Distribution Agreement - Interplay Productions and Take-Two Interactive Software Inc.
Interplay [LOGO]
BY GAMES FOR GAMES (TM)
November 13, 1997
Ryan Brant
Chief Executive Officer
Take 2 Interactive Software
1004 Ligonier St., 3rd Floor
Latrobe, PA 15690
Dear Mark,
I have set forth below the principle deal points proposed by Interplay
Productions, a California corporation ("Interplay") in connection with
consummating an affiliate label distribution agreement with Take 2 Interactive
Software ("Take 2") with respect to the MS-DOS (launchable in Windows '95)
CD-ROM & DVD versions of Jetfighter: Full Burn and the Windows '95 CD-ROM & DVD
versions of the Black Dahlia computer software products (the "Products"). The
definitive agreement will include the following terms:
Territory: North America and South America
Term: Active Economic Life (i.e. latter of: (i) five (5) years from the
effective date of the definitive agreement, or (ii) the time while the Products
are marketed or sold plus six (6) months).
Distribution Rights: Exclusive distribution rights of JetFighter: Full Burn,
Black Dahlia, and any subsequent mission disks and/or add-on products to
distributors, resellers, direct sales and OEM Bundling (OEM Bundling terms to be
agreed upon by the parties in good faith). Interplay's OEM Bundling rights
within the Territory will be exclusive, while Interplay's OEM Bundling rights in
the rest of the world will be co-exclusive with Take 2.
Guarantee: Two Million Dollars (US $2,000,000). The individual Product
guarantees shall be $1,500,000 for Jetfighter: Full Burn and $500,000 for Black
Dahlia.* However, any royalties accrued under this agreement will be
cross-collaterized against any advances and the Guarantee. Furthermore, if for
any reason the MS-DOS CD-ROM version of Jetfighter: Full Burn does not ship
pursuant to this letter agreement, the entire Guarantee will be removed.
Marketing Guarantee: Take 2 agrees to spend at minimum a total of $375,000 in
consumer advertising on Black Dahlia and Jetfighter: Full Burn prior to November
2, 1998.
Royalty Split of Net Receipts (Calculated after cost of goods (Cogs) are
reimbursed): 60% - Take 2; 40% - Interplay. Subject to recoupment of any
advances, royalties will be due sixty (60) days after the month end in which
such units of a Product are shipped.
Anticipated Wholesale Price: Black Dahlia $40.00
Jetfighter: Full Burn $42.00
Product Forecasts: MS-DOS CD-ROM & DVD versions with respect to Jetfighter: Full
Burn, and Windows '95 CD-ROM & DVD versions with respect to Black Dahlia.
<PAGE>
MDF (Marketing Development Funds): A launch fund will be mutually agreed upon by
the parties and will be at least seven percent (7%) of initial gross sales.
Interplay will continue to maintain a MDF reserve of five percent (5%)
thereafter. Take 2 will be responsible for the costs of all MDF.
Interplay will be responsible for the building of inventory after receiving all
final art files and media deliverables for duplication. Interplay will also fund
the costs for each unit produced.
Return Reserve: Interplay will withhold seven percent (7%) of the wholesale
purchase price of each purchase as a reserve for returns and defectives. On a
semi-annual basis, beginning six (6) months after release of each ProductSKU,
any amount exceeding such maximum general reserve not scheduled or applied to
returns of such ProductSKU will be paid to Take 2 with the next payment due.
In order to ensure a January launch of the products, Take 2 will deliver
approved gold masters and all related artwork necessary to produce the final
Products on or by January 5, 1998. Take 2 agrees to take best efforts to deliver
a gold master to permit a January shipment of the Products by Interplay.
Interplay will make the following advance payments (against the guarantee):
November 15, 1997 $300,000
December 15, 1997 $250,000
March 15, 1998 $450,000*
May 15, 1998 $500,000*
December 31, 1998 $500,000*
* Note if for any reason Take 2 fails to deliver the approved gold masters and
all related artwork for the MS-DOS CD-ROM version of JetFighter: Full Burn or
the Windows '95 CD-ROM version of Black Dahlia by January 5, 1998, the guarantee
will be reduced as follows:
<TABLE>
<CAPTION>
==============================================================================================
Product Delay Reduction Delay Date Reduction Delay Date Reduction
Dates of of of
Guarantee Guarantee Guarantee
------------ ----------- --------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Black Dahlia January 6, $120,000 February 9, $240,000 March 8, $360,000
1998 1998 1998
through through through
February 8, March 7, April 5,
1998 1998 1998
---------------------------------------------------------------------------------------------
Jetfighter: January 6, $180,000 February 9, $360,000 March 8, $540,000
Full Burn 1998 1998 1998
through through through
February 8, March 7, April 5,
1998 1998 1998
==============================================================================================
</TABLE>
Any reduction in the guarantee due to missed dates as described above will
be spread equally across the remaining advance dates. It is further understood
that in the event of missed dates the remaining advance dates will be launched
back thirty (30) days for each level of missed dates. Should a Product be
delayed beyond April 5, 1998, the remaining advance and the Guarantee will be
deleted with respect to such Product.
2
<PAGE>
Interplay and Take 2 agree to negotiate in good faith an agreement that
will contain the North American distribution rights to all Take 2 CD ROM and DVD
products scheduled for release to the next two (2) years including Jetfighter 4,
Full Burn 2, and Things (Working Title), Interplay shall have a right of first
option on these products and Take 2 will refrain from negotiating such rights
with any third party through February 28, 1998.
Take 2 agrees to keep this letter, the terms of this letter agreement
herein and its relationship with Interplay confidential and to not discuss,
solicit, offer or enter into any other agreement regarding the Products.
Further, Take 2 agrees that so long as Interplay is attempting to complete the
definitive agreement in good faith (the "Lock-Out Period"), Take 2 will not
either itself or through any adviser or agent solicit any offer from a third
party, respond to any offer from a third party, make any offer or proposal to a
third party concerning any affiliate label or distribution deal relating to the
Products or any other transaction which could interfere with the consummation of
the transactions contemplated by this letter. After the expiration of the
Lock-Out Period, and any extension thereto mutually agreed by the parties, if
the parties have not signed a definitive agreement, this agreement will
terminate and Take 2 will be free to negotiate with other parties.
Take 2 represents and warrants that it has all legal right and authority to
grant the rights to interplay in the Products, as described herein, and agrees
to indemnify Interplay against all costs, fees, expenses and damages incurred by
Interplay as a result of any breach of the foregoing representation and
warranty. Without limiting the foregoing, Take 2 represents that the right of
Mindscapes to the Products have been terminated.
In addition, Interplay and Take 2 agree that any and all invoices for
Jetfighter: Platinum Edition that become due prior to February 15, 1998 will
have their payment terms extended to February 15, 1998.
This letter constitutes a binding agreement between the parties, which will
serve as the agreement between the parties until they have had the opportunity
to negotiate and enter into a definitive agreement on the principle terms
contained in this letter. The parties agree that the definitive agreement will
contain other customary terms and conditions including, without limitation,
representations, indemnities, sell-off period, and the like. The parties agree
to negotiate in good faith to reach and execute a mutually acceptable definitive
agreement as soon as practicable, but in any event by the end of the Lock-Out
period. This letter is to be governed under the laws of California. This letter
agreement may be signed in counterpart and delivered by facsimile.
<PAGE>
If the terms of this letter are acceptable, please sign below and return to
my attention. Upon receipt of a signed copy of this letter, we will prepare the
definitive agreement.
/s/ Phil Adam
Phil Adam
Vice President
Business Development
Interplay Productions
ACKNOWLEDGED AND AGREED
TAKE 2 INTERACTIVE SOFTWARE
By: /s/ Mark E. Seremet
------------------------
MARK E. SEREMET
PRESIDENT COO