Licensed Publisher Agreement - Sony Computer Entertainment America Inc. and THQ Inc.
LICENSED PUBLISHER AGREEMENT
LICENSED PUBLISHER AGREEMENT, entered into as of the 28th day of August 2002
(the "Agreement" or "LPA"), by and between SONY COMPUTER ENTERTAINMENT AMERICA
INC., with offices at 919 E. Hillsdale Boulevard, Foster City, CA 94404
(hereinafter "SCEA"), and THQ Inc., with offices at 27001 Agoura Road, Suite
325, Calabasas Hills, CA 91301 (hereinafter "Publisher").
WHEREAS, SCEA and/or affiliated companies have developed a CD-based interactive
console for playing video games and for other entertainment purposes known as
the PlayStation(R) game console (hereinafter referred to as the "Player") and
also own or have the right to grant licenses to certain intellectual property
rights used in connection with the Player.
WHEREAS, Publisher has previously entered into a License Agreement, dated August
28, 1998 ("Original License Agreement") with SCEA, which granted Publisher a
non-exclusive license to develop and distribute Licensed Products (as defined
below) pursuant to the terms and conditions set forth in such Original License
Agreement, and such Original License Agreement will expire four (4) years after
the date of such Original License Agreement.
WHEREAS, Publisher desires to replace its non-exclusive license to publish, have
manufactured, market, distribute and sell Licensed Products as set forth in the
Original License Agreement with the licenses set forth in this Agreement.
WHEREAS, SCEA is willing, on the terms and subject to the conditions of this
Agreement, to renew Publisher's non-exclusive license to publish, have
manufactured, market, distribute and sell Licensed Products in accordance with
the terms and conditions of this Agreement.
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 the Licensed Products, or any other
advertising, merchandising, promotional, public relations (including press
releases) and display materials depicting any of the Licensed Trademarks.
1.2 "Affiliate of SCEA" means, as applicable, either Sony Computer
Entertainment Inc. in Japan, Sony Computer Entertainment Europe in the United
Kingdom or such other Sony Computer Entertainment entity as may be established
by Sony Computer Entertainment Inc. from time to time.
1.3 "CD Magazine" means a magazine in PlayStation Disc format to be
produced by SCEA, which incorporates first and third party Product Information,
in addition to hints and tips, interviews and other SCEA and Player-related
information, and which will be sold to subscribers and other consumers or used
for other promotional purposes of SCEA.
1.4 "Consumer Promotional Disc Program" shall have the meaning set forth
in Section 1.36 hereto.
1.5 "Designated Manufacturing Facility" means a manufacturing facility
which is designated by SCEA in its sole discretion to manufacture Licensed
Products and/or component parts for the Player, which may include manufacturing
facilities owned and operated by affiliated companies of SCEA.
1.6 "Development Tools" means the development tools leased and licensed by
SCEA to a Licensed Developer pursuant to a Licensed Developer Agreement for use
in the development of Executable Software.
1.7 "Executable Software" means Publisher's object code software which
includes Licensed Developer Software and any software (whether in object code or
source code form) provided directly or indirectly by SCEA or an Affiliate of
SCEA which is intended to be combined with Licensed Developer Software for
execution on the Player and has the ability to communicate with the software
resident in the Player.
1.8 "Generic Line" shall have the meaning set forth in Section 8.3 hereto.
1.9 "Guidelines" shall mean SCEA's Guidelines with respect to its
Intellectual Property Rights, which may be set forth in the SourceBook or in
other documentation provided by SCEA to Publisher.
1.10 "Hit Title Rebate" shall have the meaning set forth in Exhibit A,
Section C hereto.
1.11 "Intellectual Property Rights" means, by way of example but not by
way of limitation, all current and future worldwide patents and other patent
rights, copyrights, trademarks, service marks, trade names, trade dress, mask
work 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, including
without limitation all applications and
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registrations with respect thereto, and all renewals and extensions thereof.
1.12 "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.
1.13 "Licensed Developer" means any developer which is licensed by SCEA or
an Affiliate of SCEA to develop Licensed Products pursuant to a valid and then
current Licensed Developer Agreement.
1.14 "Licensed Developer Agreement" or "LDA" means a valid and current
agreement or renewal thereof between a Licensed Developer and SCEA, or an
equivalent such agreement between a Licensed Developer and an Affiliate of SCEA
(e.g., the LDA with SCEE).
1.15 "Licensed Developer Software" means Licensed Developer's application
source code and data (including audio and video material) developed by a
Licensed Developer in accordance with its LDA, which, either by itself or
combined with other Licensed Developer Software, when integrated with any
software (whether in object code or source code form) provided by SCEA or an
Affiliate of SCEA, creates Executable Software.
1.16 "Licensed Products" means the Executable Software (which may be
combined with Executable Software of two or more Licensed Developers), which
shall consist of one product developed for the Player per Unit, in final form
developed exclusively for the Player. Publisher shall have no right to package
or bundle more than one product developed for the Player in a single Unit unless
separately agreed with SCEA.
1.17 "Licensed Publisher" means any publisher which is licensed by SCEA to
publish, have manufactured, market, distribute and sell Licensed Products
pursuant to a valid and then current Licensed Publisher Agreement.
1.18 "Licensed Publisher Agreement" or "LPA" means a valid and current
agreement or renewal thereof between a Licensed Publisher and SCEA.
1.19 "Licensed Territory" means the United States (including its
possessions and territories), Canada, Mexico, and Latin America as may be
modified and/or supplemented by SCEA from time to time pursuant to Section 4.4
below.
1.20 "Licensed Trademarks" means the trademarks, service marks, trade
dress and logos designated by SCEA in the SourceBook or other documentation
provided by SCEA to Publisher as being licensed to Publisher. Nothing contained
in this Agreement shall in any way grant Publisher the right to use the
trademark "Sony" in any manner as a trademark, trade name, service mark or logo.
SCEA may amend such Licensed Trademarks from time to time in the SourceBook or
other documentation provided by SCEA to Publisher or upon written notice to
Publisher.
1.21 "Manufacturing Specifications" means specifications setting forth
terms relating to the manufacturing and assembly of Licensed Products,
Packaging, Printed Materials and their component parts, which shall be set forth
in the SourceBook or other documentation provided by SCEA to Publisher.
1.22 "Master Disc" means a gold CD-ROM disc in the form requested by SCEA
containing the final pre-production Executable Software for a Licensed Product,
which has been approved by SCEA pursuant to Section 5.4 and meets the
Manufacturing Specifications.
1.23 "Official Magazine Demo" means a demo disc in PlayStation Disc
format, to be produced by SCEA, containing first and third party Product
Information, which will be "packed-in" to any official PlayStation magazine of
SCEA or used for other promotional purposes of SCEA.
1.24 "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 container) or parts
thereof (including any portion of the jewel case containing Licensed
Trademarks), but excluding Printed Materials and PlayStation Discs.
1.25 "Pack-in Sampler Disc" means a demo disc in PlayStation Disc format
to be produced by SCEA, containing first and third party Product Information,
which will be "packed-in" to the Player hardware box or used for other
promotional purposes of SCEA.
1.26 "PlayStation Discs" means the distinctive black PlayStation
interactive software CD-ROM discs compatible with the Player which are
manufactured on behalf of Publisher which contain the Licensed Product or SCEA
Demo Discs.
1.27 "Printed Materials" means all artwork and mechanicals set forth on
the CD label of the PlayStation Disc relating to the Licensed Product and on or
inside the jewel case (or other container) and/or if applicable, on or inside
the box (or other) Packaging for the Licensed Product, and all instructional
manuals, liners, inserts, trade dress and other user information and/or
materials to be inserted into the jewel case and/or other Packaging.
1.28 "Product Information" means either (i) object code of a Licensed
Product representing a playable portion of such Licensed Product ("Demo"); or
(ii) a representative video sample of the Licensed Product; or (iii) other
Licensed Product related information, including but not limited to hints and
tips, artwork, depictions of Licensed Product cover art, videotaped interviews,
etc. With respect
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to Product Information provided in Demo form, the Demo delivered shall not
consist of a complete game and shall be, at a minimum, an amount sufficient to
demonstrate the game's core features and value, without providing too much game
play so as to give the consumer a disincentive to purchase the complete Licensed
Product, and such Demo shall also include any required Legal Copy on the title
screen.
1.29 "Purchase Order" means a written purchase order processed in
accordance with SCEA's instructions provided in this Agreement or provided
separately by SCEA to Publisher.
1.30 "Retail Sampler Disc" means a demo disc in PlayStation Disc format to
be produced by SCEA, which contains first and third party Product Information,
which will be sold at retail or used for other promotional purposes of SCEA.
1.31 "SCEA Demo Disc" means the SCEA developed and marketed demo discs,
including the CD Magazine, Official Magazine Demo, Pack-in Sampler Disc, Retail
Sampler Disc, and any other first party demo disc created by SCEA subsequent to
the date of this Agreement in which SCEA invites Licensed Publishers to
participate. Unless otherwise agreed in a separate agreement with Publisher,
SCEA shall not charge any fees or royalties to Publisher for inclusion in SCEA
Demo Discs.
1.32 "SCEA Established Third Party Demo Disc Programs" shall have the
meaning set forth in Section 1.36 hereto.
1.33 "SCEA Product Code" shall mean 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 hardware, data, object code, source code,
documentation (or any part(s) of any of the foregoing), including without
limitation any portion or portions of the Development Tools, which are provided
or supplied by SCEA or an Affiliate of SCEA to Publisher or any Licensed
Developer and/or other Licensed Publisher.
1.35 "SourceBook" means the SourceBook (or any other reference guide
containing information similar to the SourceBook but designated with a different
name) prepared by SCEA, which is provided separately to Publisher. The
SourceBook 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 "Third Party Demo Disc" means any demo disc in PlayStation Disc
format which contains Product Information and which SCEA has granted Publisher
permission to produce or which complies with the terms of an SCEA Established
Third Party Demo Disc Program. For purposes of this Agreement, "SCEA Established
Third Party Demo Disc Programs" shall include (i) the Consumer Promotional Disc
Program, whereby Publisher produces a sample disc, for promotional use only and
not for resale, to promote Licensed Products to consumers by creating a sampler
containing Product Information from multiple Licensed Products or Product
Information from a single Licensed Product; (ii) the Trade Promotional Disc
Program, whereby Publisher produces a sample disc incorporating a beta version
of Publisher's Licensed Products which have been concept approved by SCEA, for
promotional use only and not for resale, to promote its Licensed Products to
retailers, journalists and/or trade partners prior to release of such Licensed
Products and (iii) any other third party demo disc program established by SCEA
for Licensed Publishers in the future.
1.37 "Trade Promotional Disc Program" shall have the meaning set forth in
Section 1.36 hereto.
1.38 "Unit" means a copy of each individual Licensed Product game title
regardless of the number of PlayStation Discs constituting such Licensed Product
game title.
1.39 "Wholesale Price" or "WSP" shall mean the greater of (i) the
published price of the Licensed Product offered to retailers by Publisher as
evidenced by a sell sheet or price list issued by Publisher no later than thirty
(30) days before first commercial shipment of the Licensed Product, or (ii) the
actual price paid by retailers upon the first commercial shipment of a Licensed
Product without offsets, rebates or deductions from invoices of any kind.
2. LICENSE GRANT.
SCEA hereby grants to Publisher, and Publisher hereby accepts, for the term of
this Agreement, within the Licensed Territory, under Intellectual Property
Rights owned or licensed by SCEA, a non-exclusive, non-transferable license,
without the right to sublicense (except as specifically provided herein), to
publish Licensed Products, which right to publish shall be limited to the
following rights and other rights set forth in this LPA: (i) to enter into
agreements with Licensed Developers and other third parties pursuant to Sections
3 and 17.5 hereto to develop Licensed Products which have been approved by SCEA
in accordance with the terms of this LPA; (ii) to have such Licensed Products
manufactured in accordance with the terms of this LPA; (iii) to market,
distribute and sell such Licensed Products and to authorize others to do so in
accordance with the terms of this LPA; (iv) to use the Licensed Trademarks
strictly and only in connection with the marketing, packaging, advertising and
promotion of the Licensed Products, and subject to SCEA's right of approval
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as provided herein; (v) to sublicense to end users the right to use the Licensed
Products for noncommercial purposes only and not for public performance; and
(vi) from time to time to participate by invitation of SCEA in the "Third Party
Greatest Hits" program on terms and conditions to be determined and published by
SCEA and separately agreed with Publisher.
3. DEVELOPMENT OF LICENSED PRODUCTS.
This LPA grants Publisher the right to publish, have manufactured, market,
distribute and sell Licensed Products, and does not authorize Publisher to
develop Licensed Products or to lease or license Development Tools from SCEA to
assist in such development. In order for Publisher to have Licensed Products
developed for the Player or to lease or license Development Tools from SCEA to
assist in such development, it must either (i) enter into a Licensed Developer
Agreement directly with SCEA or with an Affiliate of SCEA; or (ii) enter into an
agreement with a Licensed Developer for the development of Licensed Products.
Publisher may also publish, have manufactured, market, distribute and/or sell
Licensed Products for a Licensed Developer or another Licensed Publisher
pursuant to the terms of this Agreement. Publisher shall notify SCEA in writing
of the identity of any third party or Licensed Developer with whom it has
contracted to develop, publish, have manufactured, market, distribute and/or
sell Licensed Products within thirty (30) days of entering into an agreement or
other arrangement with the third party. Publisher shall have the responsibility
for determining that any developers or other third parties meet the criteria set
forth herein. It shall be considered a material breach of this LPA for Publisher
to provide Development Tools or other Sony Materials to an unlicensed developer
or other third party.
4. LIMITATIONS ON LICENSES; RESERVATION OF RIGHTS.
4.1 REVERSE ENGINEERING PROHIBITED. Publisher hereby agrees not to
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 (whether or not all or any portion of the Sony Materials are
integrated with Licensed Developer Software), or permit or encourage any third
party to do so. 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
this Agreement. Publisher shall be required in all cases to pay royalties in
accordance with Section 9 hereto to SCEA on any of Publisher's products
utilizing Sony Materials. 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 this Section has been complied with.
4.2 RESERVATION OF SCEA'S RIGHTS. The licenses granted in this Agreement
from SCEA to Publisher extend only to publishing, manufacturing, marketing,
distribution and sale of Licensed Products for use on the Player, in such format
as may be designated by SCEA. Without limiting the generality of the foregoing
and except as otherwise provided herein, Publisher shall not have the right to
distribute or transmit the Executable Software or the Licensed Products (to the
extent each includes Sony Materials) 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 interconnected 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
Intellectual Property Rights of SCEA 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. Publisher
shall not make use of any of the Sony Materials and/or any Intellectual Property
Rights or Licensed Trademarks related to the Sony Materials and/or Player (or
any portion thereof) except as authorized by and in compliance with the
provisions of this Agreement or as may be otherwise expressly authorized in
writing by SCEA. 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(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 Player is prohibited unless
expressly authorized in writing by SCEA.
4.3 RESERVATION OF PUBLISHER'S RIGHTS. Separate and apart from Sony
Materials licensed to Publisher hereunder, Publisher (or a Licensed Developer,
as determined between Publisher and such Licensed Developer) retains all rights,
title and interest in and to the Licensed Developer Software, including without
limitation, Publisher's (or Licensed Developer's) Intellectual Property Rights
therein, as well as all of Publisher's (or Licensed Developer's) rights in any
source code and other underlying material such as artwork and music related
thereto, created by Publisher (or Licensed Developer) and contained therein, and
nothing in this Agreement shall be construed to restrict the right of Publisher
to develop, distribute or transmit products incorporating the Licensed Developer
Software and such underlying material (separate and apart from the Sony
Materials) for any hardware platform or service other than the Player or from
using the
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Printed Materials or any 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. Notwithstanding the foregoing, Publisher shall not distribute or
transmit Product Software which is intended to be used with the Player 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,
except as otherwise permitted in Section 4.2 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 country or countries from the Licensed
Territory if, in SCEA's reasonable judgment, the laws or enforcement of such
laws in such country or countries do not protect SCEA's 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 exercising such licenses in the deleted country or
countries. Publisher agrees to cease exercising such licenses, directly or
through subcontractors, in such deleted country or countries, by the end of the
period stated in such notice.
5. QUALITY STANDARDS FOR THE LICENSED PRODUCTS.
5.1 QUALITY ASSURANCE GENERALLY. The Licensed Products, including, without
limitation, the contents and title of each of the Licensed Products, and/or
Publisher's use of any of the 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 the
Licensed Product to review such Licensed Product to ensure that it meets SCEA's
quality assurance standards. Publisher agrees that all Licensed Products will be
designed (if an original title for the Player) or modified (if a pre-existing
title) to substantially utilize the particular capabilities of the Sony
Materials and the Player, including but not limited to utilizing the software
libraries and graphics capabilities of the Player.
5.2 PRODUCT PROPOSALS.
5.2.1 SUBMISSION OF PRODUCT PROPOSAL. Before Publisher contracts
with a Licensed Developer for the creation of Licensed Developer Software (or,
if Publisher is also a Licensed Developer, before Publisher commences
programming of the Licensed Developer Software) for each of the Licensed
Products, 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") in accordance with the procedures specified in
the SourceBook. Such Product Proposal must consist of a complete description of
the proposed Licensed Product and such other information specified in the
SourceBook, including but not limited to the scheduled and/or anticipated
delivery date of final Executable Software, as well as any additional
information that SCEA may deem to be useful in evaluating the proposed Licensed
Product, which may include samples of past work.
5.2.2 APPROVAL OF PRODUCT PROPOSAL. After SCEA's review of
Publisher's Product Proposal, Publisher will receive written notice of the
following possible statuses: (i) Approved; (ii) Conditional Approval; (iii)
Re-submission Requested; or (iv) Not Approved. Such statuses shall have the
meaning ascribed to them in the SourceBook, and may be changed from time to time
by SCEA in subsequent versions of the SourceBook. Any requested re-submissions
shall be made at Publisher's cost. If a Product Proposal is "Not Approved", then
Publisher cannot re-submit such Product Proposal without significant,
substantive revisions. In addition, if a Product Proposal as submitted by any
Licensed Publisher or Licensed Developer is "Not Approved" by SCEA, it cannot be
re-submitted by another Licensed Publisher or Licensed Developer without
significant, substantive revisions. Publisher shall notify SCEA promptly in
writing in the event of any material proposed change in any portion of 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. If Publisher licenses a
Licensed Product from a Licensed Developer, it shall immediately notify SCEA of
such license, and SCEA will inform Publisher as to the status of the Product
Proposal and Review Process for such Licensed Product and this Agreement shall
govern the approval process of such Licensed Product after any such
notification. SCEA shall have no obligation to approve any Product Proposal
submitted by Publisher, and any development conducted by or at the direction of
Publisher shall be at Publisher's own risk. 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 without reference to or reliance upon Publisher's work.
5.3 REVIEW OF WORK-IN-PROGRESS. SCEA has the right pursuant to this
Agreement to require Publisher to submit to SCEA work-in-progress on the
Licensed Product at certain intervals throughout the development of such
Licensed Product and, upon written notice to Publisher, at any time during the
development process. Upon receipt by Publisher of "Approved" or "Conditional
Approval" status of the Licensed Product, Publisher must, within the time frame
indicated in the approval letter, communicate with SCEA and mutually agree on a
framework for the review of
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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 LICENSED PRODUCT.
SCEA shall have the right to approve, reject or require additional information
with respect to each stage of the Review Process, which shall not be
unreasonably withheld or delayed by SCEA. 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, after a reasonable cure period agreed
to between SCEA and Publisher, is not successfully met, SCEA shall have the
right to revoke the approval of Publisher's Product Proposal. No approval by
SCEA of any particular stage of the Review Process shall be deemed an approval
of any other stage, nor shall any such approval be deemed to constitute a waiver
of any approval requirement with respect to any other stage or any of SCEA's
rights under this Agreement. LICENSED PRODUCTS WHICH ARE CANCELED BY PUBLISHER
OR ARE LATE IN MEETING THE FINAL EXECUTABLE SOFTWARE STAGE OF THE REVIEW PROCESS
BY MORE THAN THREE (3) MONTHS (WITHOUT AGREEING WITH SCEA ON A MODIFIED FINAL
EXECUTABLE SOFTWARE DELIVERY DATE) ARE SUBJECT TO RE-SUBMISSION OF PRODUCT
PROPOSAL, IN WHICH EVENT SCEA MAY RE-APPROVE OR DISAPPROVE SUCH PRODUCT
PROPOSAL. The "Approved" or "Conditional Approval" status of the Product
Proposal shall not be construed by Publisher as full approval of all elements of
such Licensed Product, or as a commitment by SCEA to grant final approval to the
Licensed Product. 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, in addition to the provisions set
forth in this Section, subject Publisher to the termination provisions set forth
in Section 15.3 hereto.
5.4 APPROVAL OF EXECUTABLE SOFTWARE. Publisher shall, on or before the
date specified in the Product Proposal or as determined by SCEA pursuant to the
Review Process, deliver to SCEA for its inspection and evaluation, a final
version of the Executable Software for the proposed Licensed Product. SCEA will
evaluate such final version of the Executable Software and notify Publisher in
writing of its approval or disapproval of such Executable Software, 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/or improvements are necessary. After making the
necessary corrections and/or improvements, Publisher may submit a new version of
such Executable Software for approval or disapproval by SCEA. No approval by
SCEA of any element of the Executable Software shall be deemed an approval of
any other element of the Licensed Product, nor shall any such approval be deemed
to constitute a waiver of any of SCEA's rights under this Agreement. SCEA shall
have the right to disapprove Executable Software if it fails to comply with one
or more conditions as set forth in the SourceBook with no obligation to review
all elements of such 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 gold master copies as SCEA may require from time to
time. Publisher warrants that all final versions of Executable Software are
fully tested and shall use its best efforts to ensure that final versions of
Executable Software are fully debugged prior to submission to SCEA. In addition,
prior to manufacture of Executable Software, Publisher shall be required to sign
an affidavit (in the form of attached Exhibit B) stating that the Executable
Software complies or will comply with standards set forth in the SourceBook or
other documentation provided by SCEA to Publisher, Publisher approves the
release of such Executable Software for manufacture in its current form and
Publisher shall be fully responsible for any problems related to such Executable
Software.
5.5 PUBLISHER'S ADDITIONAL QUALITY ASSURANCE OBLIGATIONS. If at any time
or times subsequent to the approval of the Executable Software pursuant to
Section 5.4, SCEA identifies any material bugs (such materiality to be
determined by SCEA in its sole discretion) with respect to the Licensed Product
or any material bugs are brought to the attention of SCEA or in the event that
SCEA identifies any improper use of its Licensed Trademarks or other Sony
Materials with respect to the Licensed Product or any such improper use is
brought to the attention of SCEA, Publisher shall, at no cost to SCEA, promptly
correct any such material bugs, or improper Licensed Trademark or Sony Material
use, 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 any of the Licensed Products create any
reasonable 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 to remove such defective Licensed Product 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.
5.6 APPROVAL OF PRINTED MATERIALS. For each proposed Licensed Product,
Publisher shall be responsible, at Publisher's expense, for creating and
developing all 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 any
such amended Guidelines in subsequent orders of Printed Materials and shall not
be required to recall or destroy previously
-6- CONFIDENTIAL
<PAGE>
manufactured Printed Materials unless such Printed Materials do not comply with
the original requirements in the Guidelines or unless explicitly required in
writing by SCEA pursuant to a legal requirement involving SCEA's Intellectual
Property Rights. Failure to follow the Guidelines and/or to submit or resubmit
Printed Materials to SCEA as set forth herein, and in Section 7.1.3.1 hereto
shall be a material breach of this Agreement and the provisions of Section 15.3
shall apply. No later than the time final Executable Software for a proposed
Licensed Product is submitted to SCEA for inspection and evaluation, Publisher
shall also deliver to SCEA, for review and evaluation, the proposed final
Printed Materials for such proposed Licensed Product and a form of limited
warranty for the proposed Licensed Product. Publisher acknowledges that failure
to meet any scheduled release dates for a Licensed Product are solely the risk
and responsibility of Publisher, and SCEA assumes no responsibility for
Publisher failing to meet such scheduled release dates due to disapproval of
Printed Materials relating to such Licensed Product. Publisher agrees that the
quality of such Printed Materials shall be of the same quality as that
associated with other commercially available high quality consumer 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 Packaging or Printed Materials that is disapproved
by SCEA. After making the necessary corrections to the disapproved Printed
Materials, Publisher must submit new proposed Printed Materials for approval by
SCEA. SCEA shall not unreasonably withhold or delay its review of the proposed
Printed Materials. No approval by SCEA of any element of the Printed Materials
shall be deemed an approval of any other element of the 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 of Printed
Materials shall not release Publisher from any of its representations and
warranties in Section 10.2 hereunder.
5.7 APPROVAL OF ADVERTISING MATERIALS. Pre-production samples of all
Advertising Materials relating to Licensed Products shall be submitted by
Publisher to SCEA, free of cost, for SCEA's evaluation and approval, which shall
not be unreasonably withheld or delayed, as to the quality, style, appearance
and usage of any of the Licensed Trademarks, appropriate references of any
required notices and compliance with the Guidelines, prior to any actual
production, use or distribution of any such items by Publisher or on its behalf.
No such proposed Advertising Materials shall be produced, used or distributed
directly or indirectly by Publisher without first obtaining the written approval
of SCEA. 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 which 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 affidavit (in the form of attached Exhibit C)
stating that all advertising and promotional materials for the Licensed Product
complies or will comply with the Guidelines for use of the Licensed Trademarks.
After making the necessary corrections to the disapproved Advertising Materials,
Publisher must submit new proposed Advertising Materials for approval by SCEA.
SCEA shall not unreasonably withhold or delay its review of the proposed
Advertising Materials. Failure to follow the Guidelines and/or to submit or
resubmit Advertising Materials to SCEA for review shall be a material breach of
this Agreement. PUBLISHERS WHO FAIL TO SUBMIT ADVERTISING MATERIALS TO SCEA FOR
REVIEW OR OTHERWISE BROADCAST OR PUBLISH ADVERTISING MATERIALS WITHOUT THE
APPROVAL OF SCEA SHALL BE SUBJECT TO THE PROVISIONS OF THE "THREE STRIKES"
PROGRAM AS OUTLINED IN THE SOURCEBOOK WHICH COULD RESULT IN TERMINATION OF THIS
LPA; TERMINATION OF THE LICENSED PRODUCT; OR COULD SUBJECT PUBLISHER TO THE
PROVISIONS OF SECTION 15.4 HERETO. Subject in each instance to the prior written
approval of SCEA (not to be unreasonably withheld), Publisher may use such
textual and/or pictorial advertising matter (if any) as may be created by SCEA
or in its behalf pertaining to the Sony Materials and/or to the Licensed
Trademarks on such promotional and advertising materials as may, in Publisher's
judgment, promote the sale of the Licensed Products within the Licensed
Territory. Publisher shall include, at Publisher's cost and expense, the
required consumer advisory rating code(s) on any and all Advertising Materials
used in connection with the Licensed Product, which shall be procured in
accordance with the provisions of Section 6 below. Publisher acknowledges that
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. No approval by SCEA of any element of
the Advertising Materials shall be deemed an approval of any other element of
the 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 of Advertising Materials shall not release Publisher
from any of its representations and warranties in Section 10.2 hereunder.
6. LABELING REQUIREMENTS.
All Printed Materials for each Unit of the Licensed Products shall have
conspicuously, legibly and irremovably affixed thereto the notices specified in
a template provided in the SourceBook or other documentation provided by SCEA to
Publisher, which template may be amended from time to time by SCEA during the
term of this Agreement,
-7- CONFIDENTIAL
<PAGE>
following which Publisher will incorporate such Agreement into its next print
run for the Licensed Products. Publisher agrees that, if required by SCEA or any
governmental entity, it 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 in accordance with the
SourceBook or other documentation provided by SCEA to Publisher, at Publisher's
cost and expense.
7. MANUFACTURE OF THE LICENSED PRODUCTS.
7.1 MANUFACTURE BY SCEA.
7.1.1 APPOINTMENT OF SCEA AS MANUFACTURER. Publisher hereby appoints
SCEA, and SCEA hereby accepts such appointment, as the manufacturer of
PlayStation Discs and, subject to Section 7.1.3 below, the manufacturer and
assembler of such PlayStation Discs with Printed Materials and Packaging.
Publisher acknowledges and agrees that it shall purchase from SCEA or a
Designated Manufacturing Facility all of its requirements for PlayStation Discs,
during the term of the Agreement. SCEA shall provide to Publisher written
Manufacturing Specifications, which may be amended from time to time upon
reasonable notice to Publisher. SCEA shall have the right, but no obligation, to
contract or subcontract any phase of production or manufacture of any or all of
the Licensed Products, the Packaging, the Printed Materials or any part thereof,
subject to Section 14 below. Any Designated Manufacturing Facility shall be a
third party beneficiary of this Agreement.
7.1.2 CREATION OF MASTER CD-ROM. Following approval by SCEA of each
Licensed Product pursuant to Section 5.4, Publisher shall provide SCEA with the
number of Master Discs specified in the SourceBook or in any other documentation
separately provided by SCEA to Publisher. SCEA or a Designated Manufacturing
Facility shall create from one of the Master Discs provided by Publisher the
original master CD-ROM, from which all other copies of the Licensed Product are
to be replicated. Publisher shall be responsible for the costs, as set forth in
the Manufacturing Specifications, of creating such original master CD-ROM. In
order to insure against loss or damage to the copies of the Executable Software
furnished to SCEA, Publisher will retain duplicates of all such Master Discs.
Neither SCEA nor a Designated Manufacturing Facility shall be liable for loss of
or damage to any copies of the Master Discs or Executable Software.
7.1.3 PRINTED MATERIALS, PACKAGING AND ASSEMBLY SERVICES.
7.1.3.1 PRINTED MATERIALS. If Publisher elects to obtain
Printed Materials from SCEA, Publisher shall deliver the film for all SCEA
approved Printed Materials to SCEA or, if appropriate, at SCEA's option, to a
Designated Manufacturing Facility in accordance with the Manufacturing
Specifications, at Publisher's sole risk and expense. Publisher may elect,
subject to SCEA's approval as provided in Section 5.6 hereto and in this
section, to be responsible for manufacturing its own Printed Materials. In the
event that Publisher elects to be responsible for manufacturing the Printed
Materials (other than any Artwork which may be placed directly upon the
PlayStation Disc, which will be supplied to SCEA for placement on the
PlayStation Disc), Publisher shall deliver [**] of such Printed Materials to
SCEA or at SCEA's option to a Designated Manufacturing Facility, within the time
frame specified in the Manufacturing Specifications, in the minimum order
quantities set forth in Section 7.2.2 below, at Publisher's sole risk and
expense. Publisher shall be required to supply SCEA with [**] of any Printed
Materials not produced or supplied by SCEA or a Designated Manufacturing
Facility prior to production, at no charge to SCEA or such Designated
Manufacturing Facility, for SCEA's approval with respect to the quality thereof.
[**] of such sample Printed Materials shall be supplied to SCEA and [**] shall
be supplied to a Designated Manufacturing Facility. In the event that such
Printed Materials for a Licensed Product are revised by Publisher prior to a
reorder of Units of Licensed Products, then Publisher must submit an additional
[**] samples to SCEA and a Designated Manufacturing Facility for approval prior
to production. Such Printed Materials shall be required to comply with any
Manufacturing Specifications established by SCEA for Printed Materials for
Licensed Products, and SCEA shall have the right to disapprove any Printed
Materials that do not comply with such Manufacturing Specifications. Such
Manufacturing Specifications for Printed Materials shall be comparable to the
manufacturing specifications applied by SCEA to its own software products for
the Player. If Publisher elects to supply its own Printed Materials, neither
SCEA nor a Designated Manufacturing Facility shall bear any responsibility for
any delays.
7.1.3.2 PACKAGING. Publisher may either obtain Packaging
from SCEA or from an alternate source. If Publisher elects to be responsible for
manufacturing its own Packaging (other than any edge labels or other proprietary
labels and any portion of the jewel case containing Licensed Trademarks, which
Publisher will be required to purchase from SCEA or 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 edge labels provided by SCEA or 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. Publisher shall be required to supply SCEA with
[**] samples of any Packaging not produced or supplied by SCEA or a
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
-8- CONFIDENTIAL
<PAGE>
Designated Manufacturing Facility, at no charge to SCEA or Designated
Manufacturing Facility, prior to production for SCEA's approval with respect to
the quality thereof. [**] of such sample Packaging shall be supplied to SCEA and
[**] shall be supplied to a Designated Manufacturing Facility. In the event that
Packaging for any Licensed Product is changed in any way after SCEA and a
Designated Manufacturing Facility have already approved such Packaging, then
Publisher must resubmit an additional [**] samples to SCEA and such Designated
Manufacturing Facility for approval. Failure to submit or resubmit Packaging to
SCEA and a Designated Manufacturing Facility shall constitute a material breach
of this Agreement, and the provisions of Section 15.3 shall apply. Such
Packaging shall be required to comply with any Manufacturing Specifications
established by SCEA for Packaging for Licensed Products, and SCEA shall have the
right to disapprove any Packaging that does not comply with such Manufacturing
Specifications. Such Manufacturing Specifications for Packaging shall be
comparable to the manufacturing specifications applied by SCEA to its own
software products for the Player. If Publisher procures Packaging from an
alternate source, then it must also procure assembly services from an alternate
source; neither SCEA nor a Designated Manufacturing Facility shall be required
to assemble such Licensed Product if Packaging is obtained from an alternate
source. If Publisher elects to supply its own Packaging and assembly services,
neither SCEA nor a Designated Manufacturing Facility shall bear any
responsibility for any delays.
7.1.3.3 ASSEMBLY SERVICES. Publisher may either procure
assembly services from SCEA or from an alternate source. If Publisher elects to
be responsible for assembling the Licensed Products, then SCEA shall ship the
component parts of the Licensed Product to a destination provided by Publisher,
at Publisher's sole risk and expense. Assembly of Licensed Products shall be
required to comply with any Manufacturing Specifications established by SCEA for
such assembly services, and 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 the Manufacturing
Specifications. SCEA shall have the right to 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 assemble its own Licensed Products,
neither SCEA nor a Designated Manufacturing Facility shall bear any
responsibility for any delays or missing component parts. Failure to comply with
Manufacturing Specifications regarding assembly services shall constitute a
material breach of this Agreement, and the provisions of Section 15.3 shall
apply.
7.1.4 MANUFACTURE OF UNITS. Upon approval, pursuant to Section 5 and
subject to Section 7.1.3, of such pre-production samples of the Executable
Software and the associated Printed Materials, Packaging and assembly services,
SCEA or a Designated Manufacturing Facility will, in accordance with the terms
and conditions set forth in this Section 7, and at Publisher's expense (a)
manufacture PlayStation Discs for Publisher; (b) manufacture Publisher's
Packaging and/or Printed Materials; and/or (c) assemble the PlayStation Discs
with the Printed Materials and the Packaging. SCEA reserves the right to insert,
or to require Publisher to insert, certain Printed Materials relating to the
Player or Licensed Trademarks into each Unit of Licensed Products.
7.2 PRICE, PAYMENT AND TERMS.
7.2.1 PRICE. The applicable price for manufacture of any Units of
the Licensed Products ordered hereunder shall be provided to Publisher in the
Manufacturing Specifications prior to manufacture of the Licensed Products.
Purchase price(s) shall be stated in United States dollars and are subject to
change by SCEA at any time upon reasonable notice to Publisher; provided,
however, that the applicable price shall not be changed with respect to any
Units of Licensed Products which are the subject of an effective Purchase Order
but which have not yet been delivered by SCEA to Publisher at the designated
F.O.B. point. Prices for finished Units of Licensed Products are exclusive of
any foreign or U.S. federal, state, or local sales or value-added tax, use,
excise, customs duties or other similar taxes or duties, which SCEA may be
required to collect or pay as a consequence of the sale or delivery of any Units
of the Licensed Products to Publisher. Publisher shall be solely responsible for
the payment or reimbursement of any such taxes, fees and other such charges or
assessments applicable to the sale and/or purchase of any finished Units of any
of the Licensed Products.
7.2.2 ORDERS. Publisher shall issue to SCEA written Purchase
Order(s) in accordance with the Manufacturing Specifications. All Purchase
Orders to SCEA shall reference this Agreement, give a Publisher authorization
number, specify quantities by Licensed Product, state requested delivery date
and all packaging information and be submitted on or with an order form to be
provided in the Manufacturing Specifications. All Purchase Orders to SCEA shall
be subject to acceptance by SCEA which shall not be unreasonably withheld or
delayed. Purchase Orders issued by Publisher to SCEA for each of the Licensed
Products approved by SCEA shall be non-cancelable and be for at least [*] Units
of such Licensed Product. In the event that SCEA or a Designated Manufacturing
Facility manufactures the Printed Materials for the Publisher pursuant to
Section 7.1.3 above, Publisher may, at Publisher's option, allow SCEA or such
Designated Manufacturing Facility to manufacture an additional [*] of such
Printed Materials at Publisher's expense in anticipation of reorders. Publisher
agrees that such Printed Materials will be stored by a Designated Manufacturing
Facility for a period of no more than one hundred and eighty (180) days, after
which time such Printed Materials will, at Publisher's option, either be
returned to Publisher at Publisher's cost and expense or be destroyed. Such
Designated Manufacturing Facility may also store a reasonable quantity of
Printed Materials procured from an alternate source for up to one hundred and
eighty (180) days, subject to a reasonable storage fee, after which time such
Printed Materials
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
-9- CONFIDENTIAL
<PAGE>
will, at Publisher's option, either be returned to Publisher at Publisher's cost
and expense or be destroyed. Publisher shall have no right to cancel or
reschedule any Purchase Order (or any portion thereof) for any of the Licensed
Products unless the parties shall first have determined the status of such
Purchase Order in the manufacturing process and reached mutual agreement as to
Publisher's financial liability with respect to any desired cancellation or
rescheduling of any such Purchase Order (or any portion thereof).
7.2.3 PAYMENT TERMS. Purchase Orders will be invoiced on a pro forma
basis (a pro forma invoice is issued in advance of the official invoice) as soon
as reasonably practical after receipt of Purchase Order and will include both
manufacturing price and royalties payable pursuant to Section 9 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. If the cash in advance
option is selected, then upon issuance of a pro forma invoice to Publisher by
SCEA, Publisher shall immediately forward to a Designated Manufacturing Facility
the invoice amount. Such amount shall be payable in United States dollars and
remitted by wire transfer to such bank account as shall be designated by SCEA or
a Designated Manufacturing Facility for such purpose. Upon receipt of such
amount by a Designated Manufacturing Facility, SCEA shall release the
Publisher's Purchase Order to a Designated Manufacturing Facility for
production. If the letter of credit option is selected, then at the time a
Purchase Order is placed with SCEA, Publisher shall provide to SCEA an
irrevocable letter of credit in favor of SCEA and payable at sight. The letter
of credit must either be issued by a bank acceptable to SCEA or confirmed, at
Publisher's expense, if so requested by SCEA. The letter of credit shall be in
United States dollars in an amount equal to the manufacturing price determined
pursuant to Section 7.2.1 and the royalty determined pursuant to Section 9 for
each Unit of the Licensed Product ordered. All associated banking charges with
respect to payments of manufacturing costs and royalties (including but not
limited to the costs of obtaining a letter of credit) shall be borne solely by
Publisher. If permitted by SCEA, SCEA may at its sole discretion extend credit
terms and limits to Publisher. SCEA may also at any time revoke such credit
terms and limits as extended. If Publisher qualifies for such credit terms, then
orders will be invoiced upon shipment and each invoice will be paid within
thirty (30) days of the date of the invoice. [**]. Publisher shall be
additionally liable for all of SCEA's costs and expenses of collection,
including, without limitation, reasonable fees for attorneys and court costs. No
deduction may be made from remittances unless an approved credit memo has been
issued by SCEA. No claim for credit due to shortage or breakage will be allowed
unless it is made within seven (7) days after Publisher receives the Licensed
Product, and SCEA assumes no responsibility for shortage or breakage if
Packaging and assembly services are obtained from alternate sources. Each
shipment of Licensed Products to Publisher shall constitute a separate sale to
Publisher, whether said shipment be whole or partial fulfillment of any order.
Notwithstanding the foregoing, nothing in this Section shall excuse or be
construed as a waiver of Publisher's obligation to timely provide any and all
payments owed to SCEA hereunder.
7.3 DELIVERY OF LICENSED PRODUCTS. Neither SCEA nor any Designated
Manufacturing Facility shall have an obligation to store completed Units of
Licensed Products. Delivery of Licensed Products shall be in accordance with the
Manufacturing Specifications, provided that Publisher may either specify the
carrier to be used or allow SCEA or a Designated Manufacturing Facility to use
the best way of getting the Licensed Products delivered. [**].
7.4 TECHNOLOGY EXCHANGE AND QUALITY ASSURANCE. There will be no technology
exchange between SCEA or any Designated Manufacturing Facility and Publisher
under this Agreement. Due to the proprietary nature of the mastering process,
SCEA or a Designated Manufacturing Facility will not under any circumstances
release any original master CD-ROM, Master Discs or other in-process materials
to the Publisher. All such physical master discs, stampers, etc. shall be and
remain the sole property of SCEA or a Designated Manufacturing Facility. SCEA
recognizes that the Intellectual Property Rights contained in Licensed Developer
Software (separate and apart from any Sony Materials licensed to Publisher by
SCEA hereunder) which is contained in physical master discs, stampers and other
in-process materials is, as between SCEA and Publisher, the sole and exclusive
property of Publisher or its licensors.
8. MARKETING AND DISTRIBUTION.
8.1 MARKETING GENERALLY. In accordance with the provisions of this
Agreement, at no expense to SCEA, Publisher shall, and shall direct its
distributors to, diligently market, sell and distribute the Licensed Products,
and shall use its commercially reasonable best 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
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
-10- CONFIDENTIAL
<PAGE>
Licensed Products from and against illegal reproduction and/or copying by end
users or by any other persons or entities. Such methods of protection may
include, without limitation, markings or insignia providing identification of
authenticity and packaging seals.
8.2 SAMPLES. Subject to availability, Publisher shall sell to SCEA
quantities of the Licensed Products at as low a price and on terms as favorable
as Publisher sells similar quantities of the Licensed Products to the general
trade. In addition, Publisher shall provide to SCEA at no additional cost, for
SCEA's internal use and general marketing purposes, sample copies of each
Licensed Product, which shall not exceed [**] Units of each Licensed
Product. Publisher shall be obligated to pay the manufacturing costs to the
Designated Manufacturing Facility in accordance with Section 7.2.1, but not the
royalty charges in accordance with Section 9, in connection with such sample
Units of Licensed Products. 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 Units of the Licensed Products
without Publisher's prior written consent.
8.3 MARKETING PROGRAMS OF SCEA. From time to time, SCEA may invite
Publisher to participate in promotional or advertising opportunities which may
feature one or more Licensed Products from one or more 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 11.2
hereunder and delivery to SCEA shall constitute acceptance by Publisher of the
terms of the offer. Moreover, all materials, if featured with one or more
software products of SCEA or Licensed Products of other Publishers, may be used
by SCEA, unless otherwise agreed in writing, with the following generic Legal
Copy line: "Game copyright and trademarks are the property of the respective
publisher or their licensors" ("Generic Line").
8.4 DEMONSTRATION DISC PROGRAMS. SCEA may, from time to time, provide
opportunities for Publisher to participate in SCEA Demo Disc programs by
providing Product Information to SCEA. 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 or in other
documentation to be provided by SCEA to Publisher when published. Except as
otherwise specifically set forth herein, in the SourceBook or in other
documentation provided by SCEA to Publisher, Third Party Demo Discs shall be
considered "Licensed Products" and shall be subject in all respects to the terms
and conditions of this Agreement. In addition, the following procedures shall
also apply to SCEA Demo Discs and Third Party Demo Discs:
8.4.1 SCEA DEMO DISCS.
8.4.1.1 LICENSE. If Publisher wishes 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
advertisements and promotional materials (including but not limited to in-store
displays) and to make, copy, and distribute in packaging, advertising and
promotional materials, copies of screen displays generated by the code,
representative video samples or other Product Information provided to SCEA for
use in such SCEA Demo Disc. Publisher agrees that all decisions relating to the
selection of first and third party Product Information, marketing,
advertisement, promotion, distribution or sale of the SCEA Demo Discs as a
whole, including but not limited to SCEA Demo Discs title, trade name, logo
and/or other identification, sales presentation, or retail and wholesale prices,
shall be in the sole discretion of SCEA.
8.4.1.2 SUBMISSION AND APPROVAL OF PRODUCT INFORMATION. Upon
receipt of a letter or other correspondence, the form of which is attached
hereto as Exhibit D, notifying Publisher 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 no later than the
deadline set forth in such letter or other correspondence. A separate letter
will be sent for each SCEA Demo Disc, and Publisher must sign each letter prior
to inclusion in such SCEA Demo Disc. Any Product Information provided by
Publisher shall include Legal Copy on the title screen or elsewhere in the
Product Information submitted to SCEA. The only Legal Copy provided by SCEA
shall be the Generic Line as provided in Section 8.3 above, which shall appear
on the SCEA Demo Disc title screen and packaging. Publisher acknowledges that
SCEA shall have no responsibility to provide any Legal Copy beyond the Generic
Line. Such Product Information shall comply with technical specifications
provided to Publisher by SCEA. SCEA reserves the right to review and test the
Product Information provided and request revisions prior to inclusion on the
SCEA Demo Disc. In the event that 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 in accordance with such deadline shall
result in the Product Information being
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
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<PAGE>
removed from consideration for the SCEA Demo Disc. Costs associated with
preparation of Product Information for inclusion in the SCEA Demo Disc shall be
borne by Publisher. Except as otherwise provided in this Section, SCEA shall not
edit or modify Product 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 creation or development of any SCEA Demo
Disc.
8.4.1.3 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. 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 will
not guarantee to Publisher Licensed Product prominence with regards to screen
shots or title treatment on the packaging or in SCEA Demo Discs. 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.
8.4.1.4 RETAIL SAMPLER DISCS. Publisher is aware and
acknowledges that the Retail Sampler Disc will be distributed and sold by SCEA
in the retail market. If Publisher elects to participate in any Retail Sampler
Disc program, Publisher acknowledges that it is aware of no limitations
regarding any Licensed Product or any portion thereof provided to SCEA pursuant
to the terms of this Agreement which would in any way restrict SCEA's ability to
distribute or sell the Retail Sampler Disc at retail, nor does Publisher or its
licensors have any anticipation 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 for such SCEA Demo Disc.
8.4.2 THIRD PARTY DEMO DISCS.
8.4.2.1 LICENSE. If Publisher wishes to participate in a
Third Party Demo Disc program by notifying SCEA of its intention thereto, 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 specifications provided separately to Publisher by
SCEA, which may be modified from time to time by SCEA. In addition, SCEA hereby
consents to the use of the Licensed Trademarks in connection with Third Party
Demo Discs, provided that SCEA's approval must be obtained prior to any use in
accordance with the terms of Section 8.4.2.2 hereto. 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, the right to produce Third Party Demo Discs under
such SCEA Established Third Party Demo Disc Program shall thereupon be revoked,
and SCEA shall have the right to terminate any related Third Party Demo Discs in
accordance with the terms of Section 15.3 hereto.
8.4.2.2 SUBMISSION AND APPROVAL OF THIRD PARTY DEMO DISCS.
Publisher shall deliver to SCEA, for 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 technical specifications and any other requirements
provided to Publisher by SCEA in the SourceBook 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 5.6, 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 5.7.
Costs associated with preparation of product code for inclusion on Third Party
Demo Discs shall be borne by Publisher. With respect to the Trade Promotional
Disc Program, Publisher acknowledges that Product Information provided in
connection with such program is in beta form and is not final approved code, nor
should Publisher assume that final approval for mass production has been given
at the time of manufacture. Publisher agrees to use the generic packaging and
printed materials pursuant to the Trade Promotional Disc Program and the
Consumer Promotional Disc Program to clearly and conspicuously state that the
Trade Promotional Disc Program and the Consumer Promotional Disc Program are for
promotional purposes only and not for resale.
8.4.2.3 MANUFACTURE AND ROYALTY OF THIRD PARTY DEMO DISCS.
Publisher shall comply with any Manufacturing Specifications provided separately
by SCEA to Publisher with respect to the manufacture and payment for the costs
of manufacture of Third Party Demo Discs, and Publisher shall also comply with
all terms and conditions of Section 7 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 Discs
shall be as provided in Exhibit A.
8.5 CONTESTS AND SWEEPSTAKES OF PUBLISHER. SCEA acknowledges that, from
time to time, Publisher may conduct contests and sweepstakes to promote Licensed
Products. SCEA agrees to permit Publisher to include contest and sweepstakes
materials in Printed Materials and Advertising Materials, subject to compliance
with the approval provisions of Section 5.6 and 5.7 hereunder, compliance with
the provisions of Section 10.2 and 11.2 hereunder, and subject to the following
additional terms
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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 assumes full responsibility for such contest or sweepstakes;
(ii) Publisher represents and warrants that it has obtained the consent of all
holders of intellectual property rights required to be obtained in connection
with the contest or sweepstakes including, but not limited to, the consent of
any holder of copyrights or trademarks relating to any advertisement or any
promotional materials publicizing the contest or sweepstakes, or the prizes
being awarded to winners of the contest or sweepstakes; and (iii) Publisher
shall make available to SCEA all contest and sweepstakes material prior to
publication in accordance with the approval process set forth in Section 5.6 or
5.7. Approval by SCEA of contest or sweepstakes materials for use in the Printed
Materials or Advertising Materials (or any use of the Player 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.
8.6 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 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 any Units of such Licensed Product.
8.7 LIMITATIONS ON DISTRIBUTION. Notwithstanding any other provisions in
this Agreement, Publisher shall not, directly or indirectly, solicit orders from
and/or sell any Units of the Licensed Products to any person or entity outside
of the Licensed Territory, and Publisher further agrees that it shall not
directly or indirectly solicit orders for and/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.
8.8 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. 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 5.6 hereto. Publisher
shall also provide updates to such web page in a timely manner as required by
SCEA in updates to the SourceBook. In addition, Publisher shall use its best
efforts to provide Product Information for web pages for Publisher's Licensed
Products released from the launch of the Player to the date of execution hereof
within sixty (60) days of either execution of this Agreement or receipt of
specifications provided separately by SCEA for the integration of such web page,
whichever occurs later. In the event that Publisher is unable to provide Product
Information for previously released Licensed Products within the time frame set
forth above, then SCEA may create Product Information relating to such
previously released Licensed Products and provide it to Publisher for approval.
Failure of Publisher to approve such web pages within ten (10) days after
receipt thereof will be deemed approval.
9. ROYALTIES.
Publisher shall pay SCEA a per Unit royalty in United States dollars, as set
forth on Exhibit A hereto, for each Unit of the Licensed Products manufactured.
Royalties may be subject to change in SCEA's discretion upon sixty (60) days
notice to Publisher. Upon receipt of such notice, Publisher shall have the
option to terminate this Agreement upon written notice to SCEA rather than
having such revised royalty structure go into effect. Payment of such royalties
shall be made to SCEA in conjunction with the payment to SCEA's Designated
Manufacturing Facility of the manufacturing costs for each Unit and pursuant to
the payment terms of Section 7.2.3 hereto. 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 and/or distribution of any Units of the Licensed
Products and/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
and/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 or other such documentary evidence issued by the
applicable tax authorities sufficient to substantiate that any such taxes and/or
assessments have in fact been paid.
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10. REPRESENTATIONS AND WARRANTIES.
10.1 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.
10.2 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 Licensed Developer
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 Right 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 Licensed Developer
Software or any underlying work or content embodied therein, or any name,
designation or trademark used in conjunction with the Licensed Products;
(ii) The Licensed Developer Software, Product Proposals, Product
Information, Printed Materials and Advertising Materials and their contemplated
use under this Agreement does 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;
(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 provided to
SCEA 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 Licensed Products have been developed, marketed, sold and/or distributed
under license from SCEA);
(viii) The Executable Software shall be distributed by Publisher solely in
object code form;
(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, such that use of the software or Player would be
disrupted, delayed, destroyed or rendered less than fully useful, and shall be
fully compatible with the Player 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 marketing,
sale, and/or distribution of the Licensed Products shall in no manner reflect
adversely upon the name, reputation or goodwill of SCEA; and
(xii) Publisher shall make no false, misleading or inconsistent
representations or claims with respect to any Licensed Products, the Player or
SCEA.
11. INDEMNITIES; LIMITED LIABILITY.
11.1 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/or settlement
thereof, subject to the right of Publisher to participate in any such action or
proceeding at its own expense with counsel of its
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own choosing. 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 agrees to 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.
11.2 INDEMNIFICATION BY PUBLISHER. Publisher shall indemnify and hold SCEA
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 (i) a breach of any of the representations or warranties
provided by Publisher herein, including without limitation claims resulting from
Publisher's failure to timely pay any withholding taxes or other assessments as
set forth in Section 9 hereto, any breach of Publisher's confidentiality
obligations as set forth in Section 14 hereto or any breach of any
representations, warranties or covenants relating to contests or sweepstakes as
set forth in Sections 8.5 and 10.2 hereto; or (ii) any claim of infringement or
alleged infringement of any third party's Intellectual Property Rights with
respect to the Licensed Developer Software or any Product Information of
Publisher; or (iii) any claims of or in connection with any personal or bodily
injury (including death) or property damage, by whomsoever such claim is made,
arising out of, in whole or in part, the marketing, sale, distribution and/or
use of any of the Licensed Products (including but not limited to any damages or
personal injury resulting from the awarding or failure to award contest or
sweepstakes prizes), 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 marketing, sale and/or distribution of Licensed Products;
provided, however, that SCEA shall give prompt written notice to Publisher of
the assertion of any such claim, and provided, further, that Publisher shall
have the right to select counsel and control the defense and/or settlement
thereof, subject to the right of SCEA to participate in any such action or
proceeding at its own expense with counsel of its own choosing. Publisher shall
have the exclusive right, at its discretion, to commence and/or prosecute at its
own expense any lawsuit or to take such other action with respect to such matter
as shall be deemed appropriate by 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 without
Publisher's prior written consent.
11.3 LIMITATION OF LIABILITY.
11.3.1 LIMITATION OF SCEA'S LIABILITY. IN NO EVENT SHALL SCEA OR ITS
AFFILIATES OR OTHER COMPANIES AFFILIATED WITH SCEA AND ITS AFFILIATES,
SUPPLIERS, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS BE LIABLE FOR PROSPECTIVE
PROFITS, OR ANY SPECIAL, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF 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 PLAYER BY
PUBLISHER OR ANY END-USER, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING
NEGLIGENCE), INDEMNITY, PRODUCT LIABILITY OR OTHERWISE. IT IS THE RESPONSIBILITY
OF PUBLISHER TO REVIEW THE ACCURACY OF THE DATA ON THE UNITS MANUFACTURED BY
SCEA FOR PUBLISHER. IN NO EVENT SHALL SCEA'S LIABILITY ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY LIABILITY FOR
DIRECT DAMAGES, AND INCLUDING WITHOUT LIMITATION ANY LIABILITY UNDER SECTION
11.1 AND ANY WARRANTY IN SECTION 11.4 HERETO, EXCEED [**]. EXCEPT AS EXPRESSLY
SET FORTH HEREIN, NEITHER SCEA NOR ANY 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 PLAYER OR ANY LICENSED PRODUCT.
11.3.2 LIMITATION OF PUBLISHER'S LIABILITY. IN NO EVENT SHALL
PUBLISHER OR COMPANIES AFFILIATED WITH PUBLISHER, SUPPLIERS, OFFICERS,
DIRECTORS, EMPLOYEES OR AGENTS BE LIABLE TO SCEA FOR ANY PROSPECTIVE PROFITS, OR
SPECIAL, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF 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, OR ANY LICENSED DEVELOPER SOFTWARE BY PUBLISHER OR ANY THIRD
PARTY, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), INDEMNITY,
PRODUCT LIABILITY OR OTHERWISE, PROVIDED THAT PUBLISHER EXPRESSLY AGREES THAT
SUCH LIMITATIONS SHALL NOT APPLY TO DAMAGES RESULTING FROM PUBLISHER'S BREACH OF
SECTIONS 2, 4, 11.2, 12.2 OR 14 OF THIS
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
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<PAGE>
AGREEMENT, AND PROVIDED FURTHER THAT SUCH LIMITATIONS SHALL NOT APPLY TO AMOUNTS
WHICH PUBLISHER MAY BE REQUIRED TO PAY TO THIRD PARTIES UNDER SECTIONS 11.2 OR
17.9.
11.4 WARRANTIES; DISCLAIMER OF WARRANTIES.
11.4.1 MANUFACTURING WARRANTY. SCEA warrants that the Units or any
component parts thereto that are manufactured by SCEA or a Designated
Manufacturing Facility for Publisher shall, at time of delivery to Publisher, be
free from defects in material and workmanship. The sole obligation of SCEA and a
Designated Manufacturing Facility under this warranty shall be, for a period of
one year from the date of shipment of Units of Licensed Products or component
parts thereto to Publisher, at SCEA's election, either to replace the defective
Units or component parts or to issue credit to Publisher for the purchase price
and any royalties paid to SCEA and/or a Designated Manufacturing Facility for
any such defective Units or component parts. Such warranty is the only warranty
applicable to the Licensed Product manufactured by a Designated Manufacturing
Facility for Publisher pursuant to Section 7 of this Agreement. This warranty
shall not apply to damage resulting from accident, alteration, negligence,
normal wear and tear, willful damage, abnormal conditions of use, failure to
follow directions for use (whether given in instruction manuals or otherwise) or
misuse of the Licensed Products, or to damage to or defects in any materials
provided by Publisher to SCEA or a Designated Manufacturing Facility. If, during
the aforesaid period, a defective Unit is received by Publisher, Publisher shall
notify SCEA within the warranty period set forth above and, upon request by
SCEA, provide SCEA with the returned Unit(s) or component part(s) and a written
description of the defect claimed or, if requested by SCEA in its sole
discretion, Publisher shall destroy any such defective discs. SCEA and any
Designated Manufacturing Facility shall not accept the return of any Unit(s) or
component part(s) except factory defective Unit(s) or component part(s) (i.e.,
those Units or component parts that are not free from defects in material and/or
workmanship), and all such returns must be authorized by SCEA in writing and in
advance. All Units or component parts which are returned in accordance with this
Section 11.4.1 will be sent to a place designated by SCEA at SCEA's expense. If
the defect did not arise from causes placing liability on SCEA or a Designated
Manufacturing Facility under the above warranty, Publisher shall reimburse SCEA
and any Designated Manufacturing Facility for expenses incurred in shipping,
processing and analyzing the Units or component parts. SCEA's and any Designated
Manufacturing Facility's reasonable judgment as to the origin of the defect
shall be final and binding. Notwithstanding the foregoing, nothing herein shall
be construed by Publisher to extend or create any stated limited warranty to
consumers beyond the terms of such warranty. NOTWITHSTANDING THE FOREGOING, ANY
COMPONENT PARTS OF LICENSED PRODUCTS NOT MANUFACTURED BY SCEA OR A DESIGNATED
MANUFACTURING FACILITY ARE NOT UNDER WARRANTY HEREUNDER.
11.4.2 [**].
12. COPYRIGHT, TRADEMARK AND TRADE SECRET RIGHTS.
12.1 PUBLISHER RIGHTS. The Licensed Developer Software and all Product
Information, Product Proposals, Printed Materials and Advertising Materials
related thereto (exclusive of the rights licensed from SCEA hereunder) and the
Intellectual Property Rights therein and any names or other designations used as
titles for the Licensed Products and any other trademarks used by Publisher
and/or its affiliates are and shall be the exclusive property of Publisher or of
any third party from which Publisher has been granted, or to whom Publisher has
granted, the license and related rights to develop and otherwise exploit any
such Licensed Developer Software and related materials or any such names or
other designations. 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 and/or interests in or to Publisher's Intellectual Property Rights.
12.2 SCEA RIGHTS.
12.2.1 LICENSED TRADEMARKS. The Licensed Trademarks and the
goodwill associated therewith are and shall be the exclusive property of SCEA or
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
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Affiliates of SCEA. Nothing herein shall give Publisher any right, title or
interest in or to any of the Licensed Trademarks, other than the non-exclusive
license and privilege during the term hereof to display and use the Licensed
Trademarks solely in accordance with the provisions of this Agreement. 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 and/or interests in or
to any of the Licensed Trademarks, 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.
12.2.2 LICENSE OF SONY MATERIALS AND PLAYER. All rights with respect
to the Sony Materials and Player, including, without limitation, all of SCEA's
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 Player (or any portion thereof),
other than the non-exclusive license during the term hereof to use the Sony
Materials and Player for the manufacturing, marketing, distribution and sale of
the Licensed Products solely in accordance with the provisions of this
Agreement. 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 and/or interests
in or to the Sony Materials or the Player (or any portion thereof).
13. INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS BY THIRD PARTIES.
In the event that either Publisher or SCEA discovers or otherwise becomes aware
that any of the Intellectual Property Rights of the other have been or are being
infringed upon by any third party, then the party with knowledge of such
infringement or apparent infringement shall promptly notify the other party.
SCEA shall have the sole right, in its discretion, to institute and prosecute
lawsuits against Third Parties for such infringement of SCEA's Intellectual
Property Rights. Publisher shall have the right, in its discretion, to institute
and prosecute lawsuits against third persons for such infringement of
Publisher's Intellectual Property Rights which are distinct from SCEA's
Intellectual Property Rights. If Publisher does not institute an infringement
suit within thirty (30) days after SCEA's written request that it do so, SCEA
may institute and prosecute such lawsuit. Any lawsuit shall be prosecuted solely
at the cost and expense of the party bringing suit and all sums recovered in any
such lawsuits, whether by judgment, settlement or otherwise, in excess of the
amount of reasonable attorneys' fees and other out of pocket expenses of such
suit, shall belong solely to the party bringing the suit. Upon request of the
party bringing the lawsuit, the other party shall execute all papers, testify on
all matters and otherwise cooperate in every way necessary and desirable for the
prosecution of any such lawsuit. The party bringing suit shall reimburse the
other party 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.
14. CONFIDENTIALITY.
14.1 PRIOR NONDISCLOSURE AGREEMENT. Publisher hereby reaffirms and
ratifies the Nondisclosure Agreement dated November 30, 1993 between SCEA and
Publisher ("Nondisclosure Agreement") which, as amended by Section 14.2 below,
will remain in full force and effect with respect to the Confidential
Information of SCEA throughout the term of this Agreement.
14.2 ADDITIONAL REQUIREMENTS REGARDING CONFIDENTIAL INFORMATION OF SCEA.
14.2.1 CONFIDENTIAL INFORMATION OF SCEA. "Confidential Information"
of SCEA (as defined in the Nondisclosure Agreement and amended hereby) shall
also include (i) the Sony Materials and information regarding SCEA's finances,
business, marketing and technical plans, (ii) all documentation and information
relating to the foregoing (other than documentation and information expressly
intended for use by and released to end users or the general public), (iii) any
and all other information, of whatever type and in whatever medium (including
without limitation all data, ideas, discoveries, developments, know-how, trade
secrets, inventions, creations and improvements), that is disclosed in writing
or in any other form by SCEA to Publisher, and (iv) this Agreement and the terms
and conditions thereof. If at any time Publisher becomes aware of any
unauthorized duplication, access, use, possession or knowledge of any
Confidential Information of SCEA, it shall notify SCEA as soon as reasonably
practicable, and shall promptly act to recover any such information and/or
prevent further breach of the confidentiality obligations herein. Publisher
shall take all reasonable steps requested by SCEA to prevent the recurrence of
any unauthorized duplication, access, use, possession or knowledge of the
Confidential Information of SCEA.
14.2.2 CONFIDENTIALITY OF AGREEMENT. As provided above, the terms
and conditions of this Agreement shall be treated as Confidential Information of
SCEA; 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; and (iii) in confidence, in connection
with the enforcement of this Agreement or rights under this Agreement; and (iv)
if Publisher shall be required, in the opinion of counsel, to file publicly or
otherwise disclose the terms of this Agreement under applicable federal and/or
state securities laws, Publisher shall be required to promptly notify SCEA such
that SCEA has a reasonable opportunity to contest or limit the scope of such
required disclosure, and Publisher shall request, and shall use its
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best efforts to obtain, confidential treatment for such sections of this
Agreement as SCEA may designate. Any failure to notify SCEA under clause (iv) of
this Section 14.2.2 shall be deemed a material breach of this Agreement. Unless
otherwise permitted by SCEA, both parties shall treat the fact that they have
entered into this Agreement as Confidential Information of the other party until
a public announcement regarding the execution of this Agreement is released by
SCEA, at its sole discretion, announcing that Publisher has become a licensee of
SCEA.
14.3 REQUIREMENTS REGARDING CONFIDENTIAL INFORMATION OF PUBLISHER.
14.3.1 CONFIDENTIAL INFORMATION OF PUBLISHER. "Confidential
Information of Publisher" shall mean (i) the Licensed Developer 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 expressly
intended for use by and release to end users, the general public or the trade),
and (ii) information relating to Publishers' or its affiliates' or licensors'
finances, business, marketing and technical plans, that is disclosed in writing
or in any other form by Publisher to SCEA.
14.3.2 PRESERVATION OF CONFIDENTIAL INFORMATION OF PUBLISHER. SCEA
shall hold all Confidential Information of Publisher in confidence, and shall
take all reasonable steps necessary to preserve the confidentiality of the
Confidential Information of Publisher, and to prevent it from falling into the
public domain or into the possession of persons other than those persons to whom
disclosure is authorized hereunder, including but not limited to those steps
that SCEA takes to protect the confidentiality of its own most highly
confidential information. Except as may be expressly authorized by Publisher in
writing, SCEA shall not at any time, either before or after any termination of
this Agreement, directly or indirectly: (i) disclose any 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; (ii) except as
otherwise provided in this Agreement, duplicate the Confidential Information of
Publisher for any purpose whatsoever; (iii) use the Confidential Information for
any reason or purpose other than as expressly permitted in this Agreement; or
(iv) except as otherwise provided in Section 8.3, remove any copyright notice,
trademark notice and/or other proprietary legend set forth on or contained
within any of the Confidential Information of Publisher.
14.3.3 OBLIGATIONS UPON UNAUTHORIZED DISCLOSURE. If at any time SCEA
becomes aware of any unauthorized duplication, access, use, possession or
knowledge of any Confidential Information of Publisher, it shall notify the
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 Confidential Information of Publisher 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 the Confidential Information of Publisher.
SCEA shall take all reasonable steps requested by Publisher to prevent the
recurrence of any unauthorized duplication, access, use, possession or knowledge
of the Confidential Information of Publisher.
14.3.4 EXCEPTIONS. The foregoing restrictions will not apply to
information that could be deemed to be Confidential Information of Publisher to
the extent that such information: (i) was known to SCEA at the time of
disclosure to it; (ii) becomes part of information in the public domain through
no fault of SCEA; (iii) has been rightfully received from a third party
authorized by Publisher to make such disclosure without restriction; (iv) has
been approved for release by prior written authorization of Publisher; or (v)
has been disclosed by court order or as otherwise required by law (including
without limitation to the extent that disclosure may be required under Federal
or state securities laws), provided that SCEA has notified the disclosing party
immediately upon learning of the possibility of any such court order or legal
requirement and has given Publisher a reasonable opportunity to contest or limit
the scope of such required disclosure.
15. TERM AND TERMINATION.
15.1 EFFECTIVE DATE; TERM. This Agreement shall not be binding upon the
parties until it has been signed by or on behalf of each party, in which event
it shall be effective as of the date first written above (the "Effective Date").
Unless sooner terminated in accordance with the provisions hereof, the term of
this Agreement shall be for four (4) years from the Effective Date. Any Licensed
Products approved by SCEA or otherwise qualified to proceed with development
under the Original License Agreement shall, upon full execution of this LPA by
Publisher and SCEA, be considered Licensed Products under this LPA, and the
terms and conditions of this LPA shall apply to such Licensed Products as if
they were licensed hereunder.
15.2 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 events or circumstances:
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(i) If Publisher breaches (A) any of its material obligations provided for
in this Agreement (including but not limited to Publisher's failure to pay any
amounts due hereunder), which materiality shall be determined by SCEA in its
sole discretion; (B) some of its obligations provided for in this Agreement, the
combined effect of which has a material effect hereunder; or (C) any other
agreement entered into between SCEA or Affiliates of SCEA and Publisher. In the
event of each such breach, Publisher shall have an opportunity to correct or
cure such breach within thirty (30) days after receipt of written notice of such
breach by SCEA, provided that, if after such thirty (30) day period, such breach
is not corrected or cured to SCEA's satisfaction, this Agreement shall be
terminated.
(ii) Publisher's statement that it is unable to pay any amount due
hereunder, or is unable to pay its debts generally as they shall become due.
(iii) Publisher's filing of an application for, or consenting to, or
directing the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of all or substantially all of Publisher's
property, whether tangible or intangible, wherever located.
(iv) The making by Publisher of a general assignment for the benefit of
creditors.
(v) The commencing by Publisher or Publisher's intention to commence a
voluntary case under any applicable bankruptcy laws (as now or hereafter may be
in effect).
(vi) Publisher is bankrupt or insolvent.
(vii) The filing by Publisher or the intent to file by Publisher of a
petition seeking to take advantage of any other law providing for the relief of
debtors.
(viii)Publisher's acquiescence to, intention to acquiesce to, or failure
to have dismissed within ninety (90) days, any petition filed against it in any
involuntary case under any such bankruptcy law.
(ix) 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.
(x) If during the term of this Agreement a controlling interest in
Publisher or a controlling interest in an entity which has, directly or
indirectly, 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, and such
agreement has been terminated as a result of such breach; (B) directly or
indirectly holds or acquires an interest in a third party which develops any
interactive hardware device or product which is directly or indirectly
competitive with the Player; (C) is in litigation with SCEA or Affiliates of
SCEA concerning any proprietary technology, trade secrets or other Intellectual
Property Rights or Confidential Information of SCEA. As used in this Section
15.2, "controlling interest" means, with respect to any form of entity,
sufficient power, whether by holding shares of stock, management power, voting
power or power conferred on such person by the Certificate of Incorporation,
Bylaws, Partnership Agreement or other documents regulating the form and powers
of such entity, to control the decisions of such entity.
(xi) If during the term of this Agreement Publisher, or an entity that
has, directly or indirectly, 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 hardware device or
product which is directly or indirectly competitive with the Player.
Publisher shall be obligated to immediately notify SCEA in the event that any of
the events or circumstances specified in subsections (ii) - (xi) occur, and any
failure to so notify SCEA shall constitute a material breach with no opportunity
to cure such breach.
15.3 PRODUCT-BY-PRODUCT TERMINATION BY SCEA. In addition to the events of
termination described in Section 15.2, 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 7.1.3
hereto, and such breach is not corrected or cured prior to the earlier of (i)
thirty (30) days after receipt of written notice of such breach or (ii)
commercial release of the product; or (b) 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 Executable Software; or (c) Publisher cancels a Licensed
Product or fails to provide SCEA in accordance with the provisions of Section
5.4 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, or fails to provide work in progress to SCEA in accordance
with the Review Process in Section 5.3.
15.4 OPTIONS OF SCEA IN LIEU OF TERMINATION. As alternatives to
terminating this Agreement or a particular Licensed Product as set forth in
Sections 15.2 and 15.3 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.
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15.4.1 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.
15.4.2 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, 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.
15.5 NO REFUNDS. In the event of the termination of this Agreement in
accordance with any of the provisions of Sections 15.2 through 15.4 above, no
portion of any payments of any kind whatsoever previously provided to SCEA
hereunder shall be owed or be repayable to Publisher.
16. EFFECT OF EXPIRATION OR TERMINATION.
16.1 INVENTORY STATEMENT. Within thirty (30) days of the date of
expiration or the effective date of termination with respect to any and/or all
Licensed Products, 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/or statement.
16.2 REVERSION OF RIGHTS. Upon expiration or termination and subject to
Section 16.3 below, the licenses and related rights herein granted to Publisher
shall immediately revert to SCEA, and Publisher shall cease and desist from any
further use of Confidential Information of SCEA, the Licensed Trademarks and the
Sony Materials and any Intellectual Property Rights therein, and, subject to the
provisions of Section 16.3 below, Publisher shall have no further right to
continue the publication, manufacture, marketing, sale and/or distribution of
any Units of the Licensed Products, nor to continue to use the Licensed
Trademarks; provided, however, that for a period of one year after termination,
and subject to all the terms of Section 14, and provided this Agreement is not
terminated due to a breach or default of Publisher, Publisher may retain such
portions of Sony Materials 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.
16.3 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 [**] 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 [**] 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 [**] 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.
16.4 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
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, including, without limitation, any such
information, knowledge or know-how of which either party, as the receiving
party, was apprised and which was reduced to tangible or written form by such
party or in its behalf at any time during the term of this Agreement. Within
five (5) working days after any such destruction, Publisher shall provide SCEA
with an itemized statement certified to be accurate by an officer of Publisher,
indicating the number of copies and/or units of the Sony Materials and/or
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission
-20- CONFIDENTIAL
<PAGE>
Confidential Information which have been destroyed, the location and date of
such destruction and the disposition of the remains of such destroyed materials.
16.5 RENEWAL OR EXTENSION OF THIS AGREEMENT; TERMINATION WITHOUT
PREJUDICE. SCEA shall be under no obligation to renew or 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,
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.
However, the expiration of this Agreement shall not excuse either party from its
previous breach of any of the provisions of this Agreement or from any
obligations surviving the expiration of this Agreement, and full legal and
equitable remedies shall remain available for any breach or threatened breach of
this Agreement or any obligations arising therefrom. The expiration or
termination of this Agreement shall be without prejudice to any rights or
remedies which one party may otherwise have against the other party.
17. MISCELLANEOUS PROVISIONS.
17.1 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, return receipt requested, or sent
by recognized international courier service (e.g., Federal Express, DHL, etc.),
telex, 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 receipt, as confirmed by the sending party.
17.2 FORCE 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; or compliance with any law, regulation or
order (whether valid or invalid) of any governmental body, other than an order,
requirement or instruction arising out of Publisher's violation of any
applicable law or regulation; 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 one hundred and twenty
(120) days, SCEA may terminate this Agreement for cause by providing written
notice to Publisher to such effect.
17.3 NO 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.
17.4 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 15.2 (x). Any attempted or purported assignment,
delegation or other such transfer, directly or indirectly, without the required
consent of SCEA shall be void and a material breach of this Agreement. Subject
to the foregoing, this Agreement shall inure to the benefit of the parties and
their respective successors (other than under the conditions set forth in
Section 15.2 (x)) and permitted assigns. SCEA shall have the right to assign any
and all of its rights and obligations hereunder to any affiliate(s), including,
without limitation, its obligations under Section 7 hereof.
17.5 SUBCONTRACTORS. Publisher shall not sell, assign, delegate,
subcontract, sublicense or otherwise transfer or encumber all or any portion of
the licenses herein granted; provided, however, that Publisher may retain those
subcontractor(s) to assist with the development of Licensed Products which: (i)
have signed a Nondisclosure Agreement and a Developer Agreement with SCEA (the
"PlayStation Agreements") in full force and effect throughout the term of such
development; or (ii) have signed an SCEA-approved subcontractor agreement
between Publisher and subcontractor, which subcontractor agreement shall contain
substantially identical terms to the Nondisclosure Agreement and the
confidentiality provisions of this Agreement ("Subcontractor Agreement"). If a
subcontractor will use Development Tools provided by Publisher, it must also
comply with the requirements set
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forth in Section 16.5 of an LDA with respect to usage of such Development Tools.
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 agrees to provide a copy of any such
Subcontractor Agreement to SCEA prior to and following execution thereof.
Publisher shall not disclose to any subcontractor any Confidential Information
of SCEA (as defined herein and in the Nondisclosure Agreement), including,
without limitation, any Sony Materials, unless and until either the PlayStation
Agreements or a Subcontractor Agreement have been executed. 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 17.5. Publisher shall use its best efforts to cause its subcontractors
employed hereby to comply in all respects with the terms and conditions of this
Agreement, and hereby unconditionally guarantees all obligations of its
subcontractors.
17.6 COMPLIANCE WITH APPLICABLE LAWS. The parties shall at all times
comply with all applicable regulations and orders of their respective countries
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).
17.7 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 courts of the County of San Mateo, State of California (if under
State law) or the Northern District of California (if under Federal law or
pursuant to diversity jurisdiction). 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
17.1 above. In addition, each party hereby waives the right to a jury trial in
any action or proceeding brought to enforce the terms of this Agreement or to
adjudicate any dispute arising hereunder.
17.8 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.
17.9 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 available hereunder or otherwise at law or in equity, and
all such remedies shall be deemed to be cumulative. Any breach of Sections 2, 3,
4, 5, 6, 7.1, 12 and 14 of this Agreement would cause irreparable harm to SCEA,
the extent of which would be difficult to ascertain. Accordingly, Publisher
agrees that, in addition to any other remedies 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 enjoining any
breach or threatened breach of any or all of such provisions. 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 such breach.
17.10 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 part thereof) shall be
enforced to the extent possible consistent with the stated intention of the
parties, or, if incapable of such enforcement, shall be deemed to be deleted
from this Agreement, while the remainder of this Agreement shall continue in
full force and remain in effect according to its stated terms and conditions.
17.11 SECTIONS SURVIVING EXPIRATION OR TERMINATION. The following sections
shall survive the expiration or earlier termination of this Agreement for any
reason: 4, 5.5, 6, 7.2, 7.4, 9, 10, 11, 12, 14, 15.5, 16, 17.4, 17.5, 17.6,17.7,
17.8, 17.9 and 17.10.
17.12 WAIVER. No failure or delay by either party in exercising any right,
power or remedy under this Agreement shall operate as a waiver of any such
right, power or remedy. No waiver of any provision of this Agreement shall be
effective unless in writing and signed by the party against whom such waiver is
sought to be enforced. Any waiver by either party of any provision of
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this Agreement shall not be construed as a waiver of any other provision of this
Agreement, nor shall such waiver operate as or be construed as a waiver of such
provision respecting any future event or circumstance.
17.13 MODIFICATION. No modification of any provision of this Agreement
shall be effective unless in writing and signed by both of the parties.
17.14 HEADINGS. The section headings used in this Agreement are intended
primarily for reference and shall not by themselves determine the construction
or interpretation of this Agreement or any portion hereof.
17.15 INTEGRATION. This Agreement (together with the Exhibits attached
hereto) constitutes the entire agreement between SCEA and Publisher and
supersedes all prior or contemporaneous agreements, proposals, understandings
and communications between SCEA and Publisher, whether oral or written, with
respect to the subject matter hereof; provided, however, that notwithstanding
anything to the contrary in the foregoing, the Nondisclosure Agreement referred
to in Section 14 hereto shall remain in full force and effect.
17.16 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and together shall constitute one and the
same instrument.
17.17 CONSTRUCTION. This Agreement shall be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first written above.
SONY COMPUTER ENTERTAINMENT AMERICA INC. THQ INC.
<TABLE>
<S> <C>
By: Andrew House By: Alison Locke
------------------------------- ----------------------------------
Print Name: Andrew House Print Name: Alison Locke
----------------------- --------------------------
Title: Title: Executive Vice President,
---------------------------- North America Publishing
------------------------------
Date: 11-7-2002 Date: 10-31-02
----------------------------- --------------------------------
</TABLE>
NOT AN AGREEMENT UNTIL
EXECUTED BY BOTH PARTIES
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EXHIBIT A
ROYALTIES
LICENSED PRODUCT PER UNIT ROYALTY.
A. APPLICABLE ROYALTIES ON LICENSED PRODUCTS.
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 initially released after execution of this Agreement
based on the initial Wholesale Price of the Licensed Product, as follows:
<TABLE>
<CAPTION>
Wholesale Price Per Title Royalty
----------------- ----------------- -----------------
<S> <C> <C>
[**] [**] [**]
----------------- ----------------- -----------------
[**] [**] [**]
----------------- ----------------- -----------------
[**] [**] [**]
----------------- ----------------- -----------------
[**] [**] [**]
----------------- ----------------- -----------------
[**] [**] [**]
----------------- ----------------- -----------------
</TABLE>
In the absence of satisfactory evidence to support the WSP, the royalty
rate that shall apply will be [**] per Unit. For purposes of this Agreement,
Units of Licensed Products shall be considered "released" when Units first begin
to ship from a Designated Manufacturing Facility.
2. REORDERS AND OTHER PROGRAMS. Royalties on Licensed Products
initially released prior to execution of this Agreement shall be the royalty in
effect as the time such Licensed Product was released. 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 Products qualifying for SCEA's
"Greatest Hits" programs or other programs offered by SCEA shall be subject to
the royalties applicable for such programs.
3. PAYMENT. 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, 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. The accounting statement due hereunder
shall be subject to the audit and accounting provisions set forth below.
4. 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 [**]. 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 [**] 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
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
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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.
B. SCEA ESTABLISHED THIRD PARTY DEMO DISC PROGRAM ROYALTIES: Publisher shall
pay SCEA a per Unit royalty in United States dollars of [**] for each Unit
of the Consumer Promotional Disc Program and the Trade Promotional Disc
Program manufactured. The quantity of Units ordered shall comply with the
terms of such SCEA Established Third Party Demo Disc Program. Payment of
such royalties shall be made to SCEA in conjunction with the payment to
SCEA of the manufacturing costs for each Unit and pursuant to the terms
and conditions set forth in Sections 7.2.3 and 9 hereto and in such SCEA
Established Third Party Demo Disc Program.
C. ADJUSTMENTS TO LICENSED PRODUCT ROYALTY - HIT TITLE REBATE
1. In the event that the total purchases by Publisher from SCEA with
respect to any Licensed Product exceed the following numbers of
Units during the first three (3) years after first commercial
shipment of such Licensed Product, Publisher shall be entitled to a
rebate with respect to royalties paid by Publisher to SCEA pursuant
to Section 9 of the Agreement ("Hit Title Rebate") which shall be
credited to Publisher's account as provided below, as follows:
<TABLE>
<CAPTION>
VOLUME ROYALTY REBATE
------ --------------
<S> <C>
[**] [**]
[**] [**]
[**] [**]
[**] [**]
</TABLE>
2. SCEA shall credit Publisher's account for the Hit Title Rebates as
follows:(i) if Publisher's initial order for a Licensed Product is
less than the Hit Title Rebate threshold provided in C.1.a above,
then SCEA shall credit Publisher's account sixty (60) days
following the date that Publisher notifies SCEA that sales of a
Licensed Product exceed the Hit Title Rebate threshold, subject to
SCEA's right to confirm such information; (ii) if Publisher's
initial order for a Licensed Product reaches or exceeds the Hit
Title Rebate threshold provided in C.1.a above, then Publisher may
credit the Hit Title Rebate amount set forth above as a separate
line item on the Purchase Order with respect to such Licensed
Product. It is Publisher's responsibility to inform SCEA when it
reaches a Hit Title Rebate threshold, and Publisher shall not take
a Hit Title Rebate as a separate line item on a Purchase Order
without discussing first with SCEA.
3. The Hit Title Rebate may not be used in conjunction with any
royalty reduction program of SCEA in effect from time to time,
including but not limited to any "Greatest Hits" program, nor shall
a Hit Title Rebate be taken on a Third Party Demo Disc program or
any promotional program of SCEA or on Licensed Products that
qualify for the Band 1 royalty.
4. Each Licensed Product shall be considered independently for
purposes of calculating the Hit Title Rebate and the
Webates shall be cumulative. By way of example:
a. If Publisher's aggregate shipments for a single
Licensed Product are less than [**], no rebate is
available.
b. If Publisher's aggregate shipments for a single Licensed
Product exceed [**] but are less than [**] Units, Publisher
will be entitled to receive [**] of the Royalty paid as a
rebate with respect to the first [**] Units, at the time
Publisher is invoiced for such excess order, and shall
thereafter be charged a per Unit royalty of [**] less [**],
until Units of the Licensed Product shipped exceed [**]
Units.
c. If Publisher's aggregate orders for a single Licensed
Product exceed [**], but are less than [**] Units, Publisher
will receive [**] of the Royalty paid as a rebate with
respect to the first [**] Units, at the time Publisher is
invoiced for such excess order, and shall thereafter be
charged a per Unit royalty of [**] less[**], until Units of
the Licensed Product shipped exceed [**]. Please note that
in this case Publisher will
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
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<PAGE>
only receive a [**] additional rebate with respect to the
first [**] because it has already received a [**] rebate on
such Units.
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
-26- CONFIDENTIAL
<PAGE>
EXHIBIT B
[**]
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission.
-27- CONFIDENTIAL
<PAGE>
EXHIBIT C
[**]
[*] Confidential portion omitted and filed separately with the Securities and
Exchange Commission
-28- CONFIDENTIAL
<PAGE>
EXHIBIT D
[FORM OF LETTER REGARDING SCEA DEMO DISCS]
VIA FAX
[Date]
[Name]
[Third Party Name]
[Address]
Re: [Specify SCEA Demo Disc Program]
Dear ________________:
This letter confirms that Sony Computer Entertainment America ("SCEA") would
like to include the Product Information (listed below) of your PlayStation game
(listed below) in the following Demo Disc:
Game Title:
Type of Product Information Required:
Demo Disc program:
Deadline:
Date of Licensed Publisher Agreement:
Please return a signed copy of this letter to _________________ by fax at
_______________ and submit the Product Information directly to SCEA's
consultant, _______________________________________, no later than the Deadline
set forth above. Failure to provide this acknowledged letter and the code, by
this date, will result in removal of your Product Information from the Demo
Disc.
The inclusion of your Product Information is subject to the terms and conditions
of the Licensed Publisher Agreement between SCEA and you.
Very truly yours, AGREED AND ACKNOWLEDGED BY:
[PUBLISHER]
By:_____________________________________
Title:__________________________________
Date:___________________________________
cc: Legal Department
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