EXHIBIT 10.4
PURSUANT TO RULE 24b.2 PROMULGATED UNDER THE SECURITIES
AND EXCHANGE ACT OF 1934, AS AMENDED, CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED FOR CERTAIN PROVISIONS OF
THIS AGREEMENT. SUCH CONFIDENTIAL INFORMATION HAS BEEN
(i) OMITTED FROM THIS VERSION OF THE AGREEMENT, (ii)
MARKED WITH ASTERISKS (**) TO INDICATE SUCH DELETIONS AND
(iii) FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of July 29, 1997,
between Take Two Interactive Software, Inc., a New York
corporation having offices at 575 Broadway, New York, NY
10012 ("Take Two") and GameTek, Inc., a Delaware
Corporation with offices at 3 Harbor Drive, Suite 110,
Sausalito, California 94965 ("GameTek").
W I T N E S S E T H :
WHEREAS, GameTek owns or controls the rights
in and to the Game Titles (defined below), and desires to
enter into this agreement providing for Take Two's
distribution of Software Devices (defined below)
embodying the Game Titles;
WHEREAS, Take Two is engaged in the business
of distributing, marketing, selling, advertising and
otherwise exploiting Software Devices and desires to
distribute the Software Devices embodying the Game Titles
on the terms provided herein;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS:
Capitalized terms used herein, but not
otherwise defined herein, shall have the meanings set
forth below:
1.1 "Basic Term" means the period commencing
on the date on which such party hereto has executed and
delivered to the other party hereto a copy of this
Agreement, and ending on August 31, 1998; provided,
however, that if GameTek is able to obtain from Califon
Productions, Inc. or its affiliates ("Califon") an
extension of its license for "Wheel of Fortune" and
"Jeopardy!", then the Basic Term shall extend through the
last day of such extension.
1.2 "Bug" means a repeatable phenomenon of
unintended events or actions during the running of a
Software Device under normal conditions that results in:
(a) the software component of such
Software Device being unable to perform repeatedly and
without interruption in the manner in which such Software
Device is commonly intended to be used; or
(b) the destruction or corruption of the
data embodied in such Software Device.
1.3 "Distributed Product" or "Distributed
Products" means Software Devices embodying a Game Title
and playable on the Game Machine.
1.4 "Documentation" means the technical
documentation for each Game.
1.5 "Exploitation Period" with respect to any
Game Title means the date commencing on the date hereof
and ending on the expiration of the Basic Term with
respect to such Game Title.
1.6 "Game Machine" means the Nintendo N64
console game system.
1.7 "Game Title" or "Game Titles" means,
individually or collectively, as the context requires,
the computer software games developed by or on behalf of
GameTek that are set forth on Schedule "A" .
1.8 "Manual" means a document that describes
in reasonable detail in the English language the
operation and functions of the computer software and
contains instructions for using the Distributed Products.
1.9 "SKU" or "sku" means stock keeping unit.
1.10 "Software Device" means any device on or
by which computer software and its associated visual
images, with or without sound, may be embodied or
recorded for later operation, manipulation or
communication to users and which are designed for use
with the Game Machine.
1.11 "Territory" means the world.
1.12 "Third Party Royalties" means, with
respect to any unit of any Game Title distributed by Take
Two hereunder, the aggregate of all royalties payable by
GameTek to Califon Productions, Inc., Vanna White, and
Alex Trebek or their respective successors or assigns in
respect of the sale or other disposition of such unit.
Attached as Schedule A hereto is a description of the
amount of each such Third Party Royalty.
2. RIGHTS AND OBLIGATIONS OF Take Two:
Subject to the terms and conditions hereof,
GameTek hereby grants to Take Two, and Take Two hereby
accepts and agrees to perform and discharge, the
following rights and obligations, which shall be deemed
exclusive within the Territory during the Basic Term:
2.1 Distribution Rights and Obligations.
(a) GameTek hereby engages Take Two, and
Take Two hereby agrees to be engaged by GameTek, as
GameTek's sole and exclusive seller and distributor of
Distributed Products throughout the Territory during the
Exploitation Period. During the Exploitation Period for
each Game Title, Take Two may distribute such Distributed
Products through all available wholesale channels, and
Take Two shall order and maintain inventories of
appropriate quantities of Distributed Products with
respect to each Game Title as shall be reasonably
necessary to meet anticipated demand.
(b) Take Two shall have the right to use,
publish and permit others to use and publish GameTek's
name, and, subject to obtaining the prior approval of the
relevant intellectual property licensor (i.e., Califon
Productions, Inc., Vanna White and Alex Trebek), any
names of or trademarks associated with, or embodied in,
any Game Title or reproduction or simulation thereof, the
script, speech, images, characters, characterizations,
designs, graphics, art work and other characteristics
(including the name, voice and likeness of Vanna White
and Alex Trebek) associated with each Game Title, and
the name of each Game Title (collectively, the "Marks"),
in connection with the sale, advertising, distribution
and exploitation thereof.
(c) Take Two shall have the right, solely
for advertising, publicity and promotional purposes, to
perform and display the Distributed Products publicly,
and to permit the public performance thereof, but only in
a manner consistent with ordinary custom and practice in
the industry for the promotion of products similar to the
Game Titles.
(d) GameTek shall furnish to Take Two in
camera ready form, and Take Two shall have the right to
use, all artwork, textual material and other materials
prepared by GameTek in connection with the Distributed
Products, including advertising, packaging and wrapping
materials (collectively, "Packaging and Promotional
Materials"), to the extent created by or on behalf of
GameTek in connection with Distributed Products.
(e) All rights in and to the Game Titles,
Packaging and Promotional Materials and/or Marks not
expressly granted to Take Two herein are reserved to
GameTek.
2.2 Intellectual Property Rights.
(a) As between GameTek and Take Two,
GameTek retains all copyright, patent, trade secret,
trade mark and trade name rights in and to the
Distributed Products, including all packaging, designs,
logos, slogans, advertising materials and promotional
materials and in all other materials delivered by GameTek
to Take Two (collectively, "GameTek Property"), and Take
Two will not have or acquire any right, title or interest
therein or thereto under any circumstance whatsoever
except for the specific rights granted herein. Take Two
shall not, during the Basic Term or at any time
thereafter, take any action that attacks, or that
otherwise reasonably may be expected to adversely affect
or derogate from, GameTek's ownership of or rights in the
GameTek Property or the validity thereof, nor shall Take
Two apply for any registration or file any document or
take any action that would adversely affect GameTek's
ownership of or rights in the GameTek Property or aid or
abet anyone else in doing so, or use or authorize the use
of any trademark, trade name or word, symbol or
combination thereof or other designation identical with
or confusingly similar to the trademarks and/or trade
names that constitute part of the GameTek Property. Take
Two will not alter, remove, obscure, erase or deface any
proprietary rights notices contained on or incorporated
in any SKU or the packaging of any SKU. If Take Two is
called upon or required to produce any packaging,
advertising and promotional materials for a Game Title,
Take Two will include thereon such proprietary rights
notices as may be designated and approved by GameTek.
(b) Promptly upon request, Take Two will
provide GameTek with a template for Take Two's logo and
legend for inclusion on any packaging, advertising, game
manuals or promotional materials produced in connection
with any Game Title, which template shall be reasonably
acceptable to GameTek. GameTek will include Take Two's
logo and legend, as incorporated in any such approved
template, on all such packaging, advertising and
promotional materials with respect to Game Titles. Prior
to the use of any such materials, GameTek will provide
samples thereof to Take Two for Take Two approval, which
shall not be unreasonably withheld or delayed. Such
materials will be deemed approved by Take Two unless,
within fifteen (15) days following the submission thereof
to Take Two, Take Two shall notify GameTek in writing of
any objection it may have thereto, specifying the reasons
for such objection in reasonable detail and describing
how such objections may be remedied in order to render
the submitted materials acceptable to Take Two.
3. MANUFACTURING; PRICING.
3.1 GameTek represents that, prior to the
delivery of any Game Title hereunder, it shall have
designed the computer software and all documentation
relating to such Game Title, to the extent necessary for
same to be manufactured into Distributed Products and
distributed by Take Two pursuant to this Agreement, and
operated and perceived through the Game Machines. The
Distributed Products shall consist of standard four (4)
megabyte cartridges.
3.2 Take Two shall notify GameTek from time to
time reasonably in advance of any required delivery date
of the number of units that Take Two wishes GameTek to
have manufactured in order to enable Take Two to fulfill
its distribution requirements for each Game Title. Each
such notification shall be accompanied by (i) a wire
transfer of funds, either (at Take Two's option) to an
account designated by GameTek or directly to Nintendo of
America ("Nintendo") on behalf of GameTek, sufficient to
enable GameTek to pay for the manufacture of the
Distributed Products so ordered or, if requested by
GameTek, (ii) the provision of an irrevocable documentary
letter of credit in favor of Nintendo on behalf of
GameTek in form satisfactory to Nintendo, for the full
amount of the manufacturing cost of the goods ordered.
In any event, Take Two shall arrange and pay for shipment
of the goods from Japan (including all customs duties and
similar charges) and for insuring the goods through
delivery to Take Two or its customers, as applicable.
Promptly and in no event later than two (2) business days
after its receipt of such order and funds or letter of
credit, GameTek shall arrange with Nintendo for the
manufacture of such Distributed Products, including the
posting of requisite letters of credit in favor of the
manufacturer.
3.3 GameTek shall deliver to Nintendo the
preliminary and final code for each Game Title in
accordance with the delivery schedule set forth in
Schedule "A" annexed hereto and shall use its reasonable
best efforts to obtain in a timely manner all necessary
approvals from Nintendo.
3.4. The purchase price payable by Take Two
hereunder for each unit of Distributed Product shall be
the sum of (i) the total cost charged to GameTek by
Nintendo for the manufacture of the product, plus (ii) to
the extent not included in (i) above or otherwise paid by
Take Two directly, all insurance and transportation
charges, import duties, custom fees and similar charges
incurred in shipping the unit into its warehouse in the
United States, (the sum of the amounts described in
clauses (i) and (ii) being referred to collectively as
"GameTek's Cost of Goods") plus (iii) all Third Party
Royalties payable in respect of the sale or other
disposition of such unit, plus (iv) $(**) (such $(**) per
unit being referred to as the "GameTek Share").
Transportation to Take Two or its customers shall be
arranged and paid for by Take Two. The portion of the
purchase price constituting GameTek's Cost of Goods shall
be paid by Take Two as provided in Section 3.2 hereof.
The portion of such purchase price consisting of Third-Party Royalties
shall be paid by Take Two to GameTek
within thirty days after the end of each calendar month
by wire transfer of immediately available funds into an
account designated by GameTek in writing to Take Two
commencing with the first sale by Take Two of Distributed
Products. GameTek's Share in respect of any of the first
(**) units sold hereunder shall be payable in accordance
with the payment schedule set forth in Section 5.1(a).
GameTek's Share in respect of any units in excess of (**)
units shall only accrue and become payable upon (i) the
collection by Take Two of all receivables from the sale
of at least (**) and (ii) upon collection of the proceeds
of sale of the relevant units in excess of (**). Payment
of GameTek's Share with respect to units in excess of
(**) shall be made within 30 days of the close of the
month in which the GameTek Share is earned with respect
to such units. Notwithstanding the foregoing, in the
event that the Guaranty (as hereinafter defined) is
reduced pursuant to the provisions of Sections 5.1(a) or
(c) hereof, the (**) units referred to above in this
paragraph shall be proportionately reduced.
3.5 Take Two shall be responsible, at its sole
cost and expense, for the marketing, promotion and
advertising of each Game Title, including co-operative
advertising credits, shelf or "slot" fees and any similar
discounts, credits or payments, provided that the amount
to be spent thereon and the manner in which such
expenditures shall be made shall be determined
exclusively by Take Two in the exercise of its reasonable
business judgment.
3.6 If any customer returns a unit on which
Take Two has paid the GameTek Share (including returns
for defects or "Bugs"), then Take Two shall have the right
to recoup the amount of the GameTek Share and the Third
Party Royalties previously paid by Take Two in respect of
such unit from any other monies payable to GameTek
hereunder. Except as otherwise provided in Section 7.4
hereof, if Take Two grants any customer price protection
or a markdown of inventory in respect of any Distributed
Product, an amount equal to 50% of the dollar value of
any such price protection or markdown of inventory
actually granted to such customer will be recoupable by
Take Two out of monies otherwise payable to GameTek
hereunder if, but only if, GameTek has authorized such
price protection or markdown in a writing that specifies
the account name, inventory quantity to be adjusted in
price, and the per unit and aggregate price adjustment
being authorized. GameTek shall not unreasonably
withhold or delay its consent to any such price
protection or mark down. If and to the extent Take Two
is unable to recoup any amounts owing by GameTek by
reason of the provisions of this Section 3.6 within
ninety (90) days after such amount first becomes due,
then Take Two may notify GameTek of such fact and demand
that GameTek pay the unrecouped amount. GameTek shall
pay such unrecouped amount promptly after receipt of such
demand for payment, but only to the extent that such
payment does not reduce the aggregate amount of the
GameTek Share received and retained by GameTek hereunder
to below $(**) (or such lesser amount to which the
Guaranty may reduced as provided in Sections 5.1(a) and
(c) hereof). For purposes of clarity, it is the express
intention of the parties that returns, price protection
and markdowns shall not reduce the aggregate amount of
the GameTek Share paid to and retained by GameTek in
respect of the Guaranty to less than $(**) (or such
lesser amount to which the Guaranty may be reduced as
provided in Sections 5.1(a) (c) hereof).
4. PACKAGING, TESTING, ETC.:TRANSLATIONS
4.1 GameTek will place the game machine,
medium and other operating requirements (such as minimum
memory capacity) on the front outside of each Distributed
Product, and will shrink-wrap all Distributed Product and
will incorporate into the design of the packaging all
relevant bar code information.
4.2. GameTek shall use its reasonable best
efforts to ensure that each Distributed Product shall, in
each different configuration in which such Distributed
Product is to operate, be free of Bugs or other defects.
GameTek shall be fully responsible for implementing all
necessary corrective measures to correct any Bugs or
other defects found to exist. Each party shall
immediately notify the other party in writing if it
discovers any Bugs or other defects in any Distributed
Products.
4.3. All packaging for the Distributed
Products shall contain credit to Take Two or its
affiliates as distributor, GameTek as publisher and to
appropriate third parties. The forms of such credits
with respect to Take Two and GameTek shall be
substantially in the forms annexed hereto in Schedule
"B". The credits related to such third parties shall be
in such form, substance and scope as to comply with
GameTek's contractual obligations relating thereto.
4.4 All title and other ownership rights to
each Distributed Product incorporating a Game Title shall
vest in Take Two at such time as the goods are delivered
for shipment by the manufacturer. GameTek shall retain a
security interest in the goods until Take Two shall have
paid to GameTek the full purchase price thereof. Take
Two shall bear the risk of loss of any such Distributed
Product from and after the moment at which such
Distributed Product is shipped from the manufacturer's
facility.
4.5 Take Two shall use its reasonable best
efforts, consistent with standard industry custom and
practice, to sell and to distribute the Distributed
Products throughout the Territory during the Basic Term,
subject to the terms to this Agreement.
4.6 All advertising, packaging and marketing
and promotional materials proposed to be used by Take Two
in connection with any of the Game Titles shall be
submitted to GameTek for its written approval prior to
any use or distribution thereof. GameTek shall be deemed
to have approved any materials so submitted unless,
within thirty (30) days following its receipt thereof,
GameTek delivers to Take Two a written objection to the
submitted materials specifying in reasonable detail the
nature of such objection and the manner in which the
submitted material must be changed in order to meet
GameTek's approval.
4.7 Upon request by Take Two, GameTek shall
prepare translated versions of one or both Game Titles.
With respect to any such translation request, Take Two
shall, at its own cost, provide GameTek with a complete
and accurate translation of the text of the Game Title
(including all relevant documentation) into the selected
language, and GameTek shall insert such translated text
into the Game Title within thirty (30) days after its
receipt thereof from Take Two. The foreign language
version of the text for each screen shot within any Game
Title must be close enough to the length of the English
version of such text to enable it to fit within the same
text window as the English text. The parties shall agree
on the fee that GameTek will charge and that Take Two
will pay for including such translated text into the Game
Title and related documentation prior to the delivery of
the translated text to GameTek. If the parties cannot
agree on a fee for such services, GameTek shall charge
$40.00 per hour for each man hour expended is performing
such services.
5. GUARANTEES AND ADVANCES.
5.1 Guarantees Payable by Take Two.
(a) Take Two guarantees to GameTek a
minimum aggregate GameTek Share of $(**) (the "Guaranty")
with respect to the first two Game Titles released
hereunder (subject to possible reduction in the manner
and to the extent described below). The Guaranty shall
be payable in the manner described below:
(i) $(**) payable upon execution and
delivery of this Agreement;
(ii) $(**) payable within three
business days after delivery to Take Two of written
notice of final code approval from Nintendo of Japan,
Inc. for "Wheel of Fortune" game cartridge;
(iii) $(**) payable within three
business days after the first commercial shipment from
the manufacturer of "Wheel of Fortune" game cartridges;
(iv) $(**) payable within three
business days after delivery to Take Two of written
notice of final code approval from Nintendo of Japan,
Inc. for "Jeopardy!" game cartridge;
(v)$(**) payable within three
business days after the first commercial shipment from
the manufacturer of "Jeopardy!" game cartridges;
(vi)$(**) payable within one hundred
twenty (120) days after first shipment of the second Game
Title released hereunder;
(vii)$(**) payable within two hundred
forty (240) days after first shipment of the second Game
Title released hereunder; and
(viii)$(**) payable within three
hundred sixty (360) days after first shipment of the
second Game Title released hereunder;
provided, however, that if for any reason GameTek is
unable to obtain from Califon an extension of its
existing license for "Wheel of Fortune" and "Jeopardy!"
beyond August 31, 1998, then Take Two shall have no
obligation to make the milestone payments described in
clauses (vi), (vii) and (viii) above, and the aggregate
Guaranty payable by Take Two hereunder shall be reduced
from $(**) to $(**), the foregoing being Take Two's sole
remedy hereunder for any failure by GameTek to obtain
such license extension.
All payments made hereunder shall be made by wire
transfer of immediately available funds to an account
which GameTek shall designate at least two full business
days prior to the due date of any relevant payment.
(b) Notwithstanding any contrary provision
contained herein, (i) Take Two shall be entitled to
recoup out of the GameTek Share otherwise payable to
GameTek in respect of any Game Title covered hereunder,
on a fully cross-collateralized basis, the full amount of
the advance Guaranty payments theretofore paid by Take
Two to GameTek pursuant to Section 5.1(a) above, and
(ii) to the extent that Take Two furnishes GameTek with
documentation evidencing the fact that Take Two has
incurred more than $150,000 in advertising, marketing,
promotion and sales support for the Game Titles, Take Two
may recoup up to $(**) of such costs in excess of
$150,000 from the GameTek Share otherwise payable to
GameTek in respect of the first (**) units of Distributed
Product sold or distributed by Take Two hereunder in
excess of the Guaranty (i.e., units (**) through (**);
provided that such numbers shall be proportionately
reduced if the Guaranty is reduced pursuant to the
provisions of Sections 5.1(a) or (c) hereof).
(c) If GameTek (i) is unable to obtain from
Califon an extension of its existing license beyond
August 31, 1998, and (ii) does not deliver the notice of
final code approval for the "Wheel of Fortune" game
cartridge and/or the "Jeopardy!" game cartridge by the
dates specified in Schedule "A" annexed hereto, then for
each and every month or partial month that delivery of
either such approval notice is delayed beyond the date
specified in Schedule "A," the amount payable by Take Two
upon delivery of such notice shall be decreased by
$100,000, provided that the aggregate amount of such
decrease occasioned by the late delivery of either such
notice shall not exceed the amount specified in Schedule
"A" as payable upon delivery of such notice.
(d) If GameTek does not deliver the notice of
final code approval for either the "Wheel of Fortune"
game cartridge or the "Jeopardy!" game cartridge within
ninety (90) of the delivery date specified in Schedule
"A" annexed hereto, then Take Two shall have the option
on written notice to GameTek to delete such Game Title
from this Agreement without GameTek being in default as a
result thereof, and GameTek shall, within ten (10)
business days of such notice, refund to Take Two all
amounts paid by Take Two to GameTek in respect of the
Game Title so deleted. Notwithstanding the foregoing, if
GameTek's rights with respect to any Game Title terminate
prior to the end of the Exploitation Period therefor as a
result of a failure by GameTek to comply with its
obligations under any agreement with respect thereto,
Take Two shall have the right to perform or cause to be
performed such obligations, and the reasonable out-of-pocket
expenses incurred by Take Two in connection
therewith (to the extent such expenses exceed amounts
that otherwise would have been payable by Take Two
hereunder with respect to such Game Title) shall be
recoupable by Take Two out of funds otherwise payable to
GameTek hereunder on a fully cross-collateralized basis,
or at Take Two's election, paid directly by GameTek with
thirty days after receipt of Take Two's invoice therefor.
5.2 Unless and to the extent expressly
provided otherwise in this Agreement, each party hereto
shall bear all costs and expenses incurred in connection
with the performance of its obligations hereunder,
without any right of contribution from the other party
hereto.
6. RIGHT OF INSPECTION; LATE PAYMENT.
6.1 Each party shall maintain, throughout the
term of this Agreement and for three years thereafter, at
its principal executive offices complete and accurate
books of account concerning sales of the Distributed
Products hereunder. Upon five business days' prior
written notice, either party hereto, or its agents on its
behalf, may examine the other party's books and records
relating to the sale of the Distributed Products in order
to verify the accuracy thereof, during normal business
hours, and upon reasonable prior written notice; provided
that neither party may conduct more than one such audit
in any six month period.
6.2 If either party fails or refuses to pay
any amount owing to the other party hereunder when due,
then the party in default shall reimburse the other party
for any collection expenses it may incur and the amount
not timely paid, including any such collection expenses,
shall bear interest at a rate per annum equal to 3% over
the prime rate announced from time to time by Citibank,
N.A., accruing from the first date on which such monies
were due and owing.
7. REPRESENTATIONS AND WARRANTIES:
7.1 Take Two hereby warrants and represents
that:
(i) This Agreement has been duly
authorized, executed and delivered by Take Two; Take Two
has the full power and authority to enter into this
Agreement and to perform its obligations hereunder and is
free to enter into this Agreement; this Agreement
constitutes the valid and binding obligation of Take Two,
enforceable in accordance with its terms; and the making
of this Agreement by Take Two does not violate any
agreement, right or obligation existing between Take Two
on the one hand, and any other person, firm or
corporation, on the other hand;
(ii) No consents of any third parties are
required for Take Two to enter into this Agreement; and
(iii) Take Two shall devote substantially
the same degree of diligence, effort, resources and care
to the performance of its obligations hereunder as it
devotes to the distribution of its proprietary products
or to the performance of its current contractual
obligations to third parties with respect to similar
products.
7.2 GameTek hereby represents and warrants
that:
(i) This Agreement has been duly
authorized, executed and delivered by GameTek; GameTek
has the full power and authority to enter into this
Agreement and to perform its obligations hereunder and is
free to enter into this Agreement; this Agreement
constitutes the valid and binding obligation of GameTek,
enforceable in accordance with its terms; the making of
this Agreement by GameTek does not violate any agreement,
right or obligation existing between GameTek on the one
hand, and any other person, firm or corporation, on the
other hand; and GameTek has not heretofore granted such
rights to the Game Titles to any other person, party or
company for use in connection with the Distributed
Products;
(ii) Neither the computer software, nor
the documentation incorporated in any Game Title, nor the
Game Title itself distributed by Take Two hereunder, or
any part of any character, object, sound or music
embodied therein infringes or shall infringe upon any
common law or statutory rights of any third party
including, without limitation, contractual rights,
patents, copyrights, trade secrets, rights of privacy, or
other intellectual property rights. The Distributed
Products will be free of material defects in materials
and workmanship;
(iii) GameTek shall keep Take Two
apprised of any material changes to the delivery dates
set forth in Schedule "A" annexed hereto;
(iv) There are no royalties payable to
any third parties in respect of the Game Titles other
than those specified in Schedule "A" annexed hereto.
7.3 Take Two shall make no warranties or
representations of any kind with respect to the
Distributed Products to any purchaser end-user thereof,
whether express or implied. To the extent permitted by
applicable law, GameTek's warranty set forth in the last
sentence of Section 7.2(iii) above, is the only warranty,
express or implied, that GameTek will make to any third
party with respect to the Distributed Products (such
warranty to be limited to ninety (90) days from the date
of purchase by the end-user) and all implied warranties
including but not limited to the implied warranties of
merchantability and fitness for a particular purpose are
hereby disclaimed. Any product recalls shall be
GameTek's sole responsibility.
7.4 (a) WalMart, Inc. ("WalMart") has claimed
that it is entitled to in excess of $400,000 in credits
from GameTek for price protection, returns, stock
balancing and the like. GameTek disputes that it owes
WalMart such amount and has requested that WalMart
furnish it with documentation establishing its rights to
all or any part of such amount. GameTek and WalMart have
agreed that, to the extent WalMart establishes its
entitlement to any part of such amount through
documentation that is satisfactory to GameTek (such
demonstrated and agreed credit, the "WalMart Agreed
Credit"), WalMart shall recoup the WalMart Agreed Credit
solely by taking a 10% discount off the invoiced price of
any GameTek product subsequently purchased by WalMart
from GameTek. Take Two shall not offer any such discount
on GameTek products that it sells to WalMart nor shall it
solicit or encourage a request by WalMart for any such
discount in connection with sales made by Take Two to
WalMart hereunder. If, however, WalMart demands such a
discount on product purchased by it from Take Two
hereunder without any such offer, solicitation or
encouragement by Take Two, then Take Two may grant
WalMart a 10% discount on the invoiced price of any
Distributed Products sold to WalMart hereunder and may
recoup the full amount of such discount from amounts
otherwise payable to GameTek hereunder; provided that in
no event may Take Two recoup from GameTek under this
Section 7.4(a), in the aggregate, more than the total
amount of the WalMart Agreed Credit.
(b) Toys "R" Us, Inc. ("Toys") has claimed that
it is entitled to approximately $250,000 in credits from
GameTek for price protection, returns, stock balancing
and the like. GameTek and Toys have agreed that Toys
shall recoup the full amount of such credit (the "Toys
Agreed Credit") solely by taking a 10% discount off the
invoiced price of any GameTek product subsequently
purchased by Toys from GameTek. Take Two shall not offer
any such discount on GameTek products that it sells to
Toys nor shall it solicit or encourage a request by Toys
for any such discount in connection with sales made by
Take Two to Toys hereunder. If, however, Toys demands
such a discount on product purchased by it from Take Two
hereunder without any such offer, solicitation or
encouragement by Take Two, then Take Two may grant Toys a
10% discount on the invoiced price of any Distributed
Products sold to Toys hereunder and may recoup the full
amount of such discount from amounts otherwise payable to
GameTek hereunder; provided that in no event may Take Two
recoup from GameTek under this Section 7.4(b), in the
aggregate, more than the total amount of the Toys Agreed
Credit.
8. INDEMNIFICATION; INSURANCE.
8.1 Take Two shall indemnify GameTek, its
subsidiaries, parents and affiliates and their respective
officers, directors, employees and agents (the "GameTek
Parties") and undertakes to defend the GameTek Parties,
and hold the GameTek Parties harmless from any actions,
claims, suits, proceedings, loss, liability, cost,
expense (including reasonable attorney's fees) or damage
suffered by any of them arising out of or connected in
any way with any acts, omissions or misrepresentations by
Take Two that constitute a breach of this Agreement by
Take Two or any breach by Take Two of its
representations, warranties or agreements herein made,
including without limitation the reasonable costs of any
direct claim by GameTek against Take Two by reason of the
foregoing. GameTek shall not settle any such third party
claim or proceeding without Take Two's prior written
consent, which shall not be unreasonably withheld or
delayed. Take Two shall have the right, at its expense,
to participate in the defense thereof with counsel of its
choice, provided further that GameTek shall have the
right at all times, in its sole discretion, to retain or
resume control of the conduct thereof. Take Two shall
provide GameTek with any assistance that GameTek
reasonably requests in connection therewith at GameTek's
cost.
8.2 GameTek shall indemnify Take Two, its
subsidiaries, parents and affiliates and their respective
officers, directors, employees and agents (the "Take Two
Parties") and undertakes to defend the Take Two Parties
and hold the Take Two Parties harmless from any actions,
claims, suits, proceedings, loss, liability, cost,
expense (including reasonable attorney's fees) or damage
suffered by any of them arising out of or connected in
any way with any acts, omissions or misrepresentations by
GameTek that constitute a breach of this Agreement by
GameTek or any breach by GameTek of its representations,
warranties and agreements herein made, including without
limitation the reasonable costs of any direct claim by
Take Two against GameTek by reason of the foregoing.
Take Two shall promptly notify GameTek of any such third
party claim or proceeding and shall not settle any such
claim without GameTek's prior written consent, which
shall not be unreasonably withheld or delayed. GameTek
shall have the right, at GameTek's expense, to
participate in the defense thereof with counsel of
GameTek's choice, provided that Take Two shall have the
right at all times, in Take Two's sole discretion, to
retain or resume control of the conduct thereof. GameTek
shall provide Take Two with any assistance that Take Two
reasonably requests in connection therewith at Take Two's
cost.
8.3 (a) Take Two shall obtain and maintain at
its own expense, product liability and errors and
omissions insurance from a recognized and qualified
insurance company naming GameTek as insured in the amount
of at least $1 million per occurrence and $2 million in
the aggregate against any claims, suits, loss or damage
arising out of any personal injury or property damage
arising out of the Distributed Products. Such policy
shall not be subject to cancellation or material
amendment except after thirty (30) days prior written
notice to GameTek. GameTek will be named as an
additional insured on such policy. As proof of such
insurance, a fully paid certificate of insurance will be
submitted to GameTek by Take Two on or before approval by
Nintendo of Japan, Inc. of the final code for the first
Game Title released hereunder.
(b) GameTek shall obtain and maintain at
its own expense, product liability and errors and
omissions insurance from a recognized and qualified
insurance company naming Take Two as insured in the
amount of at least $1 million per occurrence and $2
million in the aggregate against any claims, suits, loss
or damage arising out of any personal injury or property
damage. Such policy shall not be subject to cancellation
or material amendment except after thirty (30) days prior
written notice to Take Two. Take Two will be named as an
additional insured on such policy. As proof of such
insurance, a fully paid certificate of insurance will be
submitted to Take Two by GameTek on or before the
execution of this Agreement approval by Nintendo of
Japan, Inc. of the final code for the first Game Title
released hereunder.
9. EXPIRATION OR TERMINATION OF AGREEMENT:
9.1 In the event that GameTek materially
breaches this Agreement with respect to a Game Title
hereunder and such breach is not cured within thirty (30)
days after receipt of notice from Take Two of such breach
(in the case of any delay in receipt of final code
approval from Nintendo for any Game Title, GameTek shall
not be deemed to be in breach until the ninety (90) day
period referred to in Section 5.1(d) has expired;
however, GameTek shall have no further cure rights with
respect thereto), then, without in any way limiting any
of Take Two's other rights and remedies in such event,
and notwithstanding any provision to the contrary
contained herein, Take Two shall have the right at its
sole election to terminate this Agreement with respect to
the affected Game Title to which GameTek's material
breach relates, upon written notice to GameTek (the
"Termination Notice"). In such event, and without in any
way limiting any of Take Two's rights and remedies, and
notwithstanding any provision to the contrary contained
herein, but only with respect to the affected Game Title
which is the subject of the Termination Notice, GameTek
shall pay to Take Two an amount equal to any unrecouped
portion of the Guaranty allocable to such Game Title (as
set forth on Schedule "A") and theretofore paid by Take
Two to GameTek hereunder. All such amounts as described
above may be deducted from payments to be made to GameTek
hereunder, or Take Two shall have the option to require
that GameTek repay to Take Two any such amount owed
pursuant hereto, which GameTek shall do within thirty
(30) days following Take Two's written request therefor.
In addition, if so requested by Take Two, GameTek shall
purchase from Take Two all remaining inventory with
respect to the affected Game Title at Take Two's cost,
and Take Two shall deliver such inventory to a location
or locations designated by GameTek upon Take Two's
receipt of such purchase price. Payment of any amount
owing to Take Two hereunder shall be made within thirty
(30) days of Take Two's invoice therefor.
9.2 In the event Take Two fails to render any
accounting or pay any monies owing to GameTek hereunder
or if Take Two otherwise materially breaches this
Agreement with respect to a Game Title hereunder and such
breach is not cured within thirty (30) days (in the case
of a payment default, within two (2) business days after
notice of default) after receipt of notice from GameTek
of such breach, then without in any way limiting any of
GameTek's other rights and remedies in such event, and
notwithstanding any provision to the contrary contained
herein, GameTek shall have the right at its sole election
to terminate this Agreement.
9.3 If either party to this Agreement files a
petition in bankruptcy or is adjudged a bankrupt, or if a
petition in bankruptcy is filed against such party and is
not dismissed with prejudice within sixty (60) days (the
"bankrupt or insolvent party"), the other party shall
have the right to terminate this Agreement, upon written
notice to the bankrupt or insolvent party.
9.4 Upon any expiration or termination of this
Agreement, all rights granted to Take Two herein shall
immediately revert to GameTek, with the consequences
described below. If the expiration or termination
relates to less than all Game Titles covered hereby, then
the provisions of this Section 9.4 shall relate only to
such affected Game Titles:
(i) Take Two shall continue to satisfy
all of its payment obligations then or at any time
thereafter becoming due and payable;
(ii) GameTek shall thereafter be free to
distribute or authorize others to distribute the affected
Game Titles;
(iii) Take Two shall not thereafter
advertise, distribute or sell Distributed Products
incorporating the affected Game Titles, and will cease
all display, advertising and use of related GameTek
Property, except that Take Two may, if the termination of
this Agreement was not by GameTek as a result of a breach
or default by Take Two, sell off existing inventories of
such Distributed Products in the Territory on a non-exclusive
basis for a period of six (6) months (which is
equal to the length of the sell-off period granted to
GameTek under its licenses with Califon Productions,
Inc.), subject to all the other terms and conditions
hereof. If this Agreement is terminated by GameTek by
reason of a breach or default by Take Two, then Take Two
shall, at GameTek's request ship such inventory at Take
Two's expense to GameTek's California warehouse promptly
upon Take Two's receipt of payment by GameTek of Take
Two's manufacturing cost for such inventory. In any
case, Take Two shall, within ten (10) business days after
any expiration or termination of the Exploitation Period
for any Game Title, deliver to GameTek a complete and
accurate statement indicating the number, description and
whereabouts of all units of Distributed Products relating
to such Game Title that are in Take Two's inventory as of
the date of such expiration or termination of the
applicable Exploitation Period; and
(iv) Take Two shall return to GameTek all
materials furnished to Take Two by GameTek hereunder with
respect to the affected Game Titles or give evidence
satisfactory to GameTek of their destruction.
9.5 Notwithstanding any contrary provision
contained herein but subject to Take Two's exclusive
rights with respect to Distributed Products in the
Territory during the Basic Term, each of the parties
acknowledges and agrees that during the term of this
Agreement and thereafter each party shall be free to
market, sell, distribute, license or sublicense or
otherwise deal in or exploit any software titles, whether
for use on personal computers or game console systems,
including titles that may be competitive with the Game
Titles, without any liability or obligation to the other
party by reason thereof.
10. NOTICES:
All notices, statements and/or payments to be
given to the parties hereunder shall be addressed to the
parties at the addresses set forth on the first page
hereof or at such other address as the parties shall
designate in writing from time to time. All notices
shall be in writing and shall either be served by
personal delivery (to an officer of each company), mail,
or facsimile (if confirmed by mail or personal delivery
of the hard copy), all charges prepaid. Except as
otherwise provided herein, such notices shall be deemed
given when personally delivered, all charges prepaid, or
on the date five (5) days following the date of mailing,
except that notices of change of address shall be
effective only after the actual receipt thereof. Copies
of all notices to Take Two should be sent to Take Two,
Attention: Office of the President, with a copy to Gibson
Dunn & Crutcher, LLP, 2029 Century Park East, Suite 4000,
Los Angeles, California 90067, Attention: Don Parris,
Esq. Copies of all notices to GameTek should be sent to
GameTek, Attention: Office of the President, and to
Ackerman, Levine & Cullen, LLP, 175 Great Neck Road,
Great Neck, New York 11021, Attention: John M. Gaioni,
Esq.
11. MISCELLANEOUS:
11.1 Take Two shall have the right, at its
election, to assign any of its rights or obligations
hereunder, in whole or in part, to any subsidiary,
affiliated, or related company, or to any person, firm or
corporation owning or acquiring all or substantially all
of Take Two's stock or assets, provided that any such
assignment by Take Two shall not relieve Take Two of its
obligations hereunder, and provided further, that the
assignee shall acknowledge to GameTek in writing that
such assignment is subject to, and the assignee agrees to
be bound by, the terms and conditions of this Agreement.
11.2 The entire understanding between the
parties hereto relating to the subject matter hereof is
contained herein. There are no representations,
warranties, terms, conditions, undertakings or collateral
agreements, express or implied, between the parties other
than as expressly set forth in this Agreement. This
Agreement cannot be changed, modified, amended or
terminated except by an instrument in writing executed by
both Take Two and GameTek. The Schedules annexed hereto
constitute a part of this agreement. The headings and
captions used herein are inserted for convenience of
reference only and shall not affect the construction or
interpretation of this Agreement. This Agreement shall
not be deemed effective, final or binding upon Take Two
or GameTek until signed by each of them. Only the final,
executed Agreement is admissible as the written agreement
between the parties and prior drafts, if any,
incorporating revisions or original language may not be
used, and shall not be admissible as evidence for any
purpose in any litigation that may arise between the
parties. This Agreement shall be deemed to have been
drafted by all the parties hereto, since all parties were
assisted by their counsel in reviewing and agreeing
thereto, and no ambiguity shall be resolved against any
party by virtue of its participation in the drafting of
this Agreement.
11.3 No waiver, modification or cancellation of
any term or condition of this Agreement shall be
effective unless executed in writing by the party charged
therewith. No written waiver shall excuse the
performance of any act other than those specifically
referred to therein and shall not be deemed or construed
to be a waiver of such terms or conditions for the future
or any subsequent breach thereof. Except as otherwise
provided in this Agreement, all rights and remedies
herein or otherwise shall be cumulative and none of them
shall be in limitation of any other right or remedy.
11.4 This Agreement does not constitute and
shall not be construed as constituting a partnership,
joint venture, sublicense or agency relationship between
Take Two and GameTek. Neither Take Two nor GameTek shall
have any right to obligate or bind the other in any
manner whatsoever, and nothing herein contained shall
give or is intended to give any rights of any kind to any
third persons.
11.5 Any claim, dispute or disagreement between
the parties arising out of or relating to this Agreement
or the transactions or relationships contemplated hereby
shall be resolved by arbitration under the Commercial
Arbitration Rules of the American Arbitration
Association, as in effect from time to time before a
single arbitrator in New York City, New York. The
decision of the arbitrator shall be in writing, shall
include an award of reasonable attorneys' fees to the
prevailing party, and either party may enter judgment
thereon in any court of competent jurisdiction.
Notwithstanding the foregoing, in the event of any breach
or threatened breach by either party of the provisions of
this Agreement, the aggrieved party may seek and obtain a
temporary restraining order, preliminary injunction or
other equitable relief restraining such breach or
threatened breach from any court of competent
jurisdiction.
11.6 This Agreement shall be governed by the
laws of the State of New York applicable to contracts
made to be wholly performed in the State of New York
(without regard to choice of law). Subject to the
provisions of Section 11.5 hereof, any action, suit or
proceeding may be brought in any of the courts of the
State of New York , in New York City, New York, or any of
the federal courts within the Southern District of New
York. Each of the parties hereto irrevocably submits to
the personal jurisdiction of such courts in connection
with any such action, suit or proceeding. In any action,
suit or proceeding arising out of or relating to this
Agreement or the transactions or relationships
contemplated hereby (including any arbitration
proceeding) the prevailing party will be entitled to
recover court costs and reasonable fees of attorneys,
accountants and expert witnesses incurred by such a party
in connection with such action. Any process in any
action or proceeding commenced in such courts may, among
other methods, be served upon GameTek or Take Two, as
applicable, by delivering or mailing the same, via
registered or certified mail, return receipt requested,
addressed to GameTek or Take Two, as applicable, at the
addresses set forth in the first page hereof or such
other address as the parties, as applicable, may
designate pursuant to Section 10 hereof. Any such
service by delivery or mail shall be deemed to have the
same force and effect as personal service within the
State of New York.
11.7 Except for GameTek's delivery obligations
with respect to delivery of notice of final code approval
for the Game Titles pursuant to Schedule "A" annexed
hereto (which are subject to certain exclusive remedy
provisions) and as may otherwise be provided herein,
neither party shall be deemed to be in breach of any of
its obligations hereunder unless and until it shall have
been given specific written notice by certified or
registered mail, return receipt requested, of the nature
of such breach and it shall have failed to cure such
breach within thirty (30) days (ten days in the case of a
payment default) after receipt of such written notice.
11.8 If any provision of this Agreement is or
becomes or is deemed invalid, illegal or unenforceable
under the applicable laws or regulations of any
jurisdiction, such provision will be deemed amended to
conform to such laws or regulations if such amendment can
be effected without materially altering the intention of
the parties; otherwise it shall be stricken and the
remainder of this Agreement shall remain in full force
and effect.
11.9 Wherever the approval or consent of a
party is required hereunder, such approval or consent
shall be in writing and shall not be unreasonably
withheld or delayed.
11.10 If Take Two is not able to receive
payment from any customer in United States dollars
because such payment is prohibited or restricted by
applicable laws or governmental regulations, then
GameTek's Share may be paid by Take Two in the same
currency in which Take Two receives such payment,
applying Citibank N.A.'s exchange rate as in effect on
the date such payment is due to GameTek.
12. CONFIDENTIAL INFORMATION
12.1 Each party hereto shall keep in
confidence and not disclose to any third party, without
the written permission of the other party, the
proprietary information of such other party disclosed
under or pursuant to this Agreement. This requirement of
confidentiality shall not apply to information that is
(a) in the public domain through no wrongful act of the
receiving party; (b) rightfully received by the receiving
party from a third party who is not bound by a
restriction of nondisclosure; (c) already in the
receiving party's possession without restriction as to
disclosure; or (d) required to be disclosed by applicable
rules and regulations of government agencies or judicial
bodies. This obligation of confidentiality shall survive
termination of this Agreement.
13. EFFECT ON AGREEMENT OF BANKRUPTCY OF GAMETEK
13.1 This Agreement and all rights and
licenses granted by GameTek to Take Two pursuant to this
Agreement are and shall otherwise be deemed to be, for
the purpose of Section 365(n) of the United States
Bankruptcy Code (the "Bankruptcy Code") an executory
agreement under which GameTek is a licensor of
"intellectual property" as defined under Section 101(35A)
of the Bankruptcy Code. The provisions of Section 14
herein relating to the source code escrow and any
separate escrow agreements entered into thereunder shall
be considered "supplementary agreements" (as that term is
used in the Bankruptcy Code) to such license and grant of
intellectual property rights. GameTek agrees that if
GameTek as a debtor-in-possession or if a trustee in
bankruptcy rejects this Agreement, Take Two may elect to
retain its rights under this Agreement as provided under
Section 365(n) of the Bankruptcy Code. Upon written
request of Take Two to GameTek or the trustee in
bankruptcy, GameTek or such trustee shall allow Take Two
to exercise its rights under this Agreement and shall not
interfere with the rights of Take Two as provided in this
Agreement, provided that Take Two shall continue to pay
all payments as and when due to GameTek hereunder and
shall continue to otherwise perform all of its
obligations hereunder when due.
14. SOURCE CODE ESCROW
14.1 Deposit of Source Code Into Escrow.
GameTek represents, warrants and covenants that, within
10 days after the execution of this Agreement, it shall
deposit a copy of the source code for the Game Titles and
all related technical information necessary to complete
and manufacture the Game Titles (except for proprietary
third party software tools) with an escrow agent to be
mutually agreed upon in writing by GameTek and Take Two
(the "Escrow Agent"). GameTek shall provide updated
source code and technical information to the Escrow Agent
on a bi-weekly basis in accordance with and as required
by this Agreement or any amendment hereto. Take Two
shall be entitled, at its sole cost, to audit the
escrowed source code and technical information
periodically at the offices of the escrow agent to ensure
GameTek's compliance with the deposit requirements of
this Section 14, but without making any copies thereof or
removing any portion thereof from the escrow agent's
offices. In addition to the foregoing, in the event of
an occurrence of a condition for release of the source
code, Take Two shall be entitled to obtain from GameTek
the source code for any portions of the of the Game
Titles or technical information relating thereto,
including work-in-progress, that has been created but not
deposited with the Escrow Agent. Fees and expenses of
any Escrow Agent shall be paid by Take Two.
14.2 Conditions for Release of Source Code.
Such copies of the source code and technical information
shall be held in escrow and shall be released to Take Two
only upon the payment of any duplication costs and other
handling charges of the Escrow Agent, and only during the
term and prior to the termination of this Agreement, in
the event that:
(a) GameTek (i) files a petition for
relief or reorganization in bankruptcy; (ii) makes an
assignment for the benefit of creditors or is adjudicated
as bankrupt or insolvent (iii) a custodian, receiver
trustee or other officer with similar powers is appointed
for it or its property or (iv) an involuntary petition in
bankruptcy is filed against GameTek which is not stayed
or discharged within ninety (90) days after filing; or
(b) GameTek ceases to actively develop
the Game Titles either directly or indirectly through the
loss and non-replacement of key individuals responsible
for development of the Game Titles (such cessation of
development to be deemed conclusively to have occurred in
the event of a delay of ninety (90) days or more in the
delivery of any milestone required to be delivered by
GameTek hereunder); or
(c) GameTek materially fails or
discontinues to correct any Bugs or other defects or
comply with any requests by Nintendo for modifications
necessary to obtain required Nintendo approvals and such
failure or discontinuance continues for thirty (30) days
after notice of default from Take Two. GameTek shall
promptly provide Take Two with copies of any request by
Nintendo (including memoranda of any oral request), for
such modifications.
14.3 Development of Game Titles. In the event
of a release of the source code pursuant to this Section
14, GameTek shall use its reasonable best efforts to
assign its rights under any applicable agreement with
respect to the Game Titles in order to facilitate the
completion of development of such Game Titles. Take Two
may hire any software developer or programmer or outside
development companies, regardless of whether such persons
or entities were previously employed by GameTek, in order
to complete the development of the Game Titles but may
not solicit any employees or contractors then employed or
retained by GameTek; provided that to the extent that the
services of any such employees or contractors then
employed or retained by GameTek are required for the
completion of any Game Title, the parties shall enter
into a service sharing arrangement under which Take Two
may obtain the services of such employees and/or
contractors on a part-time or after-hours basis for the
purpose of completing the development of such Game Title
as long as such sharing does not materially interfere
with GameTek's operations. GameTek hereby consents to
the utilization by such persons or entitles of
intellectual property of GameTek necessary to complete
the development of the affected Game Titles and agrees to
cooperate with Take Two in obtaining the services of
persons or entities required to complete development of
the Game Titles.
IN WITNESS WHEREOF, the parties hereto have
signed this agreement as of the day and year first above
written.
TAKE TWO INTERACTIVE SOFTWARE, INC.
By: /s/ Ryan A. Brant
---------------------------
Its: Chief Executive Officer
--------------------------
Date: July 29, 1997
-------------------------
GAMETEK, INC.
By: /s/ Robert L. Underwood
---------------------------
Its: Authorized Signer
--------------------------
Date: July 29, 1997
-------------------------
[Signature page to GameTek/Take Two N64 Distribution
Agreement.]
SCHEDULE A
Game Titles:
a. Wheel of Fortune for the Nintendo N64 game
system
b. Jeopardy! for the Nintendo N64 game system
Milestone Schedule:
a. Written notice of final code approval for
Wheel of Fortune - September 18, 1997.
b. Written notice of final code approval for
Jeopardy! - November 10, 1997
Third Party Royalties:
a. Wheel of Fortune: (i) (**)% of the
aggregate of (i) GameTek's Cost of Goods, (ii) the
GameTek Share, and (iii) all Third Party Royalties
(exclusive of any Third Party Royalties payable to
Califon Productions, Inc.) with respect to each unit,
payable to Califon Productions, Inc.; and
(ii) $(**) per unit,
payable to Vanna White.
b. Jeopardy!: (i) (**)% of the aggregate of
(i) GameTek's Cost of Goods, (ii) the GameTek Share, and
(iii) all Third Party Royalties (exclusive of any Third
Party Royalties payable to Califon Productions, Inc.) of
each unit, payable to Califon Productions, Inc.; and
(ii) $(**) per unit, payable
to Alex Trebek.