EXHIBIT 10.2
EXCLUSIVE SOFTWARE LICENSE AGREEMENT
(GAME TITLE: Shenmue Online)
AMONG
SEGA CORPORATION
AND
JC ENTERTAINMENT CORPORATION
AND
SHANGHAI T2 ENTERTAINMENT CO. LTD.
INTERNET GAME LICENSE AGREEMENT
THIS SOFTWARE LICENSE AGREEMENT (the "Agreement") is entered into as of October
15, 2004 (the "Effective Date") by and among SEGA CORPORATION, a corporation
organized under the laws of Japan ("SEGA"); SHANGHAI T2 ENTERTAINMENT CO., LTD.
a corporation organized under the laws of The People's Republic of China ("PRC,"
and such corporation, T2") and JC ENTERTAINMENT CORPORATION, a corporation
organized under the laws of Republic of Korea, ("JCE").
RECITALS
WHEREAS, SEGA and JCE are engaged in the production, development, marketing, and
servicing of the Licensed Software (as defined below).
WHEREAS, T2 among other things, markets, operates, distributes and publishes
internet games in the Territory as (as defined below).
WHEREAS, T2 desires the exclusive license, the Operation Right (as defined
below) and the Technical Support (as defined below) of the Licensed Software in
the Territory (as defined below) during the Term (as defined below).
WHEREAS, SEGA desires to grant the license and Operation Right of the Licensed
Software to T2.
WHEREAS, JCE, among other things, desires to provide Technical Support of the
Licensed Software to T2.
THEREFORE, in consideration of the promises, agreements, covenants,
representations and warranties contained herein, and other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged,
SEGA, JCE and T2 hereby agree as follows.
1 CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the indicated
meanings:
1.1 "Closed Beta Test" shall mean game tests conducted internally by T2 or
externally with a limited number of users, in either case with
restricted access and user registration, for the purpose of
identifying and fixing bugs and/or stabilizing the game system in the
Territory.
1.2 "Commercial Launch Date" shall mean the date in which the Licensed
Software is commercially launched by T2.
1.3 "Game" shall mean the Internet-based game known as "Shenmue Online,"
which can be played by Subscribers who have installed the Client
Software on their personal computers and can access the Server
Software via the Internet.
1.4 "Gross Revenues" mean the revenues paid or payable (subject to Section
7.7) to T2 arising from or relating to the marketing, promotion, use,
distribution, publishing or selling of the Licensed Software by T2
(calculated as per the reports produced by the Billing Server and with
deduction of distribution costs actually incurred under specific
distribution agreements entered into between T2 and specific
distributors and in an amount not exceeding in any given calendar
month thirty-five percent (35%) of the total revenues for such month),
including, without limitation, revenues relating to: (i) any type or
form of prepaid cards sold to end users either by on-line or off-line
methods for the use of the Licensed Software, and/or (ii) CDs
containing the Licensed Software sold to end users. Gross Revenues do
not include any such prepaid cards or CDs distributed free of charge.
1.5 "Intellectual Property Rights" mean, on a worldwide basis, any and all
now known or hereafter known tangible and intangible: (a) rights
associated with works of authorship including, without limitation,
copyrights, moral rights and mask-works, (b) rights associated with
trademarks, service marks, trade names or similar rights, (c) trade
secret rights, (d) patents, designs, algorithms and other industrial
property rights, (e) all other intellectual and industrial property
rights of every kind and nature and however designated, whether
arising by operation of law, contract, license or otherwise (f) all
registrations, applications, renewals, extensions, continuations,
divisions or reissues thereof now or hereafter existing, made, or in
force (including any rights in any of the foregoing), and (g) any and
all causes of action arising from or related to any of the foregoing.
1.6 "Licensed Software" shall mean the object code version of any and all
available versions of the following computer software components of
the Game, in Mandarin Chinese (using simplified characters) only:
1.6.1 Server software which is designed to be installed onto
commercial servers connected to the Internet to enable
Subscribers to access the Game in Mandarin Chinese (using
simplified characters) via the Client Software (the "Server
Software")
1.6.2 Client software which is designed to be installed onto
subscribers' personal computers to enable Subscribers to play the
Game in Mandarin Chinese (using simplified characters) by
accessing the Server Software via the Internet (the "Client
Software").
1.6.3 Patches and Upgrade Versions to software described in Sections
1.7.1 and 1.7.2
1.7 "Open Beta Test" shall mean game tests conducted externally with users
on a generally accessible basis, for the purpose of identifying and
fixing bugs and/or stabilizing the game system in the Territory.
1.8 "Operation Right" shall mean the following rights with respect to the
Licensed Software:
1.8.1 The rights to market, promote, display, use, distribute, publish
and sell the Client Software in the Territory; and
1.8.2 The rights to use, install, test, and run the Server Software to
make the Game in Mandarin Chinese (using simplified characters)
available to Subscribers in the Territory.
1.9 "Patches" shall mean the computer software designed to be installed on
computers on which Licensed Software has been installed in order to
modify, enhance or improve such Licensed Software.
1.10 "Subscribers" shall mean the end users of the Licensed Software who
initiate their use thereof within the Territory from T2.
1.11 "Subscriber Agreement" shall mean the agreement into which each
Subscriber must enter with T2 before T2 allows the Subscriber to use
the Licensed Software. The Subscriber Agreement shall be subject to
SEGA's approval, which approval shall not be unreasonably withheld or
delayed.
1.12 "Technical Support" shall mean the following services with respect to
the Licensed Software:
1.12.1 Providing training services and help documentation about the
installation, testing, and maintenance of the Licensed Software.
1.12.2 Providing solutions to resolve any unexpected problems, such as
errors, bugs, and downgraded performance, in the systems which
the Licensed Software are installed.
1.12.3 Providing technical services in preventing and resisting
hacking or cracking of any Licensed Software.
1.13 "Territory" shall mean the geographical territory of the People's
Republic of China ("PRC"), excluding the Hong Kong Special
Administrative Region, the Macao Special Administrative Region, and
Taiwan.
1.14 "Closed Beta Version" means a version of the Licensed Software in
which (a) the localization and translation thereof is substantially
complete; (b) the functionality and performance is complete (i.e., the
coding of all functions and features (including, without limitation,
all artwork, graphics, animation, images, photographs, video and other
audio-visual material, sound, music and text and all essential and
non-essential data and device files) is completed and material
programming errors or "bugs" have been eliminated; (c) such version
operates hardware having the specifications specified by SEGA from
time to time and required for the full use of the Licensed Software;
and (d) such version is ready to be launched for a Closed Beta Test.
1.15 "Open Beta Version" means a version of the Licensed Software in which
(a) the localization and translation therefore is complete; (b) the
functionality and performance is complete (i.e., the coding of all
functions and features (including, without limitation, all artwork,
graphics, animation, images, photographs, video and other audio-visual
and material programming errors or "bugs" have been eliminated; (c)
such version operates hardware having the specifications specified by
SEGA from time to time and required for the full use of the Licensed
Software; and (d) such version is ready to be launched for an Open
Beta Test.
1.16 "Commercial Version" means a version of the Licensed Software in which
(a) the localization and translation therefore is complete; (b) the
functionality and performance is complete (i.e., the coding of all
functions and features (including, without limitation, all artwork,
graphics, animation, images, photographs, video and other audio-visual
material, sound, music and text and all essential and non-essential
data and device files); (c) such version operates hardware having the
specifications specified by SEGA from time to time and required for
the full use of the Licensed Software; and (d) such version is ready
to be commercially released.
1.17 "Upgrade Versions" shall mean modified versions of the Licensed
Software that contain changes or new functionality and contents, which
are similar to the storyline, cast and theme of the Licensed Software.
1.18 "Marks" shall mean trademarks, service marks, trade and business
names, logos, slogans, characters, or other properties, whether
registered or not, which are used on or in association with the
Licensed Software.
2 TERM
2.1 Term. The term of this Agreement shall commence on the Effective
Date and shall continue through and until the date that is three (3)
years thereafter (the "Initial Term"), unless terminated earlier in
accordance with Section 12 below. This Agreement shall automatically
be extended for one (1) additional year if none of the parties gives
notice of termination of this Agreement at least one (1) month
before the expiration of the Initial Term. Collectively, the Initial
Term and such additional one (1) year period (if applicable), shall
be referred to in this Agreement as the "Term."
2.2 No Renewal. Except as may be expressly set forth in this Agreement,
none of the parties shall be under any obligation to renew or extend
the operation of this Agreement or to enter into any new agreement
with nay other party following the expiration or earlier termination
of the Term. None of the parties shall be under any obligation of
any kind whatsoever to any other party by reason of any failure or
refusal to renew or extend the operation of this Agreement or to
enter into any new agreement with any other party, following the
expiration of the Term. Notwithstanding the foregoing, if during the
one (1) months immediately following the expiration of this
Agreement, SEGA, in its sole discretion, offers any third party in
the Territory a license to the Licensed Software for use in the
Territory, T2 shall have a right of first refusal to obtain an
exclusive license to the Licensed Software for use in the Territory
pursuant to terms and conditions identical to those offered by SEGA
to such third party in the Territory. If T2 fails to indicate in
writing that it has elected to exercise such right of first refusal
within fifteen (15) days of receiving notice from SEGA of any such
offer to any third party in the Territory during such one (1) month
period, T2 shall be deemed to have declined to exercise such right
of first refusal.
3 GRANT OF RIGHTS
3.1 Grant. In accordance with and subject to the terms and conditions of
this Agreement, SEGA hereby grants to T2, and T2 hereby accepts and
agrees to exercise, the exclusive, non-transferable license to
exercise the Operation Rights in the Territory during the Term.
Notwithstanding anything to the contrary set forth in this
Agreement, T2 will not distribute, sell, license or otherwise make
available the Licensed Software to any party outside of the
Territory, or under circumstances where T2 knows, or in the exercise
of prudent business judgment should know, that such activity
ultimately will result in the use of the Licensed Software outside
of the Territory.
3.2 No Third Party Rights. Except as otherwise expressly set forth in
this Agreement, T2 shall directly exercise the rights and licenses
granted to it under this Agreement and shall not allow or permit any
third party to exercise such rights on T2's behalf without SEGA's
prior written approval, which approval shall not be unreasonably
denied by SEGA as to controlled affiliates of T2 to the extent that
the marketing and operation of the Licensed Software in accordance
with this Agreement requires that such permission be granted by T2
to such controlled affiliates. T2 shall require any third party
(including, without limitation, any such controlled affiliate of T2)
that is approved by SEGA to exercise any such rights on behalf of T2
to execute a written sublicense agreement acceptable to SEGA in form
and substance as a precondition to such third party's exercise any
such rights, and T2 shall be liable for any and all acts or
omissions of any such third party arising our of or relating to this
Agreement or such sublicense agreement. Each such third party
obtaining a sublicense from T2 shall strictly conform to the terms
and conditions set forth in this Agreement with regard to the
Licensed Software. T2 shall not be required to make any additional
payment or compensation to SEGA beyond that set forth in this
Agreement in order to grant any such sublicense in accordance with
this Section 3.2 and T2 shall not receive any compensation or
payments form any such sublicense as consideration for granting any
such sublicense.
3.3 No Right to Reproduce, Modify or Reverse Engineer. T2 agrees that it
shall not, and shall not permit or assist any other party to, copy,
modify or adapt all or any part of the Licensed Software, except as
may be expressly and clearly permitted by this Agreement. T2 agrees
that it shall not, and shall not permit or assist any other party to
disassemble, decompile, reverse assemble, reverse engineer or
otherwise attempt to recreate the source code or extract any trade
secrets from the Licensed Software without SEGA's prior written
approval. Without limiting the materiality of any other term of this
Agreement, the failure of T2 to comply with any provision of this
Section shall be considered a material breach of this Agreement by
T2.
3.4 License and Operation Rights Only. This Agreement only grants to T2
a license to use the Server Software and to transfer units of the
Client Software to Subscribers and does not transfer any right,
title, or interest in or to any of the Licensed Software to T2.
Notwithstanding any "purchase" or "sale" or similar language
contained herein, T2 acknowledges that the Licensed Software is
licensed as indicated in this Section.
3.5 Use of Marks. Subject to the terms and conditions set forth in this
Agreement, SEGA grants to T2 during the term of this Agreement an
exclusive, nontransferable, and royalty free right to use the Marks
and the Game title for the purpose of promoting, marketing and
operating the Licensed Software in the Territory in a style and
manner approved by SEGA in writing prior to such use.
3.6 Modification to Licensed Software. Without SEGA's prior written
approval, T2 shall not make, or permit any third party to make, any
modification or revision of or to any portion of the Licensed
Software in the Territory, or in urgent situations, T2 may request
in writing permission from SEGA to modify or revise certain aspects
of the Licensed Software. SEGA shall respond in writing to any such
request within five (5) working days of SEGA's receipt of the
request. If SEGA fails to respond to any such request within such
five (5) working day period, the request shall be deemed approved.
Any approval by SEGA of a requested modification or revision,
whether actual or deemed, will be valid only for a period of thirty
(30) days from the date of such approval. If the approved
modification or revision is not completed within such thirty (30)
day period, it shall be treated as a new modification or revision
for which approval must again be obtained from SEGA as set forth in
this Section 3.6. The specific plan and schedule for the development
of any approved modification or revision shall be determined through
consultation and agreement by SEGA and T2. If SEGA provides T2 at
any time with a patch or Upgrade that substantially performs the
function of any such approved modification or revision, T2 shall
promptly implement such Patch or Upgrade and cease using such
modification or revision. If at any time T2 makes any modification
or revision of the Licensed Software, neither SEGA nor JCE shall
thereafter bear any liability to T2 with respect to the modified or
revised Licensed Software, including, without limitation, any
obligation to provide services with respect thereto pursuant to
Section 8. The immediately foregoing sentence shall not affect
SEGA's or JCE's obligations with respect to the unmodified Licensed
Software, including if, after making a modification or revision to
the Licensed Software, T2 subsequently completely de-installs all
copies of such modified or revised Licensed Software, and
re-installs the unmodified Licensed Software in the form provided by
SEGA to T2.
3.7 Reserved Rights. Any and all rights not specifically and expressly
granted by SEGA to T2 under this Agreement are hereby reserved by
SEGA.
4 COMMUNICATION
4.1 Regular Meetings. T2, SEGA and JCE shall meet regularly (i.e.,
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at least once per calendar month) during the Term to discuss
development, marketing and maintenance objectives, strategy, and
activities for the Licensed Software in the Territory (the "Regular
Meetings").
4.2 Project Manager. At all times during the Term, T2, SEGA, and JCE
shall each provide a designated individual employee as "Project
Manager." All of the Project Managers shall be primarily (though not
exclusively) dedicated to, and be fully familiar with the Licensed
Software. The Project Managers shall be available on a reasonable
basis during regular business hours and shall maintain continuous
contact with each other. The Project Managers shall coordinate the
performance by obligations of their own companies under this
Agreement, and shall promptly respond to all inquiries, both oral
and written, made by other Project Managers.
4.2.1 Wang Jim is hereby initially appointed by T2 and is deemed
reasonably satisfactory by SEGA and JCE, as T2's Project
Manager.
4.2.2 Kashiwaguchi Yukihiro is hereby initially appointed by SEGA
and is deemed reasonably satisfactory by T2, as SEGA's
Project Manager.
4.2.3 SEO, Jeung Wook is hereby initially appointed by JCE and is
deemed reasonably satisfactory by T2, as JCE's Project
Manager.
5 DEVELOPMENT
5.1 Translation Assets. SEGA shall deliver to T2 the assets needed for
translation (the "Translation Assets") of the Closed Beta Version
and shall deliver, in advance, the Translation Assets of other
versions to T2 by at least two (2) weeks prior to launch of said
version. T2 shall, at its sole cost and expense, promptly translate
into Mandarin Chinese (using simplified characters) each version of
the Translation Assets (or any portion thereof) provided by SEGA to
T2, and then deliver the translated version of the Transaction
Assets to SEGA. Upon receiving the translated version of the
Translation Assets, SEGA shall promptly integrate such translated
version into the Game as embodied in the License Software used in
the Territory. However, if SEGA finds any errors in any translated
version of any of the Translation Assets, SEGA shall return such
Translation Assets to T2 and T2 shall promptly correct such errors
and promptly provide SEGA with such corrected Translation Assets. T2
shall be only responsible for the accuracy and completeness of the
translated version of the Translation Assets as presented to SEGA by
T2. SEGA shall be responsible for the accuracy and completeness of
any modification it may make to any such translated version of the
Translation Assets. T2 shall not use the Translation Assets for any
purpose other that the one specified in this Section.
5.2 Product Plan. SEGA and JEC shall develop a product plan for the
future versions of the Licensed Software during the Term (the
"Product Plan") as set forth in this Section 5.2. SEGA shall deliver
the then-current Product Plan to T2 no later than twenty (20)
business days after the Effective Date. Thereafter, SEGA shall
deliver an up-to-date edition of the Product Plan to T2 at least
five (5) business days prior to the date of each Regular Meetings
during the Term. T2 may make suggestions to SEGA at the Regular
Meetings to perfect the next version of the Licensed Software. SEGA
shall make the final decision regarding development of the Product
but when making such decision, SEGA shall give due consideration to
T2's suggestions for the purpose of marketing, promotion and
operation of the License Software in the Territory.
5.3 Upgraded Versions. If available and agreed by T2 and SEGA to be
suitable for use in the Territory, SEGA shall deliver Upgraded
Versions to T2. The upgrades and enhancements contained in each
Upgraded Version shall be consistent with the Product Plans of SEGA
and JCE and shall be developed in consultation with T2, provided
however, that: (a) SEGA shall make all final decisions on the
upgrades an enhancements that are included in each Upgraded Version
along with the production thereof, giving due consideration to T2's
suggestions as set forth in Section 5.2; and (b) T2 shall be
responsible for translating all Translation Assets designated by
SEGA for translation into Mandarin Chinese (using simplified
characters) in connection with any Upgraded Version. T2 shall
commercially launch each Upgrade Version within twenty (20) business
days of receiving such Upgraded Version and thereafter shall only
offer such Upgraded Version to Subscribers (i.e., upon installing an
Upgraded Version, T2 immediately shall discontinue offering the
prior versions of the Licensed Software).
5.4 Delivery. SEGA shall deliver the Licensed Software to T2 as set
forth in this Agreement, to T2's place of business as set forth in
Section 15.1. SEGA shall make such delivery in strict compliance
with the schedule as set forth in Appendix II. The Licensed Software
will be delivered in CD-ROM form, by FTP, or by such other
electronic means as the SEGA and T2 may agree form time to time.
5.5 Acceptance. T2 shall, within seven (7) days following its receipt of
the items specified in Appendix I, send SEGA a written notice
indicating, and serving as proof of its receipt of such items.
6 MARKETING EFFORTS
6.1 Co-Marketing. T2 shall be responsible for the marketing of the
licensed Software in the Territory. SEGA and JCE undertake that they
shall provide reasonable assistance to T2 and/or bear expenses
incurred by T2 in the process of such marketing efforts in such
amount deemed as reasonable by SEGA and JCE, provided that such
expenses have been approved in advance in writing by SEGA and JCE.
6.2 Marketing Commitment. T2 shall use its best efforts to vigorously
and aggressively advertise, market and distribute the Licensed
Software throughout the Territory and, in doing so, shall ensure
that its marketing, promotion and advertising activities
(collectively, "Marketing Activities") are in accordance with high
quality and good taste and will be comparable to the highest quality
and good taste and will be comparable to the highest quality
Marketing Activities in the Territory for competitive products. T2
shall submit a marketing plan and budget to SEGA two months prior to
the Closed Beta Test. SEGA shall review the marketing plan and shall
either provide T2 with: (a) written approval of the marketing plan
or (b) a written list of changes that shall be made before SEGA
approves such a marketing plan. SEGA and T2 shall by consultation
determine the aforesaid changes to be made to ensure that such
changes are conductive to the marketing of the Licensed Software,
reasonably within T2's capability and in compliance with any
applicable laws. The aforesaid approvals shall not be unreasonably
withheld by SEGA. If SEGA fails to respond to any such marketing
plan and budget by providing T2 with such a written approval or
written list of changes within five (5) business days after receipt
of the marketing plan and budget from T2, SEGA will be deemed to
have approved such marketing plan and budget. During the Term, T2
may reasonably change the monthly marketing budget and marketing
activities as required by market conditions in the Territory. T2
shall submit monthly reports to SEGA indicating in reasonable
detail: (i) the costs T2 has spent on marketing during the previous
month and (ii) marketing activities conducted during the previous
month (the "Marketing Report"). T2 shall not implement any Marketing
Activities without receiving prior written approval thereof from
SEGA. SEGA's approval of any Marketing Activities or marketing plan
shall not constitute an opinion as to its legal appropriateness or
adequacy and T2 shall be solely responsible for its implementation
thereof.
6.3 Game Materials and Promotional Materials. Prior to using any
material which shall be packaged and distributed with the Licensed
Software in the Territory (the "Game Materials") or materials used
to promote the Game and/or the Licensed Software in the Territory
("Promotional Materials"), T2 shall submit such Game Material or
Promotional Material to SEGA for approval; provided, however, that
no such approval shall be required for any Game Materials or
Promotional Material provided to T2 by SEGA and used in unmodified
form by T2 in the Territory. Within two (2) business days following
receipt of any such Game material or Promotional material, SEGA
shall provide T2 with either: (a) a written approval thereof; or (b)
a written list of changes that must be made before SEGA would
approve such Game Material or Promotional Material. SEGA and T2
shall by consultation determine the changes to be made to ensure
that such changes are conductive to the marketing of the Game and
the Licensed Software, reasonably within T2's capability and in
compliance with any applicable laws. The aforesaid approvals shall
not be unreasonably withheld by SEGA and the failure by SEGA to
provide any such written approval or written list of changes within
such two (2) business day period will be deemed to constitute SEGA's
approval of the applicable Game Material or Promotional Material. T2
shall not implement any Game Material of Promotional Material until
it has been approved by SEGA in writing. T2 agrees to use all
Promotional Materials provided by SEGA to promote and market the
Game and/or the Licensed Software in the Territory. SEGA's approval
of any Game Material or Promotional Material shall not constitute an
opinion as to its legal appropriateness or adequacy and T2 shall be
solely responsible for the use thereof. T2 shall be solely
responsible for the cost to recall any Game Material or Promotional
Material that are not provided by SEGA.
6.4 Marketing Practices. T2 shall, with respect to the Game and the
Licensed Software, (a) ensure that its marketing, promotion and
advertising efforts are in accordance with high quality and good
taste and will be comparable to the highest quality marketing,
promotion and advertising efforts in the Territory for competitive
products; (b) conduct business in a manner that reflects favorably
at all times on the Game and the Licensed Software and the good
name, goodwill and reputation of SEGA; (c) avoid deceptive,
misleading or unethical practices that are or might be detrimental
to SEGA, the Game, the Licensed Software or the public, including,
but not limited to, disparagement of SEGA, the Game or the Licensed
Software; (d) make no false or misleading representations with
regard to SEGA, the Game or the Licensed Software; (e) not publish
or employ or cooperate in the publication or employment of any
misleading or deceptive advertising material; (f) include SEGA's and
JCE's trademarks on all Game Materials and Promotional Materials and
all copies of the Licensed Software; (g) comply with all of SEGA's
and JCE's then-current trademark guidelines, as may be provided and
updated from time to time by SEGA and/or JCE; and (h) make no
representations, warranties or guaranties to anyone with respect to
the specifications, features or capabilities of the Licensed
Software that are inconsistent with the Game Materials prepared or
approved by SEGA or any other literature pertaining to the Licensed
Software that has been prepared and/or approved by SEGA.
6.5 Fundraisers. Without limiting any provisions of this Section 6, T2
shall not sell or otherwise provide the Licensed Software for use in
fundraisers, sweepstakes or similar activities or provide Licensed
Software for use as prizes, premiums or give-a-ways unless and until
it obtains SEGA's prior written approval, which approval SEGA shall
not unreasonably withhold.
6.6 Free Promotional Items. Without limiting any provisions of this
Section 6, T2 shall not distribute any particular free promotional
item unless and until it obtains SEGA's prior written approval,
which approval SEGA shall not unreasonably withhold, especially with
regard to those facilitating the marketing and operation of the
Licensed Software. Such approval rights apply to all aspects of each
free promotional item, including, without limitation: the type of
item, the specifications of the item, the manner in which it will be
distributed, the manner in which it will be marketed and promoted,
the maximum number of units to be distributed, and similar matters.
6.7 Merchandising. SEGA and T2 acknowledge and agree that: (a) T2
desires the right and license to develop, manufacture, market,
promote, distribute and sell merchandise based on the Licensed
Software; and (b) the terms and conditions of such merchandising
arrangement shall be set forth in a separate written agreement.
7 COMPENSATION AND PAYMENTS
7.1 License Fee. T2 shall pay SEGA a non-refundable and non-recoupable
license fee equal to Three Million Dollars (USD$3,000,000) (the
"License Fee"). The License Fee shall be deemed fully-accrued on the
Effective Date and shall be paid in three (3) installments as
follows:
7.1.1 Once T2 obtains the necessary governmental approval, and in
any event no later that thirty (30) days after the
Effective Date T2 shall pay SEGA the first of the three (3)
installment payments, which payment shall be equal to Three
Hundred Thousand Dollars (USD$300,000);
7.1.2 No later than ninety (90) days after execution of this
Agreement, T2 shall pay SEGA the second of the three (3)
installment payments, which payment shall be equal ton One
Million Two Hundred Thousand Dollars (USD$1,200,000);
7.1.3 No later than the launch of the Open Beta Test, T2 shall
pay SEGA the third of the three (3) installment payments,
which payment shall be equal to One Million Five Hundred
Thousand Dollars (USD$1,500,000).
7.2 Royalties. Subject to the full performance of SEGA, as payment for
the rights granted by SEGA hereunder, T2 shall pay SEGA a royalty
(the "Royalties") equal to thirty-three percent (33%) of all Gross
Revenues commencing from the Commercial Release of the Licensed
Software, the calculation of which shall be consistent with the
reports produced by the Billing Server. T2 shall make all Royalty
payments to SEGA no later than the last day of the calendar month
following the calendar month during which the Gross Revenues are
received by T2. The payment of such Royalty for a given calendar
month may be deferred by T2 by three (3) months if SEGA of JCE fails
to perform its obligations under Section 8.2 of this Agreement
during such calendar month.
7.3 Late Payment. Any payments due hereunder and received by SEGA later
than its respective due date shall bear interest at a rate equal to
the basic monthly deposit interest rate of the People's Bank of
China.
7.4 Payment Forms. All payments due to SEGA hereunder shall be made by
wire transfer. All payments shall be made in U.S. Dollars, and,
subject to Section 7.6, free of any withholding tax and of any
currency control or other restriction.
7.5 Exchange Rate. Any necessary conversions of currencies of the
Territory into United States Dollars with respect to any payment to
be made to SEGA under this Agreement shall be performed using the
exchange rates in effect on the last business day of the month
immediately preceding the month in which such payment is due, as
published or announced by the People's Bank of China.
7.6 Taxes. T2, on SEGA's behalf (as T2's licensor under this Agreement)
shall withhold any amount required by the PRC tax authorities as a
royalty tax from payments of the License Fee an Royalty by T2 to
SEGA. SEGA agrees and acknowledges that as of the Effective Date
SEGA is required to pay a ten percent (10%) royalty tax in the PRC
on the License Fee and Royalty to the Government of the PRC, and
that T2 is authorized hereunder to withhold the required amount of
PRC royalty tax (i.e., ten percent (10%) as of the Effective Date)
from each of the installment payments of the License Fee and each
monthly running Royalty payment as set forth in Section 7.2, which
withholding will reduce the net amount of each such installment
payment of the License Fee and each monthly running Royalty payment
until such time (if ever) as such withholding is no longer required
by the taxation authorities of the PRC. T2 shall be solely
responsible for payments of such PRC royalty taxes on the License
Fee and Royalties hereunder to the government of the PRC, and T2
shall pay such withheld PRC royalty tax to the government of the PRC
on behalf of SEGA in a timely manner, and shall promptly provide
SEGA with official tax receipts issued by appropriate tax
authorities. T2 shall at all times withhold and pay to the
government of the PRC such PRC royalty taxes in accordance with
lowest tax rate then permitted by the laws of the PRC.
7.7 Bad Accounts Confirmation. SEGA and T2 acknowledge that the normal
payment cycle with respect to Client Software and prepaid cards
therefore is ninety (90) days from the date of the applicable sale
thereof. Any unpaid amounts for Client Software or prepaid cards is
overdue for more than one hundred and eighty (180) days from date of
the applicable sale shall be confirmed as bad accounts. T2 shall
have the right to deduct from the Royalty Payment due for a given
calendar months the accounts confirmed as bad accounts during such
calendar month in an amount not to exceed, in the aggregate, three
and three-tenths percent (3.3%) of the Gross Revenues for such
calendar month.
7.8 Periodic Reports. In order to substantiate any Royalty payment due
to SEGA, T2 shall deliver to SEGA with each Royalty payment, a
report setting forth in reasonable detail: (a) the amount of
Royalties paid to SEGA arising from the corresponding payment
period; (b) the number of new Subscribers for the corresponding
payment period; (c) the total number of Subscribers for the
corresponding payment period; (d) the amount of Gross Revenues for
the corresponding payment period; (e) the amount of distribution
costs for the corresponding payment period; (f) the amount of any
withheld PRC royalty taxes for the corresponding payment period; (g)
the amount of any bad accounts recognized an uncollectible during
the corresponding payment period: and (h) any other items reasonably
necessary to verify the accuracy of the Royalty payment or to which
SEGA and T2 otherwise agree.
7.9 Audits. T2 agrees to keep and preserve, for at least three (3) years
after the expiration or earlier termination of this Agreement,
accurate books, records and accounts of all transactions relating to
this Agreement. T2 shall provide SEGA with quarterly audited
financial reports. Commencing upon the Commercial Release of the
Licensed Software, SEGA shall have the right, once every six (6)
months, to have an independent auditor that is reasonably acceptable
to both SEGA and T2, audit such books, records and accounts of T2 to
verify T2's compliance with the terms and conditions of this
Agreement. However, if SEGA and T2 cannot agree on an independent
auditor within sixty (60) days, SEGA may conduct the audits itself
in accordance with the provisions of this Section. Any such audit
shall be conducted during the regular business hours of T2, in such
a manner so as not to interfere unreasonably with the normal
business activities of T2, and shall be at SEGA's expense. If such
an audit reveals an underpayment of five percent (5%) or more, or
any other material breach of this Agreement, T2 shall promptly pay
to SEGA all costs and expenses of such audit. T2 shall promptly pay
SEGA the amount of any underpayment (and correct any other
noncompliance) revealed by any such audit along with interest at a
rate equal to the basic monthly deposit interest rate of the
People's Bank of China.
8 SERVICES
8.1 Customer Support. T2 shall maintain a presence throughout the
Territory and provide high quality first level customer support to
Subscribers via telephone and email services. SEGA and JCE shall
provide second level customer support to T2 by providing T2's
customer support representatives with telephone and email support
during T2's normal business hours (Beijing local time) to answer
customer service and usage-oriented questions relating to the
Licensed Software and the related services. T2 shall provide SEGA
and JCE with activity reports on no less than a monthly basis
relating to customer service issues setting forth in reasonable
detail, to the extent applicable, the type of problems encountered
and the manner in which they were resolved
8.2 Technical Support. If T2 requires Technical Support consisting of
fixing bugs or logical errors with regard to the Server Software
during T2's operation of the Licensed Software, a written "Request
of Technical Support" shall be delivered to the contract person of
SEGA and/or JCE as designated by the parties. Upon receipt of such
request, SEGA and/or JCE shall make an online response to such
request within eight (8) business hours; in the event that such
online response fails to solve the aforesaid issues and the parties
determine that onsite support is necessary, SEGA and/or JCE shall
send one (1) or more engineers to conduct onsite technical service
within five (5) business days of the date such determination is
made.
In the event T2 discovers any third-party hacking activities
targeting the Server Software, T2 shall submit to SEGA and/or JCE a
written report, via e-mail or by facsimile, to the contact person of
SEGA and/or JCE as designated by the parties, describing the nature
of such activities in sufficient detail to permit SEGA and/or JCE to
provide preventative measures. Upon receipt of any such written
report, SEGA and/or JCE agree(s) to make an online response to the
reported hacking activities within eight (8) business hours and on
an urgent basis; in the event that such online response fails to
solve the aforesaid issues and the parties determine that onsite
support is necessary, SEGA and/or JCE shall send one (1) or more
engineers to conduct onsite technical service within five (5)
business days of the date such determination is made.
For serious technical problems which are likely to result in
substantial losses or other adverse effects to the operation of the
Licensed Software of to T2, SEGA or JCE, SEGA and/or JCE shall send
to T2, no less than three (3) senior technicians (including one for
programming support, one for system support and one for scripting
support) to solve such problems, within five (5) business days upon
the receipt of T2's written request and report of such problems.
8.3 Returns. T2 shall honor all refund and exchange requests received
from subscribers pursuant to the terms of this Agreement and the
Subscriber Agreements. No returns shall be accepted by SEGA, and T2
shall instruct Subscribers to make all refund requests directly to
T2 and no to SEGA. T2 may return any returned unit to T2's inventory
if the unit is in salable condition. All returned units that are not
returned to inventory shall be destroyed, and such destruction shall
be attested to in a sworn affidavit signed by an officer duly
authorized to bind T2. Returned units shall not affect the
calculation of Gross Revenues under this Agreement.
8.4 Technical Documents. If JCE provides any Patches to T2, a written
release note and test report for such Patch shall be delivered to
T2. All documents delivered by T2 to JCE shall be written in Korean
and Chinese. All documents delivered by JCE to T2 shall be written
in Korean and Chinese. All documents exchanged between T2 and JCE
and relating to technical issues should be signed by both JCE and
T2.
8.5 Localization of the Technique Support. JCE shall provide training to
a reasonable number of technical personnel designated by T2
according to the reasonable requirements of T2, and T2 and JCE shall
be responsible for the confidentiality of the procedures and
contents of such trainings with respect to their respective
participants pursuant to the terms of this Agreement. T2 shall
provide an office and bear the reasonable costs and expenses travel,
room and board for the JCE personnel providing such training, to the
extent that the travel of such JCE personnel has approved in advance
in writing by T2.
8.6 Billing Server and Gaming Server System.
8.6.1Billing Server. T2 shall be responsible for authenticating and
billing the Subscribers. In connections with such
responsibilities, T2 shall set-up and maintain a computer
server (the "Billing Server") to capture and store billing
information in a billing database (the "Billing Database") and
bill each Subscriber for all charges arising from such
Subscriber's use of the Licensed Software. The Billing Server
shall be connected to Internet and shall be capable of
producing the periodic reports described above in Section 7.8
in addition to other reports.
8.6.2Gaming Server System. T2 shall install, operate, host and
maintain the Licensed Software within the territory. In
connection therewith, T2 shall set-up and maintain a computer
server system (the "Gaming Server System" and, collectively
with the Billing Server, the "Servers") that is connected to
the Internet with sufficient processing speed and power, as
well as telecommunications bandwidth, to support Subscribers
in the Territory in accordance with the specifications
provided by SEGA from time to time. The Gaming Server System
shall include, without limitation, game servers, Subscriber
database servers, login servers and Server Software. T2 shall
ensure that the Licensed Software is generally accessible to
Subscribers via the Internet in order to play the Game
Twenty-four (24) hours a day, seven (7) day per week
(excluding maintenance periods) throughout the Term.
8.6.3Security. T2 shall maintain the following security standards
with respect to Billing Server and Gaming Server System: (a)
the Billing Server and Gaming Server System shall be provided
with redundant power sources that permit at least eight (8)
hours of backup power, a fire protection system, and adequate
cooling and ventilation; (b) T2 shall store and operate the
Billing Server and Gaming Server System in an environment
equipped with 24-hour onsite security and monitoring, security
alarm systems, and other reasonable measures designed to
protect the security and integrity thereof; and (c) T2 shall
place the Billing Server and Gaming Server System behind a
software and/or hardware firewall, and shall continuously
monitor and maintain such firewall.
8.6.4Server Audit Rights. T2 shall provide SEGA with access to the
Billing Server and Gaming Server System at all times during
the Term so that SEGA can monitor all of T2's activities
relating thereto. SEGA agrees that it shall not modify or
duplicate any of the billing information in the Billing
Database.
8.7 Permits and Certificates. T2 shall be solely responsible at T2's own
cost and expense for obtaining any and all permits and certificates
from the applicable authorities of the PRC or other governmental
authorities in the Territory that are necessary to exercise the
rights and licenses granted to T2 under this Agreement.
8.8 Notification of Claimed or Suspected Defects. T2 shall promptly
notify SEGA in writing of any claimed or suspected defect in the
Licensed Software no later than ten (10) days after T2 learns of the
same.
8.9 Compliance with Law. T2 shall comply with all Laws that are
necessary to exercise the rights and licensed granted to T2 under
this Agreement, including, but not limited to, all applicable labor
laws and regulations and all applicable governmental and industry
codes of conduct and social accountability.
9 OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS.
9.1 As between T2, on the one hand, and SEGA and JCE, on the other hand,
SEGA and JCE retain all Intellectual Property Rights in and to the
Marks, Game, Licensed Software (including, without limitation, the
Closed Beta Version, the Open Beta Version and the Commercial
Version), Promotional Materials, Game Materials, and all other
materials provided by SEGA (including, without limitation, the
Translation Assets), and T2 shall not have or acquire any right,
title, or interest in the Marks, Game the Licensed Software, the
Promotional Material, Game Materials or such other materials under
any circumstances whatsoever, except that any Intellectual Property
Rights in any part of the Licensed Software (including, without
limitation, the Closed Beta Version and Open Beta Version),
Promotional Materials and/or Game Materials independently created by
T2 as permitted pursuant to this Agreement shall be jointly owned
among SEGA, JCE and T2. T2 agrees that it shall not at any time
during or after the Term assert or claim any interest in, or do
anything that may adversely affect the validity or enforceability
of, any Intellectual Property Right belonging to or licensed by SEGA
and JCE (including any act, or assistance to any act, which may
infringe or lead to the infringement of any such rights) hereunder.
If T2 has or acquires any Intellectual Property Rights in or to the
Licensed Software (including, without limitation, the Closed Beta
Version, Open Beta Version and Commercial Version) or any
Promotional Materials, Game Materials, Marks or other materials to
which T2 is not entitled to joint ownership pursuant to the first
sentence of this Section 9.1, T2 shall assign such Intellectual
Property Rights to SEGA and/or JCE as instructed by SEGA without
additional consideration. If for any reason any such Intellectual
cannot be assigned to SEGA and/or JCE as provided above, T2 hereby
waives such rights and the enforcement thereof without additional
consideration. If such Intellectual Property Rights cannot be
assigned to SEGA and/or JCE as provided above and cannot be waived,
T2 hereby grants to SEGA and JCE an irrevocable, exclusive,
worldwide, royalty-free license in perpetuity to exercise such
intellectual Property Rights without additional consideration.
9.2 Except as expressly set forth in this Agreement, nothing herein, nor
the exercise of any rights granted T2 hereunder, conveys to T2, and
T2 shall not have or acquire, and shall not purport to have or
acquire, any Intellectual Property Right or any other right or title
to , or interest in, the Game or any part or aspect thereof
(including, without limitation, the Licensed Software, the Closed
Beta Version, Open Beta Version and Commercial Version) and any and
all Promotional Materials and Game Materials, except for those to
which T2 is entitled to joint ownership pursuant to Section 9.1).
9.3 Except as may be otherwise expressly set forth in this Agreement, T2
shall execute any and all documents and do such other acts requested
at any time by SEGA and/or JCE as may be required to evidence,
perfect, confirm and/or further effect the rights granted SEGA under
this Agreement, including without limitation, the rights under this
Section 9. In the event T2 fails to execute and deliver any such
documents and instruments promptly upon request by SEGA and/or JCE,
SEGA and/or JCE are hereby authorized and appointed to act as
attorney-in-fact of and for T2 to make, execute and deliver any and
all such documents and instruments, it being understood that such
power is coupled with an interest and is therefore irrevocable.
9.4 SEGA and JCE shall provide T2 with appropriate copyright and
trademark notices in SEGA's and JCE's respective names, and T2 shall
place, in such manner and form as SEGA and JCE shall direct, such
copyright and trademark notices on all Promotional Materials, Game
Materials and copies of the Client Software. In no event shall T2
alter, remove, obscure, erase or deface or otherwise hide from view,
any such notices or any other copyright, trademark or other
proprietary rights notice of SEGA and/or JCE contained on or
incorporated in any Licensed Software, Promotional Material or Game
Material.
9.5 T2 shall not register or attempt to register, any trademark, trade
name, software or other Intellectual Property Right related to the
Marks, the Game, the Licensed Software (including, without
limitation, the Closed Beta Version, Open Beta Version and
Commercial Version), the Promotion Materials and/or the Game
Materials with any public or private authority without the express
and unambiguous prior written consent of SEGA and JCE, except for
any Intellectual Property Rights to which T2 is expressly entitled
to joint ownership pursuant to Section 9.1. T2 shall not attach any
additional trademarks, logos or trade designations to the Licensed
Software without SEGA's prior written approval. T2 shall not affix
any SEGA or JCE trademark, logo or trade name to any non-SEGA or
non-JCE product.
9.6 T2 shall promptly report to SEGA and JCE (a) any infringement of any
of SEGA's and/or JCE's Intellectual Property Rights by any person or
entity, (b) any infringement by any person or entity of any right
granted to T2 hereunder and (c) any unauthorized copying or
distribution of the Licensed Software or any component thereof by
any person or entity. SEGA may, in its sole discretion, undertake to
prosecute necessary actions to prevent such infringement or any
unlicensed or unauthorized distribution. In the event T2 is joined
in any such litigation, the respective counsels of SEGA and T2 shall
cooperate with respect to matters of procedure, conduct of such
litigation and/or handling thereof.
9.7 As between the parties, SEGA and JCE shall have the sole right, in
their absolute discretion, to employ attorneys and to institute or
defend any action or proceeding and to take any other appropriate
steps to protect all rights owned or controlled by SEGA and/or JCE
and all interest in and to the Licensed Software (including, without
limitation, the Closed Beta Version, Open Beta Version and
Commercial Version) and every portion thereof and, in that
connection, to settle, compromise in good faith, or in any other
manner dispose of any matter, claim action, or proceeding and to
satisfy any judgment that may be rendered, in any manner as SEGA and
JCE in their sole discretion may determine; provided, however, that
this Section 9.7 shall not prevent T2 from employing attorneys or
taking actions vis-a-vis third parties to defend or protect rights
expressly granted to T2 pursuant to this Agreement.
9.8 SEGA, T2 and JCE jointly own the rights to Subscriber database and
Billing Database.
9.9 The parties specifically acknowledge and agree that the provisions
of this Section 9 are reasonable and necessary for the protection of
SEGA's and JCE's Intellectual Property Rights and to prevent damage
or loss to SEGA and JCE. T2 understands and agrees that SEGA and/or
JCE may suffer irreparable harm in the event that T2 fails to comply
with any of its obligations pursuant to this Section 9, and that
monetary damages in such event would be substantial and inadequate
to compensate SEGA and/or JCE, as the case may be. Consequently, T2
agrees that in such event SEGA and/or JCE (as the case may be) shall
be entitled, in additions to such monetary relief as may be
recoverable at law, to such injunctive or other equitable relief as
may be necessary to restrain any threatened, continuing or further
breach by T2, without showing or proving any actual damages
sustained by SEGA and/or JCE, without bond.
10 CONFIDENTIAL INFORMATION
10.1 Confidential Information Defined. Any party (the "Receiving Party")
may, during the performance of this Agreement, have access to and
acquire knowledge form, material, data, systems and other
information concerning the operation, business, financial affairs,
products, customers and Intellectual Property Rights or other
aspects of the other parties (the "Disclosing Parties") that may not
be accessible or known to the general public (referred to herein as
"Confidential Information"). "Confidential Information" also
includes (a) the terms of this Agreement and the fact of its
existence and (b) any information or materials that the Receiving
Party obtains from any third party that the Disclosing Party treats
as proprietary or designates as Confidential Information, whether or
not owned by the Disclosing Party. "Confidential Information" does
not include information that the Receiving Party can document in
reasonable detail and to the Disclosing Party's satisfaction: (i) is
know by the Receiving Party at the time of receipt from the
Disclosing Party and is not subject to any other non-disclosure
agreement between the parties; (ii) is now, or hereafter becomes,
generally know to the industry through no fault of the Receiving
Party; or (iii) is otherwise lawfully and independently developed by
the Receiving Party, or lawfully acquired from a third party without
any obligation of confidentiality.
10.2 No Disclosure. Any Confidential Information acquired by the
Receiving Party shall not be used, published or divulged by the
Receiving Party to any other person or entity in any manner
whatsoever without the prior clear and express written approval of
the Disclosing Party, which approval the Disclosing Party may
withhold in its sole discretion. The Receiving Party shall, and
shall cause its employees, agents and every other person and entity
it employs in connection with its performance of this Agreement to,
protect and safeguard the Confidential Information by using the same
degree of care, but no less than a reasonable degree of care, to
prevent the unauthorized use or disclosure of the Confidential
Information as the Receiving Party uses to protect its own
confidential or proprietary information of a like nature. In the
event that the Receiving Party is directed to disclose any portion
of any Confidential Information or any other materials proprietary
to the Disclosing Party in conjunction with a governmental or
judicial proceeding or arbitration, the Receiving Party shall
immediately notify the Disclosing Party both orally and in writing.
The Receiving Party agrees to provide the Disclosing Party with
reasonable cooperation and assistance in obtaining a suitable
protective order and in taking any other steps to preserve
confidentiality. Upon any termination or expiration of this
Agreement or upon the Disclosing Party's request, the Receiving
Party shall immediately return all materials embodying Confidential
Information to the Disclosing Party then in the custody, control or
possession of the Receiving Party.
10.3 No Confidential Information of Other Parties. Each party represents
and warrants that it shall not use in the course of its performance
hereunder, and shall not disclose to the other parties, any
confidential information of any third party (including competitors
of SEGA or T2) unless such party is expressly authorized in writing
by such third party to do so.
10.4 Publicity. Each party agrees that any press release it proposes to
issue with regard to the execution of this Agreement shall be
subject to the prior written consent of the other parties, which
consent shall not be unreasonably withheld. Notwithstanding the
foregoing, T2 shall not directly or indirectly issue or permit the
issuance of any publicity regarding, or grant any interview, or make
any public statements whatsoever concerning (a) SEGA, this
Agreement, or T2's services hereunder without prior coordination
with and approval by SEGA, which approval shall not be unreasonably
withheld or delayed, or (b) the Licensed Software without prior
coordination with and approval by SEGA, which approval shall not be
unreasonably withheld or delayed.
10.5 Confidentiality of Licensed Software. Without limiting the
generality of the foregoing provisions of this Section 10, the
parties hereby acknowledge that the Licensed Software constitutes
Confidential Information of SEGA, and T2 and JCE hereby covenant
that they shall keep in strict confidence any and all parts of the
Licensed Software licensed to T2 by SEGA hereunder and all versions
thereof in all languages, including but not limited to any source
codes thereof to which T2 of JCE may obtain access, and that they
shall not, directly or indirectly, disclose, or allow to be
disclosed, such Licensed Software and related materials to any third
party in the Territory or conduct any activity inside or outside the
Territory under circumstances where either T2 or JCE knows, or in
the exercise of prudent business judgment should know, that such
activities may, directly or indirectly, result in the disclosure of
such Licensed Software or related materials to any third party.
10.6 Specific Performance. The parties specifically acknowledge and agree
that the provisions of this Section 10 are reasonable and necessary
for the protection of the Confidential Information and to prevent
damage or loss to the Disclosing Party. Each Receiving Party
understands and agrees that the Disclosing Party may suffer
irreparable harm in the event that Receiving Party fails to comply
with any of its obligations pursuant to this Section 10, and that
monetary damages in such event would be substantial and inadequate
to compensate Disclosing Party. Consequently, Receiving Party agrees
that in such event Disclosing Party shall be entitled, in addition
to such monetary relief as may be recoverable at law, and to such
injunctive or other equitable relief as may be necessary to restrain
any threatened, continuing or further breach by Receiving Party,
without showing or proving any actual damages sustained by
Disclosing Party, without bond.
11 REPRESENTATIONS, WARRANTIES, LIMITATIONS AND INDEMNIFICATION.
11.1 Representations and Warranties of T2. T2 represents and warrants
that (a) it has the right, power and authority to enter into this
Agreement and to fully perform its obligations under this Agreement;
(b) the making of this Agreement by it does not violate any
agreement existing between it and any other person or entity, and
throughout the Term it shall not make any agreement with any person
or entity that is inconsistent with any of the provisions of this
Agreement; (c) the Game Materials, Promotional Materials and any
portions of the Licensed Software developed by T2 do not and will
not violate or infringe upon the Intellectual Property Rights of any
third party; (d) it complies, and at all times during the Term shall
comply, with all applicable laws in effect at the time duties are
performed under this Agreement and in all dealings with respect to
the Licensed Software; (e) it is, and at all times during the Term
shall be the holder of all consents necessary for it to perform its
obligations hereunder; (f) it has the experience and skill to
perform the services required to be performed by it hereunder; and
(g) it shall perform such services in accordance with generally
accepted professional standards and in an expeditious and economical
manner consistent with sound professional practices.
11.2 Indemnification by T2. Except as expressly set forth in this
Agreement, T2 shall, at its sole expense, indemnify, defend and hold
harmless SEGA and its directors, officers, employees, agents,
successors and assigns, from and against any and all claims,
demands, suits, actions, proceedings, judgments, damages, costs,
losses, expenses (including attorneys' fees and expenses) and other
liabilities (including settlements) arising form, in connection with
or related in any way to, directly or indirectly, (a) any breach or
alleged breach of any of the representations or warranties made by
T2 under this Agreement or of Sections 8.6.1, 8.6.2, 8.6.3 or 10; or
(b) the gross negligence and/or willful misconduct to T2 (each, a
"SEGA Claim"). SEGA shall promptly notify T2 of any SEGA Claim for
which indemnification is sought pursuant to this Section 11.2. T2
shall bear full responsibility for all SEGA Claims; provided
however, that (i) T2 shall keep SEGA informed of, and consult with
SEGA in connection with the progress of each SEGA claim; and (ii) T2
shall not have any right without SEGA's written consent, to settle
any SEGA Claim if such settlement arises from or is part of any
criminal action, suit or proceeding or contains a stipulation to or
admission or acknowledgment of, any liability or wrongdoing (whether
in contract, torn or otherwise) on the part of SEGA. Notwithstanding
any of the foregoing, SEGA shall have the right, in its absolute
discretion, to employ attorneys of it own choice and to institute or
defend any SEGA claim.
11.3 Representations and Warranties of SEGA
11.3.1 SEGA represents and warrants that, except if Advent
Telecommunications, Inc. and ATGames Holdings, Ltd.
(collectively, "Advent") prevail (or obtain any form of
injunctive relief) in the pending litigation between Advent
and SEGA described in the July 29th, 2004 letter that Mr.
Junji Fujita of SEGA sent to Mr. Jim Wang of ZARVA (the
"Advent Litigation"): (a) it has the right, power and
authority to enter into this Agreement and (b) the making of
this Agreement by it does not violate any agreement existing
between it and any other person or entity; (c) it complies,
and at all times during the Term shall comply, with all
applicable laws in effect at the time duties are performed
under this Agreement and in all dealings with respect to the
Licensed Software in the Territory; (d) it is, and at all
times during the Term shall be, the holder of all consents
necessary for it to perform its obligations hereunder; and
(e) the Game of any part of aspect thereof does no infringe
upon of violate any Intellectual Property Rights of any other
party in the Territory; (f) it shall provide T2 with the
Licensed Software with such functions as set forth in
Appendix I to this Agreement and deliver it upon such time as
set forth in Appendix II hereto.
11.3.2 Except for the forgoing representations and warranties, THE
GAME AND THE TRANLATION ASSETS ARE PROVIDED "AS IS." SEGA
SPECIFICALLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AS TO
THE GAME OR SERVICE PROVIDED UNDER THIS AGREEMENT.
11.4 Limitation of Liability.
EXCEPT WITH RESPECT TO ANY LIABILITY OF T2 PURSUANT TO SECTION 11.2
OR ANY BREACH BY T2 OF SECTION 3, SECTION 6.2, SECTION 6.3, SECTION
6.4, SECTION 7, SECTION 9, SECTION 10 OR SECTION 11, IN NO EVENT
SHALL SEGA, JCE OR T2 BE LIABLE UNDER OF IN CONNECTION WITH THIS
AGREEMENT FOR ANY LOSS OF PROFIT OR ANY OTHER COMMERCIAL DAMAGE,
INCLUDING WITHOUT LIMITATION INCIDENTAL, CONSEQUENTIAL, SPECIAL,
EXEMPLARY, PUNITIVE OR OTHER DIRECT OR INDIRECT DAMAGES OF ANY
NATURE, FOR ANY REASON, INCLUDING WITHOUT LIMITATION THE BREACH OF
THIS AGREEMENT, ANY EXPIRATION OR TERMINATION OF THIS AGREEMENT,
CLAIMS ALLEGING THAT THE GAME OR ANY PART OR ASPECT THEREOF
INFRINGES UPON OR VIOLATES ANY INTELLECTUAL PROPERTY RIGHT OF ANY
PARTY OR CLAIMS ARISING FORM THE MALFUNCTION OF OR DEFECTS IN THE
GAME WHETHER SUCH LIABILITY IS ASSERTED ON THE BASIS OF CONTRACT,
TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN
IF SEGA, JCE OR T2 (AS THE CASE MAY BE) HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
11.5 Representations and Warranties of JCE
JCE represents and warrants that (a) it has the right, power and
authority to enter into this Agreement and to fully perform its
obligations under this Agreement; (b) the making of this Agreement
by it does not violate any agreement existing between it and any
other person or entity, and throughout the Term it shall not make
any agreement with any person or entity that is inconsistent with
any of the provisions of this Agreement; (c) it complies and at all
times during the Term shall comply, with all applicable Laws in
effect at the time duties are performed under this Agreement and in
all dealings with respect to the Licensed Software; (d) it is, and
at all times during the Term shall be, the holder of all consents
necessary for it to perform its obligations hereunder; (e) it has
the experience and skill to perform the services required to be
performed by it hereunder; and (f) it shall perform such services in
accordance with generally accepted professional standards an in an
expeditious and economical manner consistent with sound professional
practices.
11.6 No Pass Through of Warranty Obligations SEGA DOES NOT MAKE BY VIRTUE
OF THIS AGREEMENT OF THE TRANSACTIONS CONTEMPLATED HEREIN, AND SEGA
HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY TO ANY
SUBSCRIBER OR OTHER THIRD PARTY, WITH RESPECT TO THE LICENSED
SOFTWARE, EXCLUDING ANY WARRANTY OF NON-INFRINGEMENT. T2 SHALL NOT
HAVE THE RIGHT TO MAKE OR PASS ON, AND SHALL TAKE ALL MEASURES
NECESSARY TO ENSURE THAT NEITHER IT NOR ANY OF ITS EMPLOYEES OR AGENTS
MAKES OR PASSES ON, OR ATTEMTS TO MAKE OR PASS ON, ANY SUCH
REPRESENTATION OR WARRANTY ON BEHALF OF SEGA TO ANY SUBSCRIBER OR
OTHER THIRD PARTY.
11.7 Indemnification by SEGA. SEGA shall, at its sole expense, indemnify
and defend any suit or proceeding brought against T2 insofar as such
suit or proceeding shall be based upon a claim in respect of (a) any
of the warranties set forth in Section 11.3 hereof; (b) any breach by
SEGA of Section 10 or (c) the Advent Litigation. SEGA shall pay any
damages and costs finally awarded by a court against T2 as a result of
such a claim, provided that;
11.7.1SEGA shall have been promptly notified of the suit or claim by
T2 and provided with a copy of each communication, notice or
other action relating to said claim;
11.7.2SEGA shall have the right to assume sufficient authority to
conduct the trial or settlement of such claim or any negotiations
related thereto at SEGA's expense; and
11.7.3T2 shall have provided SEGA with all information and assistance
reasonably requested by SEGA in connection with such claim or
suit.
In the event that SEGA fails to deliver the Licensed Software with
such functions as are set forth in Appendix I to this Agreement, or
to deliver the Licensed Software upon such schedule as is set forth
in Appendix II hereto, or to timely provide T2 with patches to solve
bugs and/or hacking problems with material impact to the operation
of the Licensed Software in accordance with SEGA's express
obligations under this Agreement, SEGA shall be held liable for
direct loss incurred by T2 thereby.
The foregoing shall not apply, and SEGA shall have no obligations to
T2 to the extent any such claim is based on (i) any use of the
Licensed Software in combination with any product, equipment,
software or data not manufactured or marketed by SEGA or expressly
identified y SEGA as being compatible with the Licensed Software,
(ii) any alteration or modification of the Licensed Software without
SEGA's approval, or (iii) marketing, distribution or use of the
Licensed Software after written notice that T2 should cease activity
due to such claim.
11.8 Indemnification by JCE
JCE shall, at its sole expense, indemnify, defend and hold harmless
T2 and its directors, officers, employees, agents, successors and
assigns, from ad against any and all claims, demands, suits,
actions, proceedings, judgments, damages, costs, losses, expenses
(including attorneys' fees and expenses) and other liabilities
(including settlements) arising from, in connection with or related
in any way to, directly or indirectly, its failure to fully perform
its obligations under this Agreement, particularly the obligation of
providing technical support and other services to T2 as set forth
under Section 8 of this Agreement and its obligations set forth in
Section 10 of this Agreement.
11.9 No Virus. T2 warrants that each unit of the Licensed Software, as
distributed by T2, shall be free of any willfully introduced
computer virus or any other similar harmful malicious or hidden
program or data.
12 TERMINATION.
12.1 Termination by SEGA. Without prejudice to any other rights or
remedies available to SEGA, SEGA shall have the right, in its sole
discretion, to immediately terminate this Agreement upon written
notice to T2 in the event of the occurrence of one or more of the
following:
12.1.1T2 discontinues its Internet game marketing and distribution
business;
12.1.2T2 breaches any of its material obligations under this Agreement
and fails to cure such material breach within sixty (60) days of
receipt of written notice from SEGA specifying the nature of such
material breach; or
12.1.3T2 makes a general assignment for the benefit of creditors;
applies for or consents to the appointment of a receiver, trustee
or liquidator for substantially all of its assets or such a
receiver, trustee or liquidator is appointed; or T2 has filed
against it an involuntary petition of bankruptcy that has not
been dismissed within sixty (60) days thereof, or files a
voluntary petition ob bankruptcy, or a petition or answer seeking
reorganization or seeks to take advantage of any other law
relating to relief of debtors; or has wound up or liquidated its
business.
12.2 Termination by T2. Without prejudice to any other rights or remedies
available to T2, T2 shall have the right, in its sole discretion, to
immediately terminate this Agreement upon written notice to SEGA in
the event of the occurrence of one or more of the following:
12.2.1SEGA or JCE breaches any of its material obligations under this
Agreement and fails to cure such material breach within sixty
(60) days of receipt of written notice from T2 specifying the
nature of such material breach; or
12.2.2SEGA or JCE makes a general assignment for the benefit of
creditors; applies for or consents to the appointment of a
receiver, trustee or liquidator for substantially all of its
assets or such a receiver, trustee or liquidator is appointed; or
SEGA or JCE has filed against it an involuntary petition of
bankruptcy that has not been dismissed within sixty (60) days
thereof, or files a voluntary petition of bankruptcy, or a
petition or answer seeking reorganization, or seeks to take
advantage of any other law relating to relief of debtors; or has
wound up or liquidated its business.
12.3 Effect of Termination. Upon the expiration or earlier termination of
this Agreement; (a) all rights and licenses granted to T2 under or
pursuant to this Agreement shall revert to SEGA and T2 immediately
shall terminate providing the Subscribers with access to the Server
Software and any other components of the Licensed Software; (b) T2
immediately shall pay SEGA any unpaid and due portion of the License
Fee; (c) each party shall return the Confidential Information of the
other parties; (d) any inventory of the Licensed Software in T2's
possession or control shall be destroyed or, at SEGA's election,
delivered to SEGA; and (e) T2 shall promptly transfer all of its
right, title and interest in and to the Billing Database and
Subscriber database(s) to SEGA. In the event SEGA directs the
destruction of any inventory as provided in this Section 12.3, such
destruction shall be attested to in a sworn affidavit signed by an
officer duly authorized to bind T2. The obligations in this
Agreement which are intended by their terms to survive the
expiration or earlier termination of this Agreement shall so
survive. In addition, and without limiting the generality of the
preceding sentence, Sections 1, 3.3, 7.9, 8, 9, 10, 11, 12.3, 14 and
15 hereof shall survive the expiration or termination of this
Agreement for any reason. No expiration or termination of this
Agreement shall release T2 from its obligation to pay SEGA any
amounts payable to SEGA under this Agreement which accrued prior to
such expiration or earlier termination of which may accrue
thereafter.
13 INSURANCE
T2, during the Term of this Agreement, shall carry General
Commercial Liability Insurance and Employer's Liability Insurance in
such amount and providing such coverage as is reasonable and
customary for commercial entities providing services like those
being rendered by T2 under this Agreement and shall name SEGA as an
additional insured. All insurance required hereunder shall provide
that the coverage there under may not be reduced or cancelled unless
thirty (30) days unrestricted prior written notice thereof is
furnished to SEGA. All insurance required hereunder shall be primary
and not contributory. All insurance required hereunder shall be
written by reputable insurers and accorded a rating by A.M. Best
Company, Inc. of B+: VII or higher at the time of issuance of any
policy pertaining to such insurance. Certificates of insurance (or
copies of policies, if required by SEGA) evidencing satisfactory
coverage as required hereunder shall be furnished to SEGA no later
than thirty (30) days after the Effective Date.
14 INDEPENDENT CONTRACTOR; PERMISSIONS; NO AGENCY
This Agreement shall not be construed as creating an agency,
partnership, joint venture or any other form of association, for tax
purposes or otherwise, among the parties, and the parties shall at
all times be and remain independent contractors. Except as expressly
agreed by the parties in writing, none of the parties shall have any
right or authority, express or implied, to assume or create any
obligation of any kind, or to make any representation or warranty,
on behalf of any other party or to bind any other party in any
respect whatsoever.
15 GENERAL PROVISIONS
15.1 Notices. All notices which either party is required or may desire to
sere upon the other party shall be in writing, addressed to the
party to be served as follows:
If to SEGA:
SEGA Corporation
1-2-12, Haneda, ohta-ku, Tokyo, Japan, 144-8531
Attention: Kashiwaguchi Yukihiro
Telephone: +81-3-5736-7403
Facsimile: +81-3-5736-7159
And if to T2:
T2 Internet Technologies Co. Ltd.
5th Floor, 88 Qinjiang Road
Shanghai, China 200233
Attention: Wang Jim
Telephone: +86-21-5437-8388
Facsimile: +86-21-5426-2830
And if to JCE
JC Entertainment Corporation
4th Floor, Rosedale Building
#724 Susco-Dong
Kangnam-Ku
Seoul 135-885, Korea
Attention: SEO, Jeung Wook
Telephone: +86-2-2040-1114
Facsimile: +82-2-2040-1109
Any such notice may be served personally or by courier, mail
(postage prepaid), facsimile (provided oral confirmation of receipt
is immediately obtained or a hard copy is concurrently sent by
commercially recognized national overnight delivery service) or
commercially recognized national overnight delivery service. Notice
shall be deemed served upon personal or courier delivery or upon the
date sent. Either party may change the address to which notices are
to be delivered by written notice to the other party served as
provided in this Section.
15.2 Entire Agreement. This Agreement, together with the appendices
attached hereto and hereby incorporated herein by reference,
constitutes the complete, final and exclusive understanding and
agreement between the parties with respect to the transactions
contemplated herein, and supersedes any and all prior or
contemporaneous oral or written representation, understanding,
agreement, correspondence or communication among the parties
concerning the subject matter hereof. None of the parties is relying
upon any warranties, representations, assurances or inducements not
expressly set forth herein. It is acknowledged that substantial
contents of the Appendices I and II are still to be decided by the
parties hereto as of the date hereof; and it is agreed that such
contents shall be agreed and reduced to writing within three (3)
months after the signing hereof and the agreed-upon updated
Appendixes I and II incorporating such said agreed-upon contents
shall be delivered to all of the parties in a form and substance
satisfactory to the parties and then shall be incorporated into this
Agreement.
15.3 Amendments. All amendments or modifications of this Agreement shall
be binding upon the parties despite any lack of consideration so
long as the same shall be in writing and executed by each of the
parties hereto. It is expressly understood and agreed that no usage
of trade or other regular practice or method of dealing between the
parties hereto shall be used to modify, interpret, supplement or
alter in any manner the express terms of this Agreement or any part
hereof.
15.4 Waiver. No waiver of any provision of this Agreement or any rights
or obligations of any of the parties hereunder shall be effective,
except pursuant to a written instrument signed by the party waiving
compliance, and any such waiver shall be effective only in the
specific instance and for the specific purpose stated in such
writing.
15.5 No Other Obligations. None of the parties shall have any obligation
that is not expressly set forth in this Agreement.
15.6 Cumulative Remedies. Except as may be specifically set forth in this
Agreement with respect to certain matters, the rights and remedies
of each party as set forth in this Agreement are not exclusive and
are in addition to any other rights and remedies provided under this
Agreement or now or hereafter provided by law.
15.7 Force Majeure. None of the parties shall be deemed in default
hereunder, nor shall it hold any other party responsible for, any
cessation, interruption or delay in the performance of its
obligations hereunder due to causes beyond its reasonable control
including, but not limited to: earthquake, flood, fire, storm or
other natural disaster, epidemic, accident, explosion, casualty, act
of God, act of terrorism, lockout, strike, labor controversy or
threat thereof, riot, insurrection, civil disturbance or commotion,
boycott, disruption of the public markets, war or armed conflict
(whether or not officially declared), sabotage, act of a public
enemy, embargo, delay of a common carrier, the inability to obtain
sufficient material, supplies, labor, transportation, power or other
essential commodity or service required in the conduct of its
business, or any change in or the adoption of any law, ordinance,
rule, regulation, order, judgment or decree; provided that the party
relying upon this Section shall: (a) have given the other parties
written notice thereof promptly and, in any event, within five (5)
days of discovery thereof, and (b) take all steps reasonably
necessary under the circumstances to mitigate the effects of the
force majeure upon which such notice is based.
15.8 No Third Party Beneficiaries. Nothing in this Agreement is intended
or shall be construed to give any person, other that the parties
hereto, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
15.9 Assignment. Without limiting the materiality of any other term of
this Agreement, any attempted assignment, delegation or other
transfer (including without limitation any license or sublicense,
mortgage or pledge) by any Party without the consent of the other
Parties shall be null and void and shall constitute a material
breach of this Agreement. The merger of any Party into or with any
other third party or entity, shall be deemed on assignment for
purposes of this Section.
15.10 Further Assurances. T2 agrees to do and perform all such further
acts and things and shall execute and deliver such other agreements,
certificates, instruments and documents necessary or that SEGA
and/or JCE may deem advisable in order to carry out the intent and
accomplish the purposes of this Agreement.
15.11 Construction. This Agreement has been negotiated by the parties
hereto and by their respective counsel. This Agreement shall be
fairly interpreted and construed in accordance with its terms and
without strict interpretation or construction in favor or against
either party.
15.12 Headings. The section and paragraph headings appearing in this
Agreement are inserted only as a matter of convenience. Such
headings in no way define, govern, limit, modify or construe the
scope or extent of the provisions of this Agreement to which they
may relate and therefore shall not be given any legal effect.
15.13 Severability. If any of the provisions of this Agreement shall be
adjudged by a court of competent jurisdiction to be void as going
beyond what is reasonable under the circumstances for the protection
of the interests of the party seeking to enforce such provision, but
would be valid if part of the wording thereof were deleted or the
time periods (if any) thereof were reduced or the range of
activities or area dealt with thereby reduced in scope, such
provision shall apply with such modifications as may be necessary to
make it valid and effective. In the event that any provision of this
Agreement should be found by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
15.14 Governing Law. The validity, construction, interpretation and legal
effect of this Agreement shall be governed by the laws of New York,
U.S.A. without giving effect to principles of conflicts of law.
15.15 Dispute Settlement. Any dispute relating to or arising from the
performance of this Agreement shall be settled through friendly
negotiation by the parties. Any such dispute that is not resolved
through such negotiations within thirty (30) days after the
initiation of negotiations shall be finally settled by arbitration
in New York, New York, U.S.A., using the English language, conducted
in accordance with the rules of the American Arbitration
Association, and each party agrees not to bring any action to settle
any such dispute in any other forum. The arbitrator(s) shall have
the authority to grant specific performance. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction or application may be made to any such court for
judicial acceptance of any such award and an order of enforcement,
as the case may be. Notwithstanding the foregoing, each party shall
have the right to institute legal action in a court of proper
jurisdiction for temporary injunctive relief pending final
settlement by arbitration.
15.16 Counterparts. This Agreement may be executed by manual or facsimile
signatures and in counterparts, each of which shall be deemed an
original and all of which together shall constitute on and the same
instrument.
IN WITNESS WHEREOF, the duly authorized representatives of each of the
parties hereto have executed this Agreement as of the day and year first
written above.
SEGA CORPORATION T2 INTERNET TECHNOLOGIES CO. LTD.
By:________________________ By:______________________________
Name:______________________ Name:____________________________
Title:_______________________ Title:_____________________________
JC ENTERTAINMENT CORPORATION
By:______________________________
Name:____________________________
Title:_____________________________
Appendix I
Functions of the Licensed Software
1. The Closed Beta Version of the Licensed Software shall mainly include:
[to be agreed]
2. The Open Beta Version of the Licensed Software shall mainly include:
[to be agreed]
3. The Commercial Version of the Licensed Software shall mainly include:
[to be agreed]
Appendix II
Schedule of Launch and Delivery
1. The Closed Beta Version of the Licensed Software shall be launched by T2
[ ] and deliver by SEGA to T2:
[reasonably before February, 2005 so that T2 shall be able to
properly install the Closed Beta Version on T2's computer servers on
or before such date. To be agreed]
2. The Open Beta Version of the Licensed Software shall be launched by
T2 [ ] and delivered by SEGA to T2:
[reasonably before May. 2005 so that T2 will be able to properly install
the Open Beta Version on T2's computer servers on or before such date.
To be agreed.]
3. The Commercial Version of the Licensed Software shall be launched by
T2 [ ] and delivered by SEGA to T2:
[to be agreed]
IN WITNESS WHEREOF, the duly authorized representatives of each of the
parties hereto have executed this Agreement as of the day and year first
written above.
SEGA CORPORATION SHANGHAI T2 ENTERTAINMENT CO., LTD.
By:/s/ Hsao Oguchi By: /s/ Wang Ji
------------------------- ---------------------------
Name: Haso Oguchi Name: Wang Ji
----------------------- ---------------------
Title: President Title: President
---------------------- --------------------------
JC ENTERTAINMENT CORPORATION
By: /s/ Yang Shin Kim
-----------------------------------------
Name: Yang Shin Kim
---------------------------------------
Title: CEO
--------------------------------