosure by SCEA to Publisher of SCEA's
Confidential Information hereunder shall not result in any obligation on the
part of SCEA to approve any materials of Publisher hereunder or otherwise, nor
shall such disclosure by SCEA give Publisher any right to, directly or
indirectly, develop, manufacture or sell any product derived from or which uses
any of SCEA's Confidential Information, other than as expressly set forth in
this Agreement.
13.1.6 PUBLISHER'S OBLIGATIONS UPON UNAUTHORIZED DISCLOSURE. If at
any time Publisher becomes aware of any unauthorized duplication, access, use,
possession or knowledge of any SCEA's Confidential Information, it shall notify
SCEA as soon as reasonably practicable, and shall promptly act to recover any
such information and prevent further breach of the confidentiality obligations
herein. Publisher shall provide any and all reasonable assistance to SCEA to
protect SCEA's proprietary rights in any of SCEA's Confidential Information that
it or its employees or permitted subcontractors may have directly or indirectly
disclosed or made available, and that may be duplicated, accessed, used,
possessed or known in a manner or for a purpose not expressly authorized by this
Agreement, including but not limited to enforcement of confidentiality
agreements, commencement and prosecution in good faith (alone or with the
disclosing party) of legal action, and reimbursement for all reasonable
attorneys' fees, costs and expenses incurred by SCEA to protect its proprietary
rights in SCEA's Confidential Information. Publisher shall take all steps
requested by SCEA to prevent the recurrence of any unauthorized duplication,
access, use, possession or knowledge of SCEA's Confidential Information. In
addition, SCEA shall have the right to pursue any actions at law or in equity,
including without limitation the remedies set forth in Section 16.10 hereto.
13.2 PUBLISHER'S CONFIDENTIAL INFORMATION.
13.2.1 DEFINITION OF PUBLISHER'S CONFIDENTIAL INFORMATION.
"Publisher's Confidential Information" shall mean:
(i) any Product Software as provided to SCEA pursuant to this Agreement
and all documentation and information relating thereto, including Product
Proposals, Printed Materials and Advertising Materials (other than
documentation and information intended for use by and release to end users, the
general public or the trade);
(ii) other documents and materials developed, owned, licensed or under the
control of Publisher, including all processes, data, hardware, software,
inventions, trade secrets, ideas, creations, improvements, designs,
discoveries, developments, research and know-how; and
(iii) information and documents regarding Publisher's finances, business,
marketing and technical plans, business methods and production plans.
Publisher's Confidential Information may consist of information in any medium,
whether oral, printed, in machine-readable form or otherwise, including
information apprised to SCEA and reduced to tangible or written form at any
time during the term of this Agreement.
13.2.2 TERM OF PROTECTION OF PUBLISHER'S CONFIDENTIAL INFORMATION.
The term for the protection of Publisher's Confidential Information shall
commence on the Effective Date first above written and shall continue in full
force and effect as long as any of Publisher's Confidential Information
continues to be maintained as confidential and proprietary by Publisher.
13.2.3 PRESERVATION OF CONFIDENTIAL INFORMATION OF PUBLISHER. SCEA
shall, with respect to Publisher's Confidential Information:
(i) hold all Publisher's Confidential Information in confidence, and shall
take all reasonable steps to preserve the confidentiality of Publisher's
Confidential Information, and to prevent it from falling into the public domain
or into
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the possession of persons other than those persons to whom disclosure is
authorized hereunder.
(ii) not disclose Publisher's Confidential Information to any person
other than an SCEA employee or subcontractor who needs to know or have access
to such Confidential Information for the purposes of this Agreement, and only
to the extent necessary for such purposes.
(iii) ensure that all written materials relating to or containing
Publisher's Confidential Information be maintained in a secure area and plainly
marked to indicate the secret and confidential nature thereof.
(iv) at Publisher's request, return promptly to Publisher any and all
portions of Publisher's Confidential Information, together with all copies
thereof.
(v) not use Publisher's Confidential Information, or any portion
thereof, except as provided herein, nor shall SCEA remove any proprietary
legend set forth on or contained within any of Publisher's Confidential
Information.
13.2.4 EXCEPTIONS. The foregoing restrictions will not apply to any
portion of Publisher's Confidential Information which:
(i) was previously known to SCEA without restriction on disclosure or
use, as proven by written documentation of SCEA; or
(ii) is or legitimately becomes part of information in the public domain
through no fault of SCEA, its employees or its subcontractors; or
(iii) is independently developed by SCEA's employees or affiliates who
have not had access to Publisher's Confidential Information, as proven by
written documentation of SCEA; or
(iv) is required to be disclosed by administrative or judicial action;
provided that SCEA attempted to maintain the confidentiality of Publisher's
Confidential Information by asserting in such action the restrictions set forth
in this Agreement, and immediately after receiving notice of such action,
notified Publisher of such action to give Publisher the opportunity to seek any
other legal remedies to maintain such Publisher's Confidential Information in
confidence as herein provided; or
(vi) is approved for release by written authorization of Publisher.
13.2.5 SCEA'S OBLIGATIONS UPON UNAUTHORIZED DISCLOSURE. If at any
time SCEA becomes aware of any unauthorized duplication, access, use,
possession or knowledge of any of Publisher's Confidential Information, it
shall notify Publisher as soon as is reasonably practicable. SCEA shall provide
any and all reasonable assistance to Publisher to protect Publisher's
proprietary rights in any of Publisher's Confidential Information that it or
its employees or permitted subcontractors may have directly or indirectly
disclosed or made available and that may be duplicated, accessed, used,
possessed or known in a manner or for a purpose not expressly authorized by
this Agreement including but not limited to enforcement of confidentiality
agreements, commencement and prosecution in good faith (alone or with the
disclosing party) of legal action, and reimbursement for all reasonable
attorneys' fees, costs and expenses incurred by Publisher to protect its
proprietary rights in Publisher's Confidential Information. SCEA shall take all
reasonable steps requested by Publisher to prevent the recurrence of any
unauthorized duplication, access, use, possession or knowledge of Publisher's
Confidential Information.
13.3 CONFIDENTIALITY OF AGREEMENT. The terms and conditions of this
Agreement shall be treated as SCEA's Confidential Information and Publisher's
Confidential Information; provided that each party may disclose the terms and
conditions of this Agreement:
(i) to legal counsel;
(ii) in confidence, to accountants, banks and financing sources and
their advisors;
(iii) in confidence, in connection with the enforcement of this Agreement
or rights arising under or relating to this Agreement; and
(iv) if required, in the opinion of counsel, to file publicly or
otherwise disclose the terms of this Agreement under applicable federal and/or
state securities or other laws, the disclosing party shall be required to
promptly notify the other party such that the other party has a reasonable
opportunity to contest or limit the scope of such required disclosure, and the
disclosing party shall request, and shall use its best efforts to obtain,
confidential treatment for such sections of this Agreement as the other party
may designate.
14. TERM AND TERMINATION.
14.1 EFFECTIVE DATE; TERM. This Agreement shall not be binding on the
parties until it has been signed by each party, in which event it shall be
effective from the Effective Date until March 31, 2003, unless earlier
terminated pursuant to Section 14.2. The term shall be automatically extended
for additional one-year terms thereafter, unless either party provides the other
with written notice of its election not to so extend on or before January 31 of
the applicable year. Notwithstanding the foregoing the term for the protection
of SCEA's Confidential Information and Publisher's Confidential
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<PAGE> 23
Information shall be as set forth in Sections 13.2.3 and 13.2.2 respectively.
14.2 TERMINATION BY SCEA. SCEA shall have the right to terminate this
Agreement immediately, by providing written notice of such election to
Publisher, upon the occurrence of any of the following:
(i) If Publisher breaches (A) any of its obligations hereunder; or (B)
any other agreement entered into between SCEA or Affiliates of SCEA and
Publisher.
(ii) The liquidation or dissolution of Publisher or a statement of
intent by Publisher to no longer exercise any of the rights granted by SCEA to
Publisher hereunder.
(iii) If during the term of this Agreement, a controlling interest in
Publisher or in an entity which directly or indirectly has a controlling
interest in Publisher is transferred to a party that (A) is in breach of any
agreement with SCEA or an Affiliate of SCEA; (B) directly or indirectly holds
or acquires a controlling interest in a third party which develops any
interactive device or product which is directly or indirectly competitive with
the System; or (C) is in litigation with SCEA or Affiliates of SCEA concerning
any proprietary technology, trade secrets or other SCEA Intellectual Property
Rights or SCEA's Confidential Information. As used in this Section 14.2,
"controlling interest" means, with respect to any form of entity, sufficient
power to control the decisions of such entity.
(iv) If during the term of this Agreement, Publisher or an entity that
directly or indirectly has a controlling interest in Publisher enters into
a business relationship with a third party with whom Publisher materially
contributes to develop core components to an interactive device or product
which is directly or indirectly competitive with the System.
Publisher shall immediately notify SCEA in writing in the event that any of the
circumstances specified in this Section occur.
14.3 PRODUCT-BY-PRODUCT TERMINATION BY SCEA. In addition to the events
of termination described in Section 14.2, above, SCEA, at its option, shall be
entitled to terminate, on a product-by-product basis, the licenses and related
rights herein granted to Publisher in the event that (a) Publisher fails to
notify SCEA promptly in writing of any material change to any materials
previously approved by SCEA in accordance with Section 5 or Section 6.1 hereto,
and such breach is not corrected or cured within thirty (30) days after
receipt of written notice of such breach; (b) Publisher uses a third party that
fails to comply with the requirements of Section 3 in connection with the
development of any Licensed Product; (c) any third party with whom Publisher
has contracted for the development of Executable Software breaches any of its
material obligations to SCEA pursuant to such third party's agreement with
SCEA with respect to such Licensed Product; or (d) Publisher cancels a Licensed
Product or fails to provide SCEA in accordance with the provisions of Section 5
above, with the final version of the Executable Software for any Licensed
Product within three (3) months of the scheduled release date according to the
Product Proposal (unless a modified final delivery date has been agreed to by
the parties), or fails to provide work in progress to SCEA in strict accordance
with the Review Process in Section 5.3.
14.4 OPTIONS OF SCEA IN LIEU OF TERMINATION. As alternatives to terminating
this Agreement or a particular Licensed Product as set forth in Sections 14.2
and 14.3 above, SCEA may, at its option and upon written notice to Publisher,
take the following actions in lieu of terminating this Agreement. In the event
that SCEA elects either of these options, Publisher may terminate this Agreement
upon written notice to SCEA rather than allowing SCEA to exercise these options.
Election of these options by SCEA shall not constitute a waiver of or compromise
with respect to any of SCEA's rights under this Agreement and SCEA may elect to
terminate this Agreement with respect to any breach.
14.4.1 SUSPENSION OF AGREEMENT. SCEA may suspend this Agreement,
entirely or with respect to a particular Licensed Product or program, for a set
period of time which shall be specified in writing to Publisher upon the
occurrence of any breach of this Agreement.
14.4.2 LIQUIDATED DAMAGES. Whereas a minor breach of any of the
events set out below may not warrant termination of this Agreement, but will
cause SCEA damages in amounts difficult to quantify, SCEA may require Publisher
to pay liquidated damages of [*] per event as follows:
(i) Failure to submit Advertising Materials to SCEA for approval
(including any required resubmissions);
(ii) Broadcasting or publishing Advertising Materials without
receiving the final approval or consent of SCEA;
(iii) Failure to make SCEA's requested revisions to Advertising
Materials; or
(iv) Failure to comply with the SourceBook 2, Manufacturing
Specifications or Guidelines which relates in any way to use of Licensed
Trademarks.
Liquidated damages shall be invoiced separately or on Publisher's next invoice
for Licensed Products. SCEA reserves the right to terminate this Agreement for
breach in lieu of seeking liquidated damages or in the event that liquidated
damages are unpaid.
* Confidential portion omitted and filed separately with the Commission.
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14.5 NO REFUNDS. In the event of the termination of this Agreement in
accordance with any of the provisions of Sections 14.2 through 14.4 above, no
portion of any payments of any kind whatsoever previously provided to SCEA
hereunder shall be owed or be repayable to Publisher.
15. EFFECT OF EXPIRATION OR TERMINATION.
15.1 INVENTORY STATEMENT. Within thirty (30) days of the date of
expiration or the effective date of termination with respect to any or all
Licensed Products or this Agreement, Publisher shall provide SCEA with an
itemized statement, certified to be accurate by an officer of Publisher,
specifying the number of unsold Units of the Licensed Products as to which such
termination applies, on a title-by-title basis, which remain in its inventory
and/or under its control at the time of expiration or the effective date of
termination. SCEA shall be entitled to conduct at its expense a physical
inspection of Publisher's inventory and work in process upon reasonable written
notice during normal business hours in order to ascertain or verify such
inventory and inventory statement.
15.2 REVERSION OF RIGHTS. Upon expiration or termination and subject to
Section 15.3 below, the licenses and related rights herein granted to Publisher
shall immediately revert to SCEA, and Publisher shall cease from any further
use of SCEA's Confidential Information, Licensed Trademarks and Sony Materials
and any SCEA Intellectual Property Rights therein, and, subject to the
provisions of Section 15.3 below, Publisher shall have no further right to
continue the development, publication, manufacture, marketing, sale or
distribution of any Units of the Licensed Products, or to continue to use any
Licensed Trademarks; provided, however, that for a period of one year after
termination, and subject to all the terms of Section 13, and provided this
Agreement is not terminated due to a breach or default of Publisher, Publisher
may retain such portions of Sony Materials and SCEA's Confidential Information
as SCEA in its sole discretion agrees are required to support end users of
Licensed Products but must return these materials at the end of such one year
period. Upon expiration or termination, the licenses and related rights herein
granted to SCEA by Publisher shall immediately revert to Publisher, and SCEA
shall cease from any further use of Product Information and any Publisher
Intellectual Property Rights therein; provided that SCEA may continue the
manufacture, marketing, sale or distribution of any SCEA Demo Discs containing
Publisher's Product Information which Publisher had approved prior to
termination.
15.3 DISPOSAL OF UNSOLD UNITS. Provided that this Agreement is not
terminated due to a breach or default of Publisher, Publisher may, upon
expiration or termination of this Agreement, sell off existing inventories of
Licensed Products, on a non-exclusive basis, for a period of ninety (90) days
from the date of expiration or termination of this Agreement, and provided such
inventories have not been manufactured solely or principally for sale during
such period. Subsequent to the expiration of such ninety (90) day period, or in
the event this Agreement is terminated as a result of any breach or default of
Publisher, any and all Units of the Licensed Products remaining in Publisher's
inventory shall be destroyed by Publisher within five (5) business days of such
expiration or termination. Within five (5) business days after such destruction,
Publisher shall provide SCEA with an itemized statement, certified to be
accurate by an officer of Publisher, indicating the number of Units of the
Licensed Products which have been destroyed (on a title-by-title basis), the
location and date of such destruction and the disposition of the remains of such
destroyed materials.
15.4 RETURN OF SONY MATERIALS AND CONFIDENTIAL INFORMATION. Upon the
expiration or earlier termination of this Agreement, Publisher shall immediately
deliver to SCEA, or if and to the extent requested by SCEA destroy, all Sony
Materials and any and all copies thereof, and Publisher and SCEA shall, upon the
request of the other party, immediately deliver to the other party, or if and to
the extent requested by such party destroy, all Confidential Information of the
other party, including any and all copies thereof, which the other party
previously furnished to it in furtherance of this Agreement. Within five (5)
working days after any such destruction, Publisher and/or SCEA, as appropriate,
shall provide the other party with an affidavit of destruction and an itemized
statement, each certified to be accurate by an officer of Publisher, indicating
the numbers of copies and/or units of the Sony Materials and/or Confidential
Information which have been destroyed, the location and date of such destruction
and the disposition of the remains of such destroyed materials. In the event
that Publisher fails to return the Sony Materials or Confidential Information
and SCEA must resort to legal means (including without limitation any use of
attorneys) to recover the Sony Materials or Confidential Information or the
value thereof, all costs, including SCEA's reasonable attorney's fees, shall be
borne by Publisher, and SCEA may, in addition to SCEA's other remedies, withhold
such amounts from any payment otherwise due from SCEA to Publisher under any
agreement between SCEA and Publisher.
15.5 EXTENSION OF THIS AGREEMENT; TERMINATION WITHOUT PREJUDICE. SCEA
shall be under no obligation to extend this Agreement notwithstanding any
actions taken by either of the parties prior to the expiration of this
Agreement. Upon the expiration of this Agreement, neither party shall be liable
to the other for any damages (whether direct, indirect, consequential or
incidental, and including, without limitation, any expenditures, loss of
profits or prospective profits) sustained or arising out of or alleged to have
been sustained or to have arisen out of such expiration. The expiration or
termination of this Agreement shall be without prejudice to any rights or
remedies which one party may otherwise have against the
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<PAGE> 25
other party, and shall not excuse either party from any such expiration or
termination.
16. MISCELLANEOUS PROVISIONS.
16.1 NOTICES. All notices or other communications required or desired to be
sent to either of the parties shall be in writing and shall be sent by
registered or certified mail, postage prepaid, or sent by recognized
international courier service, telegram or facsimile, with charges prepaid. The
address for all notices or other communications required to be sent to SCEA or
Publisher, respectively, shall be the mailing address stated in the preamble
hereof, or such other address as may be provided by written notice from one
party to the other on at least ten (10) days' prior written notice. Any such
notice shall be effective upon the date of actual or tendered delivery, as
confirmed by the sending party.
16.2 AUDIT PROVISIONS. Publisher shall keep full, complete, and accurate
books of account and records covering all transactions relating to this
Agreement. Publisher shall preserve such books of account, records, documents,
and material for a period of twenty-four (24) months after the expiration or
earlier termination of this Agreement. Acceptance by SCEA of an accounting
statement, purchase order, or payment hereunder will not preclude SCEA from
challenging or questioning the accuracy thereof at a later time. In the event
that SCEA reasonably believes that the Wholesale Price provided by Publisher
with respect to any Licensed Product is not accurate, SCEA shall be entitled to
request additional documentation from Publisher to support the listed Wholesale
Price for such Licensed Product. In addition, during the Term and for a period
of two (2) years thereafter and upon the giving of reasonable written notice to
Publisher, representatives of SCEA shall have access to, and the right to make
copies and summaries of, such portions of all of Publisher's books and records
as pertain to the Licensed Products and any payments due or credits received
hereunder. In the event that such inspection reveals an under-reporting of any
payment due to SCEA, Publisher shall immediately pay SCEA such amount. In the
event that any audit conducted by SCEA reveals that Publisher has under-reported
any payment due to SCEA hereunder by [*] or more for that audit period, then in
addition to the payment of the appropriate amount due to SCEA, Publisher shall
reimburse SCEA for all reasonable audit costs for that audit and any and all
collection costs to recover the unpaid amount.
16.3 FORM MAJEURE. Neither SCEA nor Publisher shall be liable for any loss
or damage or be deemed to be in breach of this Agreement if its failure to
perform or failure to cure any of its obligations under this Agreement results
from any event or circumstance beyond its reasonable control, including, without
limitation, any natural disaster, fire, flood, earthquake or other Act of God;
shortage of equipment, materials, supplies or transportation facilities; strike
or other industrial dispute; war or rebellion; shutdown or delay in power,
telephone or other essential service due to the failure of computer or
communications equipment or otherwise; provided, however, that the party
interfered with gives the other party written notice thereof promptly, and, in
any event, within fifteen (15) business days of discovery of any such Force
Majeure condition. If notice of the existence of any Force Majeure condition is
provided within such period, the time for performance or cure shall be extended
for a period equal to the duration of the Force Majeure event or circumstance
described in such notice, except that any such cause shall not excuse the
payment of any sums owed to SCEA prior to, during or after any such Force
Majeure condition. In the event that the Force Majeure condition continues for
more than sixty (60) days, SCEA may terminate this Agreement for cause by
providing written notice to Publisher to such effect.
16.4 NO AGENCY, PARTNERSHIP OR JOINT VENTURE. The relationship between
SCEA and Publisher, respectively, is that of licensor and licensee. Both
parties are independent contractors and are not the legal representative,
agent, joint venturer, partner or employee of the other party for any purpose
whatsoever. Neither party has any right or authority to assume or create any
obligations of any kind or to make any representation or warranty on behalf of
the other party, whether express or implied, or to bind the other party in any
respect whatsoever.
16.5 ASSIGNMENT. SCEA has entered into this Agreement based upon the
particular reputation, capabilities and experience of Publisher and its
officers, directors and employees. Accordingly, Publisher may not assign this
Agreement or any of its rights hereunder, nor delegate or otherwise transfer
any of its obligations hereunder, to any third party unless the prior written
consent of SCEA shall first be obtained. This Agreement shall not be assigned
in contravention of Section 14.2(iii). Any attempted or purported assignment,
delegation or other such transfer, directly or indirectly, without the required
consent of SCEA shall be void. Subject to the foregoing, this Agreement shall
inure to the benefit of the parties and their respective successors and
permitted assigns (other than under the conditions set forth in Section
14.2(iii). SCEA shall have the right to assign any and all of its rights and
obligations hereunder to any Sony affiliate(s).
16.6 SUBCONTRACTORS. Publisher shall not sell, assign, delegate,
subcontract, sublicense or otherwise transfer or encumber all or any portion of
the licenses herein granted without the prior written approval of SCEA,
provided, however, that Publisher may retain those subcontractors who provide
services which do not require access to Sony Materials or SCEA's Confidential
Information without such prior approval. Publisher may retain those
subcontractor(s) to assist with the development, publication and marketing of
Licensed
* Confidential portion omitted and filed separately with the Commission.
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<PAGE> 26
Products (or portions thereof) which have signed (i) an LPA or LDA with SCEA
(the "PlayStation 2 Agreement") in full force and effect throughout the term of
such development and marketing; or (ii) an SCEA-approved subcontractor
agreement ("Subcontractor Agreement"); and SCEA has approved such subcontractor
in writing, which approval shall be in SCEA's sole discretion. Such
Subcontractor Agreement shall provide that SCEA is a third-party beneficiary of
such Subcontractor Agreement and has the full right to bring any actions
against such subcontractors to comply in all respects with the terms and
conditions of this Agreement. Publisher shall provide a copy of any such
Subcontractor Agreement to SCEA prior to and following execution thereof.
Publisher shall not disclose to any subcontractor any of SCEA's Confidential
Information, including, without limitation, any Sony Materials, unless and
until either a PlayStation 2 Agreement or a Subcontractor Agreement has been
executed and approved by SCEA. Notwithstanding any consent which may be granted
by SCEA for Publisher to employ any such permitted subcontractor(s), or any
such separate agreement(s) that may be entered into by Publisher with any such
permitted subcontractor, Publisher shall remain fully liable for its compliance
with all of the provisions of this Agreement and for the compliance of any and
all permitted subcontractors with the provisions of any agreements entered
into by such subcontractors in accordance with this Section. Publisher shall
use its best efforts to cause its subcontractors retained in furtherance of
this Agreement to comply in all respects with the terms and conditions of this
Agreement, and hereby unconditionally guarantees all obligations of its
subcontractors. SCEA may subcontract any of its rights or obligations hereunder.
16.7 COMPLIANCE WITH APPLICABLE LAWS. The parties shall at all times
comply with all applicable regulations and orders of their respective countries
and other controlling jurisdictions and all conventions and treaties to which
their countries are a party or relating to or in any way affecting this
Agreement and the performance by the parties of this Agreement. Each party, at
its own expense, shall negotiate and obtain any approval, license or permit
required in the performance of its obligations, and shall declare, record or
take such steps to render this Agreement binding, including, without
limitation, the recording of this Agreement with any appropriate governmental
authorities (if required).
16.8 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
California, excluding that body of law related to choice of laws, and of the
United States of America. Any action or proceeding brought to enforce the terms
of this Agreement or to adjudicate any dispute arising hereunder shall be
brought in the Superior Court of the County of San Mateo, State of California or
the United States District Court for the Northern District of California. Each
of the parties hereby submits itself to the exclusive jurisdiction and venue of
such courts for purposes of any such action and agrees that any service of
process may be effected by delivery of the summons in the manner provided in the
delivery of notices set forth in Section 16.1 above. In addition, each party
hereby waives the right to a jury trial in any action or proceeding related to
this Agreement.
16.9 LEGAL COSTS AND EXPENSES. In the event it is necessary for either
party to retain the services of an attorney or attorneys to enforce the terms
of this Agreement or to file or defend any action arising out of this
Agreement, then the prevailing party in any such action shall be entitled, in
addition to any other rights and remedies available to it at law or in equity
to recover from the other party its reasonable fees for attorneys and expert
witnesses, plus such court costs and expenses as may be fixed by any court of
competent jurisdiction. The term "prevailing party" for the purposes of this
Section shall include a defendant who has by motion, judgment, verdict or
dismissal by the court, successfully defended against any claim that has been
asserted against it.
16.10 REMEDIES. Unless expressly set forth to the contrary, either party's
election of any remedies provided for in this Agreement shall not be exclusive
of any other remedies, and all such remedies shall be deemed to be cumulative.
Any breach of Sections 3, 4, 5, 6.1, 11 and 13 of this Agreement would cause
significant and irreparable harm to SCEA, the extent of which would be
difficult to ascertain. Accordingly, in addition to any other remedies
including without limitation equitable relief to which SCEA may be entitled, in
the event of a breach by Publisher or any of its employees or permitted
subcontractors of any such Sections of this Agreement, SCEA shall be entitled
to the immediate issuance without bond of ex parte injunctive relief or, if a
bond is required under applicable law, on the posting of a bond in an amount
not to exceed [*], enjoining any breach or threatened breach of any or all
of such provisions. In addition, if Publisher fails to comply with any of its
obligations as set forth herein, SCEA shall be entitled to an accounting and
repayment of all forms of compensation, commissions, remuneration or benefits
which Publisher directly or indirectly realizes as a result of or arising in
connection with any such failure to comply. Such remedy shall be in addition to
and not in limitation of any injunctive relief or other remedies to which SCEA
may be entitled under this Agreement or otherwise at law or in equity. In
addition, Publisher shall indemnify SCEA for all losses, damages, liabilities,
costs and expenses (including reasonable attorneys' fees and all reasonable
related costs) which SCEA may sustain or incur as a result of any breach under
this Agreement.
16.11 SEVERABILITY. In the event that any provision of this Agreement (or
portion thereof) is determined by a court of competent jurisdiction to be
invalid or otherwise unenforceable, such provision (or portion thereof) shall be
enforced to the extent possible
* Confidential portion omitted and filed separately with the Commission.
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