Investment Agreement - GRAVITY Co. Ltd. and Trigger Soft Corp.
INVESTMENT AGREEMENT
GRAVITY Co., Ltd. (hereinafter referred to as "GRAVITY") and Trigger Soft
Corporation (hereinafter referred to as "Trigger") hereby enter into this
investment agreement (this "Agreement") regarding a MMORPG Game to be developed
by Trigger, provisionally named "Seven Hearts" (hereinafter referred to as the
"Game").
ARTICLE 1. PURPOSE
The purpose of this Agreement is to foster for the long term a mutually
beneficial "win-win" partnership between the parties and, for the short term, to
lay out a strategic foundation for the successful launching of this Game, by
combining GRAVITY's funding and game marketing capabilities with Trigger's
development know-how in order that both parties can be leading companies in the
fast-changing Korean game industry.
ARTICLE 2. DEFINITION OF TERMS
The terms used herein shall have the following definitions.
1. "Investment Amount" means the amount payable by GRAVITY to Trigger to cover
the development cost incurred by Trigger in connection with the Game.
2. "Game" means the massively multiplayer online role playing game (MMORPG),
temporarily named "Seven Hearts: the Project of Organically Managing Seven
Planets", which is to be developed by Trigger.
3. "Commercialization" means the point at which the users of the Game are
charged a fee for the use of the Game.
4. "Royalty" means the payment by GRAVITY to Trigger of a certain percentage
of the Net Sales arising from the Commercialization of the Game.
5. "Gross Sales" means the total amount of sales and usage fees that have been
collected from the charges made to online users of the Game on a
pay-per-use basis or the sale of the CDs of the Game.
6. "Net Sales" means the amount remaining after deducting the Total Cost
described in clause 7 below from the Gross Sales described in clause 5
above, provided that the Net Sales
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shall be deemed to exist only if there is any amount remaining after
deducting the Total Cost from the Gross Sales.
7. "Total Cost" shall refer to the following costs incurred in connection with
the supply of the Game to online users:
a. Value-added tax (VAT);
b. Costs payable to third parties related to the imposition and
collection of usage fees;
c. Costs payable to online and offline agents, subscription promoters and
other individuals and corporations) that solicit or represent the
paying users (hereinafter referred to as "Agents";
d. Costs incurred in paying for claims by users or Agents of indemnity,
compensation, and/or refund, and related expenses, pursuant to
relevant law or regulations;
e. Costs incurred in exchanging foreign currencies, to the extent
necessary;
f. Production costs for the production of CDs, instruction manuals and
promotional materials following the Commercialization of the Game, to
the extent that such materials are sold for a price.
g. Costs related to the deposit or payment of money, to the extent
required by law;
h. Premiums payable under insurance policies, to the extent required by
law;
i. Costs payable to third parties in connection with overseas exports
(excluding costs related to overseas publicity, exhibition,
advertising, etc.);
j. Actual costs related to the overseas technical support for Trigger;
and
k. Costs agreed upon in writing by the parties.
8. "Marketing" means advertising, promotions and other events conducted locally
and abroad in connection with the sale and servicing of the Game, promotion
of its brand recognition and the increase of its users.
ARTICLE 3. TERM OF AGREEMENT
For the purpose of promoting a long-term strategic partnership, this Agreement
shall take effect as of the date of this Agreement and remain effective until
terminated by mutual agreement of the parties. If the Game is successfully
launched, the parties will continue to work together as strategic parties with
respect to the sequels.
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ARTICLE 4. RIGHTS TO THE GAME
1. Trigger shall hold intellectual property rights to the Game, including the
right to develop programs and the right to use.
2. GRAVITY shall hold the rights to operate and manage the exclusive domestic
and overseas rights related to the Game, including the selling and
marketing rights and the rights to the trademarks
ARTICLE 5. TRANSFER OF RIGHTS
1. With prior written consent of the other party, each party hereto may
transfer to third parties the whole or part of its respective rights and
obligations hereunder and, to the extent not in conflict with the rights of
the other party specified herein, enter into similar agreements with third
parties.
2. In the case of a transfer of rights as specified in the preceding
paragraph, the third party shall be deemed as substituting the transferring
party with respect to all related rights and obligations.
ARTICLE 6. INVESTMENT AMOUNT
The Investment Amount payable by GRAVITY to Trigger shall be KRW 700 million,
payable in the following installments:
1. KRW 100 million, within seven (7) days from the date Trigger provides with
a performance guarantee after the date of this agreement.
2. KRW 50 million on the 25th day of each month for 10 months starting from
the month following the month during which the payment in clause 1 is made.
3. The remaining KRW 100 million shall be paid within one year of the date of
this Agreement upon Trigger's request and as agreed by the parties.
ARTICLE 7. OPENING AND MANAGEMENT OF THE DOMESTIC RECEIVING ACCOUNT AND ROYALTY
1. The parties shall open a bank account (hereinafter referred to as the
"Receiving Account") in GRAVITY's name, for the purpose of collecting
online usage fee from customers and managing revenues generated from the
sale of CDs of the Game. The Receiving Account shall be jointly managed by
the parties.
2. After the Commercialization of the Game, GRAVITY shall pay Trigger as
Royalty 25% of the monthly Net Sales out of the cash and cash equivalents
actually deposited into the Receiving Account.
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3. GRAVITY shall settle its account at the end of each month and pay the
Royalty to Trigger by the tenth day of the following month, provided that
the cumulative settlement shall be made at the end of each fiscal year
(December 31).
ARTICLE 8. OPENING AND MANAGEMENT OF THE OVERSEAS RECEIVING ACCOUNT AND ROYALTY
1. The parties shall open a bank account (hereinafter referred to as the
"Overseas Receiving Account") in GRAVITY's name to collect and manage the
revenues collected from overseas customers.
2. GRAVITY shall pay Trigger as the Royalty 50% of the overseas monthly Net
Sales out of the cash and cash equivalents actually deposited into the
Overseas Receiving Account.
3. GRAVITY shall settle its account at the end of each month and pay the
Royalty to Trigger by the tenth day of the following month, provided that
the cumulative settlement shall be made at the end of each fiscal year
(December 31).
ARTICLE 9. OBLIGATION OF GRAVITY
GRAVITY undertakes to cooperate in good faith upon the receipt of the following
requests from Trigger:
1. Access to the information relating to the Gross Sales, Total Cost, and Net
Sales.
2. Transparent management of sales accounts;
3. Support on equipment related to game development;
4. Active domestic and overseas marketing promotions and sales activities; and
5. Smooth operation and maintenance of game services.
ARTICLE 10. OBLIGATION OF TRIGGER
Trigger undertakes to cooperate in good faith upon the receipt of the following
requests from GRAVITY:
1. Simultaneously with the execution of this Agreement, Trigger shall provide
to GRAVITY a performance guarantee for an amount equal to the advance
payment of KRW 100 million.
2. Trigger shall be liable for technical problems (bugs, lags, resolving
hacking problems, and domestic and overseas technical assistance) arising
in connection with
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GRAVITY's operation of the Game following the completion of the Game
development.
3. If Trigger develops a sequel following this Game, upon GRAVITY's request
Trigger will grant publishing rights thereto to GRAVITY on the same
conditions as this Agreement, provided that the Investment Amount shall be
adjusted based on consultation over the size and quality of such game.
4. If Trigger pursues a project in connection with Clause 5 of Article 15,
Trigger shall deliver a business plan to GRAVITY from the planning phase
and forth.
ARTICLE 11. JOINTLY LIABLE GUARANTEE
Moon-kyu Kim, the representative director of Trigger, and Wook-sang Cho, the
main programmer of Trigger, hereby jointly provides an unlimited guarantee of
the performance by Trigger of its obligation hereunder.
ARTICLE 12. DEVELOPMENT SCHEDULE
Trigger hereby agrees to a development period for the Game as a total of 22
months and shall complete the development of the Game according to the following
schedule. Details of the development-related plans and timing shall be provided
as an attachment hereto, which shall form an integral part of this Agreement.
Trigger shall notify GRAVITY of any delay in development schedule.
1. Date of this agreement: Development in progress with the Alpha version
completed
2. Closing test: the end of November 2003
3. Open beta test: April 2004
4. Commercialization: July 2004
5. 1st upgrade: September 2004
6. 2nd upgrade: December 2004
ARTICLE 13. THE TIMING OF COMMERCIALIZATION
The determination as to the Commercialization of the Game shall be made based on
consultation between the parties, provided that the number of concurrent users
shall have reached at least 15,000. GRAVITY, which has the know-how from past
game development and operation, shall decide the actual timing of the
Commercialization based on all other considerations.
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ARTICLE 14. LIMITATION ON THE USE OF INVESTMENT AMOUNT
1. Trigger shall use the Investment Amount paid by GRAVITY for the successful
development of this Game and may not, without prior written approval from
GRAVITY, use the Investment Amount as security to third parties or to repay
existing debts, provided that GRAVITY hereby consents to the repayment of
not more than KRW 150 million in existing debts (unrelated to GRAVITY)
which Trigger owes as of the date of this Agreement.
2. The Investments Amount payable in connection with the development of the
Game shall not be accounted other than as selling and general
administration expenses.
3. Trigger shall provide GRAVITY with a written report on the monthly
expenditure details of the Investment Amount by the fifth day of the
following month.
ARTICLE 15. LIQUIDATED DAMAGES
In the event that, after the payment of the Investment Amount by Gravity to
Trigger, Trigger fails to complete the Game or the performance of this Agreement
becomes uncertain due to unforeseen additional expenses, Trigger shall be deemed
to have performed its obligations hereunder if it does the following subject to
Gravity's prior consent:
1. If additional expenses are required as a result of the delay in
development, upon GRAVITY's request such additional expenses may be
converted into shares in Trigger upon additional investment by Gravity. The
value of such shares shall be the value of such shares as objectively
determined at the time of such additional payment, and the valuation agency
shall be determined by mutual consultation.
2. If the additional expenses described in clause 1 are between KRW 100
million and KRW 200 million and the Commercialization is delayed for more
than six (6) months, the rate of domestic Royalty shall be adjusted from
25% to 20%. If the additional expenses are between KRW 200 million and KRW
500 million and Commercialization is delayed for more than one (1) month,
the rate of domestic Royalty shall be adjusted from 25% to 20% and the rate
of overseas Royalty shall be adjusted from 50% to 40%.
3. If the Game is completed and Commercialized but fails in the market, the
Investment Amount may be converted to shares in Trigger at the request of
GRAVITY as liquidated damages. Article 15. 1 shall apply mutatis mutandis
as to share valuation.
4. If GRAVITY suffers any losses as a result of this Agreement, Trigger shall
allow GRAVITY to participate in the next project on the same conditions as
this Agreement and make its best efforts to have GRAVITY recover such
losses.
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ARTICLE 16. EXCLUSIVE PUBLISHING RIGHTS AND OTHER SPECIAL PROVISIONS
1. Trigger shall grant GRAVITY, among others and for five (5) years from the
date of this Agreement, exclusive rights to publish the programs relating
to the series of the Game provisionally named "Seven Hearts".
2. Trigger shall not exercise the above-described program copyrights and
hereby acknowledges that such rights belong exclusively to GRAVITY.
3. The scope of the exclusive publishing rights is outlined below:
3.1. Exclusive rights to reproduce and distribute the Game and its
derivative works in Korea or overseas;
3.2. Exclusive right (excluding the holder of the copyrights) to operate
the Game worldwide and display the copyrights thereto for the sake of
such operation and the monopolistic, exclusive, and transferable
license related thereto;
3.3. Exclusive license to modify the Game as required for localization,
reproduction and distribution of the program (with the secondary
copyrights belonging to GRAVITY for the term of this Agreement) and
the right to permit overseas commercial use by a third party; and
3.4. Any and all rights related to the commercial use of the Game
(excluding the copyrights holder) for the next five years (extendable
to ten years).
4. GRAVITY shall hold the rights to operate and manage the exclusive rights
related to the sequels to the Game, including the selling and marketing
rights and the rights to the trademarks.
5. Any sequel projects following the Game shall be pursed by mutual
consultation of the parties commencing from the planning stage. Any terms
and conditions that differ from this Agreement shall be determined by prior
consultation.
ARTICLE 17. CHANGE IN TRIGGER'S CAPITAL
Following this Agreement, Trigger may not dispose of its shares, increase its
capital or obtain outside funding without GRAVITY's prior written consent.
ARTICLE 18. REQUEST FOR CURE OF CONTRACTUAL BREACH
If either party breaches this Agreement, the non-defaulting party may request in
writing a cure of such breach within seven business days and the defaulting
party shall immediately so cure and give written notice to the other party
within seven days.
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ARTICLE 19. TERMINATION OF THE AGREEMENT
1. Either party may terminate this Agreement without further notice, in the
event of the following:
a. If such party fulfills its obligations but the other party breaches
its obligations hereunder due to its own fault and fails to cure such
breach within seven business days as described in Article 14;
b. If such party becomes subject to payment suspension, liquidation,
composition, corporate reorganization and bankruptcy proceedings or
similar events;
c. If the performance of this Agreement becomes impossible because the
material assets of such party necessary for the performance of this
Agreement becomes subject to orders such as provisional attachment,
injunction, attachment, repossession, public sale or the commencement
of auction; or
d. If the performance of this Agreement becomes impossible because such
party becomes subject to regulatory action related to this Agreement
such as business suspension, cancellation of business license and
criminal sanction.
2. The termination of this Agreement shall take effect on the date of
transmittal in writing of the intent to terminate.
3. This Agreement shall be deemed to be unilaterally terminated if Trigger
intentionally discloses key manpower and technical know-how to the outside
without prior agreement with GRAVITY.
ARTICLE 20. COMPENSATION FOR DAMAGES
1. If this Agreement is terminated due to reasons attributable to GRAVITY,
GRAVITY shall compensate Trigger as follows:
1.1 If this Agreement is terminated before the Commercialization, GRAVITY
shall acknowledge an amount equal to 50% of the Investment Amount
described in Article 6, which is already paid to Trigger, as damages
to Trigger and shall not make claim for its return.
1.2 If this Agreement is terminated after the Commercialization, GRAVITY
shall acknowledge an amount equal to 50% of the Investment Amount
described in Article 6, which is already paid to Trigger, as damages
to Trigger and shall not make claim for its return, and all Royalties
paid to Trigger as of such termination shall be retained by Trigger.
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2. If this Agreement is terminated due to reasons attributable to Trigger,
Trigger shall compensate GRAVITY, as follows:
2.1 If this Agreement is terminated before the Commercialization, Trigger
shall return to GRAVITY, within seven business days from the effective
date of termination, the Investment Amount received by it as of such
date, plus an amount equal to 50% of the Investment Amount.
2.2 If this Agreement is terminated after the Commercialization, Trigger
shall return to GRAVITY, within seven business days from the effective
date of termination, the Investment Amount received by it as of such
date, plus an amount equal to 50% of the Investment Amount, plus an
amount equal to 50% of the Royalty received by Trigger as of such
date.
3. Notwithstanding clauses 1 and 2 above, if the amount of actual damages
exceeds the amounts described in such clauses, the party at fault shall
compensate the other party for the amount of actual damages.
ARTICLE 21. RESOLUTION OF A DISPUTE WITH A THIRD PARTY
If legal disputes arise from this Agreement due to reasons attributable to
either party hereto, such party shall resolve such disputes at its own costs and
liability.
ARTICLE 22. FORCE MAJEURE
Neither party shall be held liable to the other party for the non-performance or
delayed performance of this Agreement due to force majeure events such as war,
riots, flood, earthquakes or government actions.
ARTICLE 23. CONFIDENTIALITY
1. The parties shall keep confidential the other party's technological and
business secrets provided or acquired from the other party in connection
with this Agreement, and shall not divulge to third parties without such
other party's written consent.
2. This provision shall remain in effect for three years following the
expiration or termination of this Agreement.
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ARTICLE 24. EFFECTIVENESS OF AGREEMENT; AMENDMENT
1. This Agreement shall be effective as of the date of signing or sealing
hereof by both parties.
2. This Agreement may be modified or amended by written mutual agreement of
the parties.
ARTICLE 25. DUTY TO EXERCISE GOOD FAITH AND COOPERATE
The parties undertake to carry out the terms and conditions herein in good faith
and shall fully cooperate to ensure smooth operation of the business for the
term of this Agreement.
ARTICLE 26. INTERPRETATION OF AGREEMENT
Matters not stipulated herein or disagreements over the interpretation of this
Agreement shall be resolved through mutual agreement of the parties.
ARTICLE 27. AGREED JURISDICTION
The parties shall endeavor to amicably resolve disagreements or disputes arising
in connection with this Agreement or the performance hereof by, provided that
where such disagreements or disputes cannot be amicably resolved, they will be
adjudicated at the local court having jurisdiction over GRAVITY.
ARTICLE 28. MISCELLANEOUS
1. Matters not specified herein shall follow general business customs.
2. All notices, claims or requests for payment in connection with this
Agreement shall be in writing.
As evidence of voluntary entry into this Agreement, the parties shall prepare
and execute two copies of this Agreement, and each party shall keep one executed
copy hereof.
Appendix 1. Copy of the Development Plan
Appendix 2. Copy of Financial Statements (B/S, P/L, Cash flow Statement)
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October 28, 2003
"GRAVITY"
Corporate Name: GRAVITY Co., Ltd.
Address: 620-2 Shinsa-dong, Gangnam-gu, Seoul
Representative Director: Jung Hwi Yung /seal/
"Trigger"
Corporate Name: Trigger Soft Corporation
Address: #305 Incheon Venture Resource Center, 169-1 Juan-dong, Nam-gu, Incheon
Representative Director: Moon-kyu Kim /seal/
Joint Guarantor 1 of "Trigger" (Representative Director)
Name: Moon-kyu Kim /seal/
Address: 105-2007 Shindongah APT, Shibjeong 2-dong, Bupyung-gu, Incheon
Resident Registration No.: ******-*******
Joint Guarantor 2 of "Trigger" (Main Programmer)
Name: Wook-sang Cho /seal/
Address: 114-1503 Manseok Beach Town, 128 Manseok-dong, Dong-gu, Incheon
Resident Registration No.: ******-*******
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